MOTILAL OSWAL FINANCIAL SERVICE LIMITED v. SANTOSH CORDEIRO
Arbitration vs. Exclusive Jurisdiction of Small Causes Court: Supreme Court Clarifies Scope of Section 11(6-A) and Arbitrability of License Fee Disputes.
Court: Supreme Court of India
Citation: 2026 INSC 5
Decision Date: 05-01-2026
List of Laws
The Arbitration & Conciliation Act, 1996; The Presidency Small Cause Courts Act, 1882; The Indian Contract Act, 1872; Section 11 of the Arbitration & Conciliation Act, 1996; Section 41 of the Presidency Small Cause Courts Act, 1882; Section 28 of the Indian Contract Act, 1872; Section 16 of the Arbitration & Conciliation Act, 1996; Doctrine of Competence-Competence
- Facts: Motilal Oswal Financial Services Limited (Appellant) entered into a Leave and License Agreement with Santosh Cordeiro and Another (Respondents) for premises in Mumbai. Disputes arose regarding license fees and security deposit after the appellant vacated the premises citing the COVID-19 pandemic. The respondent invoked the arbitration clause in the agreement. The appellant objected, arguing that the dispute was non-arbitrable under Section 41 of the Presidency Small Cause Courts Act, 1882, which grants exclusive jurisdiction to the Small Causes Court in matters between licensors and licensees.
- Procedural Posture: The respondent filed a Section 11 application under the Arbitration & Conciliation Act, 1996, seeking the appointment of an arbitrator. The Single Judge of the Bombay High Court allowed the application. The appellant appealed to the Supreme Court, challenging the High Court's order. The arbitrator had dismissed a Section 16 application filed by the appellant arguing non-arbitrability.
- Issue: Whether the High Court rightly allowed the application under Section 11 of the Arbitration & Conciliation Act, 1996, given the appellant's contention that the dispute is non-arbitrable under Section 41 of the Presidency Small Cause Courts Act, 1882, which confers exclusive jurisdiction on the Small Causes Court for disputes between licensors and licensees regarding recovery of possession or license fees? Whether Section 11(6-A) of the Arbitration & Conciliation Act, 1996, limits the court's examination to the existence of an arbitration agreement?
- Holding: The Supreme Court dismissed the appeal, holding that an arbitration agreement existed between the parties and that the arbitrator should decide on the issue of arbitrability. The court clarified that under Section 11(6-A) of the Arbitration & Conciliation Act, 1996, the court's jurisdiction is limited to examining the existence of an arbitration agreement.
- Reasoning: The Court reasoned that the Full Bench judgment of the Bombay High Court in Central Warehousing Corporation, Mumbai v. Fortpoint Automotive Pvt. Ltd., Mumbai must be understood in its specific context. The Court emphasized that Section 41 of the Presidency Small Cause Courts Act, 1882, confers jurisdiction on the Small Causes Court but does not automatically neutralize arbitration clauses. The Court referred to Vidya Drolia-II, stating that mere creation of a specific forum does not necessarily imply non-arbitrability. The Court also noted that Section 28 of the Contract Act, 1872, allows for agreements to refer disputes to arbitration. The Court clarified that the arbitrator should decide on the nature of the claim and whether it falls under Section 41(1) of the 1882 Act. The Court emphasized the doctrine of competence-competence, stating that the arbitral tribunal has the power to rule on its own jurisdiction. The Court held that an examination under Section 11(6-A) indicates that there exists an arbitration agreement between the parties.
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