Matters That Can Be Referred to Arbitration

Generally, most civil and commercial disputes that parties can legally contract upon and settle
themselves can be referred to arbitration. This is because arbitration is fundamentally based on the
consent of the parties. The Indian legal framework, particularly the Arbitration and Conciliation Act,
1996, does not explicitly list all arbitrable matters but provides a broad scope.

Here are some categories of matters that are typically considered arbitrable:

1. Contractual Disputes: This is the most common category. Disputes arising from breach of
contract, interpretation of contract terms, specific performance, damages, etc., are readily
arbitrable.

Case Law: In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011) 5 SCC 532,
the Supreme Court held that disputes relating to rights in personam (rights enforceable
against a specific person) are generally arbitrable. Most contractual disputes fall under this
category.

2. Commercial Disputes: A wide array of commercial disputes, including those related to

partnerships, joint ventures, sale of goods, supply of services, banking and financial
transactions, insurance claims, intellectual property rights (economic aspects), construction
projects, etc., are arbitrable.

Case Law: In Khaitan Holdings Ltd. v. Sunder Sethi (2016) 5 SCC 405, the Supreme Court
reiterated that commercial disputes are generally considered arbitrable.

3. Tortious Claims (with contractual nexus): While pure tortious claims (unrelated to any contract)
might be considered non-arbitrable, tortious claims arising out of or related to a contractual
relationship can be referred to arbitration.

Case Law: In Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. (1999) 5 SCC 688, the
Supreme Court held that a claim for damages arising from a breach of contract, even if it
sounds in tort, is arbitrable if the arbitration clause is wide enough to cover it.

4. Intellectual Property Rights (limited scope): Disputes concerning the economic aspects and
exploitation of IP rights, such as licensing, assignment, and royalty agreements, are generally
arbitrable. However, matters relating to the grant, registration, and validity of IP rights, which
are often statutory functions involving rights in rem, are typically non-arbitrable.

Case Law: While there isn't a single definitive judgment listing all IP matters as arbitrable,
the trend suggests that subordinate rights in personam arising from IP rights (e.g.,
licensing agreements) are arbitrable. The Supreme Court in various instances has leaned
 towards arbitrability of commercial aspects of IP.

5. Consumer Disputes (with caveats): Initially, consumer disputes under the Consumer Protection
Act were held to be non-arbitrable due to the special fora created under that Act. However,
recent amendments and judicial pronouncements have shown a shift, allowing arbitration in
certain consumer disputes, provided the arbitration agreement is voluntary.

Case Law: The issue of arbitrability of consumer disputes has seen some evolution.
Earlier, cases like National Seeds Corporation Ltd. v. M. Madhusudhan Reddy (2012) 2
SCC 506 suggested non-arbitrability. However, the Supreme Court in Emaar MGF Land
Ltd. v. Aftab Singh (2018) 12 SCC 1 held that an arbitration clause in an agreement cannot
oust the jurisdiction of consumer forums unless it is a voluntary post-dispute agreement.

Matters That Cannot Be Referred to Arbitration

Certain categories of disputes are considered non-arbitrable primarily because they involve the
exercise of sovereign or public interest functions of the State, affect rights in rem (rights against the
world at large), or are governed by special statutes that confer exclusive jurisdiction on specific
courts or tribunals as a matter of public policy.

Here are the main categories of non-arbitrable matters with relevant case laws:

1. Disputes Relating to Criminal Offences: Matters involving allegations of criminal offences, their
investigation, and prosecution fall exclusively under the jurisdiction of criminal courts and
cannot be referred to arbitration.

Case Law: The Supreme Court has consistently held that criminal matters are non-
arbitrable as they involve public rights and the State's sovereign function of maintaining law
and order.

2. Matrimonial Disputes: Disputes relating to divorce, judicial separation, restitution of conjugal

rights, child custody, etc., are generally considered non-arbitrable due to the personal and
societal implications involved and the specialized jurisdiction of family courts.

Case Law: In Kishore Kumar Khaitan v. Praveen Kumar Singh (2006) 3 SCC 317, the
Supreme Court held that matrimonial disputes are not arbitrable.

3. Guardianship Matters: Issues concerning the appointment of guardians for minors or persons
of unsound mind fall under the purview of specific statutes and are non-arbitrable.

4. Insolvency and Winding-Up Matters: Proceedings related to the declaration of insolvency,

bankruptcy, and the winding up of companies are governed by special statutes and are
 adjudicated by specialized tribunals or courts due to their impact on public interest and
creditors.

Case Law: The Supreme Court has held that insolvency and winding-up proceedings are
actions in rem and fall under the exclusive jurisdiction of the relevant courts/tribunals.

5. Testamentary Matters (Grant of Probate, Letters of Administration, Succession Certificates):

These matters involve the determination of the validity of wills and the succession of property,
which are statutory functions and are typically non-arbitrable.

6. Eviction or Tenancy Matters Governed by Special Statutes: Disputes related to eviction and
tenancy governed by specific rent control laws, which often provide statutory protection to
tenants and confer exclusive jurisdiction on designated authorities, are generally non-
arbitrable.

Case Law: In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. (2011) 5 SCC 532,
the Supreme Court specifically held that eviction or tenancy matters governed by special
statutes where the tenant enjoys statutory protection against eviction and only specified
courts are conferred jurisdiction to grant eviction or decide the disputes are not arbitrable.
However, disputes between a landlord and tenant not governed by such special statutes
might be arbitrable.

7. Trust Disputes (certain aspects): While disputes between trustees and beneficiaries regarding
the management of the trust might be arbitrable, matters relating to the creation of a trust, the
validity of a trust deed, or public charitable trusts involving public interest are generally
considered non-arbitrable.

Case Law: In Vimal Kishor Shah v. Jayesh Dinesh Shah (2016) 8 SCC 788, the Supreme
Court held that disputes relating to private trusts, trustees, and beneficiaries under the
Trusts Act are generally non-arbitrable.

8. Intellectual Property Rights (grant and registration): As mentioned earlier, matters concerning
the grant, registration, and validity of patents, trademarks, and copyrights are typically
considered non-arbitrable as they involve statutory rights conferred by the State and have
implications erga omnes.

Case Law: While economic aspects are increasingly seen as arbitrable, the core issues of
grant and registration fall under the domain of specialized statutory authorities.

9. Anti-trust/Competition Laws: Disputes arising under competition laws, which often involve
public policy considerations and the regulatory powers of competition authorities, are generally
 considered non-arbitrable.

Case Law: The prevailing view is that matters falling under the exclusive jurisdiction of the
Competition Commission of India are not arbitrable. The enforcement of competition law is
considered a matter of public policy.

10. Disputes involving serious allegations of fraud: The arbitrability of fraud has been a subject of
debate. Earlier, all allegations of fraud were sometimes considered non-arbitrable. However,
the current position, as clarified by the Supreme Court, is that only cases involving serious and
complex allegations of fraud that go to the root of the contract or involve public policy
implications might be non-arbitrable. Simple allegations of fraud that are merely incidental to
the contractual dispute are generally arbitrable.

Case Law: In A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386 and Vidya Drolia v.
Durga Trading Corporation (2021) 2 SCC 1, the Supreme Court clarified this position,
laying down tests to determine when allegations of fraud would render a dispute non-
arbitrable, focusing on whether the allegations vitiate the arbitration agreement itself or
involve public interest.

In summary, the determination of arbitrability hinges on whether the subject matter of the dispute
involves rights in personam (generally arbitrable) or rights in rem (generally non-arbitrable), whether
it involves the exercise of sovereign functions, and whether specific statutes confer exclusive
jurisdiction on certain courts or tribunals as a matter of public policy. The jurisprudence on
arbitrability continues to evolve, and the courts adopt a pragmatic approach to promote arbitration
as an effective alternative dispute resolution mechanism while safeguarding public interest and
statutory mandates.

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