Arbitrability of a dispute explained

Arbitrability of a dispute is a concept which encompasses a lot of matters. Because arbitration is a process of adjudication of a dispute by means of privately constituted tribunal instead of civil courts, the eligibility of such a dispute to be arbitrated assumes importance. Arbitral tribunal can only grant the reliefs which are in personam, as opposed to the civil court which is competent to grant reliefin rem. Again, the reliefs like equitable ones can only be granted by the Civil Courts. In such type of cases, arbitration cannot be taken resort to.

In Booz Allen and Hamilton Inc Vs SBI Home Finance Ltd (2011)5 SCC 532, the Supreme Court of India made a thorough analysis of the aspect of arbitrability. Arbitrability, in its essence, consists of three issues:

1. Whether the disputes were capable of adjudication by arbitration;

2. Whether the disputes were covered by the arbitration agreement;

3. Whether the parties had referred the disputes to arbitration.

If any of these three issues comes in the negative, the dispute would not be arbitrable.

Regarding the first issue, certain disputes are specifically out of the ambit of arbitration, due to public policy. A list of such disputes are given below:

a. Disputes relating to rights and liabilities arising out of or giving rise to criminal offence;

b. Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody, etc;

c. Guardianship matters;

d. Insolvency and winding up matters;

e. Testamentary matters;

f. Eviction or tenancy matters subject to fulfillment of the following conditions:

i. The tenancy should be governed by special statute;

ii. The tenant enjoys protection from eviction due to the special statute;

iii. Specific court has been given jurisdiction to adjudicate disputes barring the jurisdiction of civil courts.

The last point appears to be very prominent one which deals with the tenancy disputes.

The second issue is regarding the parties to the arbitration agreement. Often in case of disputes, reference is invited to some agreement where the parties to the same are very widely defined like the successor, assigns etc. In the matter of arbitration, only the parties who are parties to the arbitration agreement are bound by the arbitration and others are not at all bound. If the agreement makes reference to some other agreement which contains arbitration clause, the same would be a valid clause only if the arbitration clause is specifically referred to. Only general reference would not be sufficient.

The third issue is regarding the intention of the parties. This is a simple one as in case of institution of civil suit, one party may apply for reference to arbitration. Intention is clearly derivable from such an application.