Oriental Foundry Pvt. Ltd. Vs Uniion of India

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$~37 & 40

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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Date of decision: 24.02.2026

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- O.M.P.(I) (COMM.) 507/2025 & I.A. 5107/2026 (For Dir.)

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ORIENTAL FOUNDRY PRIVATE LIMITED .....Petitioner Through: Mr. R. Sudhinder, Mr. Ashish Mukhi, Mr. Sanidhya Sonthalia and Mr. Kanishk Pandey, Advocates.

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versus

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UNION OF INDIA & ANR. .....Respondents Through: Mr. Shashank Dixit, CGSC along with Mr. Kunal Raj, Advocate.

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40

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- ARB.P. 354/2026

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ORIENTAL FOUNDRY PVT LTD .....Petitioner Through: Mr. R. Sudhinder, Mr. Ashish Mukhi, Mr. Sanidhya Sonthalia and Mr. Kanishk Pandey, Advocates.

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versus

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UNIION OF INDIA .....Respondent Through: Ms. Shambhavi Sharma, Government Pleader.

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CORAM:

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HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR

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% JUDGEMENT (ORAL)

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HARISH VAIDYANATHAN SHANKAR, J.

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ARB.P. 354/2026

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The present Petition, filed under Section 11(6) of the

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Signature Not Verified

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Digitally Signed By:HARVINDER KAUR BHATIA O.M.P.(I) (COMM.) 507/2025 & connected matter Signing Date: 27.0 2.2026 12:30:07

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Page 1 of 9

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Arbitration and Conciliation Act, 1996¹ , seeks appointment of a Sole Arbitrator for the purpose of resolution of disputes that are stated to have arisen inter se the parties under Contract bearing No. 2024/RS(l)/954/207/1940 dated 01.08.2024 , in terms of the Clause 18 contained therein, which has to be read with the Clause 2905(b) of the Annexure A to the Railway Board Letter No. 2018/TF/Civil/ Arbitration policy dated 12.12.2018 and which read as follows:

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“18.0 Settlement of Disputes (Arbitration): The contract will be governed by the arbitration clause with amendments as specified in the Railway Board‟s letter No. 2018/TF/Civil/Arbitration Policy dated 12.12.2018.

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CLAUSE 2905(b)

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2905(b): Appointment of Arbitrator where applicability of Section 12 (5) of Arbitration and Conciliation Act has not been waived off :

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(i) In cases where the total value of all claims in question added together does not exceed Rs. 50,00,000/- (Rupees Fifty Lakh only), the Arbitral Tribunal shall consist of a Retired Railway Officer, retired not below the rank of Senior Administrative (Trade Officer, as the arbitrntor. For this purpose, the Railway will send a panel of at least four (4) names of retired Railway Officer(s) empanelled to work as Railway Arbitrator duly indicating their retirement dates to the Contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager. Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as arbitrator within 30 days from the date of dispatch of the request by Railway, the General Manager shall appoint at least one out of them as the arbitrator.

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(ii) In cases where the total value of all claims in question added together exceeds Rs. 50,00,000/- (Rurees Fifty Lakh only), the Arbitral Tribunal shall consist of three (3) retired Railway Officers, retired not below the rank of Senior Administrative Grade Officer. For this purpose, the Railway will send a panel of at least four (4) names of retired Railway Officer(s) empanelled to work as Railway Arbitrators duly indicating their retirement date to the

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1 Act

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Signature Not Verified Digitally Signed By:HARVINDER KAUR BHATIA O.M.P.(I) (COMM.) 507/2025 & connected matter Signing Date: 27.0 2.2026 12:30:07

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Contractor within 60 days from the day when a written and valid demand for arbitration is received by the General Manager.

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Contractor will be asked to suggest to General Manager at least 2 names out of the panel for appointment as Contractor‟s nominee within 30 days from the date of dispach of the request by Railway. The Genreal Manager shall appoint at least one out of them as the Contractor‟s nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the „Presiding Arbitrator‟ from amongst the 3 arbitratorts so appointed. General Manager shall complete this exercise of appointing the Arbitral Triunal within 30 days from the receipt of the names of Contractor‟s nominees. While nominating the arbitrators, it will be necessary to ensure that one of them has served in the Accounts Department.”

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Learned counsel for the Petitioner would submit that the Notice under Section 21 of the Act is dated 05.01.2026.

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Learned counsel for the Respondents submits that the Respondents have no objection if the present dispute is referred to arbitration.

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At this juncture, it is apposite to note that the legal position governing the scope and standard of judicial scrutiny under Section 11(6) of the Act is no longer res integra . A three-Judge Bench of the Hon‟ble Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning² , after taking into consideration the authoritative pronouncement of the seven-Judge Bench in Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899, In re³ , comprehensively delineated the contours of judicial intervention at the stage of Section 11of the Act. The excerpt of Krish Spg (supra) reads as under:-

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2 (2024) 12 SCC 1

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3 (2024) 6 SCC 1

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Signature Not Verified Digitally Signed By:HARVINDER KAUR BHATIA O.M.P.(I) (COMM.) 507/2025 & connected matter Signing Date: 27.0 2.2026 12:30:07

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“ (c) Judicial interference under the 1996 Act 110 . The parties have been conferred with the power to decide and agree on the procedure to be adopted for appointing arbitrators. In cases where the agreed upon procedure fails, the courts have been vested with the power to appoint arbitrators upon the request of a party, to resolve the deadlock between the parties in appointing the arbitrators.

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111 . Section 11 of the 1996 Act is provided to give effect to the mutual intention of the parties to settle their disputes by arbitration in situations where the parties fail to appoint an arbitrator(s). The parameters of judicial review laid down for Section 8 differ from those prescribed for Section 11. The view taken in SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and affirmed in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 that Sections 8 and 11, respectively, of the 1996 Act are complementary in nature was legislatively overruled by the introduction of Section 11(6-A) in 2015. Thus, although both these provisions intend to compel parties to abide by their mutual intention to arbitrate, yet the scope of powers conferred upon the courts under both the sections are different.

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112 . The difference between Sections 8 and 11, respectively, of the 1996 Act is also evident from the scope of these provisions. Some of these differences are:

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112.1 . While Section 8 empowers any “judicial authority” to refer the parties to arbitration, under Section 11, the power to refer has been exclusively conferred upon the High Court and the Supreme Court.

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112.2 . Under Section 37, an appeal lies against the refusal of the judicial authority to refer the parties to arbitration, whereas no such provision for appeal exists for a refusal under Section 11.

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112.3 . The standard of scrutiny provided under Section 8 is that of prima facie examination of the validity and existence of an arbitration agreement. Whereas, the standard of scrutiny under Section 11 is confined to the examination of the existence of the arbitration agreement.

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112.4 . During the pendency of an application under Section 8, arbitration may commence or continue and an award can be passed. On the other hand, under Section 11, once there is failure on the part of the parties in appointing the arbitrator as per the agreed procedure and an application is preferred, no arbitration proceedings can commence or continue.

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113 . The scope of examination under Section 11(6-A) is confined to the existence of an arbitration agreement on the basis of Section 7. The examination of validity of the arbitration agreement is also limited to the requirement of formal validity such as the requirement that the agreement should be in writing.

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Signature Not Verified Digitally Signed By:HARVINDER KAUR BHATIA Signing Date: 27.0 2.2026 12:30:07

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O.M.P.(I) (COMM.) 507/2025 & connected matter

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114 . The use of the term “examination” under Section 11(6-A) as distinguished from the use of the term “rule” under Section 16 implies that the scope of enquiry under Section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the Arbitral Tribunal to “rule” under Section 16. The prima facie view on existence of the arbitration agreement taken by the Referral Court does not bind either the Arbitral Tribunal or the Court enforcing the arbitral award.

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115 . The aforesaid approach serves a twofold purpose — firstly, it allows the Referral Court to weed out non-existent arbitration agreements, and secondly, it protects the jurisdictional competence of the Arbitral Tribunal to rule on the issue of existence of the arbitration agreement in depth.

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117 . In view of the observations made by this Court in Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1 , it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 and adopted in NTPC Ltd. v. SPML Infra Ltd. , (2023) 9 SCC 385 that the jurisdiction of the Referral Court when dealing with the issue of “accord and satisfaction” under Section 11 extends to weeding out ex facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1.

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119 . The question of “accord and satisfaction”, being a mixed question of law and fact, comes within the exclusive jurisdiction of the Arbitral Tribunal, if not otherwise agreed upon between the parties. Thus, the negative effect of competence-competence would require that the matter falling within the exclusive domain of the Arbitral Tribunal, should not be looked into by the Referral Court, even for a prima facie determination, before the Arbitral Tribunal first has had the opportunity of looking into it.

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120 . By referring disputes to arbitration and appointing an arbitrator by exercise of the powers under Section 11, the Referral Court upholds and gives effect to the original understanding of the contracting parties that the specified disputes shall be resolved by arbitration. Mere appointment of the Arbitral Tribunal does not in any way mean that the Referral Court is diluting the sanctity of “accord and satisfaction” or is allowing the claimant to walk back on its contractual undertaking. On the contrary, it ensures that the principle of arbitral autonomy is upheld and the legislative intent of

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Signature Not Verified Digitally Signed By:HARVINDER KAUR BHATIA Signing Date: 27.0 2.2026 12:30:07

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O.M.P.(I) (COMM.) 507/2025 & connected matter

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minimum judicial interference in arbitral proceedings is given full effect. Once the Arbitral Tribunal is constituted, it is always open for the defendant to raise the issue of “accord and satisfaction” before it, and only after such an objection is rejected by the Arbitral Tribunal, that the claims raised by the claimant can be adjudicated.

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121 . Tests like the “eye of the needle” and “ex facie meritless”, although try to minimise the extent of judicial interference, yet they require the Referral Court to examine contested facts and appreciate prima facie evidence (however limited the scope of enquiry may be) and thus are not in conformity with the principles of modern arbitration which place arbitral autonomy and judicial non-interference on the highest pedestal.

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122 . Appointment of an Arbitral Tribunal at the stage of Section 11 petition also does not mean that the Referral Courts forego any scope of judicial review of the adjudication done by the Arbitral Tribunal. The 1996 Act clearly vests the national courts with the power of subsequent review by which the award passed by an arbitrator may be subjected to challenge by any of the parties to the arbitration.

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126 . The power available to the Referral Courts has to be construed in the light of the fact that no right to appeal is available against any order passed by the Referral Court under Section 11 for either appointing or refusing to appoint an arbitrator. Thus, by delving into the domain of the Arbitral Tribunal at the nascent stage of Section 11, the Referral Courts also run the risk of leaving the claimant in a situation wherein it does not have any forum to approach for the adjudication of its claims, if its Section 11 application is rejected.

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127 . Section 11 also envisages a time-bound and expeditious disposal of the application for appointment of arbitrator. One of the reasons for this is also the fact that unlike Section 8, once an application under Section 11 is filed, arbitration cannot commence until the Arbitral Tribunal is constituted by the Referral Court. This Court, on various occasions, has given directions to the High Courts for expeditious disposal of pending Section 11 applications. It has also directed the litigating parties to refrain from filing bulky pleadings in matters pertaining to Section 11. Seen thus, if the Referral Courts go into the details of issues pertaining to “accord and satisfaction” and the like, then it would become rather difficult to achieve the objective of expediency and simplification of pleadings.

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128 . We are also of the view that ex facie frivolity and dishonesty in litigation is an aspect which the Arbitral Tribunal is equally, if not more, capable to decide upon the appreciation of the evidence adduced by the parties. We say so because the Arbitral Tribunal has the benefit of going through all the relevant evidence and

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Signature Not Verified Digitally Signed By:HARVINDER KAUR BHATIA O.M.P.(I) (COMM.) 507/2025 & connected matter Signing Date: 27.0 2.2026 12:30:07

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pleadings in much more detail than the Referral Court. If the Referral Court is able to see the frivolity in the litigation on the basis of bare minimum pleadings, then it would be incorrect to doubt that the Arbitral Tribunal would not be able to arrive at the same inference, most likely in the first few hearings itself, with the benefit of extensive pleadings and evidentiary material.”

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(emphasis supplied)

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The decision in Krish Spinning (supra) thus unequivocally reiterates that the Referral Court, while exercising jurisdiction under Section 11 of the Act, is required to confine itself to a prima facie examination of the existence of an arbitration agreement and nothing beyond. The Court‟s role is facilitative and procedural, namely , to give effect to the parties‟ agreed mechanism of dispute resolution when it has failed, without embarking upon an adjudication of contentious factual or legal issues, which are reserved for the Arbitral Tribunal.

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In view of the consensus of the parties, this Court is of the view that the matter may be referred to arbitration for the purpose of the resolution of disputes as between the parties. 7. Material on record indicates that the valuation of the present dispute is stated to be approximately Seven (7) Crores. 8. Accordingly, Mr. Shashank Garg, Senior Advocate (Mobile No. ‪+91-9811526671‪), is appointed as the Arbitrator to adjudicate the disputes inter se the parties.

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The learned Arbitrator may proceed with the arbitration proceedings, subject to furnishing to the parties the requisite disclosures as required under Section 12(2) of the Act.

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The learned Arbitrator shall be entitled to a fee in accordance with the Fourth Schedule of the Act.

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The parties shall share the learned Arbitrator's fee and arbitral costs equally.

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Signature Not Verified Digitally Signed By:HARVINDER KAUR BHATIA O.M.P.(I) (COMM.) 507/2025 & connected matter Signing Date: 27.0 2.2026 12:30:07

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All rights and contentions of the parties in relation to the claims/counter claims are kept open, to be decided by the learned Arbitrator on their merits, in accordance with law.

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Needless to state, nothing in this order shall be construed as an expression of opinion of this Court on the merits of the controversy. Let a copy of the said order be sent to the learned Arbitrator through the electronic mode as well.

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Accordingly, the present Petition, along with pending application(s), if any, stands disposed of in the above-stated terms.

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O.M.P.(I) (COMM.) 507/2025 & I.A. 5107/2026 (For Dir.)

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The present Petition has been filed under Section 9 of the Act, seeking the following interim reliefs:

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“a. Direct the Respondent No.1 to maintain status quo and not take any coercive/precipitative steps, including invocation/encashment of bank guarantee dated 24.07.2024 being B.G. No.7124IGP006076824 issued by Respondent No.2 for an amount of Rs. 7,20,26,700/- (Rupees Seven Crore Twenty Lakhs TwentySix Thousand Seven Hundred Only) pursuant to the Amendment Letter No. IV dated 08.12.2025 issued by it till the time an arbitral tribunal is constituted and an application under Section 17 of the Arbitration Act is filed before it by the Petitioner;

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b. Direct the Respondent No.2 not to encash bank guarantee dated 24.07.2024 being B.G. No. 7124IGP006076824 issued by Respondent No.2 for an amount of Rs. 7,20,26,700/- (Rupees Seven Crore Twenty Lakhs Twenty-Six Thousand Seven Hundred Only);

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c. Direct the Respondent No.1 to maintain status quo and not take any coercive/precipitative steps, including invocation/encashment of bank guarantee dated 23.07.2025 being B.G. No. 71241GP002321425 issued by the Respondent No.2 for an amount of Rs. 7,20,26,700/- (Rupees Seven Crore Twenty Lakhs TwentySix Thousand Seven Hundred Only) issued by it till the time an arbitral tribunal is constituted and an application under Section 17 of the Arbitration Act is filed before it by the Petitioner;

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d. Direct the Respondent No.2 not to encash bank guarantee dated 23.07.2025 being B.G. No. 71241GP002321425 issued by the Respondent No.2 for an amount of Rs. 7,20,26,700/- (Rupees Seven Crore Twenty Lakhs Twenty-Six Thousand Seven Hundred

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Signature Not Verified Digitally Signed By:HARVINDER KAUR BHATIA O.M.P.(I) (COMM.) 507/2025 & connected matter Signing Date: 27.0 2.2026 12:30:07

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Only)

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e. In the alternate if the bank guarantees have been invoked and encashed prior to the present application being heard, directing the Respondent No. 1 to deposit before this Hon'ble Court an amount of Rs. 7,20,26,700/- (Rupees Seven Crore Twenty Lakhs TwentySix Thousand Seven Hundred Only);

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f. ad-interim and ex-parte orders in terms of prayer (a) to (e) above;

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g. for cost of this Petition; and

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h. Pass such other and further order(s) as may be deemed foand probe in the facts and circumstances of the present case.”

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Since a learned Arbitrator has already been appointed this Petition shall be treated as an application under Section 17 of the Act, and the learned Arbitrator shall consider and decide the same. Interim Order dated 12.12.2025 to continue till the Application under Section 17 is adjudicated upon by the learned Arbitrator.

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The present Petition along with pending application(s), if any, is disposed of accordingly.

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A photocopy of the Order passed today be kept in the connected matters.

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HARISH VAIDYANATHAN SHANKAR, J. FEBRUARY 24, 2026/tk/va

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Signature Not Verified

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Digitally Signed By:HARVINDER KAUR BHATIA O.M.P.(I) (COMM.) 507/2025 & connected matter Signing Date: 27.0 2.2026 12:30:07

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Oriental Foundry Pvt. Ltd. v. Uniion of India

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Oriental Foundry Pvt. Ltd. v. Uniion of India

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