1 $-7 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ARB.P. 690/2025 Date of Decision: 28.07.2025 IN THE MATTER OF: RAJSHI FINANCIAL AND INVESTMENT CO. PVT. LTD. THROUGH ITS AUTHORISED REPRESENTATIVE MR. PUNEET CHANDRA HAVING ITS REGISTERED OFFICE AT: F-91, PREET VIHAR, VIKAS MARG, DELHI-110092, NCT OF DELHI, INDIA. ..... PETITIONER Through: Mr.Shikhar Garg, Ms.Rabiya, Mr.Ojasvi and Ms.Ankita, Advocates. Versus MR. NAVEEN KUMAR SOLE PROPRIETOR OF M/S SAI FASHION HAVING RESIDENCE AT: D-283/11B, LAXMI NAGAR, DELHI-110092, NCT OF DELHI, INDIA .... RESPONDENT Through: None. HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV JUDGEMENT PURUSHAINDRA KUMAR KAURAV, J. (ORAL) 1. The present petition has been filed under Section 11(5) of the 2 Arbitration and Conciliation Act, 1996 (the 1996 Act) by the petitioner, seeking appointment of an Arbitrator, to adjudicate upon the disputes that have arisen between the parties under the Lease Agreement dated 05.08.2021. 2. The office report indicates that by ordinary post as well as through email, service is effected on the respondent. However, despite service, no one appears on behalf of the respondent. 3. The facts of the case would indicate that the petitioner and the respondent entered into a lease Agreement for a period of 6 years on 05.08.2021 [inadvertently mentioned as 9 years in the Agreement] with effect from 01.05.2021 to be used for the purpose of the trading of the Lady Garments under the name and style of M/s Sai Fashion. That as per the agreement respondent agreed to pay monthly rent of INR 1,70,000 from 01.08.2021 to 31.07.2024 and INR 1,95,500 from 01.08.2024 to 31.07.2027 along with an interest free refundable security deposit of INR 5,10,000/- to be paid to the petitioner. It is also stated in the agreement that, in the event of delay in payment of the monthly lease rent by the respondent, he would be liable to pay an addition 18% interest of the monthly lease rental. 4. As per the case set up by the petitioner, the respondent on his own defaulted in making the regular monthly lease rent from July 2024 till date, to the petitioner. Thereafter, a Board of Resolution dated 01.11.2024 has been executed in favour of Mr. Punnet Chandra by the petitioner and the petitioner has sent the legal notice for violation of the Lease Agreement dated 19.12.2024 to the respondent requesting to remit the full outstanding 3 payment which includes an additional 18% interest of the monthly rent in reference with the Clause 2.2 of the Agreement which amounts to be INR 13,54,050 (Indian Rupees Thirteen Lakh Fifty-Four Thousand and Fifty Rupees only) within 15 days from the date of the notice. Thereafter, the petitioner issued a legal notice dated 04.03.2025. Neither the respondent reply to the said legal notice nor any payment has been made. After getting no positive response from the respondent, the petitioner invoked the Arbitration clause (Clause 15) under the said Agreement to adjudicate the disputes and differences between the parties for appointment of the Sole Arbitrator. 5. The Court takes note of Clause 15 of the Lease Agreement dated 05.08.2021, which reads as under:- “15. JURISDICTION In event of any dispute between both the parties the resolution will be done peacefully if the resolution does not hap en peacefully. The mater shall be refered to Arbitration& Reconciliation through apointment of VROHDUELWUDWRUDSSRLQWHGE\WKH6HF 6. The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the 1996 Act has been fairly well settled. This Court as well in the order dated 24.04.2025 in the case of ARB.P. 145/2025 titled as Pradhaan Air Express Pvt Ltd v. Air W orks India Engineering Pvt Ltd has extensively dealt with the scope of interference at the stage of Section 11. The Court held as under:- ³7KHODZZLWKUHVSHFWWRWKHVF under Section 1(6) of the 196 Act has been fairly wel setled. The Supreme Court in the case of SBI General Insurance Co. Ltd. v. Krish 4 Spinning 1, while considering al earlier pronouncements including the Constitutional Bench decision of seven judges in the case of Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 196 & the Indian Stamp Act, 189 , In re 2 has hel d that scope of inquiry at the stage of apointment of an Arbitrator is limited to the extent of prima facie existence of the arbitration agrement and nothing else. 10. It has unequivocaly been held in paragraph no.14 in the case of SBI General Insura nce Co. Ltd that observations made in Vidya Drolia v. Durga Trading Corpn. 3, and adopted in NTPC Ltd. v. SPM L Infra Ltd. ,4 that the jurisdiction of the referal court when dealing with the LVVXHRI³DFFRUGDQGVDWLVIDFWLRQ´ ing out ex -facie non -arbitrable and frivolous disputes would not aply after the decision of Re: Interplay . The abovenoted paragraph no.14 in the case of SBI General Insurance Co. Ltd reads as under: - ³,QYLHZRIWKHREVHUYDWLRQV in In Re: Interplay (supra), it is clear that the scope of enquiry at the stage of apointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agrement, and nothing else. For this reason, we find it difficult to hold t hat the observations made in Vidya Drolia (supra) and adopted in NTPC v. SPM L (supra) that the jurisdiction of the referal court when dealing with the isue RI ³DFFRUG DQG VDWLVIDFWLRQ´ XQGH weeding out ex -facie non -arbitrable and f rivolous disputes would continue to aply despite the subsequent decision in In 5H,QWHUSOD\VXSUD´ 1. Ex -facie frivolity and dishonesty are the issues, which have been held to be within the scope of the Arbitral Tribunal which is equally capable o f deciding upon the apreciation of evidence aduced by the parties. W hile considering the aforesaid pronouncements of the Supreme Court, the Supreme Court in the case of Goqi Technologies (P) Ltd. v. Sokrati Technologies (P) Ltd. 5, however, has held that the referal Courts under Section 1 must not be misused by one party in order to force other parties to the arbitration agrement to participate in a time - consuming and costly arbitration proces. Few instances have been 1 2024 SCC OnLine SC 1754 2 2023 SCC OnLine SC 1666. 3 (2021) 2 SCC 1. 4 (2023) 9 SCC 385. 5 (2025) 2 SCC 192 5 delineated such as, the adjudicat ion of a non -existent and malafide claim through arbitration. The Court, however, in order to balance the limited scope of judicial interference of the referal Court with the interest of the parties who might be constrained to participate in the arbitrati on proceedings, has held that the Arbitral Tribunal eventually may direct that the costs of the arbitration shall be borne by the party which the Arbitral Tribunal finds to have abused the proces of law and caused unecesary harasment to the other parti es to the arbitration. 12. It is thus seen that the Supreme Court has defered the adjudication of aspects relating to frivolous, non -existent and malafide claims from the referal stage til the arbitration proceedings eventually come to an end. The rel evant extracts of Goqi Technologies (P) Ltd. reads as under: - “20. As observed in Krish Spg. [SBI General Insurance Co. Ltd. v. Krish Spg. , (2024) 12 SC 1 : 2024 SC OnLine SC 1754 : 2024 INSC 532] , frivolity in litigation to is an aspect which the re feral court should not decide at the stage of Section 1 as the arbitrator is equaly, if not more, competent to adjudicate the same. 21. Before we conclude, we must clarify that the limited jurisdiction of the referal courts under Section 1 must not be misused by parties in order to force other parties to the arbitration agrement to participate in a time consuming and costly arbitration proces. This is posible in instances, including but not limited to, where the claimant canvases the adjudication of non -existent and mala fide claims through arbitration. 2. W ith a view to balance the limited scope of judicial interference of the referral courts with the interests of the parties who might be constrained to participate in the arbitration proceedings , the Arbitral Tribunal may direct that the costs of the arbitration shall be borne by the party which the Tribunal ultimately finds to have abused the proces of law and caused unecesary harasment to the other party to the arbitration. Having said that , it is clarified that the aforesaid is not to be construed as a determination of the merits of the mater before us, which the Arbitral Tribunal ZLOOULJKWIXOO\EHHTXLSSHGWRGH 13. In view of the aforesaid, the scope at the stage of Section 1 6 proceedings is akin to the eye of the needle test and is limited to the extent of finding a prima facie existence of the arbitration agrement and nothing beyond it. The jurisdictional contours of the referal Court, as meticulously delineated under the 196 Act and further crystallised through a consistent line of authoritative pronouncements by the Supreme Court, are unequivocaly confined to a prima facie examination of the existence of an arbitration agrement. These boundaries are not merely procedu ral safeguards but fundamental to upholding the autonomy of the arbitral proces. Any transgresion beyond this limited judicial threshold would not only contravene the legislative intent enshrined in Section 8 and Section 1 of the 196 Act but also risk undermining the sanctity and eficiency of arbitration as a prefered mode of dispute resolution. The referal Court must, therefore, exercise restraint and refrain from venturing into the merits of the dispute or adjudicating isues that fal squarely wit hin the jurisdictional domain of the arbitral tribunal. It is thus seen that the scope of enquiry at the referal stage is conservative in nature. A similar view has also been expresed by the Supreme Court in the case of Ajay M adhusudan Patel v. Jyotrind ra S. Patel” 6. 9. In view of the fact that disputes have arisen between the parties and there is an arbitration clause in the contract, this Court is inclined to appoint an Arbitrator to adjudicate upon the disputes between the same. 10. Accordingly, Mr. Kartikeya Bhargava, Advocate (Mobile No.+91 8130834222, e-mail id:- kartikeyabhargava@gmail.com ) is appointed as the sole Arbitrator. 11. The Sole Arbitrator may proceed with the arbitration proceedings, subject to furnishing to the parties the requisite disclosures as required under Section 12 of the Arbitration and Conciliation Act. 12. The Sole Arbitrator shall be entitled to fee in accordance with the IVth Schedule of the Arbitration and Conciliation Act or as may otherwise be 6 (2025) 2 SCC 147. 7 agreed to between the parties and the learned Sole Arbitrator. 13. The parties shall share the arbitrator's fee and arbitral cost, equally. 14. All rights and contentions of the parties in relation to the claims/counter claims are kept open, to be decided by the Sole Arbitrator on their merits, in accordance with law. 15. Needless to state, nothing in this order shall be construed as an expression of opinion of this Court on the merits of the controversy. All rights and contentions of the parties in this regard are reserved. Let the copy of the said order be sent to the newly appointed Arbitrator through the electronic mode as well. 16. Accordingly, the instant petition stands disposed of. PURUSHAINDRA KUMAR KAURAV, J JULY 28, 2025 Nc/ sph