Delhi High Court Reiterates Referral Court Cannot Limit Arbitrator To Specific Claims

The Delhi High Court recently reiterated that a Referral Court under Section 11 of the Arbitration and Conciliation Act, 1996, cannot dictate which disputes an arbitrator should hear. Its role is limited to appointing an arbitrator, leaving all substantive claims and defences for the arbitrator to decide.

Justice Harish Vaidyanathan Shankar imposed costs of Rs. 50,000 on Puri Constructions, the petitioner, for attempting to restrict the arbitration to selective claims while appointing Hon'ble Justice Mukul Mudgal (Retired) as the sole arbitrator in its long-standing dispute with Larsen & Toubro (L&T).

It further noted the waste of judicial time caused by these arguments, holding that “frivolous arguments should be eschewed.”

The Bench held:

“The queue for justice stretches several decades, and Counsel and litigants who can afford to litigate endlessly, in the opinion of this Court, would need a timely reminder to respect the cause of justice to all litigants and cooperate with the judicial system.”

The dispute arises from a 1998 Development Agreement for a group housing project in Gurgaon, executed between Puri Constructions and L&T, with ITC's real estate arm as a consenting party. Differences between the parties led to arbitration proceedings in 2000.

Following an appeal against a prior award, a Division Bench of the Delhi High Court had partly allowed the appeal in its 30 April 2015 decision, setting aside only the damages component. The matter was later examined by the Supreme Court, which in April 2025 allowed Puri Constructions to “pursue the appropriate course of action under law.”

After unsuccessful mediation, Puri Constructions approached the High Court seeking the appointment of an arbitrator. It argued that all issues except damages had attained finality through previous rulings and requested a direction that the new arbitrator should only calculate the money owed, ignoring all other issues.

L&T opposed this, arguing that a court's role is limited to verifying the existence of an arbitration agreement and that the arbitrator has full autonomy to determine which claims and defences are valid.

Justice Harish Vaidyanathan Shankar rejected Puri Constructions' request as “misconceived and incorrect”  and reiterated that modern arbitration relies on minimal judicial interference and expressed disappointment that the petitioner had pursued a narrow limitation despite prior cautions.

This High Court appointed Justice Mudgal as the sole arbitrator to resolve the disputes, but explicitly refused to limit arbitration to the “quantification of damages.” It held: 

"Since the learned Senior Counsel for the parties are ad idem that the matter be referred to arbitration, this Court deems it appropriate to allow the present Petition to the extent that a learned Arbitrator be appointed for the said purpose, rejecting the prayer seeking to limit the adjudication only to the aspect of quantification of damages..."

Lastly, it ordered Puri Constructions to pay Rs. 50,000 to the Delhi High Court Bar Association within two weeks as costs for pursuing frivolous arguments.