Calcutta High Court Reaffirms Limited Scope of Section 11 Referral Court — Cannot Conduct Mini-Trial on Arbitrability

Case Overview

Case Name: Rolta Infrastructure and Technology Services Pvt Ltd Vs Department of Information Technology and Electronics (Calcutta High Court)

Court: Calcutta High Court

Provision Invoked: Section 11(6) of the Arbitration and Conciliation Act, 1996

Subject Matter: Appointment of Sole Arbitrator in disputes arising from a registered Sub-Lease Agreement dated 04.07.2008

Background Facts

The Respondent — a department of the Government of West Bengal — had been allotted a lease over approximately 10.052 acres of land at Nonandanga from the Kolkata Metropolitan Development Authority (KMDA) under a Letter of Allotment dated 14.05.2007, for a period of 99 years. Subsequently, by a registered Sub-Lease Agreement dated 04.07.2008, the Respondent sub-leased approximately 5 acres of that land to the Petitioner for the remaining unexpired lease period, for the specific purpose of establishing an Information Technology and Electronics project.

The Petitioner's case was that the Sub-Lease Agreement imposed a reciprocal obligation on the Respondent to provide essential external infrastructure — specifically, a power supply point, a water line connection, and a sewerage outlet — as specified under Clause "h" of the Second Schedule to the Agreement. The Petitioner alleged that despite multiple follow-ups made between 2010 and 2017, the Respondent consistently failed to deliver the promised infrastructure or grant any of the approvals necessary for project implementation.

The situation escalated when the Respondent issued a letter dated 20.09.2023, purporting to revoke the Sub-Lease Agreement. The stated grounds for revocation were twofold: first, that the Petitioner had not undertaken any construction on the sub-leased land; and second, that the Petitioner had mortgaged the sub-leased property, leading to proceedings under the SARFAESI Act.

The Petitioner contested both grounds vigorously. In respect of the mortgage, the Petitioner asserted that it had been created only after obtaining a No Objection Certificate (NOC) from the Respondent. By letter dated 16.10.2023, the Petitioner formally disputed the revocation and took the position that the Respondent had no legal authority to terminate the Sub-Lease Agreement, particularly given that the Respondent had itself allegedly failed to perform its own reciprocal contractual obligations under the Agreement.

Invocation of Arbitration and Filing of Petition

Clause 5 of the Sub-Lease Agreement dated 04.07.2008 contains an arbitration clause, the relevant portion of which reads as follows:

"5. The parties shall make every endeavour to settle any dispute, controversy or claim arising between the parties in connection with this sub-lease amicably in Spirit of good faith. In the event of failure to do so such dispute, controversy or claim shall be finally resolved in terms of the India Arbitration and Conciliation Act, 1996 as amended from time to time within the jurisdiction of Kolkata High Court."

Invoking this clause, the Petitioner issued a formal arbitration notice dated 08.11.2023 under Section 21 of the Arbitration and Conciliation Act, 1996, proposing the appointment of a former Judge of the Calcutta High Court as Sole Arbitrator. The Respondent, by its reply dated 09.12.2023, declined to accept the invocation and took the categorical position that no arbitrable dispute existed between the parties.

In addition, the Petitioner had also filed proceedings under Section 9 of the Arbitration and Conciliation Act, 1996, challenging the revocation of the Sub-Lease Agreement and seeking interim protection. Although interim relief was initially granted, it was subsequently set aside by the Division Bench in appeal.

On the other side, the Respondent had commenced eviction proceedings against the Petitioner under Section 3(1) of the West Bengal Public Land (Eviction of Unauthorised Occupants) Act, 1962, before the First Land Acquisition Collector, Kolkata. The Petitioner appeared in those proceedings and raised a jurisdictional objection, asserting that the disputes were referable to arbitration.

Since consensus on the appointment of an arbitrator could not be reached, the Petitioner filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the Calcutta High Court.

Submissions of the Petitioner

Senior Counsel for the Petitioner advanced the following principal arguments:

• Clause 5 of the Sub-Lease Agreement dated 04.07.2008 constitutes a valid and subsisting arbitration agreement. Under Section 11(6-A) of the Act, the referral court's inquiry is confined strictly to a prima facie examination of the existence of such an agreement — nothing more.

• The Respondent's stand that "no arbitrable dispute exists" is unsustainable. The disputes — namely, the Respondent's failure to supply power, water, and sewerage infrastructure under Clause "h" of the Second Schedule, the consequent illegality of the termination notice dated 20.09.2023, and the resulting claims for damages — all arise directly from the Sub-Lease Agreement and squarely fall within the scope of Clause 5.