Relevant Acts and Sections Discussed:

• Arbitration and Conciliation Act, 1996
  • Section 11: Appointment of Arbitrators
• Insolvency and Bankruptcy Code, 2016
  • Section 8: Demand Notice by Operational Creditor
  • Section 9: Application for Initiation of CIRP

1. Appeal from High Court Judgment (Para 2)
The appeal is filed against the Bombay High Court's dismissal of an application by Goqii Technologies under Section 11 of the Arbitration and Conciliation Act, 1996. The application sought appointment of an arbitrator to resolve disputes with Sokrati Technologies under the Master Services Agreement (MSA).

2. Background of the Dispute (Para 3-5)
Goqii Technologies, a wellness consultancy, had an agreement with Sokrati Technologies for digital advertising services. Alleging malpractices, Goqii conducted an audit, which indicated significant discrepancies, including poor returns and overcharges.

3. Demand Notice and Arbitration Invocation (Para 6-7)
In response to Sokrati's demand notice under Section 8 of the IBC for unpaid dues, Goqii rejected the claim, cited audit findings, invoked arbitration, and filed counterclaims.

4. High Court's Dismissal of Arbitration Application (Para 8)
The High Court rejected Goqii's request for arbitration, finding that Goqii’s claims were insubstantial and lacked merit. It held that Goqii's invocation of arbitration was an attempt to delay payment, deeming the dispute manifestly dishonest.

5. Arguments by Goqii Technologies (Para 10-12)
Goqii’s counsel argued that the High Court exceeded its jurisdiction by conducting a factual review instead of merely assessing the prima facie existence of a dispute for arbitration. Given the technical complexity of the matter, arbitration was the appropriate venue.

6. Arguments by Sokrati Technologies (Para 13-15)
Sokrati’s counsel contended that a mere arbitration clause does not imply a genuine dispute. They argued Goqii’s claims were a tactic to evade legitimate dues, using multiple precedents to support the High Court's stance on dismissing meritless claims.

7. Supreme Court's Analysis (Para 16-20)
The Supreme Court emphasized that the scope of inquiry under Section 11 is limited to confirming the existence of an arbitration agreement and does not involve extensive factual analysis. It noted that the High Court exceeded its mandate by reviewing the auditor’s report in detail.

8. Conclusion and Directions (Para 21-25)
The Court set aside the High Court's order and appointed Mr. S.J. Vazifdar as the sole arbitrator. It emphasized that any further contentions may be raised before the arbitrator and clarified that the limited scope of judicial intervention should not be misused to prolong arbitration.

Ratio Decidendi

The Court reinforced that the role of referral courts under Section 11 of the Arbitration and Conciliation Act is limited to a prima facie assessment of an arbitration agreement's existence. The High Court should avoid engaging in a detailed factual inquiry and refrain from ruling on the merits of the dispute, as these are matters for the arbitral tribunal. Additionally, the Court acknowledged that frivolous or dishonest claims should be addressed during arbitration proceedings rather than being precluded by the referral court.

Subjects:

Arbitration, Commercial Dispute, Insolvency

Arbitration and Conciliation Act, 1996; Section 11; Prima Facie Test; Referral Court Jurisdiction; Judicial Review Limitations; Insolvency and Bankruptcy Code; Corporate Insolvency Resolution Process; Arbitrability of Disputes