The Delhi High Court in the matter of GTM Builders and Promoters Pvt Ltd vs. Sneh Development Pvt Ltd has reiterated that mere existence of an arbitration agreement or arbitration clause would not be sufficient to refer the parties to arbitration and that even in the presence of an arbitration agreement, the court may decline to refer the parties to arbitration if the dispute does not correlate to the said agreement.

While dealing with a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“A&C Act”), the Court observed that in the guise of seeking reference to an arbitrator, the petitioner was seeking recovery of the costs that it had been directed to pay as compensation to the homebuyers by the National Consumer Disputes Redressal Commission (NCDRC).

The Delhi High Court concluded that the dispute raised by the petitioner seeking recovery of costs, neither arose out of the agreement executed between the parties for construction of a housing project, and nor was it a subject matter of a dispute which may be referred for arbitration.

While dismissing the petition, the Court remarked that while adjudicating a Section 11 petition, a court shall endeavour to evaluate whether the party has made out a prima facie arbitrable case or not.