Legal Review and Analysis of Motilal Oswal Financial Services Ltd vs Santosh Cordeiro 2026 INSC 5

Case Synopsis

Case: Motilal Oswal Financial Services Ltd. vs Santosh Cordeiro, 2026 INSC 5

Synopsis: The Supreme Court ruled that an arbitration agreement is not rendered inoperative merely because a special statute (like the Presidency Small Cause Courts Act) creates an exclusive forum for certain disputes. At the stage of appointing an arbitrator under Section 11, the court's role is confined to a prima facie check on the existence of the agreement. Challenges to arbitrability based on the exclusive jurisdiction of another court must be raised before and decided by the arbitral tribunal itself under Section 16.

1. Heading of the Judgment

Case Name: Motilal Oswal Financial Services Limited vs Santosh Cordeiro and Another
Citation: 2026 INSC 5
Court: Supreme Court of India
Judges: Justice J.B. Pardiwala and Justice K.V. Viswanathan
Date: 5th January 2026

2. Related Laws and Sections

The judgment involves the interplay between the Arbitration and Conciliation Act, 1996 and a special statute conferring exclusive jurisdiction to a specific court.

• Arbitration and Conciliation Act, 1996:
  Section 11: Appointment of arbitrators.
  Section 11(6-A): (As existing, though omitted but not notified) Limits the court's examination at the appointment stage to the "existence" of an arbitration agreement.
  Section 16: Competence of arbitral tribunal to rule on its own jurisdiction.
  Section 5: Extent of judicial intervention.

• Presidency Small Cause Courts Act, 1882:
  Section 41: Confers exclusive jurisdiction on the Small Cause Court in Mumbai to entertain suits/proceedings between licensor-licensee or landlord-tenant concerning recovery of possession or license fee/rent.

• Indian Contract Act, 1872:
  Section 28: Agreements in restraint of legal proceedings are void, but Exception 1 saves contracts to refer disputes to arbitration.

3. Basic Judgment Details

Facts of the Case

• The appellant, Motilal Oswal Financial Services Ltd., entered into a Leave and License Agreement (06.10.2017) with the respondent for premises in Malad, Mumbai. The agreement contained an arbitration clause (Clause 33).

• Due to the COVID-19 pandemic, the appellant vacated the premises in September 2020 before the lock-in period expired.

• The respondent invoked arbitration, claiming arrears of license fees for the unexpired lock-in period.

• The appellant opposed the arbitration under Section 11 of the A&C Act, contending that the dispute was non-arbitrable due to the exclusive jurisdiction conferred on the Small Causes Court by Section 41 of the 1882 Act.

• The High Court appointed an arbitrator, primarily on a factual error regarding the location's jurisdiction. The arbitrator also dismissed the appellant's jurisdictional challenge under Section 16.

Issues Before the Supreme Court

1. Whether, in light of Section 41 of the Presidency Small Cause Courts Act, 1882, the dispute was non-arbitrable, rendering the arbitration clause inoperative?

2. What is the correct scope of examination for a court under Section 11(6-A) of the A&C Act when a challenge to arbitrability is based on a special statute conferring exclusive jurisdiction on a specific court?

Ratio Decidendi (Court’s Reasoning)

• Limited Scope of Examination under Section 11(6-A): The Supreme Court, relying on the seven-judge bench decision in In re Interplay (2024) 6 SCC 1, reaffirmed that at the arbitrator appointment stage under Section 11, the court's role is confined to a prima facie examination of the existence of an arbitration agreement. A deeper inquiry into validity or non-arbitrability is for the arbitral tribunal under Section 16.

• Special Statute Does Not Implicitly Bar Arbitration: The Court distinguished the Full Bench ruling of the Bombay High Court in Central Warehousing Corpn. (2009). It held that the mere creation of a special forum (Small Causes Court) with exclusive jurisdiction does not, by itself, imply a legislative intent to bar arbitration. The Court cited Vidya Drolia v. Durga Trading Corpn. (2021), which stated that "conferment of jurisdiction on a specific court... may not be the decisive test to answer... whether arbitrability is impliedly barred."

• Contextual Distinction from Precedent: The Court noted that Central Warehousing involved a party in possession seeking declaratory relief, a scenario different from the present case, which involved a purely monetary claim for alleged arrears after possession had been surrendered.

• Arbitration Agreement Saved by Contract Act: The Court highlighted Section 28 of the Indian Contract Act, 1872, and its Exception 1, which explicitly saves contracts to refer disputes to arbitration from being void. This provision was not considered in the Central Warehousing judgment.

• Doctrine of Competence-Competence: The Court emphasized that questions regarding the validity of the arbitration agreement or the true nature of the dispute (whether it is a 'debt' or 'license fee' recoverable only by the Small Causes Court) are matters for the arbitral tribunal to decide first under Section 16. The appropriate remedy against such a decision is under Section 34.

4. Core Principle of the Judgment

Title: The Primacy of Arbitration Agreements and the Prima Facie Test under Section 11

Main Issue

The core legal issue was determining the threshold for denying a reference to arbitration when a party contends that a special statute (here, the Presidency Small Cause Courts Act, 1882) has created an exclusive judicial forum, thereby rendering the dispute non-arbitrable by implied legislative intent.

Supreme Court’s Analysis and Holding

The Supreme Court delivered a judgment that reinforces the pro-arbitration policy of the 1996 Act and firmly circumscribes the power of courts at the referral stage.

The Court held that the existence of a special statute conferring exclusive jurisdiction on a designated court does not, ipso facto, nullify an arbitration clause or render the dispute non-arbitrable. To hold otherwise would allow parties to easily circumvent arbitration agreements by raising jurisdictional pleas based on forum-specific statutes.

The Court clarified the hierarchical process for addressing such challenges:

1. Stage 1 (Court under Section 11): The court must only perform a prima facie review to see if an arbitration agreement exists on the face of the contract. It does not adjudicate on whether the specific dispute is actually arbitrable under other laws. A plea of non-arbitrability based on a special statute is not a valid ground to refuse the appointment of an arbitrator at this threshold stage.

2. Stage 2 (Arbitral Tribunal under Section 16): The arbitral tribunal has the primary jurisdiction (competence-competence) to rule on its own jurisdiction, including objections that the dispute is not arbitrable due to the exclusive jurisdiction of another forum.

3. Stage 3 (Court under Section 34): If the tribunal rejects the jurisdictional challenge and proceeds to make an award, the aggrieved party can then challenge the award under Section 34, including on the ground that the dispute was not capable of settlement by arbitration.

This structured approach ensures that the arbitral tribunal gets the first opportunity to decide on its jurisdiction, in line with the doctrine of competence-competence, while preserving the right of judicial review at the award-enforcement stage.

5. Final Outcome

The Supreme Court dismissed the appeal. It upheld the High Court's order appointing the arbitrator. The Court clarified that the arbitration clause (Clause 33) was valid and existed for the purpose of Section 11(6-A). The arbitral tribunal was directed to proceed with the adjudication and conclude proceedings within six months.

6. MCQ Questions Based on the Judgment

Question 1: In Motilal Oswal Financial Services Ltd. vs Santosh Cordeiro (2026 INSC 5), the Supreme Court held that a challenge to arbitrability based on Section 41 of the Presidency Small Cause Courts Act, 1882, should primarily be decided by?
A. The High Court under its writ jurisdiction.
B. The Supreme Court at the special leave petition stage.
C. The Arbitral Tribunal under Section 16 of the A&C Act.
D. The Small Causes Court before arbitration commences.

Question 2: According to the judgment, what is the limited scope of examination for a court under Section 11(6-A) of the Arbitration and Conciliation Act, 1996, when considering an application for appointing an arbitrator?
A. A full trial on the merits of the substantive dispute.
B. A prima facie examination of the existence of an arbitration agreement.
C. A conclusive determination on whether the dispute is arbitrable under other statutes.
D. An examination of the financial credibility of the parties.