Arbitrability of Disputes – What Can and Cannot Go to Arbitration?

The doctrine of arbitrability lies at the heart of the modern arbitration regime. While arbitration is premised on party autonomy, it operates within boundaries set by public policy and statutory mandates. The question of what disputes can be referred to arbitration and conversely, what cannot defines the contours of arbitral jurisdiction. Arbitrability ensures that the private dispute resolution mechanism does not encroach upon matters reserved for judicial or sovereign adjudication.

Under Indian law, this question has evolved through judicial interpretation of Section 2(3), Section 34(2)(b), and Section 48(2) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), which implicitly recognize limits on the kinds of disputes that may be settled by arbitration.

II. Conceptual Framework of Arbitrability

A. Defining Arbitrability

Arbitrability refers to the capability of a dispute to be resolved by arbitration under the applicable legal framework. According to Gary Born, “arbitrability concerns whether the subject matter of a dispute is capable of resolution by arbitration rather than by courts or other governmental authorities.”

The issue of arbitrability can arise at three levels:

1. Subject-matter arbitrability – whether the dispute’s nature permits arbitration (e.g., criminal or matrimonial matters generally do not).

2. Personal arbitrability – whether the parties have the capacity or standing to arbitrate.

3. Remedial arbitrability – whether the remedies sought are available through arbitration.

III. Statutory Context under Indian Law

The Arbitration and Conciliation Act, 1996, modeled on the UNCITRAL Model Law on International Commercial Arbitration, 1985, does not explicitly list non-arbitrable matters. Instead, Sections 34(2)(b)(i) and 48(2)(a) allow setting aside or refusing enforcement of awards if the subject matter is not capable of settlement by arbitration under Indian law.

This open-textured framework has led the Indian judiciary to evolve the “non-arbitrability test” through precedents.

IV. Judicial Evolution of Arbitrability in India

A. Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532

This case remains the cornerstone of Indian jurisprudence on arbitrability. The Supreme Court identified two dimensions:

• The arbitrability of the dispute, and

• The jurisdiction of the arbitral tribunal.

The Court drew a fundamental distinction between rights in personam (personal rights enforceable against specific individuals) and rights in rem (rights enforceable against the world). Only disputes involving rights in personam are generally arbitrable.

The Court provided an illustrative list of non-arbitrable disputes, including:

1. Matrimonial disputes,

2. Guardianship,

3. Insolvency and winding up,

4. Testamentary matters (wills and succession), and

5. Eviction or tenancy disputes governed by special statutes.

B. A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386

The Court reaffirmed Booz Allen but clarified that mere allegations of fraud do not automatically render disputes non-arbitrable. Only where fraud “vitiates the arbitration agreement itself” or “involves serious issues of criminal wrongdoing” will courts intervene.

C. Vidya Drolia v. Durga Trading Corp., (2021) 2 SCC 1

In a landmark decision, a three-judge bench revisited and consolidated the law on arbitrability. The Court adopted a fourfold test to determine when disputes are non-arbitrable:

When the cause of action and subject matter relate to actions in rem. When adjudication affects third-party rights. When the subject matter is expressly or by necessary implication non-arbitrable under statute. When it involves sovereign and public interest functions of the State.

The Court concluded that landlord-tenant disputes under the Transfer of Property Act, 1882, are arbitrable, thereby narrowing earlier exclusions.

D. N. N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1

A seven-judge bench reaffirmed the doctrine of separability and clarified that allegations of fraud no longer render disputes non-arbitrable per se. The Court held that arbitration can proceed unless the dispute involves serious criminal wrongdoing or affects public rights.⁵

V. Categories of Non-Arbitrable Disputes

Drawing from statutory interpretation and judicial precedent, the following broad categories are considered non-arbitrable in India:

Category	Illustrative Authority / Reason
Criminal matters	Not arbitrable as they involve offenses against the State and public justice. (N. N. Global Mercantile, supra note 5)
Matrimonial and family law disputes	Involve status and personal rights in rem. (Booz Allen, supra note 2)
Insolvency and bankruptcy	Governed by the Insolvency and Bankruptcy Code, 2016, affecting collective creditor rights. (Vidya Drolia, supra note 4)
Winding up and company law matters	Central Government and NCLT have exclusive jurisdiction under the Companies Act, 2013.
Trust and guardianship	Relate to fiduciary and status relationships. (Booz Allen, supra note 2)
Tenancy under rent control statutes	Non-arbitrable if statute provides exclusive jurisdiction to special courts. (Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706)
Succession and probate	Involve declarations of legal status and validity of wills.

VI. Comparative Jurisprudence

A. United States

Under the Federal Arbitration Act, 9 U.S.C. §§ 1–16 (2018), courts have upheld a presumption in favor of arbitrability, restricting exclusions to cases where Congress explicitly provides otherwise. See AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643 (1986).

B. United Kingdom

The Arbitration Act 1996 (UK) similarly adopts an expansive approach. However, certain matters—such as criminal offenses and family disputes—remain inherently non-arbitrable. See Fiona Trust & Holding Corp. v. Privalov, [2007] UKHL 40.

C. Singapore

In Larsen Oil & Gas Pte Ltd. v. Petroprod Ltd., [2011] SGCA 21, the Singapore Court of Appeal emphasised that only disputes with statutory prohibitions or public policy conflicts are excluded, reflecting a liberal pro-arbitration stance similar to Vidya Drolia.

D. International Instruments

Article V(2)(a) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, empowers contracting states to refuse enforcement of awards if “the subject matter of the difference is not capable of settlement by arbitration under the law of that country.”

VII. Contemporary Trends

1. Narrowing of Non-Arbitrable Categories: Courts globally are converging toward the principle that all private commercial disputes are presumptively arbitrable unless expressly excluded.

2. Institutional Arbitration and Complex Commercial Disputes: Arbitral institutions now handle matters involving IP licensing, shareholder rights, and competition law—once considered sensitive—subject to safeguards ensuring public policy compliance.

3. Public Policy and Arbitrability: The public policy test under Sections 34 and 48 is increasingly confined to fundamental legal principles, aligning with the 2015 and 2019 amendments to the Arbitration Act.

   
   

VIII. Critical Analysis

The arbitrability doctrine balances party autonomy with public interest. However, excessive judicial intervention has historically diluted arbitration’s efficacy in India. The post-Vidya Drolia era marks a decisive shift toward minimal curial interference and broad commercial arbitrability.

Yet, challenges persist:

• Overlapping jurisdiction between arbitral tribunals and specialised statutory bodies (e.g., NCLT, RERA).

• Inconsistent drafting of arbitration clauses that fail to distinguish commercial from regulatory disputes.

• The need for legislative clarity in defining non-arbitrable domains to avoid case-by-case uncertainty.

IX. Conclusion

Arbitrability is not merely a procedural gateway—it is a substantive safeguard ensuring that private adjudication does not undermine state sovereignty or statutory regimes. The trajectory from Booz Allen to N. N. Global Mercantile reflects India’s transition toward a pro-arbitration ecosystem, consistent with international norms.

Ultimately, the test is one of public policy restraint:

“Everything that is not forbidden by law ought to be arbitrable.”

As arbitration continues to mature as a dispute resolution mechanism, the doctrine of arbitrability will remain its most critical compass, balancing party autonomy, judicial oversight, and public legitimacy.

References

1. Gary B. Born, International Commercial Arbitration 112–14 (3d ed. 2021).

2. Booz Allen & Hamilton Inc. v. SBI Home Fin. Ltd., (2011) 5 S.C.C. 532 (India).

3. A. Ayyasamy v. A. Paramasivam, (2016) 10 S.C.C. 386 (India).

4. Vidya Drolia v. Durga Trading Corp., (2021) 2 S.C.C. 1 (India).

5. N. N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., (2023) 7 S.C.C. 1 (India).

6. Himangni Enters. v. Kamaljeet Singh Ahluwalia, (2017) 10 S.C.C. 706 (India).

7. AT&T Techs., Inc. v. Commc’ns Workers of Am., 475 U.S. 643 (1986).

8. Fiona Trust & Holding Corp. v. Privalov, [2007] UKHL 40.

9. Larsen Oil & Gas Pte Ltd. v. Petroprod Ltd., [2011] SGCA 21.

10. New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art. V(2)(a), June 10, 1958, 330 U.N.T.S. 38.