5 January 2026: The Supreme Court of India has dismissed a civil appeal filed by Motilal Oswal Financial Services Limited, holding that an arbitration clause in a leave and licence agreement remains valid despite objections under the Presidency Small Cause Courts Act, 1882.
The ruling came in a long-running commercial dispute over a Mumbai office premises, where the company argued that the matter could not be decided through arbitration.
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Background of the Case
The dispute traces back to a leave and licence agreement executed in October 2017 for commercial premises located in Malad (West), Mumbai. The agreement was initially for 60 months but was later extended through an addendum in March 2020, increasing the term to 96 months with a lock-in period of 72 months.
Motilal Oswal claimed that due to the COVID-19 pandemic, it was unable to continue using the premises and handed over vacant possession in September 2020, invoking the force majeure clause. The company also sought a refund of its ₹10 lakh security deposit.
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However, the licensor, Santosh Cordeiro, raised a demand of over ₹94 lakh, alleging unpaid licence fees for the remaining lock-in period.
When the licensor invoked arbitration under the agreement, Motilal Oswal objected, arguing that disputes between licensors and licensees fall exclusively within the jurisdiction of the Small Causes Court under Section 41 of the 1882 Act.
In May 2024, the Bombay High Court appointed an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996. Motilal Oswal challenged this order before the Supreme Court, insisting that such disputes were non-arbitrable by law.
The company relied heavily on earlier rulings suggesting that parties cannot bypass the exclusive jurisdiction of special courts through arbitration clauses.
Court’s Observations
A Bench comprising Justices J.B. Pardiwala and K.V. Viswanathan clarified that at the stage of appointing an arbitrator, courts are required to examine only one issue - whether an arbitration agreement exists.
“The scope of examination under Section 11 is limited,” the Bench observed, noting that courts should not conduct a detailed inquiry into the nature of claims or possible statutory bars at this stage.
The judges also pointed out that possession of the premises had already been handed back in 2020. The dispute before the arbitrator was essentially about monetary claims - not recovery of possession.
The Court further explained that Section 41 of the Presidency Small Cause Courts Act merely confers jurisdiction on a particular court and does not automatically invalidate arbitration clauses in contracts.
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“The mere existence of a special forum does not, by itself, bar arbitration,” the Bench remarked.
Rejecting the appellant’s reliance on older precedents, the Supreme Court clarified that the issue of whether the claim is a “debt” or “licence fee” can be decided by the arbitral tribunal itself under Section 16 of the Arbitration Act.
The judges made it clear that questions of arbitrability, validity of claims, and statutory bars are best left to the arbitrator at the appropriate stage.
Decision
Dismissing the appeal, the Supreme Court held that a valid arbitration agreement exists between the parties and that the High Court was correct in appointing an arbitrator.
“The appeal is dismissed,” the Court ordered, directing the arbitrator to conclude the proceedings within six months. No order as to costs was passed.
Case Title: Motilal Oswal Financial Services Ltd. v. Santosh Cordeiro & Anr.
Case No.: Civil Appeal No. 36 of 2026
Case Type: Civil Appeal (Arbitration Matter)
Decision Date: 5 January 2026
