The High Court of Delhi has held that a party cannot be deemed to have waived its right to invoke arbitration merely because it has filed a written statement in respect of disputes that are not covered under the agreement.
The Single Bench of Justice Sanjeev Sachdeva held that a suit in respect of a dispute that is not governed by the arbitration agreement is not an impediment to the invocation of the arbitration.
The parties entered into an agreement dated 03.05.2014 wherein the petitioner was, inter-alia, to provide education services besides sale of certain hardware which was specified in the said agreements. Subsequently, a purchase order was placed on the petitioner to supply laptops.
A dispute arose between the parties and the respondent issued a letter dated 26.04.2017 alleging deficiency in services rendered by the petitioner and intimated to the petitioner that the agreement would stand terminated with effect from May 2017. The respondent also filed a suit for recovery of money qua the purchase order for the supply of laptops.
The Contention Of The Parties
The petitioner sought the appointment of an arbitrator on the following grounds:
- A dispute has arisen between the parties and the agreement has an arbitration clause; therefore, the Court shall appoint the arbitrator.
- The written statement filed by the petitioner is in respect of a different agreement not connected with the agreement in question.
The respondent raised a two-fold objection to the maintainability of the application on the following grounds:
- The respondent has filed a civil suit for the recovery of money for the payments made to the petitioner towards the purchase of laptops and the petitioner has filed a written statement without raising a plea that the dispute is covered by the arbitration agreements and has not sought reference of disputes to arbitration and as such petitioner is prohibited from invoking Section 11 of Arbitration & Conciliation Act, 1996 and is deemed to have waived his rights.
- The Claims of the petitioner are ex-facie barred by the limitation as the last payment was made way back in 2016.
Analysis By The Court
The Court observed that the civil suit between the parties is in respect of the purchase order of laptops and the said transaction is not covered under the agreement in question, therefore, a party cannot be deemed to have waived off its right to invoke arbitration merely because it has filed a written statement in respect of disputes that are not covered under the agreement.
The Court observed further that the plain of the suit has no reference to the agreement in question and there is no connection to show that the laptops that were supplied were a part of the agreements so as to make the said claim part of the disputes between the parties that emanate from the agreements.
The Court rejected the argument of the respondent that the claims are ex-facie barred on the ground that the termination notice was issued only in April 2017 effective from May 2017 and the application was filed on 07.12.2021, therefore, in view of the Supreme Court orders extending the Limitation Period, the invocation is within time.
Accordingly, the Court allowed the application and referred the parties to DIAC who would appoint the arbitrator.
Case Title: Extramarks Education India Private Limited V. MES Central School, ARB. P. 327 OF 2022
Citation: 2022 LiveLaw (Del) 438
Counsel for the Petitioner: Mr. Zeeshan Hashmi and Mr. Ankit Parashar, Advocates
Counsel for the Respondent: Mr. M.R. Shamshad, Mr. A.K. Suri, Mr. Arijit Sarkar and Ms. Nabeela Jamil, Advocates