Section 8 Application Should Be Filed Within Time Available For Filing Written Statement: Delhi High Court

The Delhi High Court has ruled that if a party fails to file an application under Section 8(1) of the Arbitration and Conciliation Act, 1996 (A&C Act) for referring the parties to arbitration within the time available for filing the first statement on the substance of the dispute, which would include a written statement in the context of a suit, the party would forfeit its right to apply under Section 8(1) of the A&C Act. The Division Bench of Justices Vibhu Bakhru and Amit Mahajan held that the amendment to Section 8 of the A&C Act by the 2015 Arbitration and Conciliation (Amendment) Act cannot be considered in isolation, in view of the fact that the Parliament has also enacted the Commercial Courts Act, 2015, which came into force on the same date as the Arbitration and Conciliation (Amendment) Act, 2015. The Court observed that by virtue of the amendments made to the Code of Civil Procedure, 1908 by the Commercial Courts Act, the Parliament has curtailed the outer time limit for filing a written statement in a commercial suit. The Court added that the said amendments were made to ensure expeditious adjudication of commercial disputes. The respondent M/S. Trisquare Switchgears Pvt. Ltd. supplied goods to the appellant M/S. SPML Infra Ltd. and raised invoices. After certain dues of the respondent remained uncleared, the respondent filed a suit for recovery before the Commercial Court. Since the appellant failed to file a Written Statement before the Commercial Court within the specified time, the Commercial Court closed the right of the appellant to file the Written Statement. Thereafter, the appellant filed an application under Section 8 of the A&C Act before the Commercial Court, relying upon the arbitration clause contained in the Purchase Order, to refer the parties to arbitration. The Commercial Court rejected the application filed by the appellant on the ground that the appellant had filed the said application after the statutory period to file its Written Statement had expired. The Commercial Court observed that the proceedings before the Commercial Court indicated the appellant's intention to participate in the same. Against this, the appellant filed an appeal before the Delhi High Court. The Court observed that Section 8 of the A&C Act, which deals with the power of the judicial authority to refer the parties to arbitration where there is an arbitration agreement, does not prescribe any specific time for filing an application under Section 8 of the A&C Act for referring the parties to arbitration. The Court added that Section 8 of the A&C Act merely provides that such an application ought to be moved not later than the submission of the first statement on the substance of the dispute. The Court noted that the expression "first statement on the substance of the dispute" is of wide import. The Court added that it would take within its sweep any statement filed to raise issues regarding the substratum of the matter in dispute, and that in the context of a civil suit, it would include the written statement as required to be presented under Order VIII Rule 1 of the Code of Civil Procedure, 1908 (CPC). The Court observed that the expression "not later than", as used in Section 8(1) of the A&C Act, makes it clear that a party would not be precluded from applying under Section 8 of the A&C Act simultaneously along with filing of a written statement, or from including such a relief in the written statement. The Court added that a party would, however, forfeit its right to apply under Section 8 of the A&C Act once it has filed the written statement. The Court ruled that the expression "first statement on the substance of the dispute" would also take within its sweep any other filing, whereby a party evinces its intention to contest the proceedings and subject itself to the jurisdiction of the court or the judicial authority. The Court added that filing of any such statement would indicate the party's intention to abandon the arbitration agreement and that it would preclude the said party to thereafter seek reference of the dispute to arbitration under Section 8 of the A&C Act. The Court held that though Section 8 of the A&C Act, as it stood prior to 23.10.2015, did not prescribe any time period within which a party must apply under Section 8 of the A&C Act, the scheme of the A&C Act and the provisions of Section 8 of the A&C Act clearly indicate that the application under Section 8 "should be made at the earliest". Hence, the Court ruled that once the proceedings before the court or the judicial authority have progressed beyond the initial stage, it would no longer be permissible for a party to turn around and seek recourse to arbitration. The Court added that once the proceedings have progressed beyond the stage of completion of pleadings, an application under Section 8 of the A&C Act would not lie. "It is...

Section 8 Application Should Be Filed Within Time Available For Filing Written Statement: Delhi High Court

Parina Katyal

Tags