Would a party forfeit its right to apply U/S 8(1) of the arbitration Act if it fails to apply U/S 8(1) within the time available for filing the written statement?

  The change in the language of Section 8(1) of the A&C Act ismaterial. Whereas prior to the 2015 Amendment, Sub-section (1) of Section 8 of the A&C Act used the expression “not later than when submitting his first statement on the substance of the dispute”. Subsection (1) of Section 8, as substituted, uses the expression “not later than the date of submitting his first statement on the substance of the dispute”. The legislative intent to introduce the words “not later than the date of” clearly stipulates a framework of time within which an application under Section 8(1) of the A&C Act can be made. {Para 22}

25. As stated above, a written statement would also fall within the sweep of expression “statement on the substance of the dispute” as used in Section 8(1) of the A&C Act. The introduction of the expression “the date of” in the context of the suit would necessarily have to be co-related with the time available or granted for filing of a written statement. The legislative intent of introducing the expression “the date of”, when read with the contemporaneous amendments to Order VIII Rule 1 of the CPC by virtue of the Commercial Courts Act, 2015, is quite clear; it is to introduce the precise time frame within which an application under Section 8(1) of the A&C Act could be filed.

26. Resultantly, if a party fails to file an application under Section 8(1) of the A&C Act for referring the parties to arbitration within the time available or granted 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.

IN THE HIGH COURT OF DELHI AT NEW DELHI

FAO(COMM) 81/2022 and CM No. 24865/2022

M/S SPML INFRA LTD. Vs M/S. TRISQUARE SWITCHGEARS

PVT. LTD. 

CORAM:

HON'BLE MR. JUSTICE VIBHU BAKHRU

HON'BLE MR. JUSTICE AMIT MAHAJAN

Author: VIBHU BAKHRU, J.

Judgment delivered on: 6th July 2022

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When should arbitrator decide the issue of novation of contract?

Learned counsel for the plaintiff has pointed out that the plaintiff and the defendant at the time of execution of the Lease Deed and the Maintenance Agreement were family held companies. The family has exited from the plaintiff company sometimes in September 2018 and a new management has taken over charge of the plaintiff company. It is strongly urged that there is a novation of Agreement and the original Lease Deed and the Maintenance Agreement dated 21.02.2017 stand superseded and novated in view of the terms and conditions settled upon in the emails dated 26.09.2018 and 15.10.2018. In the novated contract, there is no arbitration agreement and hence, the present application is misplaced.

16. It undoubtedly follows that in the original lease deed and the maintenance agreement, the parties have agreed to settle their disputes through arbitration.

17. I may now look at the defence of the plaintiff to the present application. It has strongly been urged that on account of the subsequent novation of the contract through exchange of the emails dated 26.09.2018 and 15.10.2018, a new contract has come into being superseding the Lease Deed dated 21.02.2017 and the Maintenance Agreement of the same date.

21. As noted above, the submission of the plaintiff is that on account of these two communications exchanged between the parties, the old contract got novated and was substituted by a new contract which does not have an arbitration agreement.

22. In this context, reference may be had to Section 62 of the Contract Act which defines novation as follows:-

“62. Effect of novation, rescission, and alteration of contract.—If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

23. In this context, reference may be had to the judgment of the Supreme Court in Lata Construction and Ors. vs. Dr.Rameshchandra Ramnikalal Shah and Anr., (2000) 1 SCC 586 where the Supreme Court held as follows:-

“9. We may, at this stage, refer to the provisions of Section 62 of the Indian Contract Act which provides as under: “62. If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.” This provision contains the principle of “novation” of contract. 10. One of the essential requirements of “novation”, as contemplated by Section 62, is that there should be complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties. A substituted contract should rescind or alter or extinguish the previous contract. But if the terms of the two contracts are inconsistent and they cannot stand together, the subsequent contract cannot be said to be in substitution of the earlier contract.”

24. Hence, a novation takes place only when there is a complete substitution of a new contract in place of the old. 

In the present case, in my opinion, as the facts noted above show, it cannot be prima facie said that there is a completely new contract and that the old registered Lease Deed dated 21.02.2017 read with the Maintenance Agreement of the same date have been novated and substituted by a completely new contract. The e-mail dated 15.10.2018 sent by the defendant merely agrees to reduction of rent. It does not specifically state that all the terms and conditions of the Lease Deed and the Maintenance Agreement stand superseded or novated. The issue would require deeper consideration and is best left to the arbitral tribunal to adjudicate upon.

IN THE HIGH COURT OF DELHI AT NEW DELHI 

 Pronounced on: 25.01.2021 

 CS(COMM) 377/2020 

KNOWLEDGE PODIUM SYSTEMS PVT. LTD. Vs S M PROFESSIONAL SERVICES PVT. LTD.

CORAM: HON'BLE MR. JUSTICE JAYANT NATH 

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Supreme Court: Parameters which the court should follow while referring the dispute to arbitration

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2402 of 2019, 

Decided On: 14.12.2020

Vidya Drolia and Ors. Vs.  Durga Trading Corporation and Ors.

Hon'ble Judges/Coram:

N.V. Ramana, Sanjiv Khanna and Krishna Murari, JJ.

Citation: MANU/SC/0939/2020

Read full judgment here: Click here

 The courts at the referral stage do not perform ministerial functions. They exercise and perform judicial functions when they decide objections in terms of Sections 8 and 11 of the Arbitration Act. Section 8 prescribes the courts to refer the parties to arbitration, if the action brought is the subject of an arbitration agreement, unless it finds that prima facie no valid arbitration agreement exists. 

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Supreme Court: Court can refer Suit for cancellation of the deed on the ground of fraud U/S 31 of the Specific Relief Act to Arbitration

1) It is submitted that while considering the application

u/s 8 of Arbitration and Conciliation Act, 1996, the court

has to consider an issue that whether there exists any

Arbitration Agreement between the parties. Such right

is certainly vested in Civil Court. The Plaintiff is

challenging the legality of agreement dated 20.05.2006

on the ground that the same is obtained by fraud and

is therefore seeking further declaration that the said

agreement is null and ab initio void. As such, the very

Arbitration clause as contained in the said agreement

is not enforceable. In spite of the fact that Section 16

of the said Act empowers the Arbitral Tribunal to

decide its own jurisdiction in view of particular

circumstances narrated in the plaint, the present

application deserves to be rejected.”

v. By a judgment dated 19.07.2011, the Additional Judge, Small

Causes Court, Pune, after hearing both sides, held as follows:

“11. After perusing the above mentioned cited cases, it

shows that when there is a clause of arbitration it is

mandated on the Civil Court to refer the dispute and

parties for arbitration as per agreement. In present

case the plaintiffs have materially contention about

playing fraud by Defendant No.3 but there is no any

contents in agreement as alleged by plaintiff in plaint

about keeping faith on Defendant No.3. It shows about

signing by Defendant No.3 for agreement dated

20.05.2006 and he was also party to said agreement.

The plaintiff alleged about playing fraud after resigning

by Defendant No.3 from partnership firm of Defendant

No.1 and signing the confirmation deed dated

13.07.2006 but as per Partnership Act remedy is

provided. Moreover, from the documents, it shows that

the confirmation deed dated 13.07.2007 was executed

by Defendant No.3 as Authorized Partner of M/s

Regency Mahavir Properties and another partner Dilip

Jain. The fraud alleged by the plaintiff is in respect of

the documents for which the remedy is also provided.

After considering the arbitration clause I find that the

application is to be allowed and the disputes have to

be referred for arbitration. Hence, I pass the following

order:

1) Application is allowed.

2) The plaintiff is directed to get the alleged dispute

resolved through the process of arbitration by

referring the plaintiff to invoke the process of

arbitration as per the arbitration clause 14

mentioned in the agreement dated 20.05.2006.”

Finding thus, the learned Judge referred the parties to arbitration.

2) High court dismissed writ petition with the result that the

parties stood referred to arbitration.

3) When sections 34 and 35 are seen, the position becomes even

clearer. Unlike section 31, under section 34, any person entitled to

any legal character may institute a suit for a declaration that he is

so entitled. Considering that it is possible to argue on a reading of

this provision that the legal character so declared may be against

the entire world, section 35 follows, making it clear that such

declaration is binding only on the parties to the suit and persons

claiming through them, respectively. This is for the reason that

under section 4 of the Specific Relief Act, specific relief is granted

only for the purpose of enforcing individual civil rights. The principle

contained in section 4 permeates the entire Act, and it would be

most incongruous to say that every other provision of the Specific

Relief Act refers to in personam actions, section 31 alone being out

of step, i.e., referring to in rem actions.

25. The reasoning in the aforesaid judgment would again expose the

incongruous result of section 31 of the Specific Relief Act being

held to be an in rem provision. When it comes to cancellation of a deed by an executant to the document, such person can approach the Court under section 31, but when it comes to cancellation of a deed by a non-executant, the non-executant must approach the

Court under section 34 of the Specific Relief Act, 1963.

Cancellation of the very same deed, therefore, by a non-executant would be an action in personam since a suit has to be filed under section 34. However, cancellation of the same deed by an

executant of the deed, being under section 31, would somehow

convert the suit into a suit being in rem. All these anomalies only

highlight the impossibility of holding that an action instituted under

section 31 of the Specific Relief Act, 1963 is an action in rem.

26. Given this finding of law, it is clear that the judgments of the District

Court and the High Court in this case need no interference. 

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5147 OF 2016

DECCAN PAPER MILLS CO. LTD. Vs  REGENCY MAHAVIR PROPERTIES 

R.F. Nariman, J.
Dated:August 19, 2020.

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Whether the dispute between licensor and licensee will be arbitrable even if the defendant has not filed application U/S 8 of Arbitration Act?

Objection of learned counsel for the plaintiffs that since no application under Section 8 of the Act has been filed by the defendant, hence the plea for rejection of the plaint cannot be accepted, deserves to be rejected in view of the decision of this Court dated 15th January, 2018 in CS (SO) No. 125/2017 Parasramka Holdings Pvt. Ltd. vs. Ambience Pvt. Ltd. and another, wherein this Court held that party invoking the arbitration clause does not have to file a formal application seeking a specific prayer for reference of the dispute to arbitration as long as it raises an objection in the written statement that the present suit is not maintainable in view of the arbitration clause in the agreement.

33. Keeping in view the aforesaid judgments as well as the judgment in Eastern Medikt (supra) and judgments of the learned Single Judge and Division Bench of this Court in Sharad P. Jagtiani (supra), this Court is of the view that the party invoking the arbitration clause does not have to file a formal application seeking a specific prayer for reference of the dispute to arbitration as long as it raises an objection in the written statement that the present suit is not maintainable in view of the arbitration clause in the agreement.

57. In the present case the defendant on the first day of the appearance itself even before filing of the written statement has raised the objection under Section 8 of the Arbitration and Conciliation Act and hence this objection cannot be summarily rejected on the ground that no application has been filed by the defendant under Section 8 of the Act.

In view of the discussion above, prima facie the plaintiffs have a right in their favour and interest in land which is more than that of a lessee or at least that of an irrevocable licensee. In MANU/SC/0359/1999 : (1999) 5 SCC 651 Olympus Superstructures vs. Meena Vijay, Supreme Court held that the relief of specific performance of an agreement can be awarded by an arbitrator. Thus if the arbitrator can direct creation of an interest in a property, the arbitrator can also award declaration of the interest of the parties in the property. Further, as held in Booz Allen in paragraph 46, an agreement to sell or an agreement to mortgage does not involved any transfer of right in rem but creates a personal obligation and, therefore, the claim for specific performance will be arbitrable contrary to a mortgage which is a transfer of a right in rem. Moreover, as noted in Vidya Drolia, there is nothing in the Transfer of Property Act or the Specific Relief Act which forbids the rights of the parties being decided by arbitration. The rights of the plaintiffs herein at best governed by the Transfer of Property Act or the Specific Relief Act, or that of an irrevocable licensee under the Easements Act can still be decided in arbitration. Consequently the present suits are not maintainable and the parties may avail the remedy of arbitration.

IN THE HIGH COURT OF DELHI

CS (COMM) 184/2020, 

Decided On: 21.07.2020

 Dharamvir Khosla  Vs. Asian Hotels (North) Ltd.

Hon'ble Judges/Coram:

Mukta Gupta, J.

Citation: MANU/DE/1394/2020

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Whether dispute involving simple allegation of fraud are arbitrable?

 In view of our aforesaid discussions, we are of

the opinion that mere allegation of fraud simplicitor

may not be a ground to nullify the effect of

arbitration agreement between the parties. It is only

in those cases where the Court, while dealing with

Section 8 of the Act, finds that there are very

serious allegations of fraud which make a virtual

case of criminal offence or where allegations of

fraud are so complicated that it becomes absolutely

essential that such complex issues can be decided

only by civil court on the appreciation of the

voluminous evidence that needs to be produced, the

Court can sidetrack the agreement by dismissing

application under Section 8 and proceed with the suit

on merits. It can be so done also in those cases

where there are serious allegations of

forgery/fabrication of documents in support of the

plea of fraud or where fraud is alleged against the

arbitration provision itself or is of such a nature

that permeates the entire contract, including the

agreement to arbitrate, meaning thereby in those

cases where fraud goes to the validity of the

contract itself of the entire contract which contains

the arbitration clause or the validity of the

arbitration clause itself. Reverse position thereof

would be that where there are simple allegations of

fraud touching upon the internal affairs of the party

inter se and it has no implication in the public

domain, the arbitration clause need not be avoided

and the parties can be relegated to arbitration.

While dealing with such an issue in an application

under Section 8 of the Act, the focus of the Court

has to be on the question as to whether jurisdiction

of the Court has been ousted instead of focusing on

the issue as to whether the Court has jurisdiction or

not. It has to be kept in mind that insofar as the

statutory scheme of the Act is concerned, it does not

specifically exclude any category of cases as nonarbitrable.

Such categories of non-arbitrable

subjects are carved out by the Courts, keeping in

mind the principle of common law that certain

disputes which are of public nature, etc. are not

capable of adjudication and settlement by arbitration

and for resolution of such disputes, Courts, i.e.

public fora, are better suited than a private forum

of arbitration. Therefore, the inquiry of the Court,

while dealing with an application under Section 8 of

the Act, should be on the aforesaid aspect, viz.

whether the nature of dispute is such that it cannot

be referred to arbitration, even if there is an

arbitration agreement between the parties. When the

case of fraud is set up by one of the parties and on

that basis that party wants to wriggle out of that

arbitration agreement, a strict and meticulous

inquiry into the allegations of fraud is needed and

only when the Court is satisfied that the allegations

are of serious and complicated nature that it would

be more appropriate for the Court to deal with the

subject matter rather than relegating the parties to

arbitration, then alone such an application under

Section 8 should be rejected.

The principles of law laid down in this appeal make a

distinction between serious allegations of

forgery/fabrication in support of the plea of fraud as

opposed to “simple allegations”. Two working tests laid

down in paragraph 25 are : (1) does this plea permeate the

entire contract and above all, the agreement of arbitration,

rendering it void, or (2) whether the allegations of fraud

touch upon the internal affairs of the parties inter se

having no implication in the public domain.

Judged by these two tests, it is clear that this is a

case which falls on the side of “simple allegations” as

there is no allegation of fraud which would vitiate the

partnership deed as a whole or, in particular, the

arbitration clause concerned in the said deed. Secondly,

all the allegations made which have been relied upon by the

learned counsel appearing on behalf of the respondent,

pertain to the affairs of the partnership and siphoning of

funds therefrom and not to any matter in the public domain.

This being the case, we are of the view that the

disputes raised between the parties are arbitrable and,

hence, a Section 11 application under the Arbitration Act

would be maintainable.

‘REPORTABLE’

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7005 OF 2019

RASHID RAZA Vs  SADAF AKHTAR 

R. F. NARIMAN, J.

Dated:September 04, 2019.

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Whether court refer dispute of interconnected agreements to arbitration if arbitration clause is in principal agreement?

A non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court answers the same in the affirmative, the reference of even non-signatory parties would fall within the exception afore-discussed.

21. In a case like the present one, though there are different agreements involving several parties, as discussed above, it is a single commercial project namely operating a 2 MWp Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh. Commissioning of the Solar Plant, which is the commercial understanding between the parties and it has been effected through several agreements. The agreement-Equipment Lease Agreement (14.03.2012) for commissioning of the Solar Plant is the principal/main agreement. The two agreements of Rishabh with Juwi India:(i) Equipment and Material Supply Contract (01.02.2012); and (ii) Engineering, Installation and Commissioning Contract (01.02.2012) and the Rishabh's Sale and Purchase Agreement with Astonfield (05.03.2012) are ancillary agreements which led to the main purpose of commissioning the Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh by Dante Energy (Lessee). Even though, the Sale and Purchase Agreement (05.03.2012) between Rishabh and Astonfield does not contain arbitration clause, it is integrally connected with the commissioning of the Solar Plant at Dongri, Raksa, District Jhansi, U.P. by Dante Energy. Juwi India, even though, not a party to the suit and even though, Astonfield and Appellant No. 1-Ameet Lalchand Shah are not signatories to the main agreement viz. Equipment Lease Agreement (14.03.2012), it is a commercial transaction integrally connected with commissioning of Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, U.P. Be it noted, as per clause(v) of Article 4, parties have agreed that the entire risk, cost of the delivery and installation shall be at the cost of the Rishabh (Lessor). Here again, we may recapitulate that engineering and installation is to be done by Juwi India. What is evident from the facts and intention of the parties is to facilitate procurement of equipments, sale and purchase of equipments, installation and leasing out the equipments to Dante Energy. The dispute between the parties to various agreements could be resolved only by referring all the four agreements and the parties thereon to arbitration.

22. Parties to the agreements namely Rishabh and Juwi India:(i) Equipment and Material Supply Agreement; and (ii) Engineering, Installation and Commissioning Contract and the parties to Sale and Purchase Agreement between Rishabh and Astonfield are one and the same as that of the parties in the main agreement namely Equipment Lease Agreement (14.03.2012). All the four agreements are interconnected. This is a case where several parties are involved in a single commercial project (Solar Plant at Dongri) executed through several agreements/contracts. In such a case, all the parties can be covered by the arbitration Clause in the main agreement i.e. Equipment Lease Agreement (14.03.2012).

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 4690 of 2018 (Arising out of SLP (C) No. 16789 of 2017)

Decided On: 03.05.2018

 Ameet Lalchand Shah Vs. Rishabh Enterprises

Hon'ble Judges/Coram:

Ranjan Gogoi and R. Banumathi, JJ.

Citation: (2018) 15 SCC 678

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Whether plaintiff can file application for reference of case to arbitration?

 A perusal of the above provisions would indicate that the application under Section 8(1) of the Act is envisaged by the defendant only and that sub-section (3) provides that even if application has been made under sub-section (1) and the issue is pending before the judicial authority, the arbitration may be commenced, continued and arbitral award could be made. The said situation can only arise once an application under Section 8(1) of the Act, 1996 is pending before the judicial authority before which action is brought and the plaintiff itself after having filed the suit, without there being any application by the defendant under Section 8 of the Act, cannot seek reference of the action/dispute to arbitration. The legal position regarding filing of the application under Section 8 of the Act, 1996 is clear as laid down in Ardy International (P) Ltd. vs. Inspiration Clothes & U & Anr. : (2006) 1 SCC 417, wherein, the Hon'ble Supreme Court inter alia laid down as under:

"The situation contemplated by Section 8 can arise only at the first instance of an opponent and defendant in a judicial proceeding, or, at the highest, suo moto at the instance of the judicial authority, when the judicial authority comes to know of the existence of an arbitration agreement."

It is also well settled that so long as the defendant has chosen not to file an application under Section 8, the civil court is entitled to proceed to deal with the matters at issue in the suit notwithstanding the existence of an arbitration clause in the contract.

The observations made by Hon'ble Supreme Court cannot be interpreted to mean that even after filing of the suit pertaining to a contract containing arbitration clause and wherein no application under Section 8 of the Act, 1996 is pending, the plaintiff itself can file an application under Section 11 of the Act seeking reference of the dispute to arbitration, as sought to be projected by learned counsel for the applicant.

REPORTABLE

Rajasthan High Court - Jodhpur

M/S Damani Shipping Pvt. Ltd vs M/S Hindustan Zinc Ltd. Co on 23 August, 2018

Bench: Arun Bhansali

Citation: AIR 2018 Raj 168

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When court should not refer dispute to arbitration if defendant takes all objections on merits of case?

Having thus answered the question in law, let us now see if the affidavit of the Defendant in reply to the summons for judgment amounts to such 'first statement'. The affidavit in reply takes all objections on merits of the case, and does not object to the jurisdiction of the Court on the ground of existence of the arbitration agreement. It is thus a 'first statement' on the substance of the dispute within the meaning of Section 8 of the Act. Learned Counsel for the Applicant-Defendant submits that the Defendant has averred that the Court has no jurisdiction. That is immaterial. What the affidavit does not indicate is the Defendant's objection to the Court exercising its jurisdiction in the matter in view of the arbitration agreement. The Defendant does not make it clear that he "does not want the Civil Court to adjudicate upon his rights or liabilities, but he wants the domestic forum to decide that." Here, the Defendant has made it amply clear that he intends to defend the matter in this Court; he indicates his defences, may be including a defence of jurisdiction; and based on these defences, seeks leave of the Court to defend the suit. That is clearly making a 'first statement' on the substance of the dispute. The stage for making an application under Section 8 is clearly crossed.

IN THE HIGH COURT OF BOMBAY

Summons for Judgment No. 51 of 2017 in Commercial Suit No. 243 of 2017 and Notice of Motion No. 126 of 2018 in Commercial Suit No. 243 of 2017

Decided On: 12.03.2018

Drive India Enterprise Solutions Ltd. Vs. Haier Telecom (India) Pvt. Ltd.

Hon'ble Judges/Coram:

S.C. Gupte, J.

Citation: 2018(3) MHLJ 60

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Whether court is barred from passing interlocutory orders if application U/S 8 of Arbitration Act is filed?

Till pendency of the application under
section 8 of the Arbitration Act for supplemental and incidental proceedings
including passing of interlocutory orders, there is no jurisdictional bar to
pass orders and directions. There is nothing to show that miscellaneous and
incidental proceedings cannot go on before the court.
29. Even a reading of section 5 and section 8 of the Arbitration Act does
not show that on a mere filing of an application under section 8 of the
arbitration act the court loses its jurisdiction to pass any further orders either
in the main proceedings or in the supplementary or incidental proceedings in
the said suit. No such interpretation can follow from a reading of section 5
and section 8 of the arbitration act.
IN THE HIGH COURT OF DELHI AT NEW DELHI

Pronounced on: 21.05.2018
 CO.A(SB) 26/2008

MR. DEEPAK KHOSLA  Vs UNION OF INDIA & ORS. 

CORAM:
HON’BLE MR. JUSTICE JAYANT NATH

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Whether Incorrect Reference Regarding Applicability Of Indian Arbitration Act, 1940 Would Render Entire Arbitration Agreement Invalid?

Viewed thus, the High Court was not right in observing that there
could be no arbitration at all in the present case. In situations where the
relevant clause made reference to the applicability of “the provisions of the
Indian Arbitration Act and Rules made thereunder” as was the case in
MMTC Ltd. (Supra), on the strength of Section 85(2)(a) the governing
provisions in respect of arbitral proceedings which had not commenced
before 1996 had came into force would be those of 1996 Act alone. On the
same reasoning even if an arbitration agreement entered into after 1996 Act
had come into force were to make a reference to the applicable provisions
of those under Indian Arbitration Act or 1940 Act, such stipulation would be
of no consequence and the matter must be governed under provisions of
1996 Act. An incorrect reference or recital regarding applicability of 1940
Act would not render the entire arbitration agreement invalid. Such
stipulation will have to be read in the light of Section 85 of 1996 Act and in
our view, principles governing such relationship have to be under and in tune
with 1996 Act. As observed earlier, the requirements of “arbitration
agreement” as stipulated in Section 7 of 1996 Act stand completely satisfied
in the present matter nor has there been any suggestion that the agreement
stood vitiated on account of any circumstances in the realm of undue
influence, fraud, coercion or misrepresentation. In the circumstances, the
attempt must be to sub-serve the intent of the parties to resolve the disputes
by alternative disputes resolution mechanism. The High Court was,
therefore, completely in error.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.4664 OF 2018
(Arising out of SLP (Civil) No.14589 of 2016)

Purushottam s/o Tulsiram Badwaik  V Anil & Ors.

Uday Umesh Lalit, J.
Dated:May 2, 2018

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Whether civil court can refer dispute to arbitration if agreement having arbitration clause is terminated by mutual consent?

In P. Anand Gajapathi Raju and Ors. v. P.V.G. Raju (Dead) and Ors. MANU/SC/0281/2000 : (2000) 4 SCC 539, it was held as under:

5. The conditions which are required to be satisfied under Sub-sections (1) and (2) of Section 8 before the court can exercise its powers are:

(1) there is an arbitration agreement;

(2) a party to the agreement brings an action in the court against the other party;

(3) subject-matter of the action is the same as the subject-matter of the arbitration agreement;

(4) the other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute.

In view of the above, where an agreement is terminated by one party on account of the breach committed by the other, particularly, in a case where the Clause is framed in wide and general terms, merely because agreement has come to an end by its termination by mutual consent, the arbitration Clause does not get perished nor is rendered inoperative. This Court, in the case of P. Anand Gajapathi Raju (supra), has held that the language of Section 8 is peremptory in nature. Therefore, in cases where there is an arbitration Clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, it is clear that in an agreement between the parties before the civil court, if there is a Clause for arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator.

27. In view of the above, we are of the considered opinion that in the present case, the prerequisites for an application Under Section 8 are fulfilled, viz., there is an arbitration agreement; the party to the agreement brings an action in the court against the other party; the subject matter of the action is the same as the subject-matter of the arbitration agreement; and the other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. We have come to the conclusion that the civil court had no jurisdiction to entertain a suit after an application Under Section 8 of the Act is made for arbitration. In such a situation, refusal to refer the dispute to arbitration would amount to failure of justice as also causing irreparable injury to the Defendant.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 8837 of 2016

Decided On: 10.04.2017

Hema Khattar and Ors. Vs. Shiv Khera

Hon'ble Judges/Coram:

Madan B. Lokur and R.K. Agrawal, JJ.

Citation: 2018 (1) MHLJ 119

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Whether objection of defendants in written statement can be treated as application U/S 8 of Arbitration Act?

32. In Booz Allen and Hamilton Inc. (supra), the Supreme Court has held as under:-

"25. Not only filing of the written statement in a suit, but filing of any statement, application, affidavit by a defendant prior to the filing of the written statement will be construed as "submission of a statement on the substance of the dispute", if by filing such statement/application/affidavit, the defendant shows his intention to submit himself to the jurisdiction of the court and waives his right to seek reference to arbitration. But filing of a reply by a defendant, to an application for temporary injunction/attachment before judgment/ appointment of Receiver, cannot be considered as submission of a statement on the substance of the dispute, as that is done to avoid an interim order being made against him."

(emphasis supplied)

33. Keeping in view the aforesaid judgments as well as the judgment in Eastern Medikt (supra) and judgments of the learned Single Judge and Division Bench of this Court in Sharad P. Jagtiani (supra), this Court is of the view that the party invoking the arbitration clause does not have to file a formal application seeking a specific prayer for reference of the dispute to arbitration as long as it raises an objection in the written statement that the present suit is not maintainable in view of the arbitration clause in the agreement.

34. In the present case, the defendants in para 5 of the preliminary objections in the written statement filed on 20th May, 2017 specifically stated that there exists an arbitration agreement between the parties. The said para is reproduced hereinbelow.

"5. That there are separate Arbitration Clauses between the Plaintiff and Defendant No.1 and the Plaintiff and Defendant No.2. all disputes and differences arising between the Plaintiff and Defendant No.1 and the Plaintiff and Defendant No.2 are liable to be referred to the separate arbitration of a Sole Arbitrator to be nominated by Defendant No.1 and Defendant No.2 respectively. The Plaintiff without invoking Arbitration has filed the above suit. The above written statement is being filed without prejudice of the rights of the Defendants to refer the disputes to the Arbitration."

(emphasis supplied)

35. Accordingly the aforesaid objection of the defendants contained in the written statement can be treated as an application under Section 8 of the Act.

Delhi High Court

Parasramka Holdings Pvt. Ltd. vs Ambience Private Ltd. & Anr. on 15 January, 2018

     CS(OS) 125/2017 
      

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Whether tenancy agreement can be referred to arbitration if there is arbitration clause?

In the light of the foregoing discussion and the authority of the precedents, we hold that both by reason of Section 28 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and by reason of the broader considerations of public policy mentioned by us earlier and also in Deccan Merchants Cooperative Bank Ltd. v. Dalichand Jugraj Jain, the Court of Small Causes has and the arbitrator has not the jurisdiction to decide the question whether the Respondent-licensor landlord is entitled to seek possession of the two Studios and other premises together with machinery and equipment from the Appellant-licensee tenant. That this is the real dispute between the parties is abundantly clear from the petition filed by the Respondents in the High Court of Bombay, Under Section 8 of the Arbitration Act seeking a reference to Arbitration. The petition refers to the notices exchanged by the parties, the Respondent calling upon the Appellant to hand over possession of the Studios to him and the Appellant claiming to be a tenant or protected licensee in respect of the Studios. The relationship between the parties being that of licensor-landlord and licensee tenant and the dispute between them relating to the possession of the licensed demised premises, there is no help from the conclusion that the Court of Small Causes alone has the jurisdiction and the arbitrator has none to adjudicate upon the dispute between the parties.

23. Yet in another case of Booz Allen & Hamilton Inc. (supra), this Court (two Judge Bench) speaking through R.V. Raveendran J. laid down the following proposition of law after examining the question as to which cases are arbitrable and which are non-arbitrable:

36. The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

24. Keeping in view the law laid down by this Court in aforementioned two decisions and applying the same to the facts of this case, we have no hesitation to hold that both the Courts below were right in dismissing the Appellant's application filed Under Section 8 of the Act and thereby were justified in holding that the civil suit filed by the Respondent was maintainable for grant of reliefs claimed in the plaint despite parties agreeing to get the disputes arising therefrom to be decided by the arbitrator.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 16850 of 2017 (Arising out of S.L.P. (C) No. 27722/2017) and (D. No. 21033/2017)

Decided On: 12.10.2017

Himangni Enterprises  Vs Kamaljeet Singh Ahluwalia

Hon'ble Judges/Coram:
R.K. Agrawal and Abhay Manohar Sapre, JJ.

Citation: AIR 2017 SC 5137,(2017) 10 SCC 706

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Whether Order refusing to refer a matter to arbitration by National Consumer Commission can challenged only before supreme court?

 The remedy of appeal was provided in Section 37(1) till 2015 Amendment against orders of a court with reference to the jurisdiction conferred on the “court” (as defined in Section 2) for “interim measures” (under Section 9) or to consider “setting aside an arbitral award” (under Section 34) only. The law then did not conceive of appeal against order making or refusing a reference to arbitration (under Section 8). This is why the provision in Section 37(1) prior to its amendment was not concerned with act of any forum except a “court”. After 2015 amendment, when the reference or refusal to make over to arbitration has been additionally made subject to appeal, the words “the court passing the order” appearing in Section 37(1) acquire new dimension and need to be properly construed so as to harmonise them with Section 8 which confers the jurisdiction to pass the order that may be challenged in appeal. Since Section 8 does not restrict such a power to a “court” but extends it to every “judicial authority”, the forum conceived by the expression “the court passing the order” under the amended law - Section 37(1)(a) - has to be read contextually and understood to connote “the judicial authority” which passed the order making or refusing the reference. The reference to “original decrees” in the opinion of this court, is meant to convey a decision taken by a court of first instance in exercise of its original jurisdiction.

14. If construed as above, the appeal against the order of NCDRC (making or) refusing the reference of the dispute to arbitration cannot be brought before this court since appeals against orders of said forum lie before the Supreme Court. NCDRC is a tribunal and not a court. This court is not authorised by the law to hear appeals from the orders passed by NCDRC in exercise of its original jurisdiction. By virtue of Section 23 of the Consumer Protection Act, 1986, such appeal is available under the said law, as noted earlier, only before the Supreme Court. Therefore, the words “the court authorised by law to hear appeals” in present cases essentially mean “the Supreme Court”.

15. For the foregoing reasons, this court holds that these appeals under Section 37(1) of the Arbitration and Conciliation Act, 1996 have been wrongly brought before this court. The same, therefore, cannot be entertained here and are consequently hereby returned to be presented before the appropriate appellate court.

In the High Court of Delhi at New Delhi

(Before R.K. Gauba, J.)

FAO 395/2017 & CM No. 37063-37064/2017

Emaar MGF Land Ltd. & Anr. v. Aftab Singh 

Decided on November 7, 2017.

Citation:2017 SCC OnLine Del 11437

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Whether court can refer dispute to arbitration if copy of arbitration agreement is not filed along with application U/S 8 of arbitration Act?

There is one another aspect of the matter which is sufficient to uphold the order of the District Judge. Section 8(2) uses the phrase "shall not be entertained". Thus, what is prohibited is the entertainment of the application unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.[17]

In the present case, the original Retirement Deed and Partnership Deed were filed by the Defendants on 12th May and it is only after filing of original deeds that Court proceeded to decide the application I.A. No. IV. Section 8(2) has to be interpreted to mean that the court shall not consider any application filed by the party Under Section 8(1) unless it is accompanied by original arbitration agreement or duly certified copy thereof. The filing of the application without such original or certified copy, but bringing original arbitration agreement on record at the time when the Court is considering the application shall not entail rejection of the application Under Section 8(2).[21] and[22]

In the present case it is relevant to note the Retirement Deed and Partnership Deed have also been relied by the Plaintiffs. Hence, the argument of Plaintiffs that Defendants' application I.A. No. IV was not accompanied by original deeds, hence, liable to be rejected, cannot be accepted. The Court was thus of the view that the Appellants submission that the application of Defendants Under Section 8was liable to be rejected, cannot be accepted.[23]

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 10837 of 2016 (Arising out of SLP (C) No. 31179 of 2014)

Decided On: 15.11.2016

 Ananthesh Bhakta and Ors.

Vs.

Nayana S. Bhakta and Ors.

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Whether defendant can be precluded from resorting to arbitration if he seeks time to file written statement?

The issue before us for consideration is whether filing of
an application for extension of time to file written statement
before a judicial authority constitutes – ‘submitting first
statement on the substance of the dispute’ or not.
 In Rashtriya Ispat Nigam Ltd. and another v. Verma
Transport Co.(2006) 7 SCC 275
, interpreting the expression “first statement
on the substance of the dispute”, this Court has held as
under: -
“36. The expression “first statement on the
substance of the dispute” contained in Section 8(1)
of the 1996 Act must be contradistinguished with
the expression “written statement”. It employs
submission of the party to the jurisdiction of the
judicial authority. What is, therefore, needed is a
finding on the part of the judicial authority that the
party has waived its right to invoke the arbitration
clause. If an application is filed before actually
filing the first statement on the substance of the
dispute, in our opinion, the party cannot be said to
have waived its right or acquiesced itself to the
jurisdiction of the court. What is, therefore,
material is as to whether the petitioner has filed his
first statement on the substance of the dispute or
not, if not, his application under Section 8 of the
1996 Act, may not be held wholly
unmaintainable…..”
9. This Court in Rashtriya Ispat Nigam Ltd. (supra)
further held as under: -
“42. Waiver of a right on the part of a defendant to
the lis must be gathered from the fact situation
obtained in each case. In the instant case, the
court had already passed an ad interim ex parte
injunction. The appellants were bound to respond
to the notice issued by the Court. While doing so,
they raised a specific plea of bar of the suit in view

of the existence of an arbitration agreement. Having
regard to the provisions of the Act, they had, thus,
shown their unequivocal intention to question the
maintainability of the suit on the aforementioned
ground.”
In view of the law laid down by this Court, as above, we
find it difficult to agree with the High Court that in the present
case merely moving an application seeking further time of
eight weeks to file the written statement would amount to
making first statement on the substance of the dispute. In
our opinion, filing of an application without reply to the
allegations of the plaint does not constitute first statement on
the substance of the dispute. It does not appear from the
language of sub-section (1) of Section 8 of the 1996 Act that
the Legislature intended to include such a step like moving
simple application of seeking extension of time to file written
statement as first statement on the substance of the dispute.
Therefore, in the facts and circumstances of the present case,
as already narrated above, we are unable to hold that the
appellant, by moving an application for extension of time of
eight weeks to file written statement, has waived right to object
to the jurisdiction of judicial authority.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 12066 OF 2016
(Arising out of S.L.P. (C) No. 34016 of 2015)
Greaves Cotton Limited 
V
United Machinery and Appliances 
Dated:December 14, 2016.
Citation:(2017) 2 SCC 268

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