The Delhi High Court held that a 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.
The judgment was delivered by the Delhi High Court in the matter of Parasramka Holdings Pvt. Ltd Versus Ambience Private Ltd. CS(OS) No. 125/2017, decided on 15.01.2018.
In the facts of the present case, the Defendants filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 in an ongoing suit for recovery and permanent injunction averring that the matter must be referred to arbitration in light of an arbitration clause in the relevant agreement. It is pertinent to mention that the application was filed after filing of the written statement. An application under O.7 R. 11 was also preferred by the Defendants which came to be rejected.
The Plaintiffs challenged the maintainability of the application stating that under Section 8(1) of the Act, such application cannot be filed subsequent to the submission of the first statement on the substance of the dispute before the judicial authority. It was contended that the defendants by filing the written statement prior to filing of the present applications have submitted themselves to the jurisdiction of this Court and are now estopped from relying on the arbitration clause, if the same did not contain a prayer for referring the matter to arbitration.
It was further averred by the Plaintiffs that after the amendment of Section 8(1) of the Act, the filing of the written statement or any other statement indicating (first) statement on the substance of the dispute constituted a waiver of the right to seek reference to arbitration and an application seeking the dispute to be referred to arbitration in terms of the arbitration agreement must be filed within the same period as is prescribed for filing of the written statement. He reiterated that merely raising a plea in the written statement that there exists an arbitration agreement between the parties without any specific prayer for referring the dispute to arbitration is inconsequential.
The Court held that the expression, “so applies not later than the date of submitting his first statement on the substance of the dispute”, means the outer limit for filing the written statement in a particular case. In the present case, as the application under Section 8 of the Act was filed within one hundred twenty days of rejection of the application under Order 7 Rule 11 CPC which was prior to the date of expiry of the time period for filing the written statement under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. It was further observed by the Court that as the defendants filed applications under Order VII Rule 11 CPC at the inception stage, they could not have filed applications under Section 8 of the Act, at least till the disposal of the said applications, as otherwise it would amount to foregoing the right to press for rejection of the plaint.
It was held 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. Therefore, the objection of the Defendants contained in the written statement was treated as an application under Section 8 of the Act.