Recently, the Calcutta High Court refused to send a commercial dispute to arbitration, holding that courts cannot refer matters to arbitration unless a party clearly and formally invokes the statutory mechanism provided under the Arbitration Act. The Court made it clear that merely pointing to an arbitration clause or seeking dismissal of a civil suit is not enough, sharply observing that “when a statute prescribes to do a thing in a particular manner, it must be done in that manner or not at all.”
Brief Fact:
The dispute arose from a commercial arrangement between two corporate entities that admittedly contained an arbitration clause. Despite this, one party approached the civil court seeking adjudication. In response, the opposing party moved the court through an application seeking dismissal of the suit, rejection or return of the plaint, and a stay on proceedings. Although the application did not expressly ask for the dispute to be referred to arbitration, the accompanying affidavit suggested that arbitration was the appropriate forum. This mismatch between what was asked for in the prayers and what was argued in substance became the central issue before the Court.
Contentions of the Applicant:
Counsel argued that once an arbitration clause is admitted, the court is duty-bound to refer the dispute to arbitration. It was submitted that courts should look at the real intent and substance of an application rather than its form, and that even if the prayers were imperfectly worded, the application effectively sought reference to arbitration. Reliance was placed on decisions suggesting that procedural labels should not defeat the right to arbitrate, and that the court has the power to mould reliefs in favour of arbitration.
Contentions of the Respondent:
Opposing the plea, counsel contended that the application was fundamentally flawed, as it never sought arbitration in clear terms. It was argued that the existence of an arbitration clause does not automatically bar a civil suit and that the Arbitration Act requires strict and express compliance. According to the respondent, a party must file a specific application seeking reference to arbitration, and courts cannot infer such a request from vague pleadings or supporting affidavits.
Observations of the Courts:
The Court agreed with the respondent and undertook a detailed examination of the Arbitration Act. The Court emphasised that the law lays down specific conditions that must be satisfied before a dispute can be referred to arbitration, and these conditions are not optional. It noted that dismissal of a suit, rejection of a plaint, or staying proceedings are remedies governed by entirely different procedural provisions and cannot substitute a formal request for arbitration.
The Court firmly rejected the argument that statements made in affidavits could override defective prayers, reiterating that statutory rights must be exercised in the manner prescribed by law. Stressing discipline in procedural law, the Court observed that “liberal interpretation in such cases would defeat legislative intent,” and clarified that objections to jurisdiction or casual references to arbitration do not amount to invoking the arbitration process.
The decision of the Courts:
Holding that the application failed to meet the mandatory requirements of the Arbitration Act, the Court dismissed the plea, ruling that arbitration can be invoked only through a clear, specific, and standalone request, and not through indirect or procedural shortcuts. The decision reinforces that while arbitration is strongly encouraged, courts will not permit parties to bypass statutory safeguards or keep arbitration “in reserve” as a tactical option.
Case Title: Jagannath Heights Pvt Ltd Anr. Vs. M/S Sammaan Capital Limited, Anr.
Case No.: IA NO. GA-COM/2/2025
Coram: Hon’ble Justice Aniruddha Roy
Advocate for the Petitioner: Sr. Adv. Abhrajit Mitra, Adv. Satadeep Bhattacharyya, Adv. Samriddha Sen, Adv.Arijeet Bera,
Advocate for the Respondent: Adv. Avishek Guha, Adv. Shounak Mukhopadhyay, Adv. Ankush Majumdar, Adv. Sonal Agarwal, Adv. Rayani Bhattacharyya
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