V.M. Mehta vs M/S Ultra Securities Pvt. Ltd.
2013 Latest Caselaw 3896 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                    Order delivered on: September 03, 2013

+            CM(M) No.903/2013 & CM No.10649/2013

      V.M.MEHTA                                              ..... Petitioner
                          Through       Mr.Sandeep Sharma, Adv. with
                                        Mr.Ankur Goel and Mr.Vikas
                                        Sharma, Advs.

                          versus

      M/S ULTRA CARE SECURITIES PVT. LTD.                    ..... Respondent
                   Through   None.

      CORAM:
      HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J. (ORAL)

CM No.10650/2013 Exemption allowed, subject to just exceptions.

The application is disposed of.

CM(M) 903/2013 & CM No.10649/2013

1. The respondent filed a suit for recovery of the amount of Rs. 6,59,349.47/- under Order XXXVII CPC against the petitioner herein. The petitioner filed an application for leave to defend in May 2005 wherein among others, one of the contention was with respect to the applicability of the provisions of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as „the Act‟) and presence of the arbitration clause between the parties. Clause F and G of Para 2 of the application are referred for the said purpose. The said contention was disputed by the respondent in its reply to the application for leave to defend however after hearing, the application for

leave to defend was allowed unconditionally. Thereafter, the petitioner filed the written statement and the issues were framed. Issue No.3 which sought to determine the presence of an arbitration agreement between the parties was decided against the petitioner by the impugned order dated 10th May 2013 and the learned trial court declined to refer the matter for arbitration mainly on the ground that as no specific application under Section 8 of the Act was filed by the petitioner, it was presumed that the petitioner had waived his right to seek arbitration. It was held by the learned Trial Court that the objection about the arbitration clause being there was already waived by the petitioner when he filed the application for leave to defend thereafter taking the advantage of obtaining unconditional leave from the court. It was opined that the petitioner intended to submit to the jurisdiction of the civil court more so when he thereafter filed the written statement.

2. Aggrieved by the same, the petitioner has filed the present petition for setting aside the impugned order with a direction that parties be referred to arbitration.

3. The question before this court is whether the prayer of the petitioner that the matter be referred to arbitration can be allowed at this stage. The question as to whether a defendant who pleads arbitration agreement in the Written Statement, but does not file an application under Section 8 of the Act, on or before filing of the Written Statement has come up before various High Courts including this Court. This Court in M/s R.R. Enterprises v. C.M.D of M/s Garware-Wall Ropes Ltd. & Ors. (2013) ILR I Delhi 248, wherein the defendant in his written statement had taken a number of preliminary objections, including that the suit is hit by Section 8 of the Act and subsequently had filed an application under Section 8 of the Act, seeking dismissal of the suit, observed as under:

"In my view, if the Court accepts the contention that an application under Section 8 of the Act can be filed even after the first statement on substance of the dispute between the parties has already been filed, this would not only be contrary to the express provisions of law but, would also defeat the very purpose behind stipulating that such an application needs to be filed not later than submitting the first statement on the substance of the dispute. If such an application is entertained after filing of the first statement, it would be possible for a party to the suit to first allow the trial to proceed by not filing the application by the stage stipulated in the Act and then come to the Court at a much later stage when the trial is substantially complete and seek reference of the dispute to arbitration. It is true that in the case before this Court the trial has not commenced as yet, but if the interpretation sought to be given by the Learned Counsel for the applicants/defendants is accepted, it would be open to a party to the suit to file such an application even after the trial has commenced."

4. In the abovementioned case, reliance was placed on K. Jayakumaran Nai vs. Vertex Securities Ltd. AIR 2005 Ker. 294, wherein the defendant filed Written Statement raising a contention that there was an arbitration agreement between the parties. After framing of issues he filed an application seeking reference of the dispute for arbitration. The High Court noted that Section 8 of the Act clearly provides that the application had to be made not later than submitting the first statement whereas the application before it had been filed after the issues were framed. The Court expressly rejected the contention that since the matter had been raised in the Written Statement that was enough. While doing so the Court noted that the Written Statement contained no prayer for referring the matter for arbitration.

5. Also in West Bengal State Electricity Board and Ors. Vs. Shanti Conductors Private Ltd., AIR 2004 Gau 70, where the defendants filed Written Statement indicating that the dispute which had arisen between the

parties and led to institution of the suit, was covered by arbitration clause. After submitting the Written Statement the defendants filed an application under Section 8 of the Act on seeking reference of the dispute to the arbitration. The trial Court having rejected the application the matter was agitated by the defendant before the High Court and it was contended that in the plaint itself the plaintiff had admitted the existence of the arbitration clause and the Written Statement also indicated about its existence and therefore the Court below had taken a misconceived view of law as to its jurisdiction. Rejecting the contention, the High Court inter alia held that "In the case at hand, the application under Section 8 was made by the defendants after the written statement stood submitted. Hence, this application was not maintainable. The fact that the existence of the arbitration clause was admitted in the plaint or asserted in the written statement is immaterial inasmuch as the Court, under Section 8, can refer for arbitration a dispute pending in a civil suit only when the party or parties concerned make application for getting the dispute referred to arbitration. If despite existence of arbitration clause, the parties choose to contest the suit, the powers under Section 8 cannot be invoked."

6. In view thereof and from the material placed on record, and the fact that the petitioner did not file an application under Section 8 of the Act either before or simultaneous with filing of written statement and that in fact pursuant to completion of pleadings between the parties, the issues were framed and evidence in respect of Issue No.3 was led, it is implicit that the petitioner clearly waived his right to apply for arbitration in terms of Section 8 of the Act and submitted to the jurisdiction of the learned Trial Court. Even otherwise as per the conduct of the petitioner who knowingly continued with the proceeding for such a long period i.e. more

than 8 years, the contention of the petitioner that the plea with respect to arbitration can be considered at any stage of the proceeding of the suit, cannot be accepted. I am not inclined to interfere with the impugned order. Accordingly, the present petition is dismissed.

(MANMOHAN SINGH) JUDGE SEPTEMBER 03, 2013