M/S Spml Infra Limited vs M/S S.N.C.C. Construction
2025 Latest Caselaw 11891 Raj

Rajasthan High Court - Jodhpur

M/S Spml Infra Limited vs M/S S.N.C.C. Construction on 17 April, 2025

[2025:RJ-JD:17797-DB]

      HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
                       JODHPUR
                 D.B. Civil Misc. Appeal No. 3045/2024

M/s S.P.M.L. Infra Limited, F 27/2, Okhla Industrial Area, Phase
II, New Delhi-110020. Corporate Office At S.P.M.L. House Plot
No. 65, Sector 32, Institutional Area, Gurgaon, Haryana- 122001
through its Authorised Signatory Shri Shalin Jain son of Shri
Subhash Jain, aged about 40 presently working as Manager
                                                                        ----Appellant


                                       Versus


1.       M/s S.N.C.C. Construction, Near Rajkiya Mahavidyalaya
         Ashapura Road, Pokran, District Jaisalmer, Rajasthan.
         702, Jai Narayan Vyas Colony, Jaisalmer, a partnership
         firm represented by one of the authorised partner Shri
         Narendra Vyas son of Shri Mahendra Kumar Vyas 702, Jai
         Narayan Vyas Colony, Jaisalmer
2.       Chief   Engineer        (Project),        Public      Health    Engineering
         Department, Jodhpur
3.       Executive Engineer, Public Health Engieering Department,
         Project Division Balotra
4.       Site Project Manager, (SPML Infra Ltd.) Site Office, PHED,
         Ramdeora
5.       Shri Sidhartha Jain, Vice President, M/s SPML Infra
         Limited, F 27/2, Okhla Industrial Area, Phase II, New
         Delhi 110020. Corporate Office at S.P.M.L. House Plot No.
         65, Sector 32, Institutional Area, Gurgaon, Haryana-
         122001.
6.       Sushil Kumar Sethi, Director, S.P.M.L., Corporate Office
         SPML House Plot No. 65, Sec. 32, Institutional Area,
         Gurgaon, Haryana-122001
7.       Subhas Chandra Sethi, Director, S.P.M.L., Corporate Office
         Spml House Plot No. 65, Sec. 32, Institutional Area,
         Gurgaon, Haryana-122001
8.       Dinesh Kumar Goyal, Director, S.P.M.L., Corporate Office
         Spml House Plot No. 65, Sec. 32, Institutional Area,
         Gurgaon, Haryana-122001
9.       Swati   Aggarwal,         Director,       S.P.M.L.,        Corporate   Office
         S.P.M.L. House Plot No. 65, Sec. 32, Institutional Area,

                        (Downloaded on 24/04/2025 at 09:15:58 PM)
 [2025:RJ-JD:17797-DB]                  (2 of 16)                        [CMA-3045/2024]


         Gurgaon, Haryana-122001
10.      Prem Singh Rana, Director, S.P.M.L., Corporate Office
         Spml House Plot No. 65, Sec. 32, Institutional Area,
         Gurgaon, Haryana-122001
11.      Manoj Kumar Digga, Director, S.P.M.L., Corporate Office
         Spml House Plot No. 65, Sec. 32, Institutional Area,
         Gurgaon, Haryana-122001
12.      Pavitra Joshi Singh, Director, S.P.M.L., Corporate Office
         Spml House Plot No. 65, Sec. 32, Institutional Area,
         Gurgaon, Haryana-122001
13.      Charan Singh, Director, S.P.M.L., Corporate Office S.P.M.L.
         House Plot No. 65, Sec. 32, Institutional Area, Gurgaon,
         Haryana-122001
14.      Srivatsan Shiv Shankar, Director, S.P.M.L., Corporate
         Office Spml House Plot No. 65, Sec. 32, Institutional
         Area, Gurgaon, Haryana-122001
15.      Laxmi Narayan Madana, Director, S.P.M.L., Corporate
         Office Spml House Plot No. 65, Sec. 32, Institutional
         Area, Gurgaon, Haryana-122001
16.      Abhinandan        Sethi,      Chief       Operating        Officer,    S.P.M.L.
         Corporate      Office       Spml       House        No.     65,       Sec.   32,
         Institutional Area, Gurgaon, Haryana-122001
                                                                    ----Respondents


For Appellant(s)             :     Mr. P.S. Chundawat, Advocate
For Respondent(s)            :     Mr. D.N. Yadav, Advocate



      HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR

HON'BLE MR. JUSTICE CHANDRA SHEKHAR SHARMA

Judgment

Reserved on : 27/03/2025 Pronounced on : 17/04/2025

Per, Shree Chandrashekhar, J :

Aggrieved by the decision dated 12th September 2024 passed

in Civil Original Miscellaneous Case/NCV No.35 of 2022 whereby

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the application filed under section 8 (1) read with section 5 of the

Arbitration and Conciliation Act, 1996 (in short, A & C Act) and

under Order VII Rule 11 of the Code of Civil Procedure has been

dismissed, M/s S.P.M.L. Infra Limited has filed this Civil

Miscellaneous Appeal.

2. Briefly stated, the Government of Rajasthan issued a Notice

Inviting Tender through the Public Health Engineering Department

on 15th February 2012 bearing number 07/11-12 for the Balotra

Pipeline Project SPR-2 Project, Santra Bhakra Head. The appellant-

company was awarded the tender and the work order was issued

in its favour on 14th September 2012. Pursuant thereto,

Agreement No.07/12-13 was signed on 18th September 2012

between the appellant-company and the Executive Engineer, Public

Health Engineering Department, Project Division at Balotra. Later

on, the contract value of Rs.187.01 crores was reduced to Rs.

165.10 crores by mutual consent. This is pleaded by the

appellant-company that it had completed work to the extent of

Rs.111.26 crores and it entered into a Sub-letting contract on 19 th

April 2017 with M/s S.N.S.S. Construction-respondent no.1 for the

remainder of the work and that included (a) balance pipeline

supply (MS/BWS/DI) (b) balance laying of pipes available at site

(c) balance hydro-testing (d) fixing of butterfly valves, sluice

valves and air valves available at site (e) construction of flow

control station (f) pipeline crossing (g) construction of valve

chambers (h) electro-mechanical works including supply and

installation and (i) testing and commissioning as per specification.

This is also the case pleaded by the appellant-company that an

amendment to the Sub-letting contract was executed on

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11th October 2017 with the respondent no.1 and clause 26 of the

Sub-letting contract was deleted with mutual consent of the

parties.

3. Clause 26 of the Sub-letting contract had provided as

under:-

"It is further agreed between the parties that in case any of the dispute under the Sub-Contract touches or concerns the issues under the Contract, then such disputes shall be decided as per the Dispute Resolution Procedure under the Contract and the decision on such disputes under the Contract shall be applicable to both."

4. On 13th April 2018, a notice for termination was issued to the

respondent no.1 as per clause 22 of the Sub-letting contract.

5. About four years thereafter, a notice dated 05 th January 2022

was served upon the appellant-company by the respondent no.1

on 13th January 2022 intimating the appellant-company about pre-

institution mediation on 18th January 2022. The pre-institution

mediation, however, remained a non-starter and Civil Misc. Case

NCV No.35/2022 titled "M/S. S.N.C.C. Construction v. M/S.

S.M.P.L Infra Ltd. & Ors." came to be instituted by the respondent

no.1 in the Court at Jodhpur seeking a decree for

Rs.6,83,69,682/-. Additionally, a decree for Rs.3,97,49,804/- with

interest at the rate of 18% is also claimed as principal outstanding

amount.

6. In the pending suit before the Commercial Court, the

appellant-company took the following stand in the application filed

under section 8(1) read with section 5 of A & C Act:-

"13. The applicant/defendant states that the Case No.35/22 is not maintainable either in law or in facts. The said commercial suit has been filed in suppression of material and relevant facts and/or by distorting the truth. The respondent plaintiff is

[2025:RJ-JD:17797-DB] (5 of 16) [CMA-3045/2024]

deliberately misleading the Learned Court. The entire suit is misconceived and is an abuse of process. Any application, if any, filed in connection thereto and/or in support thereof are also not maintainable as the same suffer from the same vices as stated above. The applicant/defendant states that any and all applications filed by the respondent/plaintiff in the commercial suit are misleading and filed with malafide intentions for the purposes of making illegal gains at the cost of the applicant defendant.

14. The respondent/plaintiff, as it appears from a plain reading of the plaint, while relying on the agreement has deliberately suppressed the Arbitration clause as agreed upon by the parties to the agreement dated April 19, 2017. The respondent/plaintiff relies upon the agreement dated April 19, 2017 but at the same time deliberately refuses to act in terms thereof.

15. As stated earlier, the intention of the parties to the agreement to adjudicate / settle any and all disputes arising out of the agreement dated April 19,2017 by way of arbitration at Delhi, is a subsisting agreement between parties standing on its own independent legs.

16. In terms of the arbitration clause enshrined within the agreement dated April 19, 2017, the Arbitration as agreed upon by the parties shall be held in Delhi as per the provisions of the Arbitration and Conciliation Act, 1996. In view of Clause 24 of the said agreement, the respondent/plaintiff has deliberately tried to harass the applicant/defendant by instituting the instant matter before this Learned Court. The applicant states that in the event this Learned Court entertains the instant suit, the Learned Court shall be acquiring jurisdiction and interfering in a dispute which has been agreed upon by the plaintiff to being settled by way of Arbitration at Delhi.

17. In view of the fact that the arbitration clause has not been deleted and/or modified and/or rescinded and/or removed the arbitration agreement remains to this date a valid subsisting agreement between the parties standing on its own independent legs.

18. It is not out of place to mention that the jurisdiction conferred and agreed to by and between the parties is to be construed harmoniously and cannot be read into as self-contrary or self-destructive. The jurisdiction agreed upon is merely in aide of the construction which furthers the scope of the alternate dispute redress mechanism agreed upon by the parties in the

[2025:RJ-JD:17797-DB] (6 of 16) [CMA-3045/2024]

event of disputes. In as much as the disputes which have arisen between the parties can be decided upon by an arbitrator, this Learned Court ought not otherwise acquire jurisdiction, interfere and/or even try the matter on merits as yet.

19. The underlying scope of the agreement from the very date of its execution has been that of the plaintiff completing its obligations under the agreement first and thereafter the defendant/applicant proceeding with its share of obligations. Under the agreement the plaintiff has specified and particular duties and obligations which the plaintiff for reasons best known to itself did not fulfill. In fact the termination of the agreement was on account of the plaintiff not complying its share of obligations.

20. In any event the applicant herein has not submitted to the jurisdiction of this Learned Court and is only bringing to the knowledge of this Learned Court the existence of a legal and binding Arbitration agreement by and between the parties, surreptitiously suppressed by the plaintiff/respondent by not coming clean and/or even succinctly aiming at the terms and conditions of the agreement. Albeit the plaintiff is relying upon the agreement and cannot deny the subsisting arbitration agreement."

7. However, the aforementioned application seeking reference

to arbitration was dismissed vide the judgment dated

12th September 2024 wherein the Commercial Court held as

under :-

"mHk; i{kdkjku ds }kjk izLrqr rdksZa ij v/;;u o euu fd;k x;k rFkk mHk; i{kdkjku }kjk izLrqr U;kf;d fofu.kZ;ksa dk llEeku v/;;u o euu dj ekxZn'kZu izkIr fd;k x;kA ,oa i=koyh dk voyksdu fd;k x;kA mHk; i{kdkjku }kjk izLrqr rdksZa ds Øe esa gh vfHkys[k ij miyC/k lkexzh dk voyksdu fd;k tkosa rks oknh }kjk gLrxr okn izfroknhx.k ds fo#) izfroknh dEiuh }kjk oknh QeZ ds iz'uxr dk;Z isVs cdk;k jkf'k dh olwyh gsrq izLrqr fd;k x;k gS ,oa bl lanHkZ esa i{kdkjku ds e/; O;olkf;d laO;ogkj gqvk gSaA gLrxr okn dh lquokbZ dk {ks=kf/kdkj@ Jo.kkf/kdkj bl U;k;ky; dks ugha gksus ds laca/k esa izfroknh i{k }kjk ;g vkifÙk yh x;h gS fd oknh o izfroknh i{k ds e/; gq;s bdjkj ds vk/kkj ij i{kdkjku ds e/; fookn mRiUUu gksus ij mldk fuiVkjk ,d ek= {ks=kf/kdkj fnYyh fLFkr U;k;ky; dks gh gksus ls oknh dk okn {ks=kf/kdkj ds vHkko esa [kkfjt fd;s tkus ;ksX; gSA bl lanHkZ esa i=koyh dk voyksdu fd;k tkosa rks oknh us vius okni= ds in la[;k 16 esa gLrxr okn dh lquokbZ dk {ks=kf/kdkj o Jo.kkf/kdkj okf.kfT;d

[2025:RJ-JD:17797-DB] (7 of 16) [CMA-3045/2024]

U;k;ky; dks gksus ds laca/k esa rF; vafdr fd;s gSaA oknh }kjk bl ckcr mHk; i{kksa ds e/; gq;s fyf[kr djkj ds DykWt 51 dh vksj U;k;ky; dk /;ku vkdf"kZr djok;k] ftlesa fd bdjkjukek fu"iknu ds LFkku ij fookn dk {ks=kf/kdkj gksuk cr;k x;k gSA vr% bl ckcr mHk; i{k ds ijLij fojks/kkHkklh dFku gksus ds dkj.k bl izØe ij bl ckcr dksbZ jk; dk;e ugha dh tk ldrh vfirq mHk; i{k dh lk{; ds ckn gh bl ckcr fu"d"kZ ikfjr fd;k tkuk U;k; laxr gSA lkFk gh izfroknh }kjk fof/kuqlkj vius tokcnkosa esa mä vkifÙk;ka mBk;s tkus ij fookn fcUnq dk;e fd;s tkdj mHk; i{k dh lk{; ds vk/kkj ij fu"d"kZ ikfjr fd;k tkuk izkÑfrd U;k; ds vuq:i gSA blfy;s bl Lrj ij ;g r; ugha fd;k tk ldrk fd okn dh lquokbZ dk {ks=kf/kdkj@ Jo.kkf/kdkj bl U;k;ky; dh gS ;k ugha\

;gka ;g Hkh mYys[kuh; gS fd nkok izLrqfr ls iwoZ oknh }kjk ftyk fof/kd lsok izkf/kdj.k ds le{k okf.kfT;d U;k;ky; vf/kfu;e dh /kkjk 12&, ds varxZr okn izLrqr fd;k x;k Fkk] ftlesa izfroknh ds ugha vkus ds dkj.k ukWu LVkVZj fd;k x;kA ml le; izfroknh ftyk fof/kd lsok izkf/kdj.k] tks/kiqj ds le{k bl laca/k esa vkifÙk dj ldrk Fkk] ijUrq izfroknh us ftyk fof/kd lsok izkf/kdj.k ds le{k vkuk mifLFkr ugha le>k] ftlls ifjyf{kr gksrk gS fd izfroknh Lo;a okn izLrqfr ls iwoZ e/;LFkrk dk;Zokgh ds fy;s rRij ugha jgkA izfroknh ds mä vkpj.k ls Li"V gksrk gS fd izfroknh Lo;a e/;LFkrk dk;Zokgh ds izfr bPNqd ugha jgk gSA vc bl izØe ij izfroknh }kjk e/;LFk fu;qfä ckcr dh x;h vkifÙk mijksä foospu ds ifjizs{; esa Lohdkj fd;s tkus ;ksX; ugha gSA

fu"d"kZr% izfroknh }kjk izLrqr izkFkZuki= /kkjk 8 ¼1½ lifBr /kkjk 5 ek/;LFke ,oa lqyg vf/kfu;e] 1996 lifBr vkns'k 7 fu;e 11 fl-iz-la- vLohdkj fd;k tkrk gSA vkns'k lquk;k x;kA i=koyh vfxze dk;Zokgh gsrq fnukad 17-10-2024 dks is'k gksaA"

English Translation :-

"The arguments of both parties have been carefully examined and duly considered. The judicial precedents submitted by both parties were respectfully reviewed and analyzed to seek guidance and the file was perused.

In continuation of the arguments advanced by both parties, a perusal of the material available on record reveals that the present suit has been filed by the plaintiff against the defendants for the recovery of outstanding dues arising out of the work executed by the plaintiff firm for the defendant company. It is evident from the record that a commercial transaction had taken place between the parties in this regard. The defendant has raised an objection regarding the lack of jurisdiction/hearing authority of this court for the present suit, stating that based on the agreement between the plaintiff and the defendant, any dispute arising between the parties shall have sole jurisdiction with the court located in Delhi. Therefore, the plaintiff's suit is

[2025:RJ-JD:17797-DB] (8 of 16) [CMA-3045/2024]

liable to be dismissed due to lack of jurisdiction. Upon examination of the case record, it is observed that in paragraph 16 of the plaint, the plaintiff has stated facts asserting that the jurisdiction for hearing and adjudication of the present suit lies with the Commercial Court. The plaintiff has drawn the Court's attention to Clause 51 of the written agreement executed between the parties, which specifies that jurisdiction shall vest in the courts at the place where the agreement was executed. In view of the mutually contradictory assertions made by both parties in this regard, no conclusive opinion can be formed at this stage. It would be appropriate and just to arrive at a determination on this issue only after the parties have led their evidence.

Furthermore, when the defendant, in accordance with legal procedure, raises such objections in its reply, it would be in line with the principles of natural justice to frame issues accordingly and arrive at a conclusion based on the evidence presented by both parties. Therefore, at this preliminary stage, it cannot be conclusively determined whether this Court has the territorial jurisdiction or authority to hear and adjudicate the suit or not.

It is also noteworthy that prior to filing the suit, the plaintiff had initiated proceedings under Section 12-A of the Commercial Courts Act before the District Legal Services Authority (DLSA). However, due to the non-appearance of the defendant, the matter was treated as a non-starter. At that stage, the defendant had the opportunity to raise objections before the DLSA, Jodhpur, but chose not to appear before the said authority. This conduct reflects that the defendant was not inclined to participate in the pre-institution mediation process. From the aforementioned conduct of the defendant, it is evident that the defendant was not genuinely interested in pursuing mediation proceedings. Accordingly, the objection now raised by the defendant regarding the appointment of a mediator is not tenable in light of the above discussion and is not liable to be accepted.

In conclusion, the application presented by the defendant under Section 8(1) read with Section 5 of the Arbitration and Conciliation Act, 1996, read with Order VII Rule 11 of the Code of Civil Procedure, stands dismissed. The order has been pronounced. The case file is hereby directed to be listed for

further proceedings on 17.10.2024."

[2025:RJ-JD:17797-DB] (9 of 16) [CMA-3045/2024]

8. Before proceeding further, it is necessary to have a glance at

section 8 of A & C Act which provides as under :-

"Power to refer parties to arbitration where there is an arbitration agreement. :- (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists] (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof :

[Provided that where the original arbitration agreement or acertified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement,then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.] (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an

arbitral award made."

9. As per sub-section (1), it is therefore absolutely essential for

resorting to section 8 of A & C Act that there is an agreement

between the parties. Pertinently, the appellant-company has

pleaded that the Sub-letting contract dated 19 th April 2017

contained the provision for arbitration under clause 23 and clause

24.

10. Such clauses in the sub-letting contract are reproduced

herein below:-

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"23. Jurisdiction : This agreement shall be subject to the jurisdiction of Courts at Delhi only.

24. Dispute resolution : Any difference or dispute arising out of or in connection with this subcontract, if not resolved amicably between the parties hereto, shall be settled through Arbitration by a panel of three Arbitrators. Both the parties shall nominate each arbitrator and both the arbitrators shall be combined to nominate third arbitrator. Such Arbitration shall be held in Delhi and as per the provisions of the Arbitration & Conciliation Act, 1996 or any amendment thereof."

11. The preamble to A & C Act, 1996 extensively refers to the

United Nations Commission on International Trade Law

(UNCITRAL) and the Model Rules. It refers to the significant

contributions made by the Model Law and Rules to the

establishment of a unified legal framework for the fair and efficient

settlement of disputes arising in the international commercial

relations. It further mentions that it was expedient to make laws

for the arbitration and conciliation proceedings taking into account

the Model Law and Rules. Quite clearly, the legislative intention

was to bring the domestic and international commercial arbitration

in line with the UNCITRAL Model Rules and the New York

Convention and Geneva Convention. The main objective of A & C

Act is to make provision for an arbitral procedure which is fair and

efficient while minimizing the supervisory role of the Courts in the

arbitral process. Section 5 of A & C Act clearly brings out the

object behind enacting this new Act for encouraging expeditious

resolution of dispute with less expenses. The non-obstante clause

under section 5 provides that there shall be minimal judicial

interference as to the matters provided under Part-I even if there

is anything contrary in force. As to the matters governed by

Part-I, in "Swiss Timing Ltd. v. Commonwealth Games, 2010

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Organising Committee"1, the Hon'ble Supreme Court held as

under :-

"25. As noticed above, the concept of separability of the arbitration clause/agreement from the underlying contract has been statutorily recognised by this country under Section 16 of the Arbitration Act, 1996. Having provided for resolution of disputes through arbitration, parties cannot be permitted to avoid arbitration, without satisfying the Court that it will be just and in the interest of all the parties not to proceed with the arbitration. Section 5 of the Arbitration Act provides that the Court shall not intervene in the arbitration process except in accordance with the provisions contained in Part I of the Arbitration Act. This policy of least interference in arbitration proceedings recognises the general principle that the function of courts in matters relating to arbitration is to support arbitration process. A conjoint reading of Section 5 and Section 16 would make it clear that all matters including the issue as to whether the main contract was void/voidable can be referred to arbitration. Otherwise, it would be a handy tool available to the unscrupulous parties to avoid arbitration, by raising the bogey of the underlying contract being

void."

12. At this stage, it is contextually relevant to note that the

appellant-company made the following prayer in the application

under section 8(1) read with section 5 of A & C Act :-

"The learned Court, in view of the salient terms of the subsisting agreement dated April 19, 2017 pleased to direct case no.35 of 2022 before the learned Court at Jodhpur be relegated to arbitration in view of clause 24 to the agreement dated April 19, 2017 and direct the parties before this learned Court to act in terms of the Arbitration and Conciliation Act, 1996 (as amended upto dated) and proceed likewise;

Any other order/orders and/or direction/directions as to which this learned court may deem fit and proper;"

13. The Presiding Judge of the Commercial Court referred to the

plaint averments in paragraph no.16 wherein the respondent no.1

pleaded that the Court at Jodhpur shall have jurisdiction to decide

1 (2014) 6 SCC 677

[2025:RJ-JD:17797-DB] (12 of 16) [CMA-3045/2024]

Civil Original Miscellaneous Case/NCV No.35 of 2022. However, the

learned Presiding Judge while dealing with the objection taken by

the appellant-company that the Court at Jodhpur shall have no

jurisdiction to deal with the present suit held that no decision at

that stage as regards jurisdiction of the Court can be rendered in

view of the conflicting pleadings and stand taken by the rival

parties. In our opinion, the Presiding Judge was not required to go

into the matter of jurisdiction and wrongly held that the issue of

jurisdiction can be decided on the basis of the evidence produced

by the parties on framing of a specific issue on jurisdiction of the

Court. In "Mcdermott International Inc. v. Burn Standard Co. Ltd.

& Ors."2, the Hon'ble Supreme Court held that A & C Act assigns

supervisory role to the Courts to ensure fairness and interference

of the Court is envisaged in limited circumstances such as fraud by

or bias of the arbitrator or violation of natural justice. It was

thought necessary that the intervention of the Court should be at

minimum level because such an approach would justify the

decision of the parties to the agreement who made a conscious

decision to exclude the Court's jurisdiction by opting for

arbitration. In "Mcdermott International Inc.", the Hon'ble

Supreme Court further held that the question of jurisdiction is

required to be raised through arbitration proceedings or soon after

initiation thereof and the jurisdictional issue shall be required to

be determined as a preliminary issue. Even otherwise, the

principle of kompetenz-kompetenz requires that the arbitral

Tribunal should exercise jurisdiction over the dispute under the

arbitration agreement and any challenge to the existence or

validity of the arbitration agreement shall not prevent the arbitral 2 2006 11 SCC 181

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Tribunal from proceeding with the hearing and ruling upon its

jurisdiction [refer, "Chloro Control (I) P. Ltd. v. Severn Trent

Water Purification INC. & Ors."3].

14. This is a matter of record that the dispute between the

appellant-company and the respondent no.1 involved the

execution of work detailed under the Sub-letting contract dated

19th April 2017 which contained a jurisdiction clause and the

dispute resolution clause. According to clause 23 of the Sub-

letting contract dated 19th April 2017, the Sub-letting agreement

shall be subject to the jurisdiction of only the Courts at Delhi.

Clause 24 provided that any difference or dispute arising out of or

in connection with the sub-contract shall be adjudicated through

arbitration to be held at Delhi and as per the provisions of A & C

Act or any amendment thereof. Indisputably, clause 24 provided a

dispute resolution mechanism whereunder the parties to the sub-

contract are required to make endeavors for resolution of any

difference or dispute through amicable settlement. It further

provided that if no amicable solution is explored by the parties

then their dispute shall be settled through arbitration by a panel of

three arbitrators. The manner in which the arbitrators shall be

appointed is also provided under clause 24. In "Hindustan

Petroleum Corporation Ltd. v. M/s Pinkcity Midway Petroleums"4,

the Hon'ble Supreme Court held that it is mandatory for the civil

Court to refer the disputes to the arbitrator if a party before the

civil Court contends that there is a clause for arbitration in the

agreement between the parties. With reference to section 16 of

A & C Act, "Hindustan Petroleum" further decided the question

3 2013 (1) SCC 641 4 (2003) 6 SCC 503

[2025:RJ-JD:17797-DB] (14 of 16) [CMA-3045/2024]

raised by a party relating to non-applicability of the arbitration

clause. It was ruled that section 16 empowers the arbitral Tribunal

to decide the question of jurisdiction of the Tribunal and to rule

and to decide any objection with respect to the existence or

validity of the arbitration agreement.

15. We must further indicate that the dispute arising between

the appellant-company and the respondent no.1 does not involve

the Public Health Engineering Department which is the Employer

under the agreement dated 18th September 2012. Clause 51 of the

agreement dated 18th September 2012 provided that any dispute

arising between the parties in respect of any of the matters

included in the agreement shall be settled by a competent Court

having jurisdiction over the place where the agreement was

executed and by no other Court. Having been so provided, clause

51 of the said agreement shall have no application to decide the

jurisdiction of the Court when the dispute is not between the

appellant-company with the Employer. Leaving aside this issue,

the finding of the Commercial Court cannot be countenanced in

law, that the appellant-company did not participate in the pre-

institution mediation and thus demonstrated by its conduct that it

was not interested in resolution of the dispute through arbitration

and therefore the application seeking reference to arbitration was

liable to be rejected. Even if it is assumed that pre-institution

mediation is mandatory, the dispute between the parties could

have been resolved only when they would have arrived at a

mutually agreed solution and not otherwise. In our opinion, the

object behind incorporating section 12-A in the Commercial Courts

Act, 2015 is to provide a forum for the aggrieved party to seek

[2025:RJ-JD:17797-DB] (15 of 16) [CMA-3045/2024]

amicable settlement of the dispute in the first instance and then

only to approach the Court. Non participation of the appellant-

company in pre-institution mediation proceedings cannot debar it

from seeking reference to arbitration in terms of clauses 23 and

24 of the Sub-letting agreement dated 19th April 2017. The

Commercial Court did not appreciate that the language of section

8 is peremptory in nature and it is obligatory for the Court to refer

the parties to arbitration in terms of their arbitration agreement in

cases where there is an arbitration clause5. It further failed to

appreciate that after an application under section 8 of A & C Act is

made nothing remains to be decided in the original action except

to refer the dispute to an arbitrator. We may also refer to the

decision in "Ravi Prakash Goel v. Chandra Prakash Goel & Anr."6,

wherein the Hon'ble Supreme Court held that the parties cannot

be compelled to take recourse to the civil Court if the dispute is

referable to arbitration. In view thereof, the Commercial Court

committed serious error in law in refusing to entertain the

application moved by the appellant-company seeking a reference

to arbitration and the reasoning so provided by the Commercial

Court to dismiss such application is clearly erroneous and cannot

be countenanced in law.

16. For the foregoing reasons, the order dated 12th September

2024 passed in contravention to the mandatory provisions under

section 8 of A & C Act is set aside. The application filed by the

appellant-company under section 8 (1) read with section 5 of A &

C Act and under Order VII Rule 11 Code of Civil Procedure is

allowed. The parties shall proceed to nominate the arbitrator of

5 P. Anand Gajapathi Raju & Ors. v. P.V.G. Raju (Died) [(2000) 4 SCC 539] 6 AIR 2007 SC 1517

[2025:RJ-JD:17797-DB] (16 of 16) [CMA-3045/2024]

their own choice and the arbitrators so chosen shall nominate a

third arbitrator as provided under clause 24 of the Sub-letting

agreement dated 19th April 2017.

17. D.B. Civil Miscellaneous Appeal No.3045 of 2024 is allowed in

the aforesaid terms.

(CHANDRA SHEKHAR SHARMA),J (SHREE CHANDRASHEKHAR),J

53-Arjun/-

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