Telangana High Court

M/S. Object Technology Solutions India ... vs M/S. Ganga Hitech City 2 Society on 6 September, 2024

            HON'BLE JUSTICE MOUSHUMI BHATTACHARYA
                              AND
               HON'BLE JUSTICE M.G. PRIYADARSINI

                COMMERCIAL COURT APPEAL No.55 of 2023

Sri G. Kalyana Chakravarthy, learned counsel for the appellant.
Ms. Varalakshmi Tadepalli, learned counsel for the respondent.



JUDGMENT:

(Per Justice Moushumi Bhattacharya)

The Appeal arises out of an order passed by the Commercial

Court on 06.10.2023 dismissing the appellant's application under

section 8(1) of The Arbitration and Conciliation Act, 1996.

2. The appellant is the defendant in a Suit filed by the

respondent herein for handing over the peaceful possession of the

suit schedule property to the plaintiff and for payment of

outstanding rents and other charges including maintenance with

regard to the suit schedule property.

3. The appellant obtained an interim order from a Co-ordinate

Bench on 27.12.2023 whereby the Co-ordinate Bench directed the

Commercial Court/Trial Court not to insist on filing of the Written

Statement by the appellant.

4. Learned counsel appearing for the appellant/defendant

argues that the Commercial Court disregarded the mandate under

section 8(1) of the Act whereby the parties have to be referred to

arbitration in the presence of a valid Arbitration Agreement forming

the subject matter of the dispute. Counsel also submits that the

application under section 8(1) of the Act was filed before the Written

Statement of the appellant.

5. Learned counsel appearing for the respondent/plaintiff urges

that the appellant has approached this Court with unclean hands

and has suppressed several facts which are relevant to the matter.

Counsel submits that the appellant has not complied with the

requirement of section 8(2) of the Act and that there is delay and

laches on the part of the appellant.

6. We have heard learned counsel appearing for the parties and

considered the documents on record.

7. The material dates brought to our notice on behalf of the

appellant are as follows:

7.1 The appellant filed an application under section 9 of the Act

on 11.08.2016 which however lost its efficacy since the appellant did

not take steps for constitution of the Arbitral Tribunal under section

9(2) of the Act. The respondent thereafter filed the Suit (O.S.No.1336

of 2016) on 13.12.2016. The appellant filed an application

purportedly under section 8 (1) of the Act on 31.03.2017 and the

Written Statement on 10.04.2017. The Trial Court thereafter

transferred the Suit to the Commercial Court and the Suit was

renumbered on 06.08.2019. The appellant's application for

amendment of the section 8 (1) petition was allowed on 11.07.2023.

The Commercial Court dismissed the said application by the

impugned order dated 06.10.2023.

8. What the appellant has however not indicated in the narration

of events is that the appellant, despite getting an order in the section

9 proceedings on 11.08.2016 failed to take any steps for constitution

of the Arbitral Tribunal under section 9(2) of the said Act. Section

9(2) of the Act mandates that the applicant must take steps within 90

days from the date of obtaining an order under section 9(1) of the

Act.

9. The narration of events, as presented by the appellant, also

does not state that the appellant filed an application for amendment

of the initial application filed under section 8 of the Act in 2021 i.e., 4

years after the filing of the first application. Further, both these

applications failed to comply with the requirement of section 8(2) of

the Act that is appending the original or a duly certified copy of the

Arbitration Agreement to the application under section 8(1) of the

Act.

10. The Court is also informed that Clause 18.5 of the 2 Lease

Agreements dated 24.06.2013 and 02.08.2014 was subsequently

superseded by an arrangement entered into between the parties.

The Court however is not inclined to enter into the merits of the

dispute including on the subsistence or supersession of the Lease

Agreements for the reasons as stated below:

11. Section 8(1) of The Arbitration and Conciliation Act, 1996

contemplates a judicial authority referring the parties to arbitration

on an application being made by a party to an Arbitration

Agreement which forms the subject matter of the action pending

before the judicial authority subject to existence of a valid

Arbitration Agreement.

12. In this case, the first application, under section 8(1) of the Act

made by the appellant, which has been disclosed by the respondent

in its counter, contains the prayer which is reproduced below:

"It is, therefore, prayed that the Hon'ble Court may be pleased to appoint an arbitrator to resolve the dispute between the parties hereto, as provided in Clause No.18 of the Agreement of Lease, under the Arbitration and Conciliation Act, 1996 in the interest of justice, as prayed for in the accompanying petition."

13. From the above prayer, it is clear that the application itself

was misconceived and cannot be treated as an application under

section 8(1) of the Act. It is in the nature of an application under

section 11 of the Act which can only be made to the High Court

under section 11(6) of the Act.

14. Further, section 8(1) of the Act mandates that an application

must be made for referring the parties to arbitration on or before the

date of submitting the first statement on the substance of the

dispute. It has been judicially settled that the 'first statement' in

section 8(1) of the Act would mean a Written Statement. Hence, the

admitted position, as would appear from the dates brought to the

notice of the Court, is that as on the date of filing of the Written

Statement, there was no application under section 8(1) of the Act on

the record before the Commercial Court.

15. Therefore, the appellant disentitled itself to any statutory

relief/orders under section 8(1) of the Act also for the reason that the

appellant (the defendant in the Suit) filed its Written Statement/First

Statement before filing the application under section 8(1) of the Act

which is contrary to the sequence provided under section 8(1) of the

Act.

16. Not only this, even the second application filed by the

appellant in 2021 does not contain the prayer as contemplated under

section 8(1) of the Act. The prayer in the second application is

reproduced below:

"It is, therefore, prayed that the Hon'ble Court may be pleased to refer to arbitration to resolve the disputes between the parties hereto, as provided in Clause No.18 of the Agreement of Lease, under the Arbitration and Conciliation Act, 1996 in the interest of justice, as prayed for in the accompanying petition."

17. Therefore, there is no application as on date before the

Commercial Court for referring the parties to arbitration under

section 8(1) of the Act.

18. The other submissions made by the appellant and the

respondent with regard to the non-compliance of section 8(2) or

supersession of the Lease Agreements or even that the Lease

Agreement not forming the subject matter of the dispute, therefore

loses relevance.

19. Vidya Drolia v. Durga Trading Corporation 1 , relied upon by

learned counsel for the appellant, for the proposition that landlord-

(2021) 2 SCC 1

tenant disputes are arbitrable and that the Court must refer the