Parties Have To Be Referred To Arbitration Once Plea Of Existence Of Arbitration Clause Is Taken In Written Statement & Defendant Objects To Court’s Jurisdiction: Jammu & Kashmir & Ladakh High Court
The appeal before the Jammu and Kashmir & Ladakh High Court was directed against the order of the Trial Court holding the suit preferred by the appellant as not maintainable.
The Jammu and Kashmir and Ladakh High Court has referred the parties to arbitration after noting that the respondents brought to the notice of the Trial Court the existence of arbitration clause in the agreement through the medium of written statement and also submitted their first statement on the substance of the dispute.
The appeal before the High Court was directed against the order/judgment of the Court of Principal District Judge, Jammu (Trial Court) whereby the Court had held the suit preferred by the appellant as not maintainable, with liberty to the parties to approach the nominated arbitrator at the earliest enabling him to settle the dispute inter se parties.
The Single Bench of Justice Rajnesh Oswal held, “This Court is of the considered view that once a plea of existence of arbitration clause is taken in the written statement and the defendant persists with the same and objects to the jurisdiction of the trial court to proceed ahead with the suit, then the judicial authority is left with no discretion but to refer the parties to arbitration.”
Senior Advocate Vikram Sharma represented the Appellant while Senior Advocate Rahul Pant represented the Respondents.
Factual Background
A suit was filed by the petitioner for a declaration to the effect that the contract/agreement executed between the parties, under the e-NITs was frustrated and become incapable of performance, on account of deliberate inaction on the part of the respondents to close numerous illegally run eat points/canteens/reharis/dhabas, etc. around and in the vicinity of the premises of the appellant with consequential relief of mandatory injunction directing the respondents to refund an amount of Rs. 7,48,650 and to return two FDR of Rs. 40,000 deposited by the appellant along with interest.
A further relief of compensation of Rs. 10 lakh was claimed for frustrating the contract of the appellant and thus damaging the goodwill of the appellant in the market. The Trial court decided the suit against the appellant and held the same to be not maintainable. Aggrieved thereby, the petitioner approached the High Court.
Reasoning
On a conjoint reading of Sub-sections 1 & 2 of Section 8 of the Arbitration Act of 1996, the Bench explained that the purpose of filing an application is to place on record the original arbitration agreement or a duly certified copy thereof, so as to bring to the notice of judicial authority the factum of existence of arbitration agreement. The only embargo contained in Section 8(1) is that an application for referring the dispute to an arbitrator cannot be filed by a party or anyone claiming through him, after the submission of his first statement on the substance of the dispute.
As per the Bench, either prior to or along with the submission of his first statement on the substance of the dispute, the party can bring to the notice of the court, a clause in respect of arbitration and thereafter it becomes obligatory on the part of the judicial authority to refer the parties to arbitration, unless the party waives off its right voluntarily.
There was no dispute with respect to the dispute being arbitrable in nature. The Bech discarded the contention of the appellant that once the written statement was filed by the respondents and had submitted themselves to the jurisdiction of the court, order impugned could not have been passed. The Bench said, “The argument though appears to be attractive but bereft of any legal force, as a preliminary objection in respect of maintainability of suit was raised by the respondents in their written statement in reference to the arbitration clause existing in the agreement and the lack of jurisdiction on part of the learned trial court to proceed ahead with the suit.”
The Bench further noticed that the respondents brought to the notice of the Trial Court the existence of an arbitration clause in the agreement through the medium of a written statement and at the same time submitted their first statement on the substance of the dispute. Therefore as per the Bench, it couldn’t be said that the respondents had submitted to the jurisdiction of the Trial Court to proceed ahead with the suit and waived off their right to get the matter adjudicated through arbitration.
The Court also explained that once a plea of the existence of an arbitration clause is taken in the written statement and the defendant persists with the same and objects to the jurisdiction of the Trial Court, then parties have to be referred to arbitration.
However, the Bench held that the Trial Court ought not to have granted liberty to the parties to approach the nominated arbitrator, who was the official of the respondents. The Bench thus disposed of the suit by referring the parties to the arbitration
Cause Title: S. Charanjeet Singh v. UT of J&K & Ors. (Case No.: RFA No. 52/2023)
Appearance:
Appellant: Senior Advocate Vikram Sharma, Advocate Sachin Dev Singh
Respondent: Senior Advocate Rahul Pant, Advocate Priyanka Bhat, Government Advocate Suneel Malhotra, Advocate Anirudh Sharma
