Case title:
ANR International Pvt Ltd v. Mahavir Singhal & Ors.
Date of Order:
3rd November 2023
Bench:
Hon’ble Mr. Justice V. Kameshwar Rao
Hon’ble Mr. Justice Anoop Kumar Mendiratta
Parties:
Appellant(s): ANR International Pvt Ltd
Respondent(s): Mahavir Singhal & Ors.
SUBJECT:
The appellant has filed an appeal against the judgment passed by the learned District Judge in Commercial Court, Karkardooma, Delhi, whereby the District Judge had dismissed the application under section 8 of the Arbitration and Conciliation Act. The Hon’ble High Court (hereinafter referred to as the ‘High Court’ or ‘the Court’) in the present appeal has allowed it, setting aside the learned District Judge’s order.
IMPORTANT PROVISIONS:
The Arbitration and Conciliation Act, 1996 (ACA):
Section 8
Section 12A
The Commercial Courts Act, 2015
OVERVIEW:
The Respondent had filed a suit before the District Judge for the recovery of the sum of rs.59,83,712 with interest from the appellant.
The respondent served a legal notice to the appellant informing about the lawsuit.
Prior to filing a response, the appellant submitted an application under section 8 arguing that there was an arbitration clause in the invoices used as evidence and the dispute should thus go to arbitration.
The appellant alleged that respondents tried to invoke the arbitration clause initially but dropped it due to incorrect advice.
It was also alleged that the learned District Judge did not consider the arbitration clause in the tax invoice or other legal provisions.
Appellant cited the case of Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal (2022), where the Supreme Court held that even without a written contract containing an arbitration agreement, parties can decide to refer a dispute to arbitration by mutual consent.
It was noted that the appellant had sought additional time to file a written statement after being served with a summons. The appellant raised no objections regarding the arbitration agreement at those hearings.
The District Judge rejected the application filed by the appellant under section 8 of ACA.
The impugned judgment is now being dealt by the High Court.
ISSUES RAISED:
Whether the District Judge was correct to dismiss the appellant’s application under section 8 of ACA?
ARGUMENTS ADVANCED BY THE APPELLANT:
The learned had erred in judgment and only focused on the technicalities and failed to take note of significant details.
There is a valid arbitration agreement between the parties.
Such disputes should go to arbitration rather than a regular court.
The original arbitration agreement should be provided by the party requesting arbitration.
ARGUMENTS ADVANCED BY THE RESPONDENT:
There is indeed an arbitration agreement between the parties but the appellant denied the existence of such agreement in their reply letter.
Appeal under section 8 of ACA is merely a delaying tactic
Appellant failed to bring up the arbitration clause while going through the pre-institution mediation under section 12A of the ACA.
JUDGEMENT ANALYSIS:
The appellant has argued that the requirements of section 8 of ACA have been met and thus, the appeal should go to arbitration while the respondent contested the denial of the existence of the arbitration clause in response to the notice sent by the respondent and stated the stance cannot be changed now.
It is to be noted that there indeed exists an arbitration clause in the ‘VAT Declaration’ section of the tax documents.
The arbitration clause does not cease to exist just because the appellant initially denied existence and contested the claim on merits.
It was the respondent’s duty to prove to the Trial Court that there existed no arbitration clause in the invoice and that invoking it would not resolve any disputes.
Evidence is required through examination to determine the validity of the clause.
From the case laws cited by the appellant, it is clear that section 8 of ACA is mandatory.
It is an admitted mutual position of the parties regarding the existence of the arbitration clause, and the fact that there have been disputes between them, and the clause applies to them.
The law related to section 8 of ACA mandates sending disputes to arbitration with minimal judicial interference.
the argument of “approbate-reprobate” raised by the appellant is not a valid reason to deny sending the parties to arbitration, especially when the existence of the arbitration clause has not been contested.
The Court was of the opinion that application under section 8 should have been granted.
CONCLUSION
The High Court, in conclusion, found that the learned District Judge had made an error in rejecting the appellant’s application under section 8 of ACA, despite having acknowledged the existence of the arbitration clause. The Court set aside the order passed by the District Judge and approved the appellant’s application under section 8 of ACA. The Court appointed Justice R.K. Gauba, a former judge of the Court, as the arbitrator to handle the disputes between parties, including any claims and counter-claims. The arbitrator’s fee was to be regulated according to the Fourth Schedule of ACA, and they were required to provide disclosure under section 12 of ACA. The suit was found to be not maintainable to no order as to costs.
