CASE TITLE:
Arun Srivastava Vs. M/S Larsen & Toubro Ltd.
DATE OF ORDER:
9 November 2017
JUDGE(S):
Justice Amit Bansal
SUBJECT
The Delhi High Court while observing that the language of section 8 of the Arbitration and Conciliation Act is peremptory, opined that in cases where there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration. While commenting upon the maintainability of a petition under Article 227 of the Constitution of India challenging an order made u/s 8 of Arbitration Act, the Court observed that “the jurisdiction under Article 227 of the Constitution of India has to be sparingly exercised in respect of orders passed by the commercial court so that the legislative intent and purpose behind the Commercial Courts Act of expeditious disposal of commercial suits is not defeated.”
IMPORTANT LEGAL PROVISIONS
THE ARBITRATION AND CONCILIATION ACT
Section 8- provides that the judicial authorities are under mandate to refer the parties to arbitration in case there is an arbitration clause agreed upon by the parties.
BRIEF FACTS OF THE CASE
- A letter of Intent was issued by the respondent to the petitioner for installation, supply and commissioning of electronic works. The same was duly executed and signed by the parties.
- It was argued by the petitioner the the respondent had wrongfully withheld an amount of Rs. 12,24,181 in respect of the bill of exchange drawn by him on the respondent.
- As a result, the petitioner filed a recovery suit for a sum amounting to 17,26,000 before the Additional District Judge on 22ndSeptember, 2017.
- In the above mentioned suit, the respondent filed an application u/s 8 of the Arbitration and Conciliation Act and sought to refer the dispute to arbitration.
- This was followed by an application under Order 12 Rule 6of CPC by the petitioner who sought a decree on the grounds of the admission made by the respondent .
- The application filed by the respondent u/s 8 was allowed on the ground that there existed a comprehensive arbitration clause between the parties and that the petitioner had no where denied the existence of such clause.
- In view of the applicability of section 8, the application filed by petitioner under Order 12 Rule 6 of CPC was dismissed.
- The petitioner had thus filed the present petition under Article 227 of the Constitution of India.
ARGUMENTS RAISED BY THE APPELLANT
- The learned counsel appearing for the petitioner contended that vide an email dated 10th November, 2016, the respondent had acknowledged their liability for the disputed sum of 12,24,181. It was further pointed out that the petitioner had furnished upon the respondent all the requisite documents and thus, the respondent had no reason to withhold the said amount.
- The learned counsel while placing reliance onFenner India Ltd. V. Brahmaputra Valley Fertilizer Corporation Ltd. [227 (2016) DLT 285] further contended that where no dispute exists between the parties and the amount claimed is also accepted by the respondent, the same can not be subjected to arbitration proceedings.
ARGUMENTS RAISED BY THE RESPONDENT
- The counsel for the respondent questioned the maintainability of the petition under Article 227 by referring to the judgement of the Supreme Court in Asha Saini v. OmaxeLimited.
- Counsel appearing for the respondent while placing reliance on the decision of the Apex Court in Hindustan Petroleum Company Ltd. V. Pinkcity Midway Petroleums [(2003) 6 SCC 503], contended that where an arbitration agreement exists between the parties, the court is under a mandate to refer them to arbitration.
ANALYSIS BY THE COURT
- The Court observed that the respondent has rightly questioned the maintainability of the present petition. In Asha Saini’s case it was held that Article 2227 is a constitutional remedy, not barred by any prohibition contained in a statute. It was also observed that the High Court would ordinarily refuse to exercise its jurisdiction under article 227 where the language of the statute gives finality to the order.
- The Court further observed that in case of Deep Industries Limited v. Oil and Natural Gas Corporation Limited [ (2020) 15 SCC 706], it was held thatif petition filed under Article 226 and 227 of the Constitution against order of an appeal under Arbitration Act were allowed the arbitral process will be derailed and will not reach its conclusion for years. The Court held that the same reasoning can also be applied to orders passed by Courts allowing applications filed u/s 8 of the Act.
- It was also observed by the Court that the Supreme Court in Black Diamond Track Parts Private Limited v. Black Diamond Motors Parts Private Limited [(2021) SCC Online DEL 2630] held that jurisdiction of a court under Article 227 shall be exercised very rarely in respect of of orders passed by the Commercial Court. Otherwise, the purpose of expediency that is sought to be achieved by the establishment of Commercial Courts will stand defeated.
- The Court also held that it was rightly observed in Hindustan Petroleum Corporation Ltd. Case that once there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of the said agreement. In the present case, the petitioner has no where denied the existence of any such clause.
CONCLUSION
In view of the above observations, the learned Single Judge Bench of Delhi High Court held that the petition filed under Article 227 challenging the order passed u/s 8 of the Arbitration Act is not maintainable. The Court also concluded that the entire case of the petitioner is based on the alleged admission made by the respondent regarding his liability of the specified sum. However, there is no evidence of any specific admission made by the respondent.
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