Filing Written Statement Does Not Waive Right To Arbitration If Preliminary Objection Is Raised At Outset: Jammu & Kashmir High Court

Brief Facts:

The matter pertained to a judgment issued by the Principal District Judge, Jammu. The trial court held that the suit filed by S. Charanjeet Singh (“Appellant”) was not maintainable. It granted the parties liberty to approach a nominated arbitrator to resolve their dispute.

The Appellant filed a suit seeking a declaration that the contract was frustrated. The Appellant also asked for a refund of Rs. 7,48,650/- and two FDRs of Rs. 40,000/-. Additionally, he prayed for Rs. 10 Lakh as compensation and a permanent injunction.

The Respondents filed their written statement. The trial court framed an issue regarding the suit's maintainability in light of the arbitration clause. The trial court held the suit was not maintainable and referred the matter to arbitration. Feeling aggrieved by the decision of the trial court, the Appellant approached the High Court.

The Appellant argued that the Respondents waived their right to arbitration by filing a detailed written statement. Further, the Respondents failed to file an application under Section 8 of the Arbitration and Conciliation Act, 1996 before submitting their written statement.

Observations by the High Court:

The High Court referred to the decision of the Supreme Court in P. Anand Gajapathi Raju and others vs P.V.G Raju (Dead) and others [(2000) 4 SCC 539] wherein it was held that if an arbitration agreement covers the disputes between the parties, it is obligatory on the part of the court to refer the matter to arbitration. The High Court also referred to Rashtriya Ispat Nigam Ltd. and another vs M/s Verma Transport Company [(2006 AIR SC 2800)], wherein it was held that once the conditions under Section 8 are satisfied, the court must refer the matter to arbitration.

The Appellant had argued that the Respondents submitted to the jurisdiction of the trial court by filing a written statement. However, the High Court rejected this argument. It noted that the Respondents raised a preliminary objection regarding the arbitration clause in their written statement. The High Court also noted that the Respondents didn't waive their right to arbitration and complied with the requirement of bringing the arbitration clause to the court's notice at the appropriate time.

The High Court held that:

“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 respondents brought to the notice of the learned trial court the existence of arbitration clause in the agreement through the medium of written statement and at the same time submitted their first statement on the substance of the dispute, therefore, it cannot be said that the respondents had submitted to the jurisdiction of the learned trial court to proceed ahead with the suit and waived off their right to get the matter adjudicated through arbitration.”

Therefore, the High Court modified the trial court's order to the extent that the suit was disposed of by referring the parties to arbitration. The High Court also directed the appointment of an independent arbitrator.

Case Title: S. Charanjeet Singh vs UT of J&K and Anr.

Case Number: RFA No. 52/2023 CM No. 7861/2023, 654/2024 CAV No. 1940/2023

Advocate for the Petitioner: Mr. Vikram Sharma, Sr. Advocate with Mr. Sachin Dev Singh, Advocate.

Advocate for the Respondent: Ms. Priyanka Bhat, Advocate vice Mr. Suneel Malhotra, GA. Mr. Rahul Pant, Sr. Advocate with Mr. Anirudh Sharma, Advocate.

Date of Judgment: 13.03.2025

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