Right To Seek Reference To Arbitration U/S 8 Can Be Waived At Instance Of Defendant: Delhi High Court

Brief Facts:

M/S Sultan Chand and Sons Pvt. Ltd. (Appellant) entered into a publication/ copyright sharing agreement with the Respondent in respect of two books namely (i) Essentials of Artificial Intelligence - Class VIII and (ii) Essentials of Artificial Intelligence - Class I. The agreement incorporated an arbitration clause.

The Appellant published a third book, "Essential of Artificial Intelligence – Class X” without a formal agreement between the parties. The Appellant received queries that the books authored by the respondent were plagiarized and copied from various sources. The Appellant filed a suit for damages for misrepresentation in the tune of Rs. 2.25 crore.

The respondent filed a criminal complaint under section 63 of the Copyright Act, 1957 against the Appellant. He filed an Application under section 8 of the Arbitration and Conciliation Act for the dismissal of the suit for damages and reference of the disputes to arbitration. The Appellant conceded to the request for reference to arbitration. However, the respondent withdrew his Section 8 application.

The Appellant filed the petition to challenge the impugned order that allowed the Respondent to withdraw his Section 8 application. The Appellant sought reference to arbitration, in terms of the mandatory nature of Section 8 of the Act

Contentions of the Appellant:

The amendment brought in Section 8 of the Act in 2015 makes it obligatory for the Court to refer the dispute to arbitration. The Appellant relied upon Hindustan Petroleum Corpn. Ltd. vs. Pinkcity Midway Petroleums (2003) 6 SCC 50; Kalpana Kothari vs. Sudha Yadav & Ors. (2002) 1 SCC 203; Kalpana Kothari vs. Sudha Yadav & Ors. (2002) 1 SCC 203 and P.Anand Gajapathi Raju & Ors. vs. P.V.G. Raju & Ors. (2000) 4 SCC 539.

Observations:

The court noted that the arbitration clause in the agreement did not govern the subject matter of the dispute. There was no arbitration clause qua the suit between the parties as there was no agreement with regard to the third book i.e. 'Essential of Artificial Intelligence – Class X'.

The court held that the Appellant, having expressly denied the existence of an arbitration clause qua the disputes raised in the plaint, cannot seek reference of the disputes to arbitration under the agreement as the Appellant's own stand in the plaint does not enable him to invoke Exception 2 of Section 28 of the Indian Contract Act, 1872.

The court observed that:

“The right to seek a reference to Arbitral Tribunal under Section 8 of the Act is a right available solely to the defendant. This right is waivable at the instance of the Respondent-Defendant and the Respondent-Defendant has an option to submit itself to the jurisdiction of the Civil Court.”

The court stated that the Appellant's reference to the above-mentioned cases was misplaced. In P. Anand Gajapathi Raju, it was held that the language of Section 8 of the Act is pre-emptory and it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement in the event the conditions precedent are satisfied. In Kalpana Kothari, the court clarified that the plea of estoppel has no application to Section 8 of the Act.

The court held that since the Respondent had withdrawn the section 8 application and didn't wish to seek a reference to arbitration, the Appellant had no legal right to oppose the withdrawal of the application and/or insist that the matter be referred to arbitration. Thus, the court dismissed the application.

Case Title: M/S Sultan Chand and Sons Pvt. Ltd. v. Kartik Sharma

Case Number: FAO(OS) 148/2024 & C.M.Nos.61069-61070/2024

For Appellant: Mr.Kunal Tandon with Mr.Saurabh D.Karan Singh, Ms.Natasha, Mr.Sanjay Shisodia and Ms.Neha Arya, Advocates.

For Respondent: Mr.Chandra Prakash, Advocate.

Date of Judgment: 18.10.2024

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