Application Under O.7 R. 11 Is Not The Submission Of The First Statement On The Substance Of Dispute, Application Under Section 8 Of A&C Act Can Still Be Filed: J&K&L High Court

The Bench of Chief Justice held that mere filing of an application for rejection of plaint would not debar a party from subsequently filing an application under Section 8 of the A&C Act as the party cannot be presumed to have given up on its right to arbitration. Similarly, it cannot preclude the party from filing an application for appointment of arbitrator.

The Court that an application for rejecting a plaint is on the basis of the averments made in the plaint and no defence or any document filed in defence is to be examined in deciding an application, therefore, it cannot be treated as submission of the first statement on the merit of the dispute.

Facts

The parties entered into an agreement dated 01.06.2016 whereby the petitioner agreed to provide her premised to the respondents to carry on their business for 25% of the profit in return as the consideration.

A dispute arose between the parties related to the non-payment of dues and encroaching upon the areas outside the agreement. Thereafter, the respondent filed a suit for specific performance of the agreement and permanent injunction against the petitioner. Subsequently, the petitioner filed an application for rejection of the plaint on grounds of Sections 56(f) and 21(d) of the Specific Relief Act.

During the pendency of the suit, the petitioner terminated the agreement and served a notice of arbitration on the respondent. On receiving no response to its application, the petitioner filed an application under Section 11 of the A&C Act for the appointment of the arbitrator.

Objections to the Application

The respondent objected to the maintainability of the petition on the following grounds:

• The petitioner has already submitted to the jurisdiction of the court as it has filed the first statement on the substance of the dispute by filing an application for rejection of plaint and did not file an application under Section 8 of the A&C Act, therefore, it has waived her right of arbitration.

The petitioner countered the above objection on the following grounds:

• While deciding an application for appointment of arbitrator, the Court is by virtue of Section 11(6A) only required to examine the existence of the arbitration agreement.
• Therefore, the question of whether the petitioner has waived her right of arbitration is an issue that cannot be decided at that stage and the parties must be referred to arbitration.

Analysis by the Court

The Court held that after the 2015 Amendment Act vide which Section 11(6A) was inserted, the scope of Court's inquiry while appointing an arbitrator is limited to the examination of the existence of the arbitration agreement, therefore, an objection that the petitioner has waived her right to seek arbitration by not taking the plea of arbitrability in proceedings before the civil court is beyond examination by the court at this stage.

However, the Court proceeded to decide the issue and held that mere non-fling of Section 8 application in a suit before the Civil Court cannot mean that a party has waived its right to arbitration.

The Court held that mere filing of an application for rejection of plaint would not debar a party from subsequently filing an application under Section 8 of the A&C Act as the parry cannot be presumed to have given up on its right to arbitration. Similarly, it cannot preclude the party from filing an application for appointment of arbitrator as the application is not the first statement on the substance of the dispute.

Accordingly, the Court rejected the objection raised by the respondent and appointed the arbitrator.

Case Title: Anita Mehta v. Gulkand Hues Pvt. Ltd. Arb. P. No. 6 of 2020

Date: 27.06.2022

Counsel for the Petitioner: Mr. Faheem Nisar Shah, Advocate.

Counsel for the Respondent: Mr. Z. A. Shah, Sr. Advocate, with Mr. A. Hanan, Advocate.

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