Order Terminating The Arbitration Not Challenged; Can't File Section 8 Application Later: Karnataka High Court

The Division Bench of Justice Alok Aradhe and Justice J.M. Khazi held that once the order of the arbitrator terminating the arbitral proceedings has attained finality, it would not be open for a party who did not lay any challenge to the order to contend that the dispute once again be referred to arbitration.

Facts

The parties entered into an agreement dated 25.06.2008. The agreement had an arbitration clause. A dispute arose between the parties which was referred to a sole arbitrator.

Thereafter, the respondent filed an application regarding under Section 16 of the A&C Act. The arbitrator vide order dated 07.11.2016, accepted the respondent's objection to its jurisdiction and permitted the respondent to take recourse to appropriate legal remedy. The appellant did not challenge the order of the arbitrator.

Consequently, the respondent filed a Civil Suit for recovery of the amount in question. The appellant filed an application under Section 8 of the A&C Act to refer the parties to arbitration. The trial court rejected the application on the ground that the appellant did not challenge the order of the arbitrator, therefore, the parties cannot be referred to arbitration.

The appellant filed an appeal against the order of the trial Court.

The Grounds For Appeal

The appellant challenged the order of the trial court on the following grounds:

• The parties admittedly have an arbitration clause between themselves.
• The provisions of Section 8 are mandatory and the parties must be referred to arbitration when there exists an arbitration agreement between them.

Analysis By The Court

The Court observed that the provisions of Section 8 of the A&C Act are mandatory and make it obligatory for the Court to refer the parties to arbitration in terms of the arbitration agreement.

However, the appellant not having challenged the order of the arbitrator by which it has held that it has no jurisdiction to adjudicate the dispute has waived its right to contend that the dispute should be referred to arbitration.

The Court held that once the order of the arbitrator terminating the arbitral proceedings has attained finality, it would not be open for a party who did not lay any challenge to the order to contend that the dispute once again be referred to arbitration.

Accordingly, the Court dismissed the appeal.

Case Title: BEML Ltd. v. Prakash Parcel Services Ltd. M.F.A. No. 4180 of 2019 (AA).

Citation : 2022 LiveLaw (Kar) 218

Date: 08.06.2022

Counsel for the Appellant: Mr. Sandesh J. Chouta, Sr. Advocate and Mr. Ismail M. Musba Advocate

Counsel for the Respondent: Mr. A.S. Gupra, Advocate.

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