Once Civil Suit Has Been Disposed Of By Referring Parties To Arbitration Under S. 89 Of CPC, The Suit Can’t Be Revived: Calcutta High Court

The Court rejected the argument of the petitioner/ claimant that since the court under Section 37 of the Arbitration and Conciliation Act, 1996 (A&C Act) had set aside the arbitral award without deciding on the merits of its claim, the High Court must appoint a new arbitrator since the original arbitrator had expired, or, in the alternative, revive the civil suit instituted by it.

The bench of Justice Krishna Rao remarked that since the petitioner had not made any request to the opposite party for appointment of a Sole Arbitrator, as required under Section 11(5) of the A&C Act, the petition seeking appointment of a new arbitrator was not maintainable.

The petitioner, Bharat Vanijya Eastern Pvt Ltd, was awarded a contract by the respondent, the State of West Bengal. Subsequently, a dispute arose between the parties with regard to the payment due under the Contract, and the petitioner filed a civil suit against the State before the Calcutta High Court.

During the pendency of the suit, the parties agreed to refer the pending suit to arbitration and entered into an agreement for appointment of arbitrator. The petitioner filed an application under Section 89 of the Code of Civil Procedure, 1908 before the High Court, seeking reference to arbitration, and the parties were referred to arbitration.

The arbitral award passed by the Sole Arbitrator in favour of the petitioner was challenged by the State under Section 34 of the A&C Act before the Calcutta High Court, who partly allowed the application.

In an appeal filed under Section 37 of the A&C Act by both the parties against the said order, the Division Bench of the High Court set aside the arbitral award on the ground that the same was unreasoned. The Division Bench granted liberty to the petitioner to pursue its claims afresh by reviving its suit, or by any other means available to it under the law.

Consequently, the petitioner, Bharat Vanijya Eastern, filed an application before the Calcutta High Court seeking appointment of a new arbitrator, since the original arbitrator appointed by the High Court had expired. The petitioner, in the alternative, sought revival of the civil suit filed by it.

While dealing the petitioner’s plea seeking revival of the suit, the Court took note, “...the petitioner in the pending suit had filed an application on the basis of the agreement entered between the parties and this Court had passed an order in terms of Section 89 of the Code of Civil Procedure referring the matter to the arbitration.”

Referring to the Supreme Court’s decision in Shailesh Dhairyawan vs Mohan Balakrishna Lulla (2015), the Court observed that once an agreement was entered between the parties for settlement of disputes through arbitration, that too in an appending suit, the intention of the parties was to settle the matter through arbitration and not to come back again to the court.

Thus, the High Court concluded that the suit instituted by the petitioner cannot be revived.

The bench added that until the dispute between the parties was not resolved, the agreement between the parties for settlement of dispute through arbitration, which was executed by them during the pendency of the suit, would subsist.

The Court reckoned that as per Section 15 (2), where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

While reiterating that ‘rules’ in Section 15 (2) means ‘provision’ or ‘procedure’ for appointment of arbitrator, as agreed by the parties or made applicable to the dispute, the Court observed that the Sole Arbitrator was appointed by the High Court with the written consent of both the parties. However, the said consent terms did not contain any ‘provision’ or ‘procedure’ for appointment of arbitrator.

The bench added: “Under Section 11(5) of the Act, failing an agreement between the parties on a procedure for appointing the arbitrator, in an arbitration with a Sole Arbitrator, a party desirous of appointing the arbitrator must make a request to the other party to agree to an appointment within thirty days from receipt of the request, failing which the appointment shall be made by the Chief Justice or his designate.”

Since the petitioner did not make any request to the respondent State for appointment of arbitrator to resolve the dispute in terms of the said agreement, before filing the application seeking appointment of a new arbitrator, the petition was non-maintainable, the Court held.

“The application by way of this Notice of Motion in the disposed of Suit in which the original Arbitrator was appointed under consent terms, is clearly misconceived and not maintainable,” said the Court, adding that the same shall not preclude the petitioner from taking appropriate steps for appointment of arbitrator in accordance with the law.

Case Title: Bharat Vanijya Eastern Private Limited versus State of West Bengal

Citation: 2023 LiveLaw (Cal) 97

Dated: 17.03.2023

Counsel for the Petitioner: Mr. Anindya Kumar Mitra, Sr. Adv. Mr. Dhruba Ghosh, Adv. Mr. Reetobroto Mitra, Adv. Mr. Sarajit Mitra, Adv. Mr. Altamash Alim, Adv.

Counsel for the Respondent: Mr. Tilak Kr. Bose, Sr. Adv. Mr. Paritosh Sinha, Adv. Mr. Anupam Das Adhikari, Adv. Mr. Ratul Das, Adv. Mr. Sounak Banerjee, Adv. Mr. Arindam Mondal, Adv. Mr. Subhabrata Datta, Adv. Mr. Debashis Sarkar, Adv. Mr. Paritosh Sinha, Adv.

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