J&K&L High Court clarifies on non-filing of application under Arbitration Act before the civil court

J&K&L High Court clarifies on non-filing of application under Arbitration Act before the civil court

The High Court appointed a retired Chief Justice of Meghalaya High Court as an arbitrator in the matter

The Jammu and Kashmir and Ladakh High Court has reiterated that non-filing an application under Section 8 of the Arbitration and Conciliation Act does not signify that the petitioner has surrendered to the jurisdiction of the court. It also does not mean that he has relinquished the right to resolve the disputes through arbitration to debar the petitioner for seeking the appointment of an arbitrator through the court's intervention.

The single bench of Chief Justice Pankaj Mithal was hearing a plea filed by the petitioner under Section 11(6) of the Act seeking the appointment of an arbitrator to adjudicate the matters of controversy between the parties.

But, opposing the plea, the respondents through their counsel Senior Advocate ZA Shah, raised a preliminary objection that the petitioner was not entitled to seek an appointment of an arbitrator. The counsel claimed that the petitioners had waived their right by not moving an application before the civil court.

The bench observed that the issue of whether the petitioner had waived her right to seek arbitration by not taking the plea of arbitrability in proceedings before the civil court was beyond examination at that stage and may be considered by the arbitrator if any.

The Chief Justice stated, "The court is supposed to only examine the existence of the arbitration agreement pertaining to the disputes raised between the parties. All other issues have to be adjudicated upon by the arbitrator."

The bench also recorded the observations made by the Supreme Court in the Uttarakhand Purv Sainik Kalyan Nigam Limited vs Northern Coal Field Limited.

During that case it was held, "The high court erred in dismissing the petition for appointment of an arbitrator on the ground that the claim was barred by limitation as such a preliminary objection ought to have been left to be decided by the arbitrator and that the court was only required to determine the existence of the arbitration agreement and if it so existed, it was bound to appoint an arbitrator."

The bench also dealt with the second contention of the respondents that the petitioner had waived the right for the appointment of an arbitrator.

It observed that a plain reading of Section 8 of the Act revealed that if a suit was filed in the court regarding an arbitration agreement, if a party to the agreement or any person claiming through him applied to the court on or before the date of submitting his first statement on the substance of the dispute, the court was under an obligation to refer the parties to the arbitration unless it found that prima facie no valid arbitration agreement existed.

The bench relied on the Supreme Court judgment in the Rashtriya Ispat Nigam Limited vs Verma Transport Company, wherein the court held that the expression 'first statement on the substance of the dispute' was different from the expression 'written statement' and observed that supplemental and incidental proceedings were not part of the main proceedings.

The court recorded that an application for rejecting a plaint was distinct from the main proceedings and the averments or the defence if any taken. The rejection of the plaint was about the averments made in the plaint and no defence or any document filed in defence was to be examined in deciding an application under Order 7 Rule 11 CPC or rejecting the plaint.

The bench simplified that the provisions were simply procedural to prevent vexatious and frivolous litigation and an application thereunder could not be regarded as a written statement on the substance of dispute since the defence even if set up in such an application was not to be treated as a defence and examined in deciding such an application.

The court allowed the application and underscored, "It does not fall within the expression 'first statement on the substance of the dispute.'"