Karnataka High Court: Arbitration Clause Challenges in Civil Suits Must Arise at Outset

Karnataka High Court: Arbitration Clause Challenges in Civil Suits Must Arise at Outset

The Karnataka High Court has overturned a trial court's decision that dismissed a lawsuit filed by Nova Medical Centers Pvt Ltd., citing the matter as arbitrable. The Court highlighted that the defendant had failed to contest the jurisdiction of the Civil Court.

A single-judge bench, presided over by Justice Anant Ramanath Hegde, emphasised that it is an established legal principle that any objection to the suit's consideration under the Arbitration Clause must be raised during the initial appearance before the Court, rather than at a later stage.

The hospital, where Jayaprakash (defendant) received medical treatment, filed an appeal. After his treatment, Jayaprakash contracted Septicemia and the hospital agreed to provide compensation. Nonetheless, the defendant purportedly engaged in actions that disrupted the hospital's operations, compelling the company to initiate a lawsuit seeking an injunction.

The civil court rejected the suit, citing the presence of an Arbitration Clause intended to address the conflict between the involved parties.

During the appeal, the Company contended that any objections concerning the jurisdiction of the Court to consider the suit, based on a potentially binding Arbitration Clause between the parties, should have been raised during the initial hearing. As this objection was not presented, the trial court's decision to dismiss the suit, citing the necessity for the parties to follow the provisions of the Arbitration & Conciliation Act, of 1996, was erroneous.

Observing that the defendant had not made an appearance before the civil court, the Bench remarked that the defendant's behaviour suggested that they had relinquished their objection regarding the court's jurisdiction. The Court documented the presented evidence accordingly.

“After having recorded evidence, the Court could not have dismissed the suit on the premise that the parties have to take recourse to the provisions of the Act of 1996,” the Bench stated.

It was also observed that the Civil Court had not formulated any specific issues for examination concerning the Company's rightful possession and the defendant's claimed interference. In light of this, the Bench continued to deliberate on the substantive aspects of the case.

Considering the unchallenged oral and documentary evidence, the Court determined that the plaintiff lawfully possesses the property. It affirmed that the defendants lack any legitimate rights or interests in the plaintiff's affairs and are prohibited from meddling in hospital operations. Consequently, the Court concluded that the plaintiff's request for an injunction is substantiated and thus deserving of approval.