Calcutta High Court: Civil Suit cannot be revived once disposed of by referring parties to Arbitration

Calcutta High Court: Civil Suit cannot be revived once disposed of by referring parties to Arbitration

Cites the Supreme Court decision in a previous case that once the parties agreed mutually to settle the dispute, it meant not going back to the court

The Calcutta High Court has ruled that once the Court has disposed of a civil suit and referred the parties to arbitration in an application filed under Section 89 of the Code of Civil Procedure (CPC), 1908, and appoints an arbitrator with the written consent of both the parties, the suit cannot be revived.

Rejecting the argument of the petitioner that since the Court under Section 37 of the Arbitration and Conciliation (A&C) Act, 1996 had set aside the arbitral award without deciding on the merits of its claim, it must appoint a new arbitrator, as the original arbitrator expired. Or, it should revive the civil suit.

The bench of Justice Krishna Rao remarked that since the petitioner had not made any request to the opposite party for the appointment of a sole arbitrator, as required under Section 11(5) of the A&C Act, the petition seeking the 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 on the payment of dues. The petitioner then filed a suit against the State before the high court.

Meanwhile, the entities agreed to refer the pending suit to arbitration and entered into an agreement for the appointment of an arbitrator.

The petitioner filed an application under CPC, seeking reference to arbitration, and the parties were referred to arbitration.

The sole arbitrator’s award in favour of the petitioner was challenged by the State before the court, which partly allowed the application.

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

As a result, Bharat Vanijya filed an application seeking the appointment of a new arbitrator, since the original arbitrator appointed by it had expired. The petitioner also sought a revival of the civil suit it had filed.

The court observed, “In the pending suit, the petitioner 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 arbitration.”

Referring to the decision of the Supreme Court in the Shailesh Dhairyawan vs Mohan Balakrishna Lulla case, 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 going back again to the court.

Thus, concluding that the suit instituted by the petitioner could not be revived, the bench added that until the dispute was resolved, the agreement between the parties for settlement of the dispute through arbitration (executed by them during the pendency of the suit), would subsist.

Justice Rao stated that as per Section 15 (2), where the mandate of an arbitrator was terminated, a substitute arbitrator would be appointed according to the rules. He reiterated that the ‘rules’ meant ‘provision’ or ‘procedure’ for the appointment of the arbitrator.

The Court observed that the sole arbitrator was appointed by the Court with the written consent of both parties. However, the consent terms did not contain any ‘provision’ or ‘procedure’.

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 30 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 such request to the respondent State, the petition was non-maintainable.