Pricewaterhouse Coopers Service vs Mohan Kumar Thakur. Miscellaneous First Appeal 8750/2019 decided on 5 November 2020. Justice B.V. Nagarathna and Justice N.S. Sanjay Gowda.
Judgment Link: http://judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/351911/1/MFA8750-19-05-11-2020.pdf
Relevant paragraphs: 18. Whether a defendant would lose the right to seek for reference of the parties to arbitration, if the application for referring the parties to arbitration under Section 8 of the Act, is filed along with the written statement?
22 & 23. A plain reading of the provision (Section 8) would indicate that a party to an arbitration agreement is entitled to seek for a reference to arbitration if the other party to the agreement has brought an action before a judicial authority in respect of a matter which is the subject of an arbitration agreement. This entitlement is however subject to two riders: Firstly, that the party applies for reference before he files his first statement of defence on the substance of the dispute and Secondly, that the application for reference should be accompanied by the original arbitration agreement or a certified copy of the arbitration agreement.
23. The intent behind this provision is manifestly clear, which is, to ensure that once an agreement has been entered into which provides for resolution of any dispute that may arise between the parties during the working of the contract, the parties to the agreement, should seek for resolution of that dispute only through the medium of arbitration, a mode which they had voluntarily agreed to resort to at the time of entering into the agreement.
29. Thus, the key ingredient to be examined while considering whether an application for referring the parties to arbitration under Section 8 of the Act is to be granted is to determine whether the defendant had unequivocally submitted to the jurisdiction of the judicial authority before whom an action has been brought, which in our country, would be the Civil Court before whom a suit has been filed by a party to an arbitration agreement.
33. The Apex Court in the case of Rashtriya Ispat Nigam Limited and Another Vs. Verma Transport Company – (2006) 7 SCC 275 has observed at paragraphs 36 and 42 as under:
“36. The expression “first statement on the substance of the dispute” contained in Section 8(1) of the 1996 Act must be contradistinguished with the expression “written statement”. It employs submission of the party to the jurisdiction of the judicial authority. What is, therefore, needed is a finding on the part of the judicial authority that the party has waived its right to invoke the arbitration clause. If an application is filed before actually filing the first statement on the substance of the dispute, in our opinion, the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the court. What is, therefore, material is as to whether the petitioner has filed his first statement on the substance of the dispute or not, if not, his application under Section 8 of the 1996 Act, may not be held wholly unmaintainable. We would deal with this question in some detail, a little later.
Waiver of a right on the part of a defendant to the lis must be gathered from the fact situation obtaining in each case. In the instant case, the court had already passed an ad interim ex parte injunction. The appellants were bound to respond to the notice issued by the Court. While doing so, they raised a specific plea of bar of the suit in view of the existence of an arbitration agreement. Having regard to the provisions of the Act, they had, thus, shown their unequivocal intention to question the maintainability of the suit on the aforementioned ground.
34. What is discernable from the above decision is that a Court before which an application under Section 8 of the Act is made will have to record a finding as to whether the defendant had waived his right or acquiesced to the jurisdiction of the Court and this waiver of the right to seek for reference to arbitration must be gathered from the fact situation obtaining in each case.
36..……even if a party submits his written statement and thereafter, seeks for reference and the same is not objected to by the other side, the Apex Court has held that there would be no bar on the Court to refer the parties to arbitration. This clearly leads to the conclusion that a Court is required to give effect to the intent of the parties to resort to the mode of resolving their disputes in the manner that they had originally agreed to.
38. ……what is to be considered while determining an application under Section 8 of the Act is as to whether the defendant has exhibited his intention to submit himself to the jurisdiction of the Court and has waived his right to seek for reference to arbitration.
40. ….. a party to the arbitration agreement should have indicated his clear intention to submit to the jurisdiction of the Civil Court and should have expressly waived his right to seek for reference to arbitration and only if such a situation existed, the judicial authority could reject the request for reference to arbitration.
45. It is in this background that the act of defendant filing its written statement is required to be viewed and not in isolation. The fact that the defendant expressly indicated that it was not submitting to the jurisdiction of the Court was manifestly evident by the act of defendant filing an application under Section 8 of the Act along with the written statement. The filing of application under Section 8 of the Act at the very outset also makes it clear that the defendant was not waiving its right to seek for reference to arbitration.
46.If, however, the defendant had filed its written statement and had participated in the proceedings and had then made an application seeking for reference, then, an argument could have been advanced that the defendant had waived its right to seek for reference to arbitration.
48. We are of the view that the term ‘not later than’ used in Section 8 (1) of the Act permits the filing of an application seeking for reference of the parties along the written statement and the filing of the written statement and application for reference under Section 8 simultaneously cannot and should not lead to an inference that the defendant had submitted to the jurisdiction of the Civil Court and had waived its right to seek for reference to arbitration as provided under Section 8 of the Act.
Appeal allowed.
Compiled by S. Basavaraj, Daksha Legal.
Daksha Legal 