Full Text
HIGH COURT OF DELHI
JUDGMENT
ANR INTERNATIONAL PRIVATE LIMITED..... Appellant
Through: Mr. Samrat Nigam, Ms. Stuti Gupta and Mr. Sunil Manchanda, Advs.
Through: Mr. Udit Maniktala, Mr. S. K.
Maniktala, Mr. Mohit Sharma, Mr.Ayush Kumar and Mr. Abhishek Kedia, Advs.
HON'BLE MR. JUSTICE ANOOP KUMAR MENDIRATTA
1. The present appeal has been filed challenging an order dated June 02, 2023 passed by the District Judge, Commercial Court-01, Shahdara, Karkardooma, Delhi, whereby an application under Section 8 of the Arbitration and Conciliation Act, 1996 (‘Act of 1996’, hereinafter) filed by the defendant No.1 in suit bearing CS(COMM.) No. 541/2022, has been dismissed.
2. The respondent No.1 (‘respondent’, hereinafter) in this appeal had filed the suit for recovery of a sum of ₹59,83,712/- along with pendente lite interest @ 18% per annum before the learned District Judge. The respondent served summons on the appellant on January 19, 2023. The appellant, before filing the Written Statement, filed an application under Section 8 of the Act of 1996 on April 28, 2023 i.e., within a period of 120 days, stating that the tax invoices filed and relied upon by the respondent in support of its suit contains an arbitration clause, and as such the suit is not maintainable and is liable to be dismissed. The learned District Judge dismissed the application under Section 8 of the Act of 1996 vide order dated June 02, 2023.
3. Mr. Samrat Nigam, learned counsel for the appellant would submit that the learned District Judge has taken a hyper technical view in deciding the application under Section 8 of the Act of 1996, and has failed to appreciate that (i) there is a valid arbitration agreement between the parties; (ii) action should be brought before a judicial authority and that action should be the subject matter of the arbitration (iii) either of the parties or any person related to the dispute can invoke the arbitration clause or agreement before the date of submitting their first statement on the substance of the dispute before the judicial authority (iv) the application of the party to refer the case to arbitration should be filed with the original arbitration agreement or its duly certified copy.
4. He stated that the respondent invoked the arbitration clause by issuing notice under Section 21 of the Act of 1996, which was initially denied by the appellant under wrong advice. He also stated that there is a valid arbitration clause in the tax invoices and the learned District Judge has not given any finding on the existence of an arbitration agreement. He also stated that the learned District Judge has failed to appreciate the conditions under Section 7(4) of the Act of
1996. Further, under Section 8, the party merely needs to insinuate the Court about the arbitration clause before the filing of the first statement.
5. Mr Nigam has stated that the arbitration clause contained in the tax invoice has been relied upon by both the parties; the relevant part whereof is reproduced as under:- "Terms & Conditions:
1. Cenvat Credit of 4% Additional Duty of Customs (SAD) is not Admissible on this Invoice.
2. All the disputes will be referred to the Arbitration to be held at delhi by an Arbitrator appointed by the supplier to which the buyer shall have no objection & Decision of the Arbitrator shall be final & binding on the Parties & cost of such arbitration proceedings shall be borne by the Unsuccessful Party. Other conditions mention PTO."
6. Under Section 8 of the Act of 1996, if all conditions are satisfied, then the judicial authority is obliged to refer the parties to arbitration. The Trial Court ought to have decided the debatable question of fact i.e., existence of a valid arbitration agreement. However no findings have been given by the learned District Judge on the issue.
7. He also stated that counsel for both the parties have relied upon the tax invoices containing arbitration clause, which ought to be treated as an arbitration agreement. In support of his submission, he has relied upon the order of the Trial Court dated May 20, 2023, which reads as under:- “The said Tax Invoices, as per the submissions of the Ld. Counsel for both the parties, contains the Arbitration Clause and may be treated as an Arbitration Agreement”
8. He has stated that the learned District Judge failed to appreciate the ratio of the judgment in Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleum, (2003) 6 SCC 503 relied upon by the appellant and mentioned in the application, wherein the Supreme Court has held as under:- “This court in the case of P. Anand Gajapathi Raju v. P. V. G. Raju, has held that the language of Section 8 is preemptory in nature. Therefore, in cases where there is an Arbitration Clause in the Agreement, it is obligatory for the court to refer the parties to Arbitration in terms of their Arbitration Agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an Arbitrator. Therefore, it is clear that if, as contended by a party in an Agreement between the parties before the Civil Court, there is a clause for Arbitration, it is mandatory for the civil court to refer the dispute to an Arbitrator. In the instant case the existence of an Arbitral Clause in the Agreement which is duly accepted by both the parties as also by the courts below but the applicability thereof is disputed by the Respondent and the said dispute is accepted by the courts below. Be that as it may, at the cost if repetition, we may again state that the existence of the Arbitration Clause is admitted. If that be so, in view of the mandatory language of Section 8 of the Act, the courts below ought to have referred the dispute to Arbitration.” (emphasis supplied)
9. He submitted that the learned District Judge while passing the impugned order has observed that the appellant cannot be permitted to take inconsistent and contradictory stands, but has not observed that the respondent No.1/plaintiff has also concealed the fact that a legal notice was issued by him to the appellant invoking the arbitration clause and has later taken a contradictory stand by objecting to the application of the appellant under Section 8 of the Act of 1996. In support of his submission he has relied upon the judgment in Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal, Civil Appeal No. 2935- 2938/2022, wherein the Supreme Court while referring the matter to arbitration held that even without any written contract containing any arbitration agreement, the parties may themselves decide to refer the dispute to arbitration by mutual consent.
10. In support of his submissions, he has also relied upon the judgments in Magma Leasing and Finance Limited and Anr v. Potluri Madhavilata and Anr, (2009) 10 SCC 103; and Hema Khattar v. Shiv Khera, (2017) 7 SCC 716;
11. Mr Udit Maniktala, learned counsel appearing for the respondents, has conceded that the respondent No.1 had sent a notice invoking arbitration on January 02, 2021 stating that there exists an arbitration agreement between the parties and that any dispute arising from the invoice should be referred to arbitration. But the appellant/defendant No.1 denied the existence of any arbitration agreement between the parties vide reply letter dated January 09,
2021. He also stated that the appellant has approached the learned District Judge with the application under Section 8 of the Act of 1996 as a dilatory tactic.
12. The appellant did not submit his first statement on the substance of dispute with regard to admissibility of the arbitration clause before the Shahdara District Legal Service Authority, despite appearing before it. As such, the appellant once again failed to point out the existence of the arbitration clause while exhausting the remedy of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015.
13. Thereafter, the appellant was served summons on January 19, 2023 and on the dates of hearing (January 23, 2023 and February 27, 2023), the counsel for the appellant had sought time to file Written Statement and had not raised the objection with regard to the existence of arbitration agreement.
14. According to him, under Section 8 (1) of the Act of 1996, the appellant ought to have shown the arbitration agreement before submitting his first statement on the substance of dispute, only then would a judicial authority refer the parties to arbitration. The appellant failed to demonstrate the admissibility of arbitration clause as he had not pointed out the existence of an arbitration agreement during his first statement on the substance of the dispute.
15. In support of his submission, he has relied upon the judgment of this Court in Raman Kwatra & Anr v. M/s. KEI Industries Limited, FAO (OS) COMM. 172/2022 and of the Supreme Court in the case of Mumbai International Airport Pvt. Ltd v. M/s Golden Chariot Airport & Anr, Civil Appeal No. 8201/2010.
16. Having heard the learned counsel for the parties, the short issue which arises for consideration is whether the learned District Judge was right in dismissing the application filed by the appellant under Section 8 of the Act of 1996. The conclusion drawn by the learned District Judge is the following:
17. The submission of Mr. Nigam is primarily that the provisions of Section 8 of the Act of 1996 are mandatory in nature and if all the conditions thereof are satisfied, the judicial authority is obliged to refer the parties to arbitration. Whereas the stand of Mr. Maniktala is that the appellant having denied the existence of an arbitration clause in reply to the legal notice issued by the respondent, cannot now contend otherwise and file an application under Section 8 seeking reference to arbitration.
18. To answer this issue, it is necessary to reproduce Section 8 of the Act of 1996:
19. Going by the above, we note that in the present case, an arbitration clause exists under the heading ‘VAT Declaration’. The respondent had sent a notice to the appellant invoking the arbitration clause as per the Terms & Conditions in the tax invoice. We reproduce the notice dated January 02, 2021 issued by the respondents invoking the arbitration clause in the invoice as under:-
20. Though the plea of Mr. Maniktala looks appealing on a first blush, on a deeper consideration, we are of the view that merely because the appellant had denied the existence of the arbitration clause in its reply and also denied the claim on merit, it would not per se mean that the arbitration clause ceases to exist. It was required for the respondent / plaintiff to convince the Trial Court that no arbitration clause exists in the invoices and arbitration has been wrongly invoked for determining the inter se disputes between the parties.
21. Mr. Nigam is justified in relying upon the judgment in the case of Sundaram Finance Ltd. v. T. Thankam, (2015) 14 SCC 444, wherein the Supreme Court has in paragraph 8 held as under:
22. Mr. Nigam is also justified in relying upon the judgment in the case of Magma Leasing and Finance Limited (supra), wherein the Supreme Court has in paragraph 18 held as under:
23. Insofar as the scope of Section 8 of the Act of 1996 is concerned, the Supreme Court has in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1, held as under:
238. At the cost of repetition, we note that Section 8 of the Act mandates that a matter should not (sic) be referred to an arbitration by a court of law unless it finds that prima facie there is no valid arbitration agreement. The negative language used in the section is required to be taken into consideration, while analysing the section. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above. Therefore, the rule for the court is “when in doubt, do refer”.
24. From the above judicial pronouncements, it is clear that Section 8 of the Act of 1996 has a mandatory effect and once the conditions prescribed therein are seen to have been fulfilled, it is incumbent upon the Court to allow the application filed by the appellant and refer the parties to arbitration. It is conceded by the learned counsel for the respondents that there is an arbitration clause governing the parties and disputes have arisen between the parties and that they have invoked the arbitration clause in the invoice vide notice dated January 02, 2021 issued under Section 21 of the Act of 1996. If that be so, then there was no option left to the learned District Judge but to refer the parties to arbitration.
25. Insofar as the judgment in the case of Mumbai International Airport Pvt. Ltd. (supra) relied upon by the learned counsel for the respondents for a similar proposition is concerned, the issue in the said case arose from the proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The same is not applicable to the issue relating to Section 8 of the Act of 1996.
26. In view of the position of law which we have referred to above, it must be held here that though the doctrine of approbate-reprobate invoked by the learned counsel for the respondents is a facet of the law of estoppel, it is also a law well settled that there cannot be an estoppel against a law. The law with regard to Section 8 of the Act of 1996 mandates reference of the parties to arbitration with minimal judicial interference. Mr. Maniktala has also relied upon the judgment in the case of Raman Kwatra (supra) to contend that a person is not permitted to approbate and reprobate and if he does so, he is not entitled to any equitable relief. This judgment also has no applicability for the reasons already stated above.
27. The plea of approbate- reprobate on part of the appellant is no ground to decline reference of the parties to arbitration, moreover, when it is not the case of the respondents that the arbitration agreement has ceased to exist or has been novated.
28. The three-judge bench of the Supreme Court in Vidya Drolia (supra) being clear and also in terms of the judgments in Sundaram Finance Ltd. (supra) and Magma Leasing and Finance Limited (supra), as relied upon by Mr. Nigam, we are of the view that the learned District Judge has erred in rejecting the application filed by the appellant under Section 8 of the Act of 1996, more so, when the learned District Judge accepts the existence of the arbitration clause in the invoice. Still, on the strength of the stand taken by the appellant in reply to the legal notice dated January 02, 2021 and by invoking the doctrine of approbate-reprobate, the learned District Judge has dismissed the same, which according to us, is clearly untenable.
29. In the conspectus of the foregoing discussion, the present appeal is required to be allowed. The order dated June 02, 2023 of the learned District Judge is set aside. We allow the application filed by the appellant under Section 8 of the Act of 1996 and appoint Justice R.K. Gauba, a former Judge of this Court as the Arbitrator, who shall adjudicate the disputes between the parties, through claims and counter-claims, if any. His fee shall be regulated by the Fourth Schedule of the Act of 1996. He shall give disclosure under Section 12 of the Act of 1996.
30. The suit bearing No. CS (COMM) 541/2022 is dismissed as not maintainable. No costs.
31. Let a copy of this order be sent to Justice R.K. Gauba (Retd.) on his email justicegauba@gmail.com and through WhatsApp on his mobile number 9650411919. CM APPL. 40580/2023 Dismissed as infructuous.
V. KAMESWAR RAO, J
ANOOP KUMAR MENDIRATTA, J NOVEMBMER 03, 2023/jg/aky