Law on Arbitration | What is the remedy against an order allowing application under S. 8 of Arbitration Act, where existence of arbitration clause is not disputed? Del HC discusses

Delhi High Court: Amit Bansal, J., dismissed a petition challenging the order passed by the lower court whereby respondent’s application under Section 8 of Arbitration and Conciliation Act, 1996 was admitted.

Instant petition was filed impugning the decision of the lower court whereby the application filed on behalf of the respondent under Section 8 of the Arbitration and Conciliation Act was allowed.

Background

It was contended by the petitioner that the respondent had wrongly withheld an amount of Rs 12,24,181 which led to the filing of a recovery suit for an amount of Rs 17,26,000 before the Court of ADJ. In the said suit, an application under Section 8 of the Act was filed on behalf of the respondent seeking that the parties may be referred to arbitration in terms of the arbitration clause contained in the Letter of Intent.

Further, the application under Section 8 was allowed by the impugned order.

Analysis, Law and Decision

High Court while analyzing the matter, expressed that,

Unlike an order refusing an application under Section 8 of the Act for which statutory remedy of appeal has been provided under Section 37 of the Act, no remedy has been provided in respect of an application allowing a Section 8 application.

The intent of the Act is that existence and validity of the arbitration agreement can be raised by a party before the Arbitral Tribunal and therefore, finality has been given to the orders passed by the court allowing application under Section 8 of the Act.

In Deep Industries Ltd. v. ONGC (2020) 15 SCC 706, the Supreme Court observed that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Arbitration Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy so that interference is restricted to orders which are patently lacking in inherent jurisdiction. It was further observed that, if petitions under Articles 226 and 227 of the Constitution of India against orders passed in appeals under the Arbitration Act were entertained, the entire arbitral process would be derailed and would not come to fruition for many years.

The reasoning given by the Supreme Court in the above decision would be equally applicable in the context of orders passed by courts allowing the application under Section 8 of the Act.

Hence, the Court opined that all grounds in respect of the existence and validity of the arbitration clause can be raised by the petitioner before the Arbitral Tribunal.

Court noted that the entire case was based upon the admission made by the respondent in respect of its alleged liability towards the petitioner and nowhere did the petitioner dispute the existence of the arbitration clause.

As observed by the Supreme Court in Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503, once there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of the said agreement.

No merit was found in the present petition as the petitioner had not denied the existence of the arbitration agreement. [Arun Srivastava v. Larsen & Toubro Ltd., 2021 SCC OnLine Del 4909, decided on 9-11-2021]


Advocates before the Court:

For the Petitioner:

Randhir Jain with Bhoop Singh, Advocates

For the Respondent:

Ankit Chaturvedi with Neeraj Sood, Advocates

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