Source: Delhi High Court

Why in News?

Recently, the Delhi High Court in the matter of Ranjana Bhasin v. Surender Singh Sethi & Ors., has held once a party has filed the written statement, it forfeits its right to file an application under Section 8 of the Arbitration and Conciliation Act, 1996 (A & C Act).

What was the Background of Ranjana Bhasin v. Surender Singh Sethi & Ors. Case?

• In this case, the respondent initiated a civil suit against the appellant in April 2022 before the Commercial Court.
• A summon for the suit was issued to the Appellant in May 2022 but was refused by the Appellant, leading to deemed service.
• The Appellant filed a memo of appearance before the Commercial Court in June 2022, but the Court closed the window for Petitioner to file written submissions, proceeding ex-parte against her.
• Before the Commercial Court, the Appellant filed an application under Section 8(1) of the A & C Act, praying that the parties be referred to arbitration.
• The Commercial Court dismissed the application.
• Aggrieved by this, the appellant filed an appeal before the Delhi High Court which was later dismissed by the Court.

What were the Court’s Observations?

• A bench comprising of Justices Vibhu Bakhru and Tara Vitasta Ganju observed that a party forfeits its right to file an application under Section 8 of the A& C Act once it has filed the written statement in a civil suit.
• The Court held that if a party neglects to submit an application under Section 8 of the A & C Act, within the timeframe allotted for filing the initial statement addressing the substance of the dispute, which typically includes a written statement in the context of a lawsuit, that party would relinquish its entitlement to apply under Section 8 the said Act.
• It was further held that the Court found no deficiency in the decision of the Commercial Court in rejecting the Appellant's application.

What is Section 8 of the A & C Act?

About the Act:

• This Act improved the previous laws regarding arbitration in India, namely the Arbitration Act, 1940, the Arbitration Act, 1937, and the Foreign Awards Act, 1961.
• This act also derives authority from the UNCITRAL (United Nations Commission on International Trade Law) Model Law on international commercial arbitration and the UNCITRAL rules on conciliation.
• It unites and manages the laws associated with domestic arbitration, international business arbitration, and the enforcement of foreign arbitral awards.
• It also defines the law related to conciliation.
• It controls domestic arbitration in India and was amended in 2015, 2019 and 2021.

Section 8 of the Act:

• This Act deals with the power to refer parties to arbitration where there is an arbitration agreement. It states that -

(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued, and an arbitral award made.