The court held that disputes regarding settled amounts are not arbitrable under the Arbitration and Conciliation Act, 1996, unless specifically covered by the arbitration agreement.

JUDGMENT :

(Ravi Nath Tilhari, J.)

Heard Sri Varun Byreddy and Sri Sai Charan Chodisetty, learned counsels for the appellants and Ms. Lanka Sai Prasanthi, learned counsel for the respondent.

2. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (in short ‘the Arbitration Act’) has been filed by the appellants, the defendants Nos.1 to 3 in O.S.No.234 of 2015 in the Court of the VII Additional District Judge, Vijayawada. The respondent is the plaintiff. In the suit, the appellants filed I.A.No.21 of 2016 under Section 8 (1) of the Arbitration Act to refer the parties to arbitration. The said I.A. was rejected by Order dated27.08.2024. Challenging the said Order, this appeal has been filed.

Facts:

3. The respondent filed the suit for recovery of money with subsequent interest. The transaction between the plaintiff and the defendants No.1 and 2 in O.S.No.234 of 201 was for execution of contract work for mechanical erection of three units of Turbine, Generator, Condenser, High Pressure Piping and connected works at KSK Mahanandi Power Plant, Akaltara, Jangir, Champa District, Chhattisgarh by the plaintiff. The agreement dated 02.08.2011 was4 CMA No. 623 of 2024 entered with agreed terms and conditions signed by the plaintiff and defendants 1 and 2, represented by the 3^rd defendant.

4. The defendants/appellants filed I.A.No.21 of 2016 under Section 8 (1)of the Arbitration Act to refer the suit dispute along with I.A.No.383 of 2015 to an arbitrator as agreed under Clause No.17 of the agreement, dated 02.08.2011. It was stated that the agreement dated 02.08.2011 in Clause No.17 contained arbitration clause of compulsory reference of any dispute, but the plaintiff did not file the said agreement with the plaint. So, the plaintiff suppressed the arbitration clause fact. However, once the parties elected the special forum for arbitration and settlement of any dispute, the suit dispute could not be adjudicated by the Court. Clause No.17 of the agreement was comprehensive and covered any dispute. It was binding on the parties and so the request was made to refer the parties to the arbitration. The defendants did not file any written statement in the suit. The original agreement dated 02.08.2011 was in the custody of the plaintiff and a Xerox copy of that agreement was supplied to the defendants in response of the notice memo under Order 12 Rule 8 which was filed along with I.A.

5. The plaintiff/respondent filed objections/counter to the I.A, inter alia denying the averments of the I.A. It was stated that the statutory period of 90 days for filing counter and written statement had lapsed. Prior to the suit, the plaintiff issued legal notice to the defendants which was received and they also issued a reply notice, from which, it was clear that the defendants were liable to pay the amount to the plaintiff. The plaintiff further contended that ClauseNo.17 of the agreement was confined to the execution of the work, but not for payment of the work. There was no dispute for payment of the suit amount, as such, there was no dispute to be referred to the arbitrator. The Court had got jurisdiction to try the suit and there was no need to refer the matter to the arbitrator. The I.A. was not maintainable and was liable to be dismissed with costs.

Judgment of the trial Court:

6. The learned trial Court framed the following point for consideration: “Whether the provisions of Section 8 (1) of the Act are applicable to the present suit and whether the parties are to be referred to Arbitration as prayed for.”

7. The learned Court of VII Additional District Judge, Vijayawada dismissed the petition, by observing that the suit dispute was not with regard to any of the terms of the clauses in the agreement. The dispute in the suit was with regard to recovery of balance amount of Rs.40,22,561/- which was admittedly settled between the parties without intervention of any intermediary. He further observed that if there was any dispute with regard to