The central legal point established in the judgment is that a party's conduct, denial of an arbitration agreement, and participation in trial proceedings can preclude them from relying on the arbitration clause.

Najmi Waziri, J.

1. This petition impugns an order dated 19.8.2013 whereby the petitioners’ application under Order 7 Rule 11 of the Code of Civil Procedure (hereinafter referred to as “the Code”) read with Section 5 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act”) was dismissed with costs of Rs.3,000/-. The petitioners’ aforesaid application had sought an identical relief which was dismissed on 17.4.2010 in the following facts :

In the respondents suit it was stated that Defendant Nos.2 to 5 were partners of defendant No.1 M/s. B.H. Enterprises which had been appointed as the non-exclusive stockist of the plaintiffs/respondents’ products in Delhi vide an agreement dated 8.8.1996. For the goods supplied to the defendants no sales tax was included in their price on the assurance that defendants would issue ST-35 Forms to the plaintiffs (suppliers) goods. Since the defendants had failed to supply the said forms and the Sales Tax Department had raised a demand on the plaintiff the suit was filed for recovery of statutory dues. Against the order dated 17.4.2010, the petitioner had approached this court in CRP No.91/2010, however, it was dismissed as withdrawn on 10.8.2012, while granting them liberty to the extent that in the event the petitioner moved any fresh application, the same will be dealt with in accordance with law, uninfluenced by any observations made in the order which was under challenge. In disposing off the petitioners’ application under Order 7 Rule 11 of the Code, the Trial Court limited its reference only to the plaint and the documents filed with it and did not extend it to the defence in the suit. The petitioners had contended that the agreement/letter dated 8.8.1996 had been forwarded to the plaintiff and would be in their custody. They argued that relying on its arbitration clause i.e. Clause 31 A of the agreement, the plaintiff had already referred the entire dispute to Federation of Indian Chambers of Commerce & Industry (FICCI) by a letter dated 20.7.2002. The petitioners further argued that upon the invocation of the arbitration clause the proceedings had commenced under Section 21 of the Arbitration Act, hence the jurisdiction of the civil court was barred, consequently the suit would not be maintainable without following the procedure prescribed under Section 32(2) of the Arbitration Act. The petitioners had relied upon the established precedents to the effect that no civil court would have jurisdiction in respect of a suit which is already subject matter which has been initiated under the Arbitration Act.

2. The plaintiff/present respondent had resisted the application on the ground that it was preferred almost a year after the liberty was granted by this Court and the trial of the suit had already begun. They submitted that the applicant/defendant had already disowned and debunked the agreement dated 8.8.1996 by terming it as “unilateral and one-sided in nature”. The Trial Court noted that the application was filed on 18.10.2012 without any whisper of the delay of about 30 months from the order of 17.4.2010. Meanwhile, the suit proceedings, not having been stayed by the High Court, continued and issues were settled on 5.8.2010. The plaintiffs ‘sole witness had filed his examination-in-chief and was also partly cross-examined by the applicants on 8.8.2012. The Trial Court held that the defendants having participated in the trial of the suit to that extent knowingly due to their omission/negligence cannot turn the clock back by contending that the subject matter falls within the purview of the arbitrator as it would be against the tenets of Section 8 of the Arbitration Act. To come to this conclusion the Trial Court relied upon the ratio in Arti Jethani Vs. Daehsan Trading (India) Pvt. Ltd. 180 (2011) DLT 511. The Trial Court referred to the applicants/defendants reply dated 8.3.2002 in which they had contended that the terms & conditions of the ag