IMPORTANT POINT
Section 8 of the Arbitration and Conciliation Act, 1996 has a mandatory effect, and once the conditions are fulfilled, the court is obligated to refer the parties to arbitration.

JUDGMENT

V. Kameswar Rao, J. - 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 Rs. 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