The main legal point established in the judgment is the mandatory nature of section 8 of the Act of 1996, which obligates the court to refer disputes to arbitration when there is an arbitration clause in the agreement between the parties. The judgment also establishes the competence of an arbitrator to adjudicate on frauds in connection with civil disputes.

JUDGMENT :

Anubha Rawat Choudhary, J.

This Appeal has been filed against the order dated 14th September 2022 passed by the learned Presiding Officer, Commercial Court, Ranchi in Original Suit No. 188 of 2020 (re-numbered as Commercial Suit No. 78 of 2022) whereby the prayer for rejection of plaint filed by the respondents (hereinafter referred to as the defendants) has been allowed. The petition so allowed was numbered as Misc. Civil Application No. 317 of 2022.

2. The petition involved in the present case was filed by the defendants before the learned Commercial Court under Order VII Rule 11 of the Code of Civil Procedure (hereinafter referred to as CPC) and also under section 5 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as Act of 1996) praying for dismissal of the suit alleging that the suit was barred by law. Such prayer was made in the light of the invocation of the arbitration clause in terms of the agreement dated 12th June 2014 read with orders dated 27th October 2021 and 18th November 2021 passed by Hon’ble Delhi High Court in the arbitration petition filed by the defendants under section 11(6) of the Act of 1996. The petition under section 11(6) of the Act of 1996 was allowed by the Hon’ble Delhi High Court and an arbitrator was appointed for adjudication of the dispute between the parties which was followed by a procedural order dated 07th December 2021 by the Arbitral Tribunal.

3. The aforesaid petition was filed primarily on the ground that there was a valid arbitration clause between the parties contained in the agreement dated 12th June 2014 and in view of section 5 of the Act of 1996 there is a clear embargo on intervention by judicial authority except where so provided by the Act of 1996. It was asserted that on account of the arbitration clause for resolution of disputes between the parties, the suit itself was not maintainable and the plaint was fit to be rejected. It was also asserted in the petition that notice dated 13th August 2020 invoking arbitration clause and calling upon the appellant (hereinafter referred to as the plaintiff) to appoint an arbitrator to settle the dispute between the parties was issued by the defendants to the plaintiff prior to the filing of the suit and the arbitral proceeding had already commenced in view of section 21 of the Act of 1996. The plaintiff refused to comply with the notice and vide reply dated 02nd September 2020 the plaintiff completely denied its liability towards the defendants.

A reference was also made, inter alia, to the judgment passed by the Hon’ble Supreme Court in “Hindustan Petroleum Corpn. Ltd. v. Pink city Midway Petroleums” (2003) 6 SCC 503 to submit that it has been held by Hon’ble Supreme Court that the language of section 8 of the Act of 1996 is peremptory in nature and, therefore, in cases where there is an arbitration clause in the agreement, it was obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement and, therefore, if there is an arbitration clause it was mandatory for the Civil Court to refer the dispute to an arbitrator.

4. The plaintiff objected to the aforesaid petition. It was asserted that the petition filed under Order VII Rule 11 of the CPC was neither maintainable in law nor on facts and none of the grounds as contemplated under Order VII Rule 11 of the CPC was attracted. It was also asserted that the dispute in the suit was outside the purview of the agreement. An objection was also taken to the effect that on 05th January 2022, one similar petition filed earlier under section 8 read with section 5 of the Act of 1996 read with Order VII Rule 11 of the CPC was withdrawn by the defendants by endorsing “not pressed” and, therefore, the application was barred by the principles of res judicata, waiver, estoppel and acquiescence.

5. The learned Commercial Court allowed t