The court reaffirmed that civil suits to prevent arbitration are barred by law where an arbitration clause exists, emphasizing the limited jurisdiction of civil courts over arbitration disputes.

JUDGMENT :

Moushumi Bhattacharya, J.

The subject matter of the Commercial Court Appeal is an order dated 04.11.2024 passed by the Special Judge for Trial and Disposal of Commercial Disputes, Ranga Reddy District at L.B. Nagar (Commercial Court) allowing an Interlocutory Application (I.A.No.60 of 2024 in C.O.S.No.46 of 2023) filed by the respondent No.1 under Order VII Rule 11 r/w Section 151 of The Code of Civil Procedure, 1908 (CPC), for rejection of plaint. By the impugned order, the Commercial Court rejected the plaint filed by the appellant in C.O.S.No.46 of 2023.

2. The appellant filed the Suit (C.O.S.No.46 of 2023) for a permanent injunction restraining the respondent No.1/defendant No.1 (M/s.H.B.T. GMBH) from continuing to resolve its claims through arbitration before the defendant No.2 (the International Court of Arbitration in International Chamber of Commerce) (ICA) under the Agreements dated 18.12.2009 and 11.04.2011. The defendant No.2 is the second respondent in this appeal. The cause of action pleaded in the plaint arose on 29.04.2023 with the respondent No.1/defendant No.1 invoking the arbitration clause in the Agreement dated 18.12.2009 against the appellant and on 31.08.2023 when the defendant No.2 (ICA) directed the parties to nominate their Co-Arbitrators. The cause of action pleaded in the plaint includes 29.09.2023 when the respondent No.2/ICA directed the appellant/plaintiff to nominate its Co-Arbitrator.

3. The respondent No.1 filed the Interlocutory Application (I.A.No.60 of 2024 in C.O.S.No.46 of 2023) under Order VII Rule 11 of the C.P.C stating that the plaint in the C.O.S. deserves to be rejected since the appellant had an equally efficacious remedy under section 16 of The Arbitration and Conciliation Act, 1996 (1996 Act) and also under the law pronounced by the Supreme Court declaring that a Civil Suit is not maintainable where the existence or validity of an Arbitration Agreement has been questioned by a party. The respondent No.1 accordingly sought for rejection of the plaint on the ground that the plaint is barred by law.

I. Submissions of the Appellant and the Respondent No.1

4. Learned Senior Counsel appearing for the appellant/plaintiff submits that the parties executed Agreements on 18.12.2009 and 11.04.2011 for procurement of long wall equipment for extracting coal from the appellant/plaintiff’s underground mines, which contained an arbitration clause. Counsel submits that disputes arose between the parties during the course of execution of the contract in 2015-16 and the respondent No.1 claimed amounts from the appellant, which the latter refused to pay on the ground that the predecessor of the respondent No.1 had committed default in the guaranteed performance of the equipment supplied by the respondent No.1 to the appellant for extracting coal from the underground mines.

5. Counsel submits that the appellant was precluded from invoking the Arbitration Clause (Clause 15 of the Agreement dated 18.12.2009) since the invocation was beyond the time limit provided under Clause 15. Counsel relies on Clause 15A of the Agreement to argue that the respondent No.1 could only have initiated proceedings before the District Courts of Khammam/ Karimnagar since the respondent No.1 failed to initiate arbitral proceedings within the time limit provided under Clause 15(a) of the Agreement. Counsel submits that the parties had unsuccessfully tried to resolve the dispute through negotiation and that the respondent N