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2025 Supreme(Online)(Del) 3553
IN THE HIGH COURT OF DELHI AT NEW DELHI
Ravinder Dudeja, J
DIN DAYAL AGRAWAL HUF – Appellant
Versus
CAPRISO FINANCE LTD – Respondent
CM(M) 2008/2024 & CM APPL. 12962/2024
For the Appellants/Petitioners: Ms. Manpreet Kaur, Ms. Jaya Goyal
For the Respondents: Mr. Gaurav Pachauri
Court emphasized that arbitration clauses do not automatically bar civil suits, and procedural defects can be cured by subsequent resolutions.
Headnote:(A) Constitution of India - Article 227 - Code of Civil Procedure, 1908 - Order VII Rule 11 - The petition seeks to challenge an order dismissing an application for rejection of a plaint based on lack of jurisdiction as a result of an arbitration agreement. (Paras 1-22)
(B) Arbitration and Conciliation Act, 1996 - Section 8 - The necessity for an application under Section 8 for referring disputes to arbitration is emphasized, while failure to do so does not bar the civil suit. (Paras 10-11)
(C) Procedural Irregularities - The court ruled that defects in a board resolution can be cured and do not nullify the authority to act on behalf of a corporation. (Paras 16-17)
Facts of the case:
The petitioner contested a suit initiated by the respondent without valid authorization, citing a dispute resolution clause mandating arbitration which was not honored.
Findings of Court:
The trial court's order did not exhibit legal infirmities nor was there sufficient cause to justify filing a written statement late.
Issues: The court addressed the validity of the board resolution under which the suit was initiated and the applicability of the arbitration clause.
Ratio Decidendi: The court found that an arbitration agreement does not bar civil action; failure to invoke Section 8 of the Act means rejection of the plaint due to arbitration is unwarranted.
Result: Petition dismissed.
| Table of Content |
|---|
| 1. petition challenges trial court's order regarding jurisdiction and authorization. (Para 1 , 2) |
| 2. respondent's failure to follow arbitration procedure raised questions about jurisdiction. (Para 4 , 5 , 6) |
| 3. court outlined that failure to invoke section 8 does not bar the civil suit. (Para 10 , 11 , 20) |
| 4. procedural defects do not invalidate authority and can be remedied. (Para 16 , 17 , 18) |
JUDGMENT
RAVINDER DUDEJA, J.
1. This is a petition under Article 227 of the Constitution of India read with Section 151 Code of Civil Procedure , 1908 [“CPC”], seeking to set aside the order dated 19.01.2024 passed by the learned District Judge, Commercial Courts-01, Tis Hazari Courts in CS (Comm) No. 2242/2022, whereby the petitioner’s application under Order VII Rule 11 CPC was dismissed and right to file the written statement was closed.
2. The petitioner availed a loan of Rs. 35,00,000/- from the respondent and entered into a Loan Agreement dated 18.03.2019, pledging 13,113 fully paid-up equity shares of M/s Trishul Dream Homes Ltd. Subsequently, the respondent filed a recovery suit bearing CS (Comm) No. 2242/2022 on 22.09.2022 before the Commercial Court at Tis Hazari, without filing a valid board resolution against the petitioner herein, inasmuch as, the board resolution filed by the respondent-company is qua M/s Trishul Dream Homes Ltd. and not qua the petitioner. The application under Order VI Rule 17 CPC was allowed on 22.10.2022 and suit was treated as an ordinary suit upon the counsel’s statement. The petitioner filed an application under Order VII Rule 11 CPC for rejection of plaint raising the objection that plaintiff failed to disclose that as per clause 10 of the Loan Agreement, if the dispute arises between the parties, the same shall be referred to the sole arbitrator and arbitrator shall be appointed jointly by both the parties and hence in view of the said clause, the Court was not having the jurisdiction to entertain the suit.
3. During pendency of the suit before the trial Court, respondent had realised that board resolution filed along with plaint was not valid as by way of said board resolution, Authorised Representative [“AR”]/Director, Mr. Pradeep Kumar Jain was authorised to take legal action against M/s Trishul Dream Homes Ltd. instead of the present petitioner, Mr. Din Dayal Agrawal-HUF. In view of the defect in authority letter of the AR, respondent filed an application seeking permission to place board resolution dated 27.09.2023, which ratified the board resolution dated 03.04.2020 in favour of Mr. Pradeep Kumar Jain, Director of the plaintiff-company.
4. The learned trial Court granted permission to the respondent to place the board resolution dated 27.09.2023 on record and dismissed the petitioner’s application under Order VII Rule 11 CPC by order dated 19.01.2024 and also closed the petitioner’s right to file the written statement.
5. Learned counsel appearing for the petitioner has submitted that the impugned order dated 19.01.2024, passed by the learned District Judge suffers from serious legal infirmities. It has been submitted that suit bearing CS (Comm) No. 2242/2022 was filed without valid board resolution, authorising the alleged AR of the respondent-company to institute the proceedings against the petitioner. The board resolution filed subsequently is dated 27.09.2023, which is admittedly after the date of filing of suit i.e. 22.09.2022. Furthermore, it has been pointed out that initial board resolution placed on record pertains to M/s Trishul Dream Homes Ltd. and not to the petitioner-HUF, which is a separate legal entity. It has been submitted that this renders the board resolution unauthorised and order passed by the learned trial Court is without proper appreciation of facts and law.
6. It has been further submitted that clause 10 of the Loan Agreement dated 18.03.2019 clearly stipulates the mandatory dispute resolution clause, requiring the parties to first attempt resolution through
