Prior civil suit withdrawal without leave does not bar arbitration reference under Section 11 if agreement prima facie exists.

ORDER

Relying on clause 21 of the contract between the parties, the petitioner has applied for appointment of an arbitrator after issuing notice dated 22.11.2024 under Section 21 of the Arbitration and Conciliation Act, 1996 (The A & C Act).

2. Learned counsel for the petitioner invited my attention to the arbitration clause and to the Section 21 notice. He pointed out that such notice was replied to by the respondent on 14.01.2025 stating that the notice had been issued after the lapse of more than three years and that the cause of action does not survive.

3. Learned counsel for the respondent responded to these contentions by referring to the earlier suit filed by the petitioner before the District Judge, Commercial Court, Delhi in C.S.(Comm.) No.654 of 2024. Learned counsel points out that said suit was withdrawn by the petitioner herein/plaintiff therein without obtaining leave of the Commercial Court to initiate arbitral proceedings. Relying on Order XXIII Rule 1(3) and (4) of Code of Civil procedure, 1908, learned counsel submits that without obtaining leave, the petitioner is not entitled to initiate arbitral proceedings and that the filing of a civil suit tantamounts to giving a go-by to the arbitration clause. He has relied on the following judgments in support of the contention:

(i) Magma Leasing Limited vs. NEPC Micon Limited and another (1997 SCC OnLine Cal 268)

(ii)Raj & Associates vs. Videsh Sanchar Nigam Limited and others (2004 (76) DRJ 60)

4. According to learned counsel, the proposition laid down in both these judgments is that a party choosing to institute a civil suit in spite of an arbitration agreement does not have the option thereafter to seek a reference either under Section 8 of the statute or otherwise.

5. Considering the rival contentions, the question that falls for consideration is whether the request for appointment of an arbitrator should be declined in view of the defence raised by the respondent. The scope of Section 11 of A & C Act has been elucidated in multiple judgments, including judgments of the Supreme Court. In Vidya Drolia and Others Vs. Durga Trading Corporation [(2021) 2 SCC 1] (Vidya Drolia), the Supreme Court held that while considering such a petition, the Court should examine whether an arbitration agreement exists between the parties and whether the dispute is manifestly non-arbitrable. It was also held that refusal to refer should be limited to removal of dead wood. Both parties agree that Clause 21 provides for resolution of disputes by arbitration. For the sake of clarity, said clause is set out below:

‘21. ARBITRATION:

All disputes and differences arising out of the connections(s) with this order failing amicable settlement shall be referred to Project Manager / Project Director of site and his decision will be final and binding on both parties.’

6. The principal ground on which the request for appointment of an arbitrator is resisted is the filing of a civil suit by the petitioner. Such civil suit was withdrawn by the petitioner after realising that there is an arbitration agreement in clause 21 of the agreement.

7. On the basis of statement made by the petitioner, the Court issued the following order:

‘03.10.2024 Present – Sh.Piyush Upadyay, Ld. Counsel for plaintiff through VC It is submitted by Ld. Counsel for plaintiff that he has already made statement to withdraw the present suit on

28.09.2024.

I have perused the record. Perusal of file reveals that Ld. Counsel for plaintiff has already made statement on 28.09.2024. In view of the statement made by Ld. Counsel the plaintiff, the present suit is dismissed as withdrawn. As the Ld. Counsel for plaintiff has withdrawn the suit at in