The present appeal has been filed under section 37 of the Arbitration and Conciliation Act, against the order dated 11.8.2025 passed by 5th Civil Judge, Junior Division, Bhopal, in Ex.A.No.16/2024, whereby the learned court has dismissed the appellants application under section 8 of the Act seeking reference of the subject dispute to the arbitration in terms of clause 8 of the compromise decree dated 17.2.2012 passed in Civil Suit No.490-A/2009 by III Addl. Judge to I Civil Judge, Junior Division, Bhopal.

It is contended by learned counsel for the appellant that the parties had entered into a compromise in an eviction suit filed by the respondent landlord vide order dated 17.02.2012 in Civil Suit No.490-A/2009. The said compromise has been recorded by the competent civil court and the suit was disposed of accordingly. As such, the compromise entered into between the parties led to a compromise decree.

It is submitted that the respondent had filed an application under Order XXI Rule 11 of the Code of Civil Procedure (CPC) before the executing court to execute the said compromise decree, which contained a stipulation regarding the payment of a compensatory amount / mesne profits @ Rs. 2,000/- per day for six months if the construction by the appellant was not completed within a year, and thereafter Rs. 5,000/- per day till the construction gets over.

In the said execution proceedings, the appellant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, on the ground that the compromise decree contains a stipulation in Clause 7 that if any dispute arises between the parties in connection with or in relation to the compromise agreement, it shall be decided by the arbitrator agreed upon by the parties.

It is submitted that however, the construction could not be started due to practical reasons not attributable to the appellant, therefore, the appellant is not liable to make any payment as agreed between the parties. Consequently, if the execution proceeding initiated by the respondent is allowed to proceed, the very purpose of deciding the dispute through arbitration and the clause referring the dispute to the arbitrator would be rendered otiose. Therefore, before proceeding with the execution proceedings, the matter ought to have been referred to the arbitrator.

Learned counsel for the respondent has vehemently opposed the prayer on the ground that the respondent had preferred an application under Order XXI Rule 11 of the CPC for execution of the compromise decree, which contains a stipulation for payment of compensatory amount / mesne profits for failure to fulfill obligations within time. As the appellant did not perform its obligation, therefore, the respondent is entitled to the said amount. It is submitted that the appellant was responsible for the delayed initiation of the construction and, therefore, the respondent is entitled to the claimed payment. It is further submitted that the learned court below has rightly rejected the application on the ground that mere filing of an application under Section 8 does not bar the jurisdiction of the civil court to proceed in an execution proceeding.

Heard learned counsel for the parties and perused the record.

It is not disputed that the parties have amicably settled the matter and entered into a compromise, which ultimately resulted in a decree dated 17.02.2012. From a perusal of the said compromise decree, it is found that although it contains a clause for mesne profits or a compensatory amount for not initiating/completing construction within the stipulated time, it also contains an arbitration clause if any dispute arises between the parties.

It is the case of the appellant that they did not get possession of the property to start construction. However, the same has been vehemently denied by the respondent, who states that it was due to the lethargic attitude of the appellant in failing to obtain timely permissi