Civil suits do not always invalidate arbitration clauses

In Ministry of Sound International Ltd v Indus Renaissance Partners Entertainment Pvt Ltd, Delhi High Court addressed the question of whether the filing of a civil suit by a defendant amounted to an abandonment of the right to invoke arbitration. According to the court, it is well understood that an arbitration clause does not prohibit the filing of a civil suit. If the contesting party files an application under section 8 or 45 of the Arbitration and Conciliation Act, 1996, the parties are relegated to arbitration. The plaintiff takes a risk when he invokes the jurisdiction of a civil court in spite of the existence of an arbitration clause: it is up to the defendant to determine whether civil proceedings should continue or whether the parties should be relegated to arbitration (if conditions of sections 8 or 45 of the act are satisfied). However, once both parties have consented and allowed civil proceedings to continue, neither can subsequently invoke or revive the arbitration clause.

The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in, lbhasin@vsnl.com or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.