Objection in written statement can serve as arbitration application

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Delhi High Court held that a party invoking an arbitration clause is not required to file a formal application specifically asking for reference of the dispute to arbitration as long as it raises an objection in the written statement that the suit is not maintainable in view of the arbitration clause in the agreement.

In the Parasramka Holdings v Ambience & Anr case, Ambience executed an apartment buyer’s agreement with Parasramka in 2009, which contained an arbitration clause. When disputes arose between the parties, Parasramka filed a suit in Delhi High Court in 2017 and in response Ambience first filed an application for rejection of plaint, which was dismissed. Ambience then filed a written statement objecting to the maintainability of the suit in view of the arbitration agreement. It then filed a formal application under section 8 of the Arbitration and Conciliation Act, 1996, which Parasramka objected to, contending that the application could not be filed subsequent to the submission of the first statement on the substance of the dispute, i.e. the written statement. Parasramka argued that Ambience had submitted to the jurisdiction of the court and was estopped from relying on the arbitration clause.

Delhi High Court rejected Parasramka’s contentions and allowed Ambience’s application, referring the case to arbitration. The court held that filing of any statement, application, affidavit by a defendant prior to the filing of the written statement will be construed as “submission of a statement on the substance of the dispute”, if by filing such statement/application/affidavit, the defendant shows its intention to submit to the jurisdiction of the court and waive the right to seek reference to arbitration.

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