Case Note & Summary
The petitioner, RBL Bank Ltd., filed a Commercial Suit No. 100234 of 2022 against the respondents for recovery of a deposit amount paid under a Leave and License Agreement dated 31.08.2018. The suit proceeded ex-parte and was decreed on 31.10.2022. The respondents filed a Notice of Motion No. 4692 of 2022 (first motion) under Order IX Rule 13 CPC to set aside the ex-parte decree and for condonation of delay in filing written statement. In the affidavit in support, they also raised the existence of an arbitration clause. The trial court allowed the first motion on 21.06.2023, setting aside the decree on condition that the respondents deposit Rs.36 lakh and pay costs. The respondents complied, and the suit was restored on 09.11.2023 at the stage of evidence. Meanwhile, on 05.07.2023, the respondents filed a second motion (Notice of Motion No. 102415 of 2023) under Section 8 of the Arbitration and Conciliation Act, 1996 seeking reference to arbitration. The trial court allowed this motion on 29.01.2024, leading to the present writ petition under Article 227. The petitioner argued that the respondents had forfeited their right to file a written statement and thus could not raise any defence, including the arbitration clause. The respondents contended that they had raised the arbitration clause in the first motion itself and that the trial court had postponed its consideration. The High Court dismissed the petition, holding that the respondents had not submitted their first statement on the substance of the dispute before filing the Section 8 application, and that the application was maintainable. The court noted that the respondents had immediately raised the arbitration clause and that the trial court had not considered it earlier. The petition was dismissed, and the impugned order referring the matter to arbitration was upheld.
Headnote
A) Arbitration and Conciliation Act, 1996 - Section 8 - Reference to Arbitration - Ex-Parte Decree Set Aside - The issue was whether the respondents could file a second motion under Section 8 after the ex-parte decree was set aside and the suit restored. The court held that the respondents had not forfeited their right to seek arbitration as they raised the arbitration clause in their first motion itself and the trial court had postponed consideration of that objection. The second motion was filed immediately after restoration, and thus the application was maintainable. (Paras 2-6, 9-10)
B) Code of Civil Procedure, 1908 - Order IX Rule 13 - Setting Aside Ex-Parte Decree - Restoration of Suit - The court noted that once an ex-parte decree is set aside, the suit is restored to its original position. The respondents complied with the conditional order and the suit was restored at the stage of evidence. The court held that the respondents could still file a Section 8 application as they had not yet filed their first statement on the substance of the dispute. (Paras 4-6, 9-10)
C) Arbitration and Conciliation Act, 1996 - Section 8 - 'First Statement on the Substance of the Dispute' - The court considered the meaning of this phrase in the context of a suit restored after setting aside ex-parte decree. It held that the respondents had not submitted any statement on the substance of the dispute before filing the Section 8 application, as they had only filed a motion under Order IX Rule 13 which does not constitute such a statement. Therefore, the application was within time. (Paras 9-10)
Issue of Consideration
Whether a defendant who has suffered an ex-parte decree and subsequently gets it set aside can file an application under Section 8 of the Arbitration and Conciliation Act, 1996 for reference to arbitration, even though the time for filing written statement has expired.
Final Decision
The High Court dismissed the writ petition, upholding the trial court's order dated 29.01.2024 allowing the respondents' Notice of Motion No. 102415 of 2023 under Section 8 of the Arbitration and Conciliation Act, 1996, thereby referring the parties to arbitration.
Law Points
- Section 8 of the Arbitration and Conciliation Act
- 1996
- Order IX Rule 13 CPC
- Article 227 of the Constitution of India
- Commercial Suit
- Ex-Parte Decree
- Restoration of Suit
- First Statement on Substance of Dispute
Case Details
2024 LawText (BOM) (9) 262
Writ Petition No. 4193 of 2024
Mr. Aseem Naphade a/s Nishit Dhruva a/w Khushbu Chhajjed, Pulkit Awasthi i/b MDP & Partners for the Petitioner; Mr. Pankaj Jain a/w Ms. Tejashree Kamble, Tanmay Sangani and Indesh Rathod i/b P.D. Jain and Co. for Respondents
Sohanlal V. Jain (HUF), Mehraj S. Jain, Ajit Jain
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Nature of Litigation
Writ petition under Article 227 challenging an order allowing a motion under Section 8 of the Arbitration and Conciliation Act, 1996 for reference to arbitration in a commercial suit for recovery of deposit amount.
Remedy Sought
The petitioner (original plaintiff) sought to set aside the order dated 29.01.2024 allowing the respondents' motion for reference to arbitration.
Filing Reason
The petitioner contended that the respondents had forfeited their right to raise the arbitration clause by not filing a written statement within 120 days and that the second motion under Section 8 was not maintainable.
Previous Decisions
The trial court had passed an ex-parte decree on 31.10.2022, which was set aside on 21.06.2023 on condition of deposit of Rs.36 lakh and costs. The respondents complied, and the suit was restored on 09.11.2023. The respondents' first motion had raised the arbitration clause, but the trial court postponed its consideration. The respondents' commercial appeal against the conditional order was dismissed on 01.08.2023.
Issues
Whether the respondents' application under Section 8 of the Arbitration and Conciliation Act, 1996 was maintainable after the ex-parte decree was set aside and the suit restored, given that the time for filing written statement had expired.
Whether the respondents had submitted their 'first statement on the substance of the dispute' before filing the Section 8 application, thereby barring the application.
Submissions/Arguments
Petitioner: The respondents forfeited their right to file written statement after 120 days, and thus cannot raise any defence including arbitration. The second motion under Section 8 is not maintainable. Relied on Mira Gehani, SPML Infra, SSIPL Lifestyle, and Assam Petroleum.
Respondents: The arbitration clause was raised in the first motion itself. The trial court postponed its consideration. The second motion was filed immediately after restoration. The respondents have not filed any statement on the substance of the dispute, so the Section 8 application is within time.
Ratio Decidendi
A defendant who has suffered an ex-parte decree and subsequently gets it set aside can file an application under Section 8 of the Arbitration and Conciliation Act, 1996 for reference to arbitration, provided the application is made before submitting the first statement on the substance of the dispute. The filing of a motion under Order IX Rule 13 CPC does not constitute such a statement, and the right to seek arbitration is not forfeited merely because the time for filing written statement has expired.
Judgment Excerpts
This petition under Article 227 of the Constitution of India, takes exception to order dated 29th January 2024 by which Notice of Motion No. 102415 of 2023 filed by the Respondents, seeking reference of the dispute to Arbitrator, under section 8 of The Arbitration and Conciliation Act, 1996 is allowed, in commercial suit filed by Petitioner.
The Trial Court by order dated 21.06.2023 allowed the first motion thereby setting aside ex-parte decree on the condition that Respondents deposit Rs.36 Lakh in the Court within 2 months and the Respondents were directed to pay costs to the Plaintiff within same time limit.
He submitted that necessary pleadings about Section 8 of the said Act has been made in the first motion itself, even though the motion was under Order IX Rule 13 of the CPC.
Procedural History
The petitioner filed Commercial Suit No. 100234 of 2022 for recovery of deposit. The suit proceeded ex-parte and was decreed on 31.10.2022. The respondents filed Notice of Motion No. 4692 of 2022 (first motion) under Order IX Rule 13 CPC to set aside the ex-parte decree, which was allowed on 21.06.2023 on condition of deposit of Rs.36 lakh and costs. The respondents complied, and the suit was restored on 09.11.2023. Meanwhile, on 05.07.2023, the respondents filed Notice of Motion No. 102415 of 2023 (second motion) under Section 8 of the Arbitration and Conciliation Act, 1996 for reference to arbitration. The trial court allowed this motion on 29.01.2024. The petitioner filed the present writ petition under Article 227 challenging that order.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 8, 11
- Code of Civil Procedure, 1908: Order IX Rule 13
- Constitution of India: Article 227
