Case Note & Summary
The appellant, Haier Telecom (India) Pvt. Ltd., was the defendant in a summary suit filed by the respondent, Drive India Enterprise Solutions Ltd., for recovery of Rs.54,46,31,354.51 under a produce purchase agreement and a logistic agreement. The respondent filed a summons for judgment, and the appellant filed an application for leave to defend under Order 37 Rule 3(5) CPC. During the pendency of that application, the appellant filed a notice of motion under Section 8 of the Arbitration and Conciliation Act, 1996, seeking to refer the dispute to arbitration. The learned Single Judge dismissed the notice of motion on the ground that the application for leave to defend constituted the first statement on the substance of the dispute, and the Section 8 application was filed beyond the time prescribed under Section 8(1). The appellant appealed. The Division Bench allowed the appeal, holding that an application for leave to defend under Order 37 CPC is not a statement on the substance of the dispute; it is merely a procedural request for permission to defend. The substance of the dispute is only submitted in the written statement. Since the appellant had not filed a written statement, the Section 8 application was timely. The court set aside the impugned order and directed the learned Single Judge to consider the Section 8 application on its merits.
Headnote
A) Arbitration Law - Section 8 Application - Timeliness - Leave to Defend not First Statement - The issue was whether an application for leave to defend under Order 37 CPC amounts to the first statement on the substance of the dispute under Section 8(1) of the Arbitration and Conciliation Act, 1996. The Court held that such an application is not a statement on the substance of the dispute as it only seeks permission to defend and does not address the merits. Therefore, an application under Section 8 filed before the written statement is timely. (Paras 1-18)
B) Civil Procedure - Order 37 CPC - Leave to Defend - Nature - The Court examined the nature of an application for leave to defend under Order 37 Rule 3(5) CPC and concluded that it is a procedural step to obtain leave and does not constitute a submission of the substance of the dispute. The substance is only submitted in the written statement. (Paras 5-10)
C) Arbitration Law - Waiver of Right to Arbitrate - Filing of Leave to Defend - The Court held that filing an application for leave to defend does not manifest an intention to waive the right to arbitration or to submit to the jurisdiction of the court. The right to seek reference under Section 8 is not lost until the defendant files a written statement or takes a step that unequivocally submits to the court's jurisdiction. (Paras 11-15)
Issue of Consideration
Whether an application for leave to defend filed under Order 37 Rule 3(5) CPC constitutes the 'first statement on the substance of the dispute' within the meaning of Section 8(1) of the Arbitration and Conciliation Act, 1996, thereby barring a subsequent application under Section 8.
Final Decision
The appeal is allowed. The impugned order dated 12th March 2018 is set aside. The notice of motion under Section 8 of the Arbitration and Conciliation Act, 1996 is restored to the file of the learned Single Judge for consideration on its own merits in accordance with law.
Law Points
- Application for leave to defend under Order 37 CPC is not a first statement on the substance of the dispute
- Section 8 application must be filed before first statement on substance of dispute
- filing of leave to defend application does not waive right to arbitration
Case Details
2018 LawText (BOM) (04) 61
COMM. APPEAL (L) NO. 178 OF 2018 IN COMM. NOTICE OF MOTION NO.126 OF 2017 IN COMMERCIAL SUIT NO. 243 OF 2016
Naresh Patil, Anuja Prabhudessai
Mr. Durgesh Kulkarni i/b. Lex Firms for the Appellants, Ms. Naira Jejheeboy a.w, Ms. Poojam, Ms. Sneha Jaisingh i/b. Bharucha & Partners for the Respondent
Haier Telecom (India) Pvt. Ltd.
Drive India Enterprise Solutions Ltd.
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Nature of Litigation
Commercial appeal against dismissal of notice of motion under Section 8 of Arbitration and Conciliation Act, 1996 in a summary suit for recovery of money.
Remedy Sought
The appellant sought to set aside the order dismissing its notice of motion under Section 8 and to refer the dispute to arbitration.
Filing Reason
The appellant filed the notice of motion under Section 8 to refer the dispute to arbitration, which was dismissed by the learned Single Judge on the ground that the application for leave to defend constituted the first statement on the substance of the dispute, making the Section 8 application time-barred.
Previous Decisions
The learned Single Judge dismissed the notice of motion under Section 8 on 12th March 2018, holding that the application for leave to defend was the first statement on the substance of the dispute.
Issues
Whether an application for leave to defend under Order 37 Rule 3(5) CPC constitutes the 'first statement on the substance of the dispute' under Section 8(1) of the Arbitration and Conciliation Act, 1996.
Whether the appellant's application under Section 8 was filed within the time prescribed under Section 8(1).
Submissions/Arguments
Appellant argued that the application for leave to defend is not a statement on the substance of the dispute; it only seeks permission to defend and does not manifest intention to waive arbitration. The Section 8 application was filed before the written statement and is timely.
Respondent argued that the application for leave to defend contained submissions on the merits and thus constituted the first statement on the substance of the dispute, making the Section 8 application time-barred.
Ratio Decidendi
An application for leave to defend under Order 37 Rule 3(5) CPC is not a 'first statement on the substance of the dispute' within the meaning of Section 8(1) of the Arbitration and Conciliation Act, 1996. Such an application is merely a procedural step to obtain leave to defend and does not address the merits of the dispute. Therefore, a party does not waive its right to seek arbitration by filing an application for leave to defend, and an application under Section 8 filed before the written statement is timely.
Judgment Excerpts
The appellant herein, the defendant in Commercial Suit No. 243 of 2017, has challenged the Order dated 12th March, 2018 whereby the learned Single Judge of this Court has dismissed the Notice of Motion under Section 8 of the Arbitration and Conciliation Act, 1996.
He urges that in the application filed under Order 37 Rule 3 (5), the appellant had not manifested intention to waive the benefit of arbitration agreement or to submit to the jurisdiction of the court.
He further contends that the substance of the dispute can be submitted in the written statement and not in the application for leave to defend.
Procedural History
The respondent filed Commercial Suit No. 243 of 2016 for recovery of money. The respondent filed summons for judgment on 5th June 2017. The appellant filed an application for leave to defend on 15th June 2017. During pendency of that application, the appellant filed a notice of motion under Section 8 of the Arbitration and Conciliation Act on 6th January 2018. The learned Single Judge dismissed the notice of motion on 12th March 2018. The appellant filed the present appeal against that order.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 8
- Code of Civil Procedure, 1908 (CPC): Order 37 Rule 3(5)
