Can’t have the cake and eat it too

By February 17, 2015 December 20th, 2019 No Comments
The instant case[1]
 arises out of a Special Leave Petition
No. 15314 of 2014. A special suit was filed at Aurangabad by a partnership firm
being M/S Rana Sahebram Mannulal and others pertaining to the disputes arising
out of the partnership business. The appellants were Defendants in the
aforementioned suit. The appellants filed an application under Section 9 of the
Code of Civil Procedure, which was deemed to be an application under Section
8(1) of the Arbitration and Conciliation Act 1996 (“the Act”) for dismissal of the special suit since the partnership
deed contained a provision for arbitration and thus the disputes were to be
resolved in terms of the Act. The application was opposed by the present Respondents
(Plaintiff in the special suit) and an Arbitration Application under Section
11(6) of the act seeking appointment of an arbitrator as per the terms of the
partnership deed was filed by them to the Chief Justice at the High Court of

The following issues were to be
considered by the Supreme Court:-

i) Whether a party to the proceedings
can invoke the jurisdiction of the Chief Justice under Section 11(6), once the
judicial authority has taken a final decision under Section 8(1) of the Act
declining to refer the dispute pending before it to arbitration?
ii) What is the scope of Section 8(3)
of the Act?

The trial court opined that it was
within the jurisdiction of the court to try the dispute and no reference to
arbitration was required under law.

The high court while interpreting
Section 8(3) along with section 11 of the Act held that in accordance with the
partnership deed, a proper person shall be appointed as an arbitrator to
entertain dispute between the parties.

No 1: Once the judicial authority takes a decision not to refer the parties to
arbitration, and the said decision has become final, thereafter jurisdiction
under Section 11(6) cannot be invoked by either parties

It was held by the Supreme Court that
the application filed by the Respondents under Section 11 of the Act was not
maintainable as it amounts to abuse of process of law. The abovementioned
application was filed when the civil suit was at its final stage. The
respondent themselves had opposed to the reference to Arbitration and had hence
approached the civil court. Considering the decision of the court has become
final, the Respondents cannot invoke the jurisdiction under Section 11(6) of
the Act as the same is hit by the principle of estoppels.

Further, the Supreme Court also upheld
the decision of the Lower Court regarding the jurisdiction of a civil court to
adjudicate a dispute despite the existence of arbitration clause in the
partnership deed. Thus, the jurisdiction under Section 11 (6) cannot be invoked
as the same attracts principles of res

No 2: Scope of Sub clause 3 of Section 8 of the Act

This was an ancillary issue and the
court has not dealt with the same in detail. Section 8(3) of the Act permits
the parties to commence and continue arbitration proceedings despite the
pendency of an application under Section 8(1) of the Act.

[1] ANIL
ON 18.12.2014

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