2008 (12) TMI 680 - SC - Companies Law

Application under Section 8 of the Arbitration and Conciliation Act, 1996 dismissed - Held that - As there is no arbitration agreement with reference to the subject-matter of the suit filed by the plaintiff (first respondent herein), rejection of the application filed by defendants under Section 8 of the Act, does not call for interference. The special leave petition is, therefore, dismissed

Summary

Issues:
Dismissal of application under Section 8 of the Arbitration and Conciliation Act, 1996; Delay in filing special leave petition; Existence of arbitration agreement between parties in a money suit.

Analysis:
The Supreme Court addressed the dismissal of an application under Section 8 of the Arbitration and Conciliation Act, 1996, filed by the defendants in a money suit. The delay of 182 days in filing the special leave petition was considered, with the petitioner attributing the delay to confusion over diverse opinions. The Court found the explanation for the delay unsatisfactory and insufficient for condonation. Even if the delay was condonable, the special leave petition was deemed liable for rejection on merits.

The plaintiff had filed a suit for recovery of a specific amount with interest, citing two main reasons. The defendants, in response, filed an application under Section 8 of the Act, seeking arbitration based on three invoices from a proprietary concern related to one of the defendants. The trial court and subsequently the High Court concluded that the invoices in question did not constitute an arbitration agreement within the meaning of the Act, as they were not signed by all parties involved.

The petitioner contended that a document containing an arbitration agreement need not be signed by all parties, arguing that acceptance or acknowledgment of an invoice by the buyer could suffice. However, the Court did not delve into this contention as it was deemed irrelevant to the case at hand. The fundamental issue highlighted was the absence of an arbitration agreement between the parties concerning the suit transactions, as the invoices relied upon were unrelated to the subject matter of the suit.

The Court emphasized that for an arbitration agreement to be valid, it must satisfy two conditions: it should be between the parties to the dispute and relate to the specific dispute at hand. In this case, neither condition was met, as the documents containing the arbitration provision were not linked to the suit transactions. The defendants failed to establish the existence of an arbitration agreement relevant to the subject matter of the suit, leading to the dismissal of their application under Section 8 of the Act.

Ultimately, the Supreme Court dismissed the special leave petition on grounds of both delay and lack of merit, as there was no arbitration agreement pertaining to the subject matter of the suit. The Court maintained that the rejection of the defendants' application under Section 8 did not warrant interference, upholding the decision of the lower courts.