2021 (11) TMI 1208 - HC - Indian Laws

Maintainability of the present petition under Article 227 of the Constitution - Validity of the Section 8 application under the Arbitration and Conciliation Act, 1996 - HELD THAT - In Deep Industries Ltd. v. Oil and Natural Gas Corporation Limited 2019 (11) TMI 1632 - SUPREME COURT the Supreme Court observed that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Arbitration Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy so that interference is restricted to orders which are patently lacking in inherent jurisdiction. It was further observed in the M/S. DEEP INDUSTRIES LIMITED VERSUS OIL AND NATURAL GAS CORPORATION LIMITED ANR. 2019 (11) TMI 1632 - SUPREME COURT that, if petitions under Articles 226 and 227 of the Constitution of India against orders passed in appeals under Arbitration Act were entertained, the entire arbitral process would be derailed and would not come to fruition for many years. The present petition under Article 227 of the Constitution of India against the impugned order allowing the Section 8 application would not be maintainable. All grounds in respect of existence and validity of the arbitration clause can be raised by the petitioner before the Arbitral Tribunal. The entire case of the petitioner is based on the admission made by the respondent in respect of its alleged liability towards the petitioner. Nowhere has the petitioner disputed the existence of the arbitration clause. The impugned order has correctly noted that there is no specific admission made by the respondent. Therefore, the judgment of this Court in FENNER (INDIA) LTD. VERSUS BRAHMAPUTRA VALLEY FERTILIZER CORPORATION LTD. 2016 (1) TMI 1512 - DELHI HIGH COURT has been correctly distinguished. It may also be noted here that the Order 12 Rule 6 application was filed by the petitioner only after the Section 8 application had been filed by the respondent. As is being observed by the Supreme Court in Hindustan Petroleum Corporation Ltd. 2003 (7) TMI 493 - SUPREME COURT once there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of the said agreement. In the present case, the petitioner has not denied the existence of the arbitration agreement. The only case put by the petitioner is that in light of the admission made by the respondent, there is no arbitrable dispute to be referred for arbitration. No merit is found in the petition - Petition dismissed.

Summary

Issues:
1. Validity of the Section 8 application under the Arbitration and Conciliation Act, 1996.
2. Maintainability of the petition under Article 227 of the Constitution of India.
3. Interpretation of arbitration clauses and obligations of courts in referring parties to arbitration.
4. Grounds for interference with the impugned order allowing the Section 8 application.

Analysis:
The judgment pertains to a petition challenging the allowance of a Section 8 application under the Arbitration and Conciliation Act, 1996. The petitioner contested the respondent's withholding of payment, leading to a recovery suit. The respondent filed a Section 8 application seeking arbitration based on the arbitration clause in the contract. The court allowed the application, citing the comprehensive arbitration clause and the petitioner's admissions. The court dismissed the petitioner's application under Order 12 Rule 6 of CPC as infructuous due to the Section 8 application's allowance.

The petitioner argued that no disputes existed as the respondent admitted liability, relying on a judgment to support their stance. The respondent contended that the issue of document supply should be decided in arbitration. The court addressed the maintainability of the petition under Article 227, emphasizing the finality given to orders allowing Section 8 applications. Referring to relevant case law, the court highlighted the need for caution in interfering with arbitration-related orders to avoid derailing the arbitral process.

The court emphasized the mandatory nature of referring parties to arbitration when an arbitration clause exists, as per the Arbitration Act. It noted the absence of specific admissions by the respondent regarding the arbitration clause, distinguishing a previous judgment. The court underscored that the petitioner did not dispute the existence of the arbitration agreement but argued against arbitrability due to the respondent's admissions. Ultimately, the court found no merit in the petition and dismissed it, affirming the allowance of the Section 8 application.

In conclusion, the judgment upholds the validity of the Section 8 application, emphasizes the limitations of challenging such orders under Article 227, and underscores the mandatory nature of referring parties to arbitration when an arbitration clause exists, even in the presence of admissions by a party.