Madras HC | Court cannot suo motu return a suit at threshold on the ground that parties had agreed to refer all disputes to arbitration

Madras High Court: P.T. Asha, J., held that Section 8 of the Arbitration Conciliation Act, 1996 clearly indicate that the role of judicial authority to refer parties to arbitration arises only upon an application being made by a party to the arbitration agreement.

The High Court was faced with a very interesting question: “Whether the Civil Court can act at the threshold in returning/rejecting a Plaint without numbering the suit on the ground that the parties have entered into an Agreement to refer the disputes to arbitration?”

In the present case, there existed a Lease Agreement between the parties. As per Clause 19 of the Agreement, all disputed arising between the parties were to be resolved under the A&C Act. Subsequently, a dispute arose between the parties. The petitioner filed a suit before the District Munsif who returned the suit at the very threshold, observing on the basis of Clause 19 that “this Court does not have jurisdiction to entertain this suit. Hence, this plaint is returned.” Aggrieved thereby, the petitioner approached the High Court.

The High Court referred to Section 9 CPC (courts to try all suits unless barred) and observed Civil Court have to try all suits of civil nature except those suits which have been specifically barred under provisions of some Acts or impliedly barred. Therefore, the Court perused Section 8 of the A&C Act (power to refer parties to arbitration where there is an arbitration agreement). Relying on the decision in P. Anand Gajapathi Raju v. P.V.G. Raju, 2000 (4) SCC 539 and Ameet Lalchand Shah v. Rishabh Enterprises, 2018 SCC OnLine SC 487, the Court observed, “a reading of Section 8 would clearly indicate that the role of the Judicial authority to refer parties to arbitration will arise only upon an application being made by a party to the arbitration agreement or a person claiming under or through him. This window is given only to enable the defendant who is not desirous of having the dispute settled by arbitration to waive his right for having the dispute referred to arbitration. Therefore, from a reading of the above, it is very clear that a Judicial authority cannot suo moto return/reject a suit on the ground that the parties to the suit have agreed to refer all their disputes to arbitration at the threshold when the case is filed.” It was further observed that under the A&C Act, there is no total ouster of jurisdiction of Civil Courts unlike in cases arising under the SARFAESI Act, Motor Vehicles Act, etc. Resultantly, the petition was disposed of by directing the District Munsif to number the suit forthwith on the petitioner resubmitting the returned papers along with the copy of orders. [Convinio Shopping Nine 2 Nine v. Olympia Opaline Owners Assn., 2019 SCC OnLine Mad 646, Order dated 04-03-2019]

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