Mandatory To Raise An Application Under Section 8 Of The Act In Front Of A Judicial Authority Only And To Be Analysed In View Of Existence Of A Dispute.

Mini SummaryApplication under Section 8 of the Arbitration and Conciliation Act, 1996- For referring disputes raised in the plaint to arbitration- discussion as to who is a judicial authority under Section 8- also discussed what constitutes a dispute.

News Update:

An application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘the Act’) was filed in the Hon’ble Delhi High Court by the Northern Railways (hereinafter referred to as ‘the Defendants’) in the matter of Gateway Rail Freight Ltd. v. The Northern Railway, New Delhi & Others[1] for referring the disputes raised in the plaint filed by the Plaintiff to arbitration.

In the present case the Plaintiff filed a suit for recovery of Rs. 2,00,32,356 along with interest from the Defendants. However, the Agreement provided for resolution of disputes by way of Arbitration under Clause 37 (v). It was the averment of the Plaintiff that the Plaintiff had not raised any dispute which could be considered within the scope of Section 8 of the said Act. It was further stated that the Defendants illegally deducted and appropriated the freight charges due to the Plaintiff and that the same was done without any basis. The Plaintiff also argued that there was delay on part of the Defendants in filing Section 8 application as no reference was made to the arbitration clause or it being applicable to the present dispute when the Plaintiff initially raised the dispute. The Plaintiff further stated that as per a report submitted by a Committee formed by the Defendants to examine the legality of the deduction, the said charges raised against the Plaintiff had been levied incorrectly.

The Court was of the opinion that there was no delay on the part of the Defendants in invoking the arbitration clause in as much as Section 8 of the Act, stipulated that the plea of existence of an arbitration clause in an Agreement can only be raised before a judicial authority. The Court further observed that since the Chief Commercial Manager (FM) (in front of whom the dispute was initially raised by the Plaintiff) is not a judicial authority, no delay can be attributed to the Defendants in filing the present application.

The Hon’ble Court was also of the opinion that just because there was a report in the file of the Railways in favour of the plaintiff did not mean that there existed no dispute and/or the Plaintiff’s claim had been admitted by the Defendants. The Court held that as already established by the Hon’ble Supreme Court of India in various judgments, a noting/ report in the file of the Defendant-Railways (even if communicated to the Plaintiff) without a formal order being passed, could not be made the basis for recording a finding that there is a decision in favour of the Plaintiff or that there is no dispute between the parties.

Lastly, the Court observed that a dispute entails an element and assertion of denying but since in the present case in the rejoinder, the Defendants had specifically denied that any amount was due and payable to the Plaintiff, the Court was of the view that a dispute had definitely arisen between the parties.

The Hon’ble Court therefore allowed the application filed under Section 8 of the Act and referred the parties to arbitration.

[1] CS(OS) No. 1540/2015 dated 18th August 2017.

– Updates powered by Singh & Associates, Founder- Manoj K. Singh, Advocates & Solicitors

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