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The Right To Refer The Dispute To Arbitration Cannot Be Reclaimed Once It Is Waived By A Party: Karnataka High Court

The Karnataka High Court has upheld that a party is presumed to have waived its right to request the referral of the issue to arbitration if it objects to the arbitrability of a dispute brought up by the other party in response to the notice invoking the arbitration clause through the Single Bench of Justice Sachin Shankar Magadum in the case of Y Harish and Anr. versus Y Satish and Ors. (WRIT PETITION NO.10716 OF 2022 (GM-CPC) 

FACTS OF THE CASE:

The respondent No.1/plaintiff filed a complaint in the Commercial Court, requesting that the present petitioner No.1 pay an amount of Rs.7,34,12,647/-. Following receipt of summons, the present petitioners opposed the proceedings. They filed the instant application under Order 7 Rule 11(d) read with Section 151 of the CPC, seeking rejection of the plaint as forbidden by law. According to the present petitioners, respondent No.1/plaintiff issued a legal notice requiring the present petitioner No.1 to resolve the matter through arbitration.

As a result, the current petitioner contended that because arbitral proceedings had already begun at the instance of respondent No.1/plaintiff, who had issued a notice, respondent No.1 could no longer maintain a suit before the Commercial Court. The only recourse available to respondent No.1 was to apply for the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

The learned counsel representing caveator/respondent No. 1 argued that the Civil Court’s jurisdiction is only eliminated once the matter has been referred to arbitration. As a result, the learned attorney claimed that unless a party complies with the requirements under Section 8 by timely filing an application, it is presumed that the party has waived his right to seek reference.

JUDGEMENT:

Having heard both the parties and examined the material, the learned Judge rejected the application. While rejecting the application, the learned Judge has taken judicial note of the reply notice issued by the present petitioners herein. Having examined the reply notice, the learned Judge was of the view that the petitioners, having objected to the appointment of the proposed sole Arbitrator on the ground that the dispute does not fall within the arbitration clause, now cannot turn around and say that the present suit is not maintainable.

In view of the principles established by the Coordinate Bench of the Court, it was observed that petitioners had not invoked Section 8 of the Act of 1996 in this instance. On the contrary, the present petitioners have filed an application under CPC Order 7 Rule 11(d) seeking the rejection of the plaint on the grounds that it is barred by law. Even today, the present petitioners have not invoked the provisions of Section 8 of the Act,1996.

It was also noted that the current petitioners had waived their rights and hence could not force the respondent No.1/plaintiff to take recourse under Section 16 of the Act of 1996. Therefore, the suit filed by respondent No.1 before the Trial Court was barred under Section 11 of the Commercial Courts Act. 

Accordingly, the writ petition was dismissed.

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JUDGEMENT REVIEWED BY REETI SHETTY

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