Application Seeking Reference U/S.8 Of A & C Act Has To Be Filed Within 120 Days From Date Of Service Of Summons: Karnataka HC
The Karnataka High Court recently clarified that the reference application under Section 8 of the Arbitration & Conciliation Act should have been filed within an outer limit of not later than 120 days as stipulated under amended Order 8 Rule 1 of CPC from the date of service of summons, which provides for filing of written statement.
The Single-Judge Bench comprising Justice Hemant Chandangoudar said, “Thus, where the reference application under Section 8 of the Arbitration and Conciliation Act, 1996 was made long after the expiry of the outer limit of 120 days from the date of service of summons, such a reference could not be construed to have been made at the earliest.”
Advocate Prasad K R Rao represented the Petitioner while Advocate Abhinav R represented the Respondents.
The plaintiff had approached the High Court challenging the order of the XIX Additional City Civil and Sessions Judge, Bangalore, in an Original Suit by which the application filed by respondent No.1 (defendant No.1) under Section 8(1) of the Arbitration and Conciliation Act, 1996, came to be allowed. The said order was affirmed vide an order passed in an application in the suit preferred by the petitioner seeking a review of the earlier order.
The suit filed by the petitioner-plaintiff was for the recovery of Rs.16,29,311.74 along with interest at the rate of 18% per annum and was decreed ex parte. Thereafter, defendant No.1 filed a Miscellaneous Application under Order IX, Rule 13 of the CPC, 1908, and the trial court restored the suit by an order dated February 20, 2019. Subsequently, defendant No.1 applied Section 8(1) of the Arbitration and Conciliation Act, 1996, seeking referral of the dispute to arbitration, as stipulated in Clause 12 of the partnership deed. Aggrieved by the order allowing the application and the dismissal of the review petition, the petitioner filed the present petition before the High Court.
The petitioner argued that the application under Section 8(1) of the Arbitration and Conciliation Act, 1996, should have been filed before the first written statement was filed. The written statement was required to be filed within 30 days, extendable by an additional 60/90 days. Therefore, the application filed under Section 8(1) after the prescribed period of limitation was not maintainable.
The respondent, on the other hand, argued that since the defendant did not file a written statement, there is no bar to applying Section 8 of the Act, as Section 8 allows filing the application before the first statement is made.
One of the main issues before the Bench was whether an application made under Section 8 of the Arbitration and Conciliation Act, 1996, is subject to the period of limitation prescribed for filing a written statement under Order VIII of the CPC, 1908.
Reference was made to the judgment of the Delhi High Court in SSIPL Lifestyle Pvt Ltd vs. Varma Apparels (India) Private Limited (2020) whereby it is held that the 2016 amendment to the Act, in light of recent amendments to the CPC under the Commercial Courts Act, 2015, was a conscious step to fix a limitation period for filing the reference application. The High Court also referred the decision of the Apex Court in the case of Booz Allen and Hamilton Corporation -vs- SBI Home Finance Ltd. (2011) wherein while dealing with the unamended Section 8 of the Act 1996, the Apex Court held that though Section 8 does not prescribe any time limit for filing an application thereunder and only states that such an application is to be filed before submission of the first statement on the substance of the dispute, the scheme of the Arbitration and Conciliation Act, 1996 and provisions of Section 8 indicate that the application thereunder should be made at the earliest.
“In view of the legal principles established with reference to the unamended and amended Section 8 of the Act 1996, the application under Section 8 of the Act should have been filed within an outer limit of not later than 120 days as stipulated under amended Order 8 Rule 1 of CPC from the date of service of summons, which provides for filing of written statement”, the Bench said.
The Bench noticed that in the instant case, while passing the earlier order of ex parte decretal of the petitioner's suit, the Trial Judge observed therein that “inspite of service of summons, defendant No.2 failed to appear before the court to contest the suit. Since the respondent-defendants had failed to contest the suit, the case was posted for commencement of recording the plaintiff’s evidence. The suit however, was restored and the respondent-defendant No.2 despite being granted an extension of time to file the written statement, had instead preferred a reference application under Section 8 of the Arbitration and Conciliation Act.
The Court also clarified, “A contextual interpretation of the statutory scheme of the Act of 1996, and the prescription of the outer limit of 120 days to file the written statement as contained in Order 8, Rule 1 of CPC, 1908, and the ratio laid down by the Apex Court in the case of Booz Allen (2011 5 SCC 532) leads us to reasonably conclude that a reference application under Section 8 of the Act, 1996 should have been filed within 120 days from the date of service of summons to the defendant, which was long passed before March 20,2019.”
As per the Bench, where the reference application under Section 8 of the Arbitration and Conciliation Act, 1996 was made long after the expiry of the outer limit of 120 days from the date of service of summons, such a reference could not be construed to have been made at the earliest.
Thus, allowing the civil revision, the Bench set aside the impugned order passed by the Additional City Civil and Sessions Judge.
Cause Title: Sri. Thangavelu. R v. Shri. Santhosh. J & Anr. (Neutral Citation: 2024:KHC:51347)
Appearance:
Petitioner: Advocate Prasad K R Rao
Respondents: Advocate Abhinav R