Court’s Decision
The Bombay High Court held that pendency of civil suits between parties does not bar invocation of Section 11 of the Arbitration and Conciliation Act for appointment of an arbitrator, and clarified that a party invoking arbitration cannot be prevented from seeking appointment of an arbitrator merely because parallel civil proceedings are pending.
The Court further held that the case did not involve impermissible splitting of causes of action, particularly where the petitioner had agreed to withdraw a non-arbitrable statutory suit and pursue claims before the arbitral tribunal. Accordingly, the Court appointed a sole arbitrator to adjudicate disputes arising out of lease agreements between the parties. ordjud (6)
Court’s Decision
The Court observed that Section 8(3) of the Arbitration and Conciliation Act clearly provides that pendency of a civil proceeding does not prevent arbitration from commencing or continuing. Therefore, it is not necessary for a party to first file a Section 8 application before the civil court and obtain dismissal of the suit before invoking Section 11 before the High Court. ordjud (6)
The Court held that accepting the respondent’s contention would create an artificial procedural requirement not contemplated by the statutory scheme of the Arbitration Act.
Facts of the Case
The dispute arose from two Agreements for Lease executed on 24 June 2019 relating to premises located on multiple floors of a building. The lease period was 10 years from 1 May 2019 to 30 April 2029, with a five-year lock-in period up to 30 April 2024. ordjud (6)
The respondent terminated the agreements through a notice dated 4 January 2024.
Following termination:
- The respondent filed a civil suit seeking injunction restraining entry into the premises.
- The petitioner alleged forcible dispossession and filed a Section 6 Specific Relief Act suit seeking restoration of possession.
- The respondent filed a Section 8 Arbitration Act application seeking dismissal of the Section 6 suit, relying on the arbitration clause.
The civil court rejected the Section 8 application on the ground that remedy under Section 6 of the Specific Relief Act is statutory and non-arbitrable. ordjud (6)
Meanwhile, the petitioner invoked the arbitration clause through notice and approached the High Court under Section 11 for appointment of an arbitrator, along with a Section 9 petition for interim relief. ordjud (6)
Court’s Observations
Section 6 possession suits are not arbitrable
The Court observed that an arbitrator cannot grant restoration of possession under Section 6 of the Specific Relief Act, which involves a summary statutory remedy.
However, to avoid multiplicity of proceedings, the petitioner agreed to withdraw the Section 6 suit and pursue the relief before the arbitral tribunal. ordjud (6)
Civil suits do not bar Section 11 arbitration reference
The Court relied on the Supreme Court judgment in Vijay Kumar Sharma v. Raghunandan Sharma (2010) 2 SCC 486, which held that pendency of civil proceedings or Section 8 applications does not prevent arbitration proceedings from being commenced or continued. ordjud (6)
Thus, a party to an arbitration agreement is not required to first invoke Section 8 before the civil court before approaching the High Court under Section 11.
No impermissible splitting of causes of action
The respondent argued that the petitioner had split remedies between civil courts and arbitration.
The Court rejected this contention, holding that:
- The petitioner had agreed to withdraw the Section 6 suit.
- The remaining civil suit had been filed by the respondent.
- Therefore, the petitioner was not splitting causes of action by pursuing multiple forums.
Accordingly, pendency of the respondent’s suit could not bar the petitioner from invoking arbitration. ordjud (6)
Appointment of Arbitrator
Finding that the lease agreements contained a valid arbitration clause, the Court held that disputes relating to termination and performance of the agreements must be adjudicated through arbitration.
The Court therefore appointed Justice Nitin Jamdar (Former Chief Justice of the Kerala High Court) as sole arbitrator to adjudicate the disputes between the parties. ordjud (6)
Final Directions
The Court directed that:
- The arbitrator shall issue the statutory disclosure under Sections 11 and 12 of the Arbitration Act.
- Arbitration fees shall be governed by the Bombay High Court Arbitrator Fee Rules, 2018.
- The Section 9 petition shall be treated as a Section 17 application before the arbitral tribunal.
- The petitioner shall withdraw the Section 6 possession suit within six weeks.
All rights and contentions were kept open to be decided by the arbitral tribunal.
Final Outcome
- Sole arbitrator appointed
- Civil suit pendency held not to bar Section 11 arbitration
- No impermissible splitting of causes of action
- Section 9 petition converted to Section 17 application
- Section 6 suit to be withdrawn
The Arbitration Petition and Arbitration Application were disposed of accordingly.