Civil suit filed even though there is arbitration agreement between parties

Civil suit filed even though there is arbitration agreement between parties

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Question: I have a commercial dispute with a person arising out of an agreement under which there is an arbitration clause. However, instead of resorting to arbitration, the opposite party has filed a civil suit against me in the court. What should I do in such a case since a civil suit will take a very long period to decide the issue between the parties and it appears that the opposite party is interested to delay the proceedings as much as he can? Can I insist for appointment of the arbitrator instead of pursuing with the civil suit?

Answer: Yes, it is possible for you to oppose the civil suit on the ground that there is an arbitration clause in the agreement between the two parties.

In this regard, I may point out that Section 8 of the Arbitration and Conciliation Act, 1996, allows you to file an application before the court where the civil suit is pending, clearly mentioning therein that the subject matter of the suit is governed by an arbitration agreement. You may have to enclose a copy of the original arbitration agreement or a duly certified copy thereof along with such application. If the court is convinced that there is an arbitration agreement between the parties on the subject matter of the suit, it is duty bound to refer the parties to arbitration instead of continuing with the civil suit. This section is reproduced as under:

8. Power to refer parties to arbitration where there is an arbitration agreement.— (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”

Further, the provisions of Section 8(3), as mentioned above, clearly show that even during the pendency of the application filed by you under Section 8(1), you can initiate the process for appointment of the arbitrator. Section 8(3) clearly shows that even during the pendency of such application before the court, and arbitration may be commenced or continued and an arbitral award may also be made.

In view of the above provisions in the law, before submitting your first statement on the substance of the dispute in the court when the civil suit is pending, you should file an application before the court, along with a certified copy of the arbitration agreement, in terms of Section 8(1) of the Arbitration and Consolation Act. You may also proceed with the process of appointment of the arbitrator at the same time.

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