Introduction
The interplay between civil procedure and arbitration law often raises nuanced questions related to jurisdiction and maintainability. A recurring concern is the attempt to seek rejection of a plaint on the ground that the dispute is governed by a legally valid and subsisting arbitration agreement.
This engages the interplay between (i) Order VII, Rule 11(d) of the Code of Civil Procedure, 1908 (“CPC”), which empowers the court to reject a plaint where the suit appears barred by law, and (ii) Section 8 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), which mandates a judicial authority to refer parties to arbitration if the subject matter of the dispute is covered by a valid arbitration agreement.
The main contention is whether simply having an arbitration agreement, without a formal application under Section 8, constitutes a bar under Order VII, Rule 11(d) thereby warranting rejection of the plaint? Different High Courts in India have responded to this question in varied ways, reflecting a range of judicial perspectives.
Strict Procedural Compliance: Mandatory Application under Section 8, Arbitration Act
Several High Courts have maintained a firm stance that filing an application in compliance with Section 8 of the Arbitration Act is a pre-requisite for seeking rejection of a plaint under Order VII, Rule 11 of the CPC.
The Andhra Pradesh High Court in Chunduru Visalakshi v. Chunduru Rajendra Prasad[1] held that if an application is filed under Section 8 of the Arbitration Act, the Court shall refer the parties to arbitration and reject the plaint under Order VII, Rule 11(d) CPC. However, if no application is filed under Section 8 and there is no prayer to refer parties to arbitration, the mere existence of an arbitration clause would not be grounds to reject the plaint. An application under Order VII, Rule 11 CPC cannot be treated as a composite application under Section 8, particularly where it does not comply with mandatory requirements under Section 8(2) of the Arbitration Act.
The Bombay High Court in Commissioner of Customs & Central Excise v. Anandibai Venkatesh Sawant[2] held that failure to abide by the requirements of Section 8(1) and Section 8(2) of the Arbitration Act can be fatal to the application for rejection of plaint.
The Delhi High Court in Din Dayal Agrawal v. Capriso Finance Ltd.[3] followed the Andhra Pradesh High Court precedent, but provided further clarification that Order VII, Rule 11 CPC empowers the Court to reject the plaint only if there exists bar to the suit under any law. From this perspective, Section 8 does not create any bar to Civil Courts; rather it provides an alternative to the defendant to submit to the jurisdiction of the Civil Court or file an appropriate application under Section 8 for referring the parties to arbitration.
The Liberal Substantive Approach: Substance Over Form
The Delhi High Court has adopted a contrasting liberal approach in Madhu Sudan Sharma v. Omaxe Ltd.[4]The court held that even without a specific request to refer the dispute to arbitration, raising an objection to maintainability of suit due to an arbitration clause can be read as an implied request to refer the dispute to arbitration. The court held it would be too hyper-technical to require a separate request where the arbitration clause has been extracted and relied upon, as by doing so the party clearly evinces intent to seek reference to arbitration.
The Telangana High Court in Naolin Infrastructure (P) Ltd. v. Kalpana Industries[5] adopted a similar position, holding that Section 8(1) requirement was satisfied by filing an application under Order VII, Rule 11 CPC, which brought to the Court’s notice that an arbitration agreement exists between the parties. The Court found that where an applicant had not submitted to the Court’s jurisdiction, it could not be held that there was non-compliance with Section 8(1).
Therefore, while the strict procedural approach emphasises that Section 8 is a self-contained procedural mechanism distinct from an application under Order VII, Rule 11, the liberal substantive approach emphasises that once parties have agreed to arbitrate, compelling them to litigate violates party autonomy and the pro-arbitration legislative policy.
The Pragmatic Middle Ground: Flexible Compliance
The Delhi High Court in Punjab State Electricity Board v. Vee Kay General Industries[6] (“Vee Kay Industries”) provides a pragmatic middle ground, harmonising the two approaches. The Court made a crucial distinction, holding that while there is no bar on filing a civil suit even if there is an arbitration clause, if the suit pertains to a contract requiring arbitration, the defendant can seek appropriate orders under Section 8. The Court emphasised that it is “altogether one thing to say that the dispute as raised in the plaint, being arbitrable, should be stayed (position under the Old Act) or referred to arbitration (position under the New Act) vis-a-vis to state that the suit is not maintainable.”
This distinction recognises that the mere existence of an arbitration agreement does not bar a suit under Order VII, Rule 11(d) CPC, rather, the procedural mechanism under Section 8 must be actively invoked to seek referral to arbitration.
This approach prevents pre-mature dismissal of suits due to an arbitration clause, but also protects the defendant’s right to insist on arbitration through proper procedural invocation.
Judicial Interpretation of Section 8 of the Arbitration Act: Scope and Application by the Supreme Court
The above understanding must be viewed against the backdrop of the Supreme Court’s jurisprudence on Section 8. The apex court has firmly held that Section 8 of the Arbitration Act is mandatory, stating that the judicial authority “shall” refer parties to arbitration if the following conditions are satisfied:[7]
- a valid arbitration agreement exists between the parties,
- a party to the arbitration agreement applies for reference,
- the application precedes the first statement on the substance of the dispute, and
- the dispute falls within the scope of the arbitration agreement, and
- the arbitration agreement is not null, void, inoperative, or incapable of being performed.
This position has been reaffirmed in Rashtriya Ispat Nigam Ltd. v. Verma Transport Co.,[8] where the Court underscored the mandatory nature of Section 8 and clarified that “first statement on the substance of the dispute” means submission to the jurisdiction of the court. Once a party submits without seeking reference to arbitration, it is deemed to have waived its right to invoke the arbitration clause. The Court distinguished this from a “written statement” and held that such waiver arises from participation in the main proceedings, not from supplemental proceedings like opposing interim injunctions or ancillary reliefs.
The Court’s reasoning was grounded in the legislative evolution from Section 34 of the Arbitration Act, 1940, to Section 8 of the 1996 Act. Whereas Section 34 contemplated stay of the suit in favour of arbitration, Section 8 mandates a reference without any exercise of discretion. While these observations seem to support the liberal line of approach discussed above, they do not specifically touch upon the requirement of a Section 8 application.
In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.,[9] (“Booz Allen”), examining the nature and extent of the jurisdictional bar created by Section 8, the Court held that once a valid arbitration agreement is brought to the notice of the court through a proper Section 8 application, the civil court’s jurisdiction stands ousted for the disputes covered by the arbitration clause. The Court emphasised that the Arbitration Act creates a parallel adjudicatory mechanism, and parties who have agreed to arbitrate cannot be compelled to litigate in civil courts.
Notably, the Court stated that “when an application is made under Section 8, the power of the civil court to adjudicate the dispute stands ousted.”, suggesting that such ouster of jurisdiction is not automatic but contingent on Section 8 application.
This interpretation is consistent with the structure of Section 8, which does not declare that civil courts lack jurisdiction over arbitrable disputes, but rather provides a mechanism by which a party can invoke the arbitration agreement and seek reference. The provision is framed as a right of the parties rather than a bar on the civil court’s jurisdiction, and it is the procedural act of filing the application that activates the jurisdictional bar under Order VII, Rule 11(d).
Conclusion
The jurisprudence, evolved through decisions such as Booz Allen and Vee Kay Industries, establishes a coherent framework where the bar under Order VII, Rule 11(d) operates only upon the formal invocation of Section 8. Until such invocation, the plaint cannot be rejected merely because the underlying contract contains an arbitration clause. This interpretation harmonises the procedural safeguards of the CPC with the pro-arbitration policy of the 1996 Act, ensuring that the ouster of civil jurisdiction is not presumed but procedurally invoked.
In essence, courts have adopted a pragmatic middle path, one that prevents the misuse of arbitration clauses to stifle legitimate claims while safeguarding the autonomy of the arbitral process. The requirement of a Section 8 application thus serves as a procedural checkpoint.
The evolution of arbitration jurisprudence in India will hinge on how courts maintain equilibrium between upholding both the sanctity of arbitration agreements and the due process rights of litigants before civil courts.
For further information, please contact:
Vikash Kumar Jha, Partner, Cyril Amarchand Mangaldas
vikashkumar.jha@cyrilshroff.com
[1] 2022 SCC OnLine AP 888
[2] 2021 SCC OnLine Bom 3590
[3] 2025 SCC OnLine Del 4576
[4] 2023 SCC OnLine Del 7136
[5] 2024 SCC OnLine TS 1618
[6] 2007 SCC OnLine Del 1049
[7] (2000) 4 SCC 539; (2003) 6 SCC 503
[8] (2006) 7 SCC 275
[9] (2011) 5 SCC 532
