3 April, 2020
The High Court of Delhi in its recent judgment of SSIPL Lifestyle Pvt. Ltd. v. VAMA Apparels [CS (COMM.) 735/2018] has held that pursuant to the amendment to Section 8 of the Arbitration and Conciliation Act (“Act”), vide the Amendment Act 3 of 2016 brought into effect from 23 October 2015 (“2016 Amendment”), the arbitration clause can be waived by a party under dual circumstances – one by filing a statement of defence and secondly by unduly delaying the filing of the application under section 8 of the Act i.e. by not filing the same till the date by which the statement of defence could have been filed. Under both these circumstances, there can be no reference to arbitration. Section 8 (1) [pursuant to the 2016 amendment] states that:
“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 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……”
In the present case, the questions of law for consideration of the Ld. Single Judge of the High Court were as follows:
a. Whether there is a limitation period prescribed for filing an application under Section 8 of the Act?
b. Whether the limitation for filing of the written statement as prescribed under the Code of Civil Procedure, 1908 (“CPC”) as also under the Commercial Courts Act, 2015 (“Commercial Courts Act”) would be applicable for filing of a Section 8 application?
After due consideration of various judgments passed by different benches of the Delhi High Court, the Ld. Single Judge observed that the Legislature had made a conscious change in section 8 of the Act by using the language “not later than the date of”. The use of the word ‘date’ itself signified precision. A perusal of the various amendments brought about by the 2016 Amendment showed that the intention was to tighten the time limit within which arbitration proceedings should commence and conclude.
Taking into the consideration the amendments to section 9, 11, 29A and 29B of the Act, the Ld. Single Judge held that the entire emphasis of the 2016 Amendment had been to speed up arbitral proceedings. It is in this context that the change of language in section 8 from “when” to the “date of” was to be construed. The words ‘not later than the date of ‘submitting’ meant that the date of submitting the statement on the substance of the dispute i.e. written statement in a civil suit, was the outer limit for filing of a section 8. Hence, in effect, there was a limitation period which was prescribed.
The Ld. Single Judge further observed that viewed in the background of the amendments in the CPC including the recent amendments in CPC in the context of the Commercial Courts Act and the 2016 Amendment, the amendment to section 8 is a conscious step towards prescribing a limitation period for filing the application. The mention of the word ‘date’ in the amended provision means that it is a precise date and usually incapable of ambiguity. The same is a crystallized ‘date’ and not an ambiguous ‘period’ prior to the filing of the first statement on the substance of the dispute. The entire intention is that those parties who wish to proceed for arbitration ought to do so with alacrity and speed and not merely procrastinate.
Consequently, since the limitation period for filing the statement of defence (written statement) had expired, the High Court held that the Section 8 application preferred by the Defendant was also time barred and the same was dismissed.
For further information, please contact:
Gaurav Wahie, Partner, Clasis Law
gaurav.wahie@clasislaw.com