21 November 2022


High Court of Delhi

Ahuja Builders Vs. Doonvalley Technopolis Pvt. Ltd.




When there is no dispute between the parties relating to the contract containing an arbitration clause, the arbitration clause cannot be invoked

The undisputed facts relevant for the determination of the present application is that, the Defendant had awarded the Balance Civil & Structural Works, of Radisson Hotel & Metropolis Mall to the Plaintiff vide Contract Agreement. The said agreement contains the arbitration Clause No. 13, pursuant to which, all the disputes arising out of the Contract had to be referred to the Arbitrator. On completion of said work and after a discussion between parties, Defendant determined a sum of Rs. 2,72,04,349/- as due and payable by them to the Plaintiff. The Defendant wrote a letter dated 1st April, 2013 confirming the aforesaid outstanding amount towards running bills of the Plaintiff and undertook to clear it by 15th May, 2013. The Plaintiff did not dispute the said amount and waited for the payment. The Defendant, however, did not pay the said sum within the stipulated time and thereafter, the Plaintiff served a legal notice, calling upon the Defendant to pay the said sum along with the interest at the rate of 18% per annum. Upon failure of the Defendant to make the payment pursuant to the legal notice, present suit under Order XXXVII of the Code of Civil Procedure, 1908 (CPC) has been filed. The question for determination thus is whether there is any dispute between the parties, which needs to be referred to Arbitrator and the suit is barred in view of the arbitration clause, contained in Contract Agreement.

Learned counsel for the Defendant has argued that, even if the liability to make the payment has been admitted, still the suit does not lie in view of Sections 5 & 8 of the Arbitration and Conciliation Act, 1996/Act and the dispute need to be referred to the Arbitrator. Further, that Section 8 of the Arbitration and Conciliation Act would have the primacy over Order XXXVII of CPC and if the conditions laid down in Section 8 of the Arbitration and Conciliation Act are fulfilled, jurisdiction of the Civil Court is barred.

There was an arbitration agreement between the parties and any dispute arising under the Contract is needed to be referred to the Arbitrator. Under Clause 13 of said Contract Agreement, what is referable is 'a dispute arising out of or in any way connected with Contract Agreement'. Under Section 8 of the Arbitration and Conciliation Act, 1996 a judicial authority is mandated to refer "the dispute". For referral the existence of 'Dispute' is sine qua non. The Plaintiff contends that, since the money payable under the Contract was calculated by the Defendant and the calculation is accepted by the Plaintiff as it is, there exists no dispute between them in relation to the terms of Contract. The applicant/Defendant has also not contended anywhere that, there is any dispute between the parties relating to the amount payable under the Contract or of any other nature. Its plea is based on mere existence of arbitration Clause 13 in the Contract.

The present suit is filed for the recovery of the said amount under Order XXXVII of CPC. It is a simple case of recovery of money based on acknowledgement and undertaking to pay. In view of these facts, it is clear that none of the parties has raised any dispute arising out of the said Contract. When there is no dispute between the parties relating to the contract containing an arbitration clause, the arbitration clause cannot be invoked.

An analysis of Section 8 of Act, would show that for its applicability, the following conditions must be satisfied: (a) that there exists an arbitration agreement; (b) that action has been brought to the Court by one party to the arbitration agreement against the other party; (c) that the subject matter of the suit is same as the subject matter of the arbitration agreement; (d) that the other party before he submits his first statement of the substance of the dispute, moves the Court for referring the parties to arbitration; and (e) that along with the application the other party tenders the original arbitration agreement or duly certified copy thereof.

Section 8 of Act, is in the form of legislative command to the Court and once the pre-requisite conditions as aforestated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfillment of conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration. In this case, the Defendant/Applicant has not so far raised any dispute relating to the terms and conditions of the Contract Agreement.

The law propounded in both Nathani case and National Insurance case by the Supreme Court is that, on voluntary settlement between the parties leaving no outstanding claim or pending disputes, the Contract stands discharged as to the satisfaction of both the parties and there exists no arbitrable dispute. In view of facts and circumstances of the case, there exists no dispute to refer for arbitration in terms of Section 8 of Act. The application has no merit and the same is dismissed.


National Insurance Co. Ltd. vs. Boghara Polyfab Pvt. Ltd. MANU/SC/4056/2008
, Nathani Steels Ltd. v. Associated Constructions

Tags : Dispute Existence Reference

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