No Arbitration Reference After Closure of Written Statement – A Detailed Commentary on Delhi High Court’s Decision in R. Santosh v. One97 Communications Ltd. (2025 DHC 4963-DB)

1. Introduction

The Division Bench of the Delhi High Court in R. Santosh v. One97 Communications Ltd. has delivered a far-reaching ruling on two practical yet frequently litigated questions in commercial suits:

1. Can a defendant, whose right to file a written statement has been closed, still invoke the arbitration clause and seek a reference under Section 8 of the Arbitration & Conciliation Act, 1996?
2. What is the evidentiary consequence of a defendant’s failure to cross-examine the plaintiff’s witness in a money-recovery action?

The Court answered both questions against the appellant-defendant, thereby upholding the trial court’s money decree of ₹5,00,000 with interest in favour of One97 Communications Ltd. (Paytm ). By refusing to entertain a belated Section 8 application, the Bench has crystallised a strict rule: once the statutory period for filing a written statement expires and the right is formally closed, a defendant cannot sidestep the suit by belatedly invoking arbitration.

2. Summary of the Judgment

After recounting the procedural history—non-filing of the written statement, closure of cross-examination, and dismissal of an Order VII Rule 11 CPC plea—the High Court held:

• The plaintiff (One97) successfully proved, through unrebutted evidence, that it had paid an interest-free refundable security deposit of ₹5 lakh to the defendant (proprietor of Sharada Talkies) under an Addendum Agreement.
• Because the appellant neither filed a written statement nor cross-examined the plaintiff’s witness, the evidence stood unchallenged. The observation of the trial court that the amount credited to “Santosh Talkies” amounted to payment to the defendant was affirmed.
• An application under Section 8 of the A&C Act filed after the closure of the defendant’s right to file a written statement is not maintainable, in line with earlier Delhi High Court precedents.
• The appeal was dismissed in toto, and the trial court’s decree for refund of the security deposit with 8 % pendente lite and future interest, plus costs, was sustained.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

1. Anil Rishi v. Gurbaksh Singh, (2006) 5 SCC 558
   Cited by the appellant for the proposition that a plaintiff must strictly prove payments. The High Court distinguished it on facts, emphasising that unrebutted documentary and oral evidence sufficed.
2. R.K. Roja v. U.S. Rayudu, (2016) 14 SCC 275
   Relied on by the appellant to support an Order VII Rule 11 application. The Division Bench noted that Roja disallows using procedural applications as a ruse to revive lost opportunities, thereby turning the citation against the appellant.
3. Madhu Sudan Sharma v. Omaxe Ltd., 2023 SCC OnLine Del 7136
   Distinguished because in that case the Section 8 objection preceded the period for filing a written statement, unlike the belated attempt in the present matter.
4. Hitachi Payment Services (P) Ltd. v. Shreyans Jain, 2025 SCC OnLine Del 1042 & Ranjana Bhasin v. Surender Singh, 2024 DHC 499-DB
   These Division Bench rulings formed the backbone of the Court’s reasoning that a Section 8 application becomes legally untenable once the right to file a written statement is lost.

3.2 Legal Reasoning

1. Burden of Proof & Adverse Inference: The Court reiterated that under Sections 101-104 of the Evidence Act, the plaintiff bears the initial burden; however, once prima facie evidence is adduced and remains unchallenged due to the defendant’s default, the burden is discharged and the court may draw an adverse inference.
2. Closure of Defence: Guided by Order VIII Rule 1 CPC (as amended for commercial disputes) and Section 16 of the Commercial Courts Act, the right to file a written statement is forfeited automatically after 120 days. Once closed, it cannot be resurrected by clever procedural devices.
3. Non-Maintainability of Section 8: Relying on Hitachi, the Bench held that a Section 8 plea is inseparable from the written statement in timing because it must be taken “not later than the date of submitting his first statement on the substance of the dispute.” If no written statement is permitted, no “first statement” can legally arise.
4. Mis-joinder & Third-Party Bank Account Argument: The Court treated the proprietary concern (“Sharada Talkies”) and the individual proprietor (R. Santosh) as one legal entity for proceedings. The mere appearance of “Mysore Talkies” in bank details did not defeat the claim because the defendant admitted the agreements and offered no evidence of fraud.

3.3 Potential Impact

The decision fortifies a strict procedural discipline in commercial litigation:

• Strategic Timelines: Defendants can no longer withhold their defence, observe the plaintiff’s evidence, and then pivot to arbitration once prospects appear grim.
• Speedier Commercial Suits: By eliminating dilatory Section 8 motions filed beyond time, the ruling dovetails with the Commercial Courts Act’s objective of time-bound adjudication.
• Drafting & Risk Management: Corporate entities that rely on security deposits or advances will find renewed confidence in enforcing refund obligations when backed by clear contractual clauses and digital trails.
• Litigation Strategy: Plaintiffs are reminded to produce bank statements and affidavits early, whereas defendants must engage promptly or risk being shut out entirely.

4. Complex Concepts Simplified

• Section 8 (Arbitration & Conciliation Act, 1996): Allows a judicial authority to refer parties to arbitration when a valid arbitration agreement exists, provided the request is made before submitting the first statement on the dispute.
• Order VII Rule 11 CPC: Empowers a court to reject a plaint at the threshold on specified grounds (no cause of action, barred by law, etc.). It is a “knife that cuts without bleeding”—decided solely on plaint averments, not evidence.
• Order VIII Rule 1 CPC (Commercial Courts context): Sets inflexible deadlines (30 + 90 days) for filing written statements in commercial suits; expiry results in automatic forfeiture.
• Pendente Lite & Future Interest: “Pendente lite” refers to interest accruing from the date of filing the suit until judgment; “future” interest runs from decree until payment.
• Proprietorship Concern: Legally, a sole-proprietorship and its proprietor are not separate persons; thus, suing or being sued in the proprietor’s name is sufficient.

5. Conclusion

The Delhi High Court, in upholding the decree against R. Santosh, cements a significant procedural precedent: a defendant who allows the statutory window for filing a written statement to lapse cannot later invoke an arbitration clause to derail the suit. Concurrently, the judgment emphasises that unrebutted documentary and oral evidence is adequate to decree a money claim. The ruling thus furthers the twin goals of the Commercial Courts Act—efficacy and expedition—while sending a clear message: procedural timelines are not mere guidelines but jurisdictional mandates.

—End of Commentary—