In the case of M/S. SPML Infra Ltd. versus M/S. Trisquare Switchgears Pvt. Ltd, the Court noted that the Parliament had shortened the deadline for submitting a written statement in a commercial lawsuit as a result of changes made to the Code of Civil Procedure, 1908 by the Commercial Courts Act. The Court further stated that the changes were implemented to ensure the swift resolution of business disputes.
The appellant M/S. SPML Infra Ltd. received products from the respondent M/S. Trisquare Switchgears Pvt. Ltd., who also generated invoices. The respondent filed a lawsuit for collection before the Commercial Court after some of its debts were unpaid. As a result of the appellant's failure to submit a written statement to the Commercial Court within the allotted time, the Commercial Court terminated the appellant's window of opportunity to do so.
After that, the appellant applied to the Commercial Court for a referral to arbitration under Section 8 of the Arbitration & Conciliation Act, using the Purchase Order's arbitration provision. The Commercial Court denied the appellant's application on the grounds that it was submitted after the required deadline for submitting its Written Statement had passed. The Commercial Court noted that the appellant's intention to take part in the proceedings had been made clear in those proceedings. The appellant appealed this situation to the Delhi High Court.
The Court noted that Section 8 of the Arbitration Conciliation Act does not specify a deadline for submitting an application under Section 8 of the Arbitration &Conciliation Act for referring the parties to arbitration. Section 8 of the Arbitration &Conciliation Act deals with the judicial authority's ability to refer the parties to arbitration where there is an arbitration agreement. The Court further stated that Section 8 merely stipulates that such an application must be filed prior to the delivery of the first statement on the merits of the controversy.
According to the Court, even though Section 8 of the Arbitration & Conciliation Act, as it existed before 23.10.2015, did not specify a deadline for a party to apply under Section 8 and the overall structure and its provisions make it clear that an application under Section 8 should be made at the earliest.
Therefore, the Court decided that it would no longer be permitted for a party to turn around and seek recourse to arbitration once the procedures before the court or the judicial authority have gone beyond the first stage. The Court further stated that an application under Section 8 of the Act would not be admissible once the legal process had advanced past the point at which the pleadings were complete.
According to the Court, Section 8 does not allow for the annulment of finalized processes. The Court ruled that once a party's opportunity to file a written statement of defense is closed, the litigation moves past the point at which the pleadings are finished, and the defendant is no longer permitted to request a referral to arbitration.
The Court further clarified that the change to Section 8 of the Act cannot be viewed separately. The Arbitration and Conciliation (Amendment) Act, 2015 and the Commercial Courts Act, 2015 both took effect on October 23, 2015, according to the Court, which also stated that the Commercial Courts Act, 2015 was also passed by the Parliament. The Court noted that certain CPC requirements were modified in their application to any lawsuit involving a commercial dispute of a certain value by virtue of Section 16 of the Commercial Courts Act.
The Court noted that the outer time limit for filing a written statement in a commercial suit has been reduced by the Parliament to 120 days after receipt of summons as a result of the changes made to CPC by the Commercial Courts Act. The Court noted that the changes were aimed to ensure the swift resolution of business disputes.
The Court noted that Section 29A of the Arbitration and Conciliation Act, which specifically states that an arbitral award would be made within a period of twelve months from the date the arbitral tribunal enters upon reference, was also introduced by the Arbitration and Conciliation (Amendment) Act, 2015.
The Supreme Court had noted that the Arbitration & Conciliation Act had been amended twice, in 2015 and 2019, to include additional time limits to ensure that the arbitration proceedings are conducted and concluded quickly in the case of Bharat Sanchar Nigam Limited and Anr. v. M/s Nortel Networks India Private Limited (2021), the Court further noted.
The time allotted or given for filing a written statement has to mandatorily be written in the very beginning of the phrase after the date in the lawsuit. When combined with the concurrent amendments to Order VIII Rule 1 of the CPC made possible by the Commercial Courts Act of 2015, the legislative intent behind the introduction of the phrase “the date of” becomes quite clear. It was intended to establish the precise time frame within which an application under Section 8(1) of the Arbitration &Conciliation Act could be filed, the Court concluded.
Therefore, the Court decided that a party would lose their ability to apply under Section 8(1) of the Act if they fail to submit an application under that section of the Act within the time frame allotted for filing the first statement on the substance of the dispute, which would include a written statement in the case of a lawsuit.
In the case of Hughes Communications India Ltd. and Ors. v. Union of India (2018), in which the Single Judge of the Delhi High Court had ruled that Section 8 of the Arbitration &Conciliation Act cannot be interpreted to mean that an application under Section 8(1) of the Act would not lie after the right to file the written statement has expired, was overturned by the Court.
Thus, the Court confirmed the Commercial Court's ruling that the appellant's ability to make an application under Section 8(1) of the Arbitration &Conciliation Act was no longer open. As a result, the Court rejected the appeal.