Hyderabad High Court: In the instant appeal, question arose that whether the Application I.A.No. 1751 of 2006 filed for recovery of shares, is an application under Section 8 of the Arbitration and Conciliation Act, 1996 or whether it is an application under Order VII Rule 11 of CPC seeking rejection of plaint on the ground that arbitration clause in the contract bars the suit. The Division Bench of S.K. Kait and D.V.S.S. Somayajulu, JJ., allowing the appeal held that, the said application is under Order VII Rule 11 CPC seeking rejection of the plaint while observing that when a statute describes or requires a thing to be done in a particular manner; it should be done in that manner or not at all.
As per the history of the case, in 2005 a suit was filed for recovery of shares of various companies belonging to the appellants’ share allegedly sold by the respondents/defendants. Post the filing of the suit, one of the defendants filed an application under Order VII Rule 11 CPC pleading inter alia that the dispute between the parties should be settled according to arbitration as per Bye-law No. 248(c) of the Bombay Stock Exchange Bye-laws. However, instead of asking for an order under Section 8 of the 1996 Act to refer the parties to arbitration, the defendant sought for rejection of the plaint. The Additional Chief Judge, City Civil Court, Secunderabad while agreeing that there is a valid arbitration clause, rejected the plaint thereby leaving the parties to invoke the arbitration clause. The appellants/plaintiffs via their counsel Mahmood Ali in addition to opposing the application of 2006 also argued that the appellants were not in the purview of the arbitration clause. However the respondents/ defendants’ counsel argued that the arbitration clause was well highlighted in the contract between the parties and that this Court has no jurisdiction over the matter as per the provisions of Section 8 of 1996 Act.
The Division Bench duly noting the averments made by the counsel observed that the issue of the case is that whether the Chief Judge was right in “rejecting” the plaint. The Court observed that the lower court should have noted that Section 8 of only empowers the Court to “refer” the parties to arbitration but does not give the Court an option to reject a plaint whereas Order VII Rule 11 CPC empowers the Court to reject the plaint, when there is “bar” to the suit because of any law and Section 8 is not a bar to a Civil Court and provides an alternative to a defendant against whom a civil suit is initiated to submit to the jurisdiction of the civil Court. The Court observed that an application under Section 8 of the Act is an application that should be made in a particular manner and at particular time. The application should be accompanied by the original arbitration agreement or a certified copy thereof. The Court thus noted that the lower court did understand it as an application under Order VII Rule 11 CPC only. However the Division Bench also observed that the application was misconceived in the first place and thereby set aside the order of the lower court dated 16.11.2006. [M. Shankara Reddy v. Amara Ramakoteswara Rao, 2017 SCC OnLine Hyd 426, decided on 24.10.2017]
