Right to arbitration will not be rejected unless a concluded settlement is placed before the court: Supreme Court of India
The arbitration clause cannot be invoked in view of the settlement ending in the resolution of the dispute unless there is material brought on record to indicate the nature of settlement entered into between the parties. This auspicious judgment was passed by the Supreme Court of India in the matter of V. SREENIVASA REDDY V. B.L. RATHNAMMA [SLP (CIVIL) NO.11036 OF 2019] by Honourable Chief Justice of India S.A. Bobde, Honourable Justice A. S. Bopanna, and Honourable Justice V.Ramasubramanian. The petition before the court was taken back since it was contended that the parties had settled the matter outside the court. However, the parties continued to be in dispute regarding the issue and the matter and filed subsequent petitions demanding re-admission of petition or appointment of an arbitrator. Later, the HC recorded that since the matter has been settled outside the court and the Chief Justice of HC opined that since the matter was already settled it is noted in judicial order that this would be sufficient to decline the request of appointment of an arbitrator and hence the application was dismissed. The appellant is assailing the order passed by the High Court of Hyderabad in an Arbitration Application filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 for seeking appointment of a sole Arbitrator to resolve the dispute between the parties. When a notice for balance payment sent the appellant raised certain issues relating to the transaction. In that background, the respondent got issued a notice informing that the agreement stood canceled and the advance amount paid is forfeited. Now the dispute was to be resolved by an arbitrator and when it did not happen a petition was filed in HC. In this regard, the SC observed that “The entire issue would revolve around the factual aspect involved in the instant case to come to a conclusion as to whether there was a concluded settlement between the parties and therefore in that circumstance, whether it should be construed that the dispute which had arisen between the parties should be deemed as not subsisting for resolution through arbitration.“ Court also added, “In the said background there is no definite material on record to indicate that there was a concluded settlement between the parties based on which the petition was disposed and, therefore there is no reason to hold that there is no dispute which required resolution through arbitration; nor are we in a position to hold that there is Novation of the earlier agreement. Though the learned Judge of the High Court of Karnataka disposed of the petition under Section 11(6) of the Act, 1996 by recording the submission that the matter has been settled out of court, the so-called settlement has not been recorded nor made a part of the order so as to bind the parties and to indicate that the dispute had been resolved and had accordingly erased the original dispute or amounted to Novation. That apart, no material is placed on record to show that the settlement had been reduced into writing and had been placed before the Court when the petition was disposed of so as to indicate that the right to arbitration under the original agreement cannot be claimed. If that be the position, the rejection of the IA also on the ground that the original order had merely recorded the settlement will not indicate that a concluded settlement was placed before the court.” Thus, the Apex Court stated, “It cannot be accepted in the present facts that there was an abandonment of part of any claim nor was there a conclusive adjudication of the dispute between the same parties on merits to constitute res-judicata. As already indicated above, the so-called settlement has neither been recorded in the earlier proceedings nor any document brought on record to indicate that factually the settlement had taken place so as to wipe out the original dispute. In such circumstances, a party to the arbitration agreement contending that there was a dispute amongst them cannot be left without a forum for the resolution of the dispute by taking a hyper-technical view of the matter. In any event, whether the dispute which had arisen at the first instance has been settled: if the dispute subsisted, whether the claim is within the period of limitation, the nature of relief if any, and all other contention on merits are to be considered in the arbitral proceedings.“
2. The appellant is before this Court assailing the order dated 31.12.2018 passed by the High Court of Judicature at Hyderabad in Arbitration Application No.52 2016 filed under Section 11(5) and of the Arbitration and Conciliation Act 1996 of the Act 1996 in CMP No.228 2015 was filed. When the said petition was listed for consideration on 02.03.2016 the learned senior counsel for the appellant with the was noticed that a petition seeking appointment of the Arbitrator was to be filed before the High Court of Judicature at Hyderabad. The learned Judge through the order dated 02.03.2016 placed the submission on record and dismissed the petition as withdrawn with the appropriate court in accordance with law. It is in The said application was opposed by the respondent referring to the earlier proceedings noted above more particularly the disposal of the first application by recording that the matter is settled between the parties. In the said situation the learned Chief Justice High Court of Judicature at Hyderabad though the Karnataka High Court had permitted the appropriate Court the same is not seen to be one would continue to evidence that the Karnataka High Court had recorded the submission on behalf of the settled out of the court. In that circumstance the having already been settled out of the court which is the request for appointment of Arbitrator. Accordingly aspect involved in the instant case to come to a conclusion as to whether there was a concluded settlement between the parties after the application in CMP No.297 2009 was filed and therefore in that circumstance whether it should be construed that the deemed as not subsisting for resolution through 05.07.2011 in CMP No.297 2009 which reads as “The counsel for the petitioner and the In any event the application does not merit settlement of the matter out of court Both the aforestated orders do not throw light on the nature of the settlement or the conclusiveness of the 11. On the other hand the settlement proposed itself not being finalized not just the original dispute had remained unresolved but the non­settlement of the 11(6) of Act 1996 seeking appointment of Arbitrator to appointment of Arbitrator was to be made by the High Court of Judicature at Hyderabad the petition in CMP No.228 2015 was withdrawn with liberty and the No.52 2016 a detailed affidavit was filed by the appellant. The statement contained in paragraphs 18 and 22 explains the crux of the matter which read as Tahsildar the Respondent herein was duty­ per the terms of Agreement of Sale dated 23.11.2006. However the Respondent once and again has avoided complying with the the efforts put forth by me with the help of mediators who have helped in settling the differences during the pendency of C.M.P No.297 of 2009 have also gone in vain. The Applicant herein undertook extensive oral discussions and visited the Respondent on numerous occasions seeking to settle dispute Respondent though reported intention to settle before the Hon’ble High Court the same were not acted upon. It is or contended by the Respondent in the said 22. I submit that pursuant to the said order Respondent herein on 09.03.2016 informing 23.11.2006. I submit that the Respondent despite the service of said notice had not consented to the appointment of the sole submit that I am therefore constrained to application u s 11(2) & of the Arbitration and Conciliation Act 1996 praying for the by this Hon’ble Court. A copy of the notice said clause and as such any dispute that agreement in any manner is referable to Arbitration to resolve such dispute. Therefore the dispute which arose out of the failure to Arbitration. In the alternative it is submitted agreed to revives the original dispute which arose between the parties as the ‘dispute’ 13. The learned Chief Justice High Court of the sworn statements to the effect that the settlement original dispute which requires resolution through 14. We note that in the said background there is no the petition was disposed and therefore there is no reason to hold that there is no dispute which required hold that there is Novation of the earlier agreement indicate that the dispute had been resolved and had accordingly erased the original dispute or amounted to was disposed of so as to indicate that the right to arbitration under the original agreement cannot be claimed. If that be the position the rejection of the IA also on the ground that the original order had merely 15. If that be the position the observation of the learned Chief Justice High Court of Judicature at Hyderabad that the settlement was recorded by the Karnataka High Court and therefore it would not be of that order does not stand to reason. Further while referring to the aspect that the application was filed the High Court of Karnataka and though noting that liberty had been granted through the order dated 02.03.2016 it is observed that such permission to withdraw with liberty was not with the consent of the respondent. However what is to be noticed from the the respondent in the said petition was represented by noted by the learned Chief Justice the counsel has stage it was not even contended on behalf of the respondent that such liberty does not arise since the matter has been settled nor were the details of the in the concerned proceedings. In addition we also note earlier proceedings wherein it is contended that CMP without giving liberty to either of the parties to seek appointment of an Arbitrator in future it is to be seen that no material is brought on record to indicate the clause agreed therein cannot be invoked in view of the not just the original dispute but even the fact as to whether the matter was settled amongst themselves or agreement dated 23.11.2006 entered into between the parties. If that be the position the learned Chief Justice therein on behalf of the respondent about the petition being hit by Order II Rule 2 of CPC and also the principles of res­judicata. It cannot be accepted in the claim nor was there a conclusive adjudication of the res­judicata. As already indicated above the so­called settlement has neither been recorded in the earlier proceedings nor any document brought on record to as to wipe out the original dispute. In such circumstance a party to the arbitration agreement contending that there was a dispute amongst them cannot be left without a forum for resolution of the first instance has been settled if the dispute subsisted whether the claim is within the period of limitation the 17. Accordingly the appeal is allowed the order dated 31.12.2018 passed in AA No.52 2016 is set aside Chief Justice of the High Court of Uttarakhand is Pending application if any shall stand disposed of Page 1