Madras High Court: Is It Mandatory To File Original Arbitration Agreement With An Application Seeking Stay Of Judicial Proceedings In Favor Of Arbitration?

Chennai_High_Court

In Alstom T&D India Ltd. v. M/s Texcel International Pvt., Ltd C.M.A.No.3683 of 2019 decided on 31 January 2020, the Madras High Court inter alia addressed the issue of whether the requirement to file the original arbitration agreement or its duly certified copy with an application under Section 8 of the Arbitration & Conciliation Act, 1996 (‘Arbitration Act’) seeking stay of court proceedings in favor of arbitration is mandatory or directory. Section 8 of the Arbitration Act in so far it is relevant for this issue is reproduced hereunder:-

‘8(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

In this case, the applicant had neither filed the original of the agreement nor the certified copy of the agreement containing the dispute resolution clause. The Madras High Court observed that the applicant, who seeks reference to the suit to arbitral proceeding shall file the original arbitration agreement or a duly certified copy thereof as contemplated under Section 8(2) of Arbitration Act as amended by Arbitration and Conciliation (Amendment) Act, 2015.

The reasoning followed by the Madras High Court finds its genesis in the Supreme Court dictum of Radha Krishnan v. Maestro Engineers and Others 2010 (1) SCC 72 wherein the Apex Court inter alia noted that in an application under Section 8, the applicant cannot absolve himself from the mandatory requirement of filing an original copy of the deed containing the arbitration clause.

Interestingly, in PEC Ltd. v. Austbulk Shipping Sdn Bhd., 2018 SCC OnLine SC 2549, the Supreme Court, while deciding the issue of whether an application for enforcement of a foreign award made under Section 47 of the Arbitration Act is liable to be dismissed if it is not accompanied by the original arbitration agreement inter alia held that the word “shall” in Section 47 of the Arbitration Act relating to the production of the evidence for the enforcement of foreign award has to be read as “may”. In other words, it was held that by virtue of the word “shall” appearing in Section 47 of the Act,  it is not mandatory to produce an authenticated copy of the original arbitration agreement at the time of filing of an application for the enforcement of a foreign award in India. However, it is pertinent to note that the Supreme Court was cautious in interpreting “shall” as “may” and restricted this interpretation only to the initial stage of the filing of such application and not thereafter.

However, similar interpretation of “shall” as “may” under Section 8 of the Arbitration Act may not be appropriate since referring the parties to arbitration may sometimes lead to serious civil consequences as noted by Supreme Court in Kerala State Electricity Board and Anr. V. Kurien E.Kalathil and Anr. (2018) 4 SCC 793. Once the parties are referred to arbitration, the proceedings will be in accordance with provisions of Arbitration Act and the matter will go outside the stream of the civil court. Further, under Section 19 of the Arbitration Act, the arbitral tribunal shall not be bound by the Code of Civil Procedure and the Indian Evidence Act. In addition, once the award is passed, the award shall be set aside only under the limited grounds provided under the Arbitration Act. Hence in such a scenario referring the parties to arbitration may result in serious civil consequences procedurally and substantively.

Disclaimer: The views expressed in this post are mine and do not reflect the views of the organisation(s) I am engaged with

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