Section 8 of the Arbitration and Conciliation Act, 1996 permits the parties to file an application before the court for the reference of the dispute to arbitration if there is a valid arbitration agreement between them. The time period within which the parties are required to file the application is before submitting the first statement on the substance of the dispute. But, over the time the section became ambiguous. The literal terms of the section were not sufficient to decide the limitation period for filling such application. Hence, the terms ‘applies not later than the date of submitting his first statement on the substance of the dispute’, required to be interpreted to set the limitation period for filling such application. The ambiguity was finally settled by the Supreme Court of India in SSIPL Lifestyle Private Limited vs. Vama Apparels (India) Private Limited
Before the Act was amended in 2015, section 8 of the Act required the parties to file the application for reference to arbitration, not later then when submitting his first statement. The 2015 amendment changed the terms under Section 8 from ‘not later then when submitting’ to ‘not later then the date of submitting’. The motive of legislature behind changing the terms from ‘when’ to ‘date’ is to give precise idea about the limitation of filling such application for reference. In Booz Allen vs. Hamilton Inc., the supreme court dealt with the unamended Section 8 of the Arbitration and Conciliation Act, 1996 and held that there is no time limit, the application had to be filed `at the earliest'.
The question as to the limitation under section 8 of the act was unanswered and the situation was still ambiguous.
- Whether there is a limitation period prescribed for filing of an application under Section 8 of the Arbitration and Conciliation Act?
- Whether the limitation for filing of the written statement as prescribed in the Civil Procedure Code, 1908 as also the Commercial Courts Act, 2015 would be applicable for filing of a Section 8 application?
- Whether the adding of the words 'the date of' means that the date for filing a written statement in a suit would be considered as the limitation period for filing of a Section 8 application?
First of all, the supreme court gave reliance to the 2015 amendment under section 8. The terms "not later than when submitting" have been substituted by "not later than the date of submitting" are of some significance. Under the amended law the defendant is now required to invoke the arbitration clause and apply to the court for a reference thereunder by moving an application. The court further held that the words 'not later than the date of submitting' means that the date of submitting the statement on the substance of the dispute i.e. the written statement in a civil suit, is the outer limit for filing of a Section 8. Hence, in effect, there is a limitation period which is prescribed. Hence, the limitation period for filing the application under section 8 of the act before the date of filing the first statement that is the written statement or defence under CPC. The time period for filing the written statement is 120 days. Thus the maximum time which can be granted to file the application under section 8 is 120 days. After filing the written statement or after the expiry of 120 days, the application under section 8 cannot be filed. Moreover, it will be considered as a waiver of the right to file such an application.
The court held that, the arbitration clause, can be waived by a party under dual circumstances-
- one by filing of a statement of defence or submitting to jurisdiction and
- secondly, by unduly delaying the filing of the application under Section 8 by not filing the same till the date by which the statement of defence could have been filed. Under both these situations, there can be no reference to arbitration.
The court was correct to decide that there is a limitation period under section 8 for filing an application, so that it do not disturb the process of the court. It would also fulfill the object of 2015 amendment for speedy arbitration.
The court was also correct to equate the ‘first statement’ and ‘written statement’ and putting them on the same footing as first statement is the very first representation of the party before the court which is the written statement. If the filing of application is allowed on any stage after the filing of written statement, then the time devoted to the proceedings will go in vein and also the parties will behave in a careless manner. The decision is rightly decided to make the parties conscious.