Active Participation in Trial Constitutes Waiver of Right to Seek Reference to Arbitration

The Plaintiff/Respondent, a sole proprietorship concern, provided security services to the Appellants under an agreement dated 30.10.2009

The Plaintiff alleged that the Appellants failed to pay outstanding invoices totaling ₹3,91,031 for services rendered between June and October 2013

A cheque issued by the Appellants was dishonored with the remark "payment stopped by drawer"

The Appellants contended that the suit was filed by an unauthorized person (Mr. Raj Kumar Dagar), that there was no privity of contract as the initial agreement was with "Shiva Associates," and that they suffered losses of ₹10,93,121 due to thefts resulting from the security guards' negligence

The Trial Court decreed the suit for ₹2,91,031 (after a ₹1,00,000 deduction for the theft incident) plus 12% interest

1. Whether the suit was signed, verified, and instituted by a duly competent person on behalf of the proprietorship firm?

2. Whether the suit was maintainable in a Civil Court despite the existence of an arbitration clause in the agreement?

3. Whether there was privity of contract between the Plaintiff (Dollar Security) and the Appellants given the agreement was in the name of Shiva Associates?

4. Whether the Appellants were entitled to set off the value of stolen goods against the Plaintiff's dues?

The court applied Section 96 and Order XLI Rule 1 of the CPC regarding appeals

It considered Order VII Rule 1 regarding the description of parties and Order XXX Rule 10 of the CPC concerning suits against persons carrying on business in names other than their own

The court relied on Section 8 of the Arbitration and Conciliation Act, 1996, which requires a party to object to the court's jurisdiction at the first instance before filing a statement on the substance of the dispute

It also referenced State Bank of Travancore v. M/s Kingston Computers (P) Ltd. (2011) regarding the necessity of proper authorization for instituting suits

The court found that Mr. Raj Kumar Dagar was competent to file the suit because he had signed the original agreement and possessed an authority letter (Ex. PW-1/1) from the proprietor, Deepak Dagar

Regarding the change of name, the court determined that Dollar Security was the successor to Shiva Associates (both being family-run proprietorships), and the Appellants had recognized this by continuing services and corresponding with the new entity

The court rejected the arbitration objection because the Appellants participated in the trial without filing a Section 8 application at the first instance, thereby waiving the right

Regarding the theft, the court noted that the agreement lacked a specific indemnity clause for losses, and the Appellants failed to provide concrete proof of the value of stolen goods; however, the Trial Court’s "benevolent" deduction of ₹1,00,000 and denial of pre-suit interest remained undisturbed as the Plaintiff did not cross-appeal

It held that the suit was properly instituted by an authorized person conversant with the facts

It further held that the Appellants submitted to the Civil Court’s jurisdiction by failing to invoke Section 8 of the Arbitration Act timely

The court affirmed the decree for ₹2,91,031 with 12% p.a. pendente lite and future interest, finding no merit in the challenges to the invoices or the identity of the firm