Filing a Statement on Merits Without Invoking Arbitration Clause Constitutes Waiver of Right to Seek Reference

The Appellant (Oyo Hotels) appealed an order dated 10.10.2023 passed by the District Judge (Commercial Court), Dwarka, which dismissed its application under Section 8 of the Arbitration and Conciliation Act, 1996.

The Appellant submitted a written statement addressing the substance of the dispute and referenced the underlying agreement dated 01.08.2017 but failed to mention the arbitration clause or move a Section 8 application at that stage.

Only after pleadings were complete and the matter was fixed for framing of issues did the Appellant move the Section 8 application, claiming they previously lacked possession of the agreement.

1. Whether a party is deemed to have waived its right to invoke an arbitration clause if it files a written statement on the substance of the dispute without intimation of the arbitration agreement to the judicial authority.

2. Whether the inability to produce the physical arbitration agreement at the time of filing the first statement on merits absolves a party of the procedural requirements under Section 8 of the Act of 1996.

Section 8 of the Arbitration and Conciliation Act, 1996, which requires a party to apply for reference to arbitration not later than the date of submitting their first statement on the substance of the dispute.

Sukanya Holdings Pvt. Ltd vs Jayesh H. Pandya & Anr, which establishes that Section 8 conditions provide for waiver by conduct.

Mi2C Security Facilities Pvt Ltd vs North Delhi Municipal Corporation, Rashtriya Ispat Nigam Limited vs. M/S Verma Transport Company, and Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., which collectively hold that filing any statement on the merits of a dispute without invoking arbitration indicates an intention to submit to the court's jurisdiction and constitutes a waiver of the right to arbitrate.

The Court rejected the Appellant's contention that the delay in filing the Section 8 application was excusable because the agreement was not in their possession.

Section 8 imposes a mandatory procedural requirement to invoke arbitration at the first instance of responding to the merits of the suit.

By filing a written statement that contested the substance of the Respondent's claims without mentioning the arbitration clause, the Appellant objectively demonstrated an intent to abandon the arbitration agreement and submit to the Civil Court’s jurisdiction.

The Court noted that even though the agreement was referenced in the written statement, the failure to raise the jurisdictional objection regarding arbitration meant that, in the eyes of the law, the party "waived off its right".

The completion of pleadings (including replication) and the progression of the case to the stage of framing issues further solidified this waiver.

The High Court upheld the District Judge’s order, holding that the Section 8 application was not maintainable after the first statement on the substance of the dispute had been filed. The appeal was dismissed, and the parties were directed to proceed with the trial as per the issues framed by the District Judge.