HDFC Bank’s Arbitration Bid Fails After Predecessor Filed Written Statement And Plaintiff Evidence Ended: Gujarat HC

The plaintiffs brought Special Civil Suit No. 781 of 2001 against Centurion Bank of Punjab, with whom they had an agreement containing an arbitration clause.

The predecessor bank appeared and filed a written statement without seeking reference to arbitration.

Following its merger with HDFC Bank, HDFC was substituted in the suit.

After the plaintiffs’ evidence had concluded and the suit had reached the stage of recording the defendant’s evidence, HDFC applied under Section 8 of the Arbitration and Conciliation Act, 1996.

The trial court rejected the application, and HDFC challenged that order under Article 227 of the Constitution.

Section 8 of the Arbitration and Conciliation Act, 1996, provides for referral to arbitration where the dispute is covered by an arbitration agreement; the court treated an application made after the original defendant had filed its written statement and the suit had substantially progressed as too late to be entertained.

A successor-in-interest steps into the position of its predecessor and cannot claim a better right than the predecessor had.

The court also applied the principle that citing an incorrect procedural provision does not, by itself, defeat the court’s power to grant relief otherwise available.

The original defendant knew of the arbitration clause but chose to contest the suit by filing a written statement rather than invoke Section 8.

By the time HDFC applied, the plaintiffs’ evidence was complete and the defendant’s evidence was due.

The court considered HDFC’s position to arise from the merger and substitution of the original defendant, not from a fresh independent right to seek arbitration.

As successor, HDFC could not revive a right its predecessor had not timely exercised.

The trial court therefore committed no egregious error warranting supervisory intervention.

It permitted HDFC to seek leave from the trial court to file an additional or amended written statement; the trial court must hear the plaintiffs and decide that request appropriately.

The suit was to proceed before the trial court, which was urged to decide it expeditiously.