Party Denying the Existence of an Agreement Cannot Seek Referral to Arbitration Under Section 8

The respondents (plaintiffs) filed a suit for eviction against the appellant (defendant) based on three agreements dated January 27, 2006, concerning tenancy, maintenance, and service

The appellant moved an application under Sections 8 and 5 of the Arbitration and Conciliation Act, 1996, seeking to refer the dispute to arbitration as per clauses contained in those agreements

A learned Single Judge dismissed the application on the grounds that the agreements had expired by efflux of time

During the proceedings, it was revealed that in a separate application under Chapter XIIIA of the Original Side Rules, the appellant had filed an affidavit-in-opposition asserting that the three subject agreements were "manufactured," insufficiently stamped, and unregistered

The respondents argued that a new month-by-month tenancy had been created by novation, rendering the original arbitration clauses unenforceable

1. Whether a party can invoke Section 8 of the Arbitration and Conciliation Act, 1996, while simultaneously contesting the validity and execution of the underlying agreements containing the arbitration clause

2. Whether the subject matter of the suit is covered by a valid and subsisting arbitration agreement

Section 8 of the Arbitration and Conciliation Act, 1996, which mandates that a judicial authority refer parties to arbitration only if a valid arbitration agreement exists covering the subject matter of the suit

Section 5 of the Act regarding limited judicial intervention

Zenith Drugs and Allied Agencies Private Limited v. Nicholas Piramal India Limited (2020) 17 SCC 419, which establishes that a Section 8 application is maintainable only if the subject matter of the suit is identical to the subject of the arbitration and has not been altered by novation

The Court found the appellant’s position contradictory and legally unsustainable.

While the appellant sought a reference to arbitration under Section 8 based on the 2006 agreements, they had elsewhere pleaded in an affidavit-in-opposition that these very documents were "manufactured"

The Court reasoned that for a Section 8 application to succeed, the applicant must establish the existence of a valid arbitration agreement

By denying the execution of the documents and labeling them as fabricated, the appellant effectively denied the existence of the arbitration agreement itself

The Court held that it would be improper to rely on agreements whose validity is contested by the very party seeking to enforce them

Furthermore, following the principle in Zenith Drugs, the Court noted that if the subject matter is altered (e.g., through a new monthly tenancy), the original arbitration clause ceases to apply

The Court held that a party cannot seek to invoke an arbitration clause while simultaneously denying the existence or execution of the contract in which that clause is contained

The application under Section 8 was deemed non-maintainable due to the appellant's own stand regarding the "manufactured" nature of the agreements

No order as to costs was made