Section 8 Arbitration application filed after expiry of written statement limitation period constitutes waiver of right.

The Respondents (plaintiffs) obtained a business loan of ₹20.40 lakhs from the Appellants (defendants) in April 2018 under an agreement containing an arbitration clause.

After a dispute arose regarding the foreclosure amount, the Respondents filed Title Suit No. 2334 of 2023 for declaration and injunction.

The Appellants appeared in the suit on April 10, 2024, but failed to file a written statement for 11 months.

On March 6, 2025, the Appellants filed an application under Sections 5 and 8 of the Arbitration and Conciliation Act, 1996, seeking a reference to arbitration.

The Trial Court dismissed the application and struck off the Appellants' defense, holding that the application was filed beyond the limitation period for filing a written statement.

1. Whether an application under Section 8 of the Arbitration and Conciliation Act, 1996, can be entertained after the expiry of the time prescribed for filing a written statement under Order VIII Rule 1 of the CPC.

2. Whether the Appellants’ failure to file a statement of defense within the statutory period constitutes a waiver of their right to seek reference to arbitration.

Section 8 of the Arbitration and Conciliation Act, 1996, which mandates that a party must apply for arbitration "not later than the date of submitting his first statement on the substance of the dispute".

Order VIII Rule 1 of the Code of Civil Procedure, 1908, which prescribes a 30-day window (extendable to 90 days) for filing a written statement.

Booz Allen and Hamilton INC v. SBI Home Finance Ltd., which establishes that while the "first statement" refers to the written statement, the right to arbitrate is waived if the party submits to the court's jurisdiction.

SSIPL Lifestyle Pvt. Ltd. v. Vama Apparels (India) Pvt. Ltd., which clarifies that the limitation for a Section 8 application is tied to the limitation for filing a written statement.

The Court reasoned that the phrase "not later than the date of submitting his first statement" in Section 8 of the Act implies a strict timeline linked to the procedural deadlines of the CPC.

In this case, the Appellants appeared on April 10, 2024, but waited 11 months to file the Section 8 application without ever filing a written statement.

The Court observed that despite being granted extensions by the Trial Court, the Appellants showed "laxity or gross negligence," which does not qualify for the exceptional circumstances required to extend the 90-day directory limit under Order VIII Rule 1.

Following precedents from the Delhi, Bombay, and Karnataka High Courts, the Court concluded that once the maximum outer limit for filing a written statement expires, the right to seek reference to arbitration is deemed waived.

The Court distinguished cases where delay was caused by court-related errors, noting that here the Appellants simply failed to act diligently.

The Court affirmed the Trial Court's order, ruling that the Appellants had waived their right to arbitration by failing to apply within 90 days of appearance and failing to provide sufficient cause for the 11-month delay. The appeal (FMA 1389 of 2025) was dismissed, and the striking off of the Appellants' defense was upheld.