Order 7

Order Details: COPY OF ORDER
Pdf Text: IN THE COURT OF SH. DEVENDER KUMAR JANGALA, DISTRICT
JUDGE (COMMERCIAL COURT) – 01, NORTH WEST DISTRICT,
ROHINI COURTS, DELHI
C.S. (Comm.) No. 636/2025
CNR: DLNW010096062025
M/s Absound Overseas v. M/s Ridhi Constructions
APPLICATION UNDER SECTION 8 OF THE ARBITRATION AND
CONCILIATION ACT, 1996 (IA/01/2026)
O R D E R
20.08.2026
1. 	By this order, I shall adjudicate upon the Application under Section 8 of
the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the
Act"), filed by the Defendant, M/s Ridhi Constructions, seeking reference of
the parties to arbitration and dismissal of the present suit, on the ground that
the disputes forming the subject matter of the suit are covered by an arbitration
clause contained in the Revised Work Order dated 16.11.2023.
2. 	The Plaintiff had instituted the present suit for recovery of Rs. 7,59,336/-
consisting of Rs.6,43,505.25 along with 12% pre suit interest w.e.f. 01.03.2024
till the date of filing of the present suit amounting to Rs.1,15,831/- and
pendente lite and future interests @ 12% per annum till realisation.
3. 	Summons were issued vide order dated 13.09.2025. The Defendant was
duly served on 13.01.2026. On 11.03.2026, the defendant filed the Written
Statement along with an application under Order VIII Rule 1 read with Section
151 CPC seeking condonation of delay and filed the present application under
Section 8 of the Act.
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4. 	In the present application, it is stated by the Defendant that the Revised
Work Order dated 16.11.2023, issued in favour of the Plaintiff for the work of
Audio Visual & Stage Lights for the STPI project, contains, at Clause 7
thereof, which is an arbitration clause which reads: "In the event of any dispute
between the parties, the matter shall be referred to the arbitrator appointed by
the Company." That under the said Revised Work Order, payments to the
Plaintiff were to be released only after inspection and satisfaction of the
contractor, i.e. CPWD, and the entire project was to be completed by the
Plaintiff within a stipulated period of three months. That the Plaintiff rendered
services pursuant to the said Revised Work Order and is thus bound by its
terms, including Clause 7. That the amount claimed by the Plaintiff as
outstanding is, on the Plaintiff's own pleadings, referable to the said Revised
Work Order. That no amount is in fact outstanding. That the Plaintiff has filed
the present suit with malafide intention, and the Defendant objects to each and
every contention raised therein. That since there exists an arbitration clause
governing the subject matter of the dispute, the proceedings must be initiated in
accordance with the Act. That in view of the existing arbitration clause, this
Court does not have jurisdiction to entertain the suit and is obligated under
Section 8 of the Act to refer the parties to arbitration. That the present
application has been moved without delay and at the first instance, before filing
of the Written Statement, and is made bona fide and in the interest of justice.
5. 	The Plaintiff has opposed the present application by filing a detailed
reply. It is stated by the Plaintiff in the reply that the application is not
maintainable as it is not accompanied by the original arbitration agreement or a
duly certified copy thereof, as mandated under Section 8(2) of the Act. That the
alleged arbitration clause does not constitute a valid arbitration agreement
within the meaning of Section 7 of the Act, inasmuch as the Revised Work
Order dated 16.11.2023 has not been counter-signed by the Plaintiff or any
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authorised representative. That the said clause is, in any event, invalid and
illegal, inasmuch as it seeks to confer the entire authority for appointment of
the arbitrator upon the Defendant, and further contemplates that in the event of
any dispute, the decision of the Defendant shall be final; such a unilateral and
arbitrary clause is ex-facie illegal and unenforceable in view of settled law.
That the Defendant has already filed a detailed Written Statement dealing with
the merits of the case, raising factual disputes and furnishing para-wise replies,
and has thereby submitted to the jurisdiction of this Court, rendering the
present application barred under Section 8(1) itself. That the business
relationship between the parties in fact commenced under the Purchase Order
dated 26.05.2023, and the Tax Invoices issued upon, pertains to material
supplied and job work executed under the said Purchase Order, which contains
no arbitration clause; the arbitration clause contained in the subsequent Revised
Work Order dated 16.11.2023 accordingly has no bearing on the present
dispute. That the present suit is founded on the said Tax Invoices and a running
ledger account maintained in the books of the Plaintiff, to which the alleged
arbitration clause again has no bearing. That the alleged arbitration clause was
never agreed upon by the Plaintiff and does not bear its signature, and the
Defendant never pleaded or invoked the said clause in its reply dated
28.05.2025, which shows that the Defendant had no intention, at the relevant
time, of referring the dispute to arbitration. That the present application is
accordingly nothing but an afterthought, filed with a view to delay the
proceedings of the suit, and is liable to be dismissed with exemplary costs.
6. 	Arguments on the present application advanced by Sh. Puneet Kumar,
Ld. Counsel for the Plaintiff, and Sh. Ashish Upadhyay, Ld. Counsel for the
Defendant, already heard. Record perused.
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7. 	Before proceeding to examine the present case, it is necessary to set out
the relevant statutory framework of the Act. The twin provisions that govern
the present application are Section 7, which defines an ‘arbitration agreement’
and lays down the foundational requirements for its validity, and Section 8,
which confers upon a judicial authority the power and the obligation, subject to
satisfaction of conditions to refer parties to arbitration. Section 7 of the Act,
1996 reads as under:
“7. Arbitration agreement.—
(1) In this Part, “arbitration agreement” means an agreement by the parties to submit
to arbitration all or certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a
contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication
[including communication through electronic means] which provide a record of the
agreement; or
(c) an exchange of statements of claim and defence in which the existence of the
agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause
constitutes an arbitration agreement if the contract is in writing and the
reference is such as to make that arbitration clause part of the contract.”
8. 	A reading of Section 7 makes it manifest that an arbitration agreement is
not a creature of form alone. There should be consensus ad-idem between the
parties. Sub-section (1) defines the subject-matter of an arbitration agreement
as the submission of disputes whether present or future in respect of a defined
legal relationship. Sub-section (2) recognises two types of agreement, as a
clause within a contract, or as a separate agreement. However, sub-section (3)
mandates that any arbitration agreement, regardless of its mode, must be in
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writing. It is a requirement going to the very existence of the agreement. Sub-
section (4) expands the concept of ‘writing’ to include not merely a document
signed by both parties but also exchanges of letters, telegrams, telex, electronic
communication or statements of claim and defence. It shows that there must be
meeting of minds between the parties to a dispute and their consensus to refer
the matter to arbitration. The written record is the means of evidencing that
consensus. it cannot itself substitute for the absence of any consensus. Sub-
section (5) further provides that where a contract refers to a document
containing an arbitration clause, such reference constitutes an arbitration
agreement, but only if the contract is itself in writing and the reference is such
as to make the arbitration clause part of the contract.
9. 	Coming back to the facts of the present case, the question, therefore, is
whether Clause 7 of the Revised Work Order dated 16.11.2023 is capable, in
law, of constituting a valid arbitration agreement at all. Clause 7 reads as
under:
“7. The decision of the company shall be final in case of any dispute arising out
of the project or work and the area of jurisdiction for any dispute confined to
Delhi only in the event of any dispute between the parties, the matter shall
refer to the arbitrator to be appointed by the Company.”
10. Upon bare perusal of the clause as provided in the Revised work order
dated 16.11.2023, the clause provides that in case of any dispute between the
parties, the matter shall be referred to arbitration, and in such case, the
arbitrator shall be appointed by the company. If read as a whole, the clause
does not merely confer upon the Defendant, the power to select a person to
adjudicate the dispute; it contemplates that the Defendant's own decision on the
dispute is to be treated as final. A clause of this character does not create
arbitration in any meaningful sense, it converts the Defendant, who is a party
interested in the outcome, into the judge of its own cause. This offends the
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most basic postulate of law, captured in the maxim nemo judex in causa sua,
and cannot be regarded as an arbitration agreement within the meaning of
Section 7, which presupposes reference of the dispute to a third party for
independent determination.
11. It is well settled that a party who has an interest in the outcome of the
dispute cannot be permitted to unilaterally appoint the sole arbitrator, since
such power strikes at the root of the impartiality that Section 12(5) read with
the Seventh Schedule of the Act is designed to protect. This position, first
articulated in TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC
377, and reaffirmed in Perkins Eastman Architects DPC v. HSCC (India)
Ltd., (2020) 20 SCC 760, has been most recently and authoritatively restated
by the Hon'ble Supreme Court of India in Bhadra International (India) Pvt.
Ltd. & Ors. v. Airports Authority of India, 2026 SCC OnLine SC 7, decided
on 05.01.2026. The Hon’ble Apex Court while summarising the law relating to
appointment of an arbitrator in paragraph 123 of the judgment, held as follows:
“VIII. CONCLUSION
123. A conspectus of the aforesaid detailed discussion on the position of law as
regards Section 12 of the Act, 1996, is as follows:—
i. The principle of equal treatment of parties provided in Section 18 of the Act,
1996, applies not only to the arbitral proceedings but also to the procedure for
appointment of arbitrators. Equal treatment of the parties entails that the
parties must have an equal say in the constitution of the arbitral tribunal.
ii. Sub-section (5) of Section 12 provides that any person whose relationship with
the parties or counsel, or the dispute, whether direct or indirect, falls within
any of the categories specified in the Seventh Schedule would be ineligible to be
appointed as an arbitrator. Since, the ineligibility stems from the operation of law,
not only is a person having an interest in the dispute or its outcome ineligible to act
as an arbitrator, but appointment by such a person would be ex facie invalid.
iii. The words “an express agreement in writing” in the proviso to Section 12(5)
means that the right to object to the appointment of an ineligible arbitrator
cannot be taken away by mere implication. The agreement referred to in
the proviso must be a clear, unequivocal written agreement.
iv. When an arbitrator is found to be ineligible by virtue of Section 12(5) read with
the Seventh Schedule, his mandate is automatically terminated. In such
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circumstance, an aggrieved party may approach the court under Section 14 read with
Section 15 for appointment of a substitute arbitrator. Whereas, when an award has
been passed by such an arbitrator, an aggrieved party may approach the court under
Section 34 for setting aside the award.
v. In arbitration, the parties vest jurisdiction in the tribunal by exercising their
consent in furtherance of a valid arbitration agreement. An arbitrator who lacks
jurisdiction cannot make an award on the merits. Hence, an objection to the
inherent lack of jurisdiction can be taken at any stage of the proceedings.”
12. Applying these principles, Clause 7 of the Revised Work Order dated
16.11.2023, which vests the exclusive power of appointment of the arbitrator in
the Defendant, denies the Plaintiff any say whatsoever in the constitution of the
arbitral tribunal, and thereby offends the principle of equal treatment
recognised in Bhadra International as flowing from Section 18 of the Act.
Such an appointment, if made, would be ex facie invalid by operation of law,
and no conduct of the Plaintiff, including performance of the underlying work
order can be read as an implied waiver of this objection, since a waiver under
the proviso to Section 12(5) must be an express, unequivocal agreement in
writing entered into after disputes have arisen, which is neither pleaded nor
shown to exist here. The unilateral character of Clause 7 is not, therefore, a
mere irregularity capable of correction after the event; it is a defect that goes to
the very jurisdiction of any tribunal that might be constituted under it, and one
that a Court can and must take note of even at the referral stage under Section 8
of the Act.
13. Additionally, and independently, the application is not accompanied by
the original arbitration agreement or a duly certified copy thereof as mandated
under Section 8(2) of the Act. The Revised Work Order dated 16.11.2023
annexed to the application is admittedly only a photocopy, and is neither the
original nor a copy duly certified in accordance with law. Nor has the
Defendant availed of the proviso to Section 8(2) by filing a petition praying
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that the Plaintiff be called upon to produce the original or a certified copy, on
the ground that the same is in the Plaintiff's possession. This requirement is not
a mere technicality but goes to the very maintainability of the application; in
the absence of compliance therewith, the application is liable to be dismissed
on this ground alone, independent of and in addition to the infirmity in Clause
7 discussed above.
14. It is pertinent to mention here that Clause 7 as present in the revised
work order is not counter-signed by the Plaintiff or any authorised
representative, a fact unrebutted by the Defendant. An arbitration agreement
being distinct and severable from the main contract under Section 7 an assent
to this specific dispute-resolution clause has not been given by the Plaintiff.
The absence of counter-signature is thus not a formal omission but reflects the
absence of consensus ad idem itself, reinforcing that no binding arbitration
agreement was formed.
15. On a conspectus of the above, this Court finds, on a prima facie
examination as contemplated under Section 8(1) of the Act, that no valid
arbitration agreement exists between the parties. Clause 7 of the Revised Work
Order dated 16.11.2023 is unenforceable, firstly, for want of a genuine
consensus ad idem between the parties, the said Work Order having admittedly
not been counter-signed by the Plaintiff or any authorised representative
thereof. Secondly, and independently, for vesting an unfettered and unilateral
power of appointment in the Defendant contrary to the principle of equal
treatment under Section 18 of the Act and the law declared in Bhadra
International. The application is, in addition, not maintainable for non-
compliance with the mandatory requirement of Section 8(2) of the Act. The
precondition for invoking Section 8 is accordingly not satisfied on any of these
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independent grounds. The present application, is therefore liable to be
dismissed.
16. In view of the foregoing, the application filed by the Defendant
under Section 8 of the Arbitration and Conciliation Act, 1996 (IA/01/2026)
is hereby dismissed.
Announced in the open Court today
on this 20th day of August, 2026
(DEVENDER KUMAR JANGALA)
District Judge (Commercial Court) – 01
North West / Rohini / Delhi
20.08.2026
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