Once Right To File Written Statement Is Closed, Application U/S 8 Of Arbitration Act Can't Be Entertained: Delhi High Court

Brief Facts:

This Regular First Appeal under Section 13 of the Commercial Courts Act, 2015 challenges the judgment dated 25.11.2024 passed by the District Judge, Commercial Court-06, South-East District, Saket Courts, New Delhi.

The Respondent (plaintiff before the learned District Judge), is a company engaged in the business of providing telecom-based value-added services, including services relating to bill payments, recharges, and ticketing. The Appellant, (defendant before the learned District Judge), being the owner of a movie theatre, namely Sharada Talkies, approached the Respondent for the purpose of marketing, promotion, listing, and booking of movie tickets of his cinema through the Respondent's platform.

An Addendum dated 04.01.2017 was executed, under which the Respondent advanced ₹5,00,000 as an interest-free, refundable security deposit.

The Appellant's theatre ceased operations in April 2022. The Respondent terminated both agreements via notice dated 13.12.2022 and demanded refund of the security deposit. Upon the Appellant's failure to pay, a recovery suit was filed.

Despite service of summons, the Appellant did not file a written statement in time, leading to closure of that right on 13.10.2023. Evidence was led by the Respondent, but the Appellant did not cross-examine the witness. An application under Order VII Rule 11 of the Civil Procedure Code, 1908 (CPC), raising objections including existence of an arbitration clause, was dismissed on 08.10.2024. The suit was decreed on 25.11.2024 in the Respondent's favour. The Appellant now challenges this judgment through the present Regular First Appeal.

Contentions:

The Appellant submitted that the Respondent was afforded two opportunities by the learned District Judge, on 12.12.2023 and again on 22.01.2024, to place on record the documentary proof of the alleged payment of Rs.5,00,000/-, however, the Respondent failed to do so on both occasions. Yet, without considering the said serious lapse on part of the Respondent, the Suit was decreed by the learned District Judge.

It was further submitted that since the entire Suit revolved around the recovery of Rs.5,00,000/, it should have been proved that such payment was received by the Appellant. The Respondent has merely relied upon a statement of account filed along with the Suit, which in no way substantiates the claim that the amount was paid to the Appellant.

It was also submitted that the learned District Judge has erred in disposing of the application under Order VII Rule 11 of the CPC without appreciating that there was an arbitration agreement between the parties in the Ticketing Agreement, therefore, the parties should have been referred to arbitration in accordance with Section 8 of the Arbitration and Conciliation Act, 1996.

Observations:

The court noted that the Respondent supported its claim through PW-1's affidavit and documentary evidence, including the Ticketing Agreement , Addendum Agreement and statement of accounts, and the termination notice. The Appellant did not cross-examine PW-1 on 12.12.2023, thus failing to contest either the testimony or the documents. This unchallenged evidence is deemed proved, indicating the absence of any credible defence by the Appellant.

It further observed that the Appellant claims he did not receive the ₹5,00,000, alleging it was credited to the account of Mysore Talkies, owned by Shri Manjunath Gowda. However, he does not dispute signing the Ticketing and Addendum Agreements or receiving the amount. The burden to prove this defence lay on him, which he failed to discharge.

The court further noted that as the Appellant failed to file the written statement within the prescribed time, the objection regarding the arbitration clause became untenable. The application under section 8 of the Arbitration Act was filed only after the Respondent's evidence had concluded. Citing Hitachi Payments Services (P) Ltd. v. Shreyans Jain, 2025, it held that such an application is not maintainable once the right to file a written statement is closed.

It further observed that in Madhu Sudan, objections under section 8 of the Arbitration Act were raised before filing the written statement, making it inapplicable to the present case. Similarly, in R.K. Roja, while the Supreme Court observed that an Order VII Rule 11 CPC application must be decided at the threshold, it also cautioned against using such applications to recover a lost chance to file a written statement. Here, the Appellant's application was precisely such a belated attempt.

The court concluded that “upon reviewing the plaint, the evidence presented, and the Appellant's lack of participation, it is evident that the Respondent has proved its case. The Appellant's failure to contest the evidence led by the Respondent and present a valid defence, leads to the conclusion that the Respondent's claims are substantiated.”

Accordingly, the present appeal was dismissed.

Case Title: R. SANTOSH versus ONE97 COMMUNICATIONS LTD

Citation: 2025 LiveLaw (Del) 688

Case Number: RFA(COMM) 130/2025

Judgment Date: 12/06/2025

For Appellant: Ms. R. Gayathri Manasa, Adv.

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