Once Referred To Arbitration Suit Cannot Remain Pending Before Civil Court: Calcutta High Court

The Calcutta High Court on 31 August held that once a civil court refers parties to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, the suit does not remain pending before the civil court.

A Division Bench of Justices Sabyasachi Bhattacharyya and Sandip Kumar De allowed an appeal by Badri Narayan Bhatter and another, restored a partition suit and directed the Trial Court to appoint a Receiver for the disputed Kolkata property. The judges held:

“...Section 8 of the Arbitration Act does not allow for continuance of a suit or retention of the same by the court after an order is passed by the court in the suit under Section 8 of the said Act to refer the parties to arbitration. Sub-section (1) of Section 8 of the Arbitration Act clearly provides that upon an application under Section 8 being made, the judicial authority before which such action is brought “shall refer the parties to arbitration”, thus not leaving anything of the suit to be retained before the said Court..."

The dispute arose from an earlier partition suit involving the predecessors-in-interest of Badri Narayan Bhatter and Hari Narayan Bhatter. Hari Narayan Bhatter's mother was also a party to the suit.

On 25 September 2000, the disputes in the suit were referred to arbitration under Section 8, with two family members appointed as arbitrators. The parties consented to an extension of time for completing the arbitration on 22 December 2000. Hari Narayan Bhatter later relied on a purported arbitral award dated 9 February 2002, claiming that the property dispute had already been decided.

However, in an order dated 22 July 2002, a Single Judge of the Calcutta High Court recorded that the award could be made and published if an extension was granted. The Division Bench found nothing on record to show that the award was ever published thereafter. Badri Narayan Bhatter subsequently filed a fresh partition suit before the City Civil Court at Calcutta, claiming independent co-ownership rights.

Hari Narayan Bhatter sought rejection of the plaint under Order VII Rule 11 read with Section 151 of the Code of Civil Procedure, contending that the earlier arbitral award barred the suit and that the property had been undervalued. Badri Narayan Bhatter separately sought appointment of a Receiver under Order XL Rule 1 read with Section 151 of the Code of Civil Procedure.

On 10 March 2025, the Trial Court refused to reject the plaint but directed its return for presentation before the appropriate forum on the ground of undervaluation. It also dismissed the application for appointment of a Receiver. Badri Narayan Bhatter then appealed to the Calcutta High Court.

Hari Narayan Bhatter and the other defendant argued that the earlier partition suit had been dismissed for default and therefore barred the fresh suit.

Rejecting the contention, the High Court held that after the earlier suit was referred to arbitration, nothing remained before the civil court. Its subsequent dismissal for default was therefore only a procedural recording and could not bar the fresh partition suit. It also held that the cause of action for partition is continuing in nature.

The Bench further held that the purported 9 February 2002 award could not bind Badri Narayan Bhatter merely because his mother had participated in the earlier arbitration. The appellants claimed co-ownership independently and not through their mother. It held:

“Even if their mother was, the award could at best have bound the mother and not the present appellants, who do not claim through any of the parties to the arbitral proceeding.”

It also found that the purported award had never been published, was unstamped and was unreasoned, and therefore could not operate as res judicata.

Accordingly, the High Court set aside the 10 March 2025 order, restored the partition suit and directed the Trial Court to appoint a Receiver to collect rents, maintain the property and keep accounts.

Appearances for appellants (Badri Narayan Bhatter and Another): Advocates Siddhartha Banerjee, R. Karmakar, Soumyajit Majumder and Abhisek Baran Das.

Appearances for respondents (Hari Narayan Bhatter and Another): Advocates Rachit Lakhmani, Shubham Gupta and Rajsekhar Bal Bakshi for respondent no. 1; Narayan Prasad Agarwala, Nipa Mallick and Nandini Mazumdar for respondent no. 2.