Withdrawn Civil Suit Does Not Bar Invocation Of Arbitration Clause: Delhi High Court

The Delhi High Court has recently held that the filing of an earlier civil suit does not bar a party from invoking an arbitration clause where the suit was subsequently withdrawn.

The court observed, “Mere fact that earlier a civil suit had been filed, would be no bar to invoke arbitration in terms of the Arbitration Clause, especially, when the said suit had been withdrawn.”

Justice Mini Pushkarna made the observation while appointing Justice (Retd.) Kurian Joseph, former judge of the Supreme Court, as the Presiding Arbitrator in disputes between VE Commercial Vehicles Ltd. (VECV) and its former dealer, Singh Enterprises.

VECV and Singh Enterprises had been in a dealership relationship since 2006 in relation to Eicher Pro Trucks/Buses, spare parts of commercial vehicles, and related services in Rewa, Madhya Pradesh.

After Singh Enterprises consistently fell short of its obligations, VECV expressed its intent to end the dealership on April 22, 2024. The formal split came on May 11, 2024, when VECV terminated the partnership and demanded a recovery of around Rs 1.42 Crores.

Singh Enterprises answered the notice on June 26, 2024. The dispute sat quiet for a little over a year until August 5, 2025, when VECV officially triggered the arbitration clause.

Singh Enterprises fired back on September 5, 2025. They rejected VECV's choice of arbitrator, invoked the arbitration clause on their own terms, and launched a massive counterclaim of roughly forty crore sixty-seven lakh rupees.

It also invoked the arbitration clause and raised a counterclaim of Rs. 40.66 crore. As the parties could not reach a consensus regarding the appointment of an arbitrator, VECV approached the High Court.

Among other objections, Singh Enterprises contended that VECV had suppressed the fact that it had earlier instituted two civil suits before courts in Indore and Rewa. It argued that by voluntarily submitting the disputes to civil courts, VECV had waived its right to invoke arbitration.

VECV, on the other hand, contended that the Indore suit had already been withdrawn with liberty to institute appropriate proceedings. It further contended that the suit filed at Rewa arose from a distinct cause of action.

Rejecting the objection, the Court held that the first suit filed before the civil court at Indore had been withdrawn with liberty to file a fresh suit. The Court held that the earlier institution of the suit did not prevent VECV from invoking arbitration.

The Court further held that the suit filed before the Rewa court arose from a different cause of action. It noted that the claims and reliefs sought in the arbitration proceedings arose from alleged non-compliances of the dealership agreement.

In contrast, the Rewa suit had been filed on account of alleged interference by Singh Enterprises in VECV's business activities after termination of the dealership agreement.

“The premise and cause of action for instituting the said civil suit is entirely distinct from the present dispute between the parties,” the Court held.

The court also found that the dealership agreement contained a valid arbitration clause providing for resolution of disputes by a panel of three arbitrators.

Since both parties had already nominated their respective arbitrators and the nominee arbitrators had been unable to appoint the third arbitrator, the Court appointed Justice (Retd.) Kurian Joseph as the Presiding Arbitrator.