Civil Court Has No Jurisdiction When Arbitration Clause Exists And Proceedings Are Already Pending: Andhra Pradesh High Court

“Once an arbitration clause is admitted and proceedings are pending, a civil suit is barred — bifurcation would only delay justice and create conflicting decisions,” rules AP High Court

In a significant reaffirmation of the primacy of arbitral jurisdiction under the Arbitration and Conciliation Act, 1996, the High Court of Andhra Pradesh categorically holding that once arbitral proceedings are pending in terms of an admitted arbitration clause in a partnership deed, the civil courts are bound under Section 8 of the Act to refer parties to arbitration, and cannot assume jurisdiction over the same dispute.

Justice Venuthurumalli Gopala Krishna Rao, sitting in Special Original Jurisdiction, dismissed Second Appeal and Cross Objections, affirming the order of the First Appellate Court which had directed the civil court to refer the matter to arbitration. The judgment reiterates that the existence and invocation of an arbitration clause ousts the jurisdiction of the civil court and any contrary course would defeat the very object of the Arbitration Act.

“Bifurcation of Jurisdiction Defeats Arbitration — Forum Shopping and Delay Must Be Prevented”

“Once the lis is referred under Section 8, there is nothing left to adjudicate in the suit,” observes Court

The Court began by noting that the partnership dispute at hand — relating to profit and loss share in the registered firm M/s. Ajantha Real Estates, Srikakulam — was already being adjudicated before an arbitral tribunal since 2007. Despite this, the plaintiff approached the civil court in 2011 seeking a permanent injunction to restrain the defendant from claiming any share in the partnership.

Rejecting this attempt, the Court emphasized:

“Once it is brought to the notice of the Court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statute, the civil court should first see whether there is ouster of jurisdiction in terms or compliance with the procedure under the special statute. The general law should yield to the special law — generalia specialibus non derogant.”

Justice Rao found that both the trial and appellate courts correctly applied Section 8 of the Arbitration and Conciliation Act. The First Appellate Court rightly modified the trial court’s order rejecting the plaint under Order VII Rule 11 CPC, and instead directed the civil court to refer the matter to arbitration, as mandated under Section 8.

“The Order under Section 8 of the Act has the effect of disposing the suit, and the remedies for contesting parties are governed by the Arbitration and Conciliation Act, 1996. The trial court could not have proceeded with further proceedings as there is no suit in effect,” the Court clarified.

Allegations of Fraud Do Not Oust Arbitral Jurisdiction When Arbitration Clause Exists

The plaintiff attempted to resist reference to arbitration by alleging fabrication and fraud. However, relying on the Supreme Court’s judgments in A. Ayyasamy v. A. Paramasivam and Ameet Lalchand Shah v. Rishabh Enterprises, the High Court held:

“Allegations of fraud simplicitor and such allegations merely alleged may not be necessary to nullify the effect of the arbitration agreement... Such issues can be determined by the Arbitral Tribunal.”

Further, Justice Rao added:

“The very object of Section 16 of the Arbitration Act confirms the power of the arbitral Tribunal to rule on its own jurisdiction. Therefore, the civil Court cannot have jurisdiction to go into that question.”

Non-filing of Original Arbitration Agreement Not Fatal When Existence and Pendency Are Admitted

The appellant also sought to raise technical objections regarding non-filing of the original arbitration agreement or certified copy, citing Section 8(2) of the Act. However, the Court dismissed this argument as inconsequential, noting that the plaintiff himself was the custodian of the original partnership deed and admitted the arbitration proceedings were pending since 2007.

“The plaintiff cannot take advantage of the non-production of the original deed when he is the Managing Partner and admitted that arbitral proceedings were already in progress,” held the Court.

“No Substantial Question of Law — High Court Cannot Interfere Under Section 100 CPC”

Justice Rao reaffirmed the limited scope of interference under Section 100 CPC, observing:

“The High Court cannot substitute its opinion for that of the First Appellate Court unless it is found that the conclusions drawn were contrary to mandatory provisions of law or based on inadmissible evidence.”

Citing Bhagwan Sharma v. Bani Ghosh and Kondira Dagadu Kadam v. Savitribai Sopan Gujar, the Court held that the concurrent findings of fact of the First Appellate Court did not warrant any interference and that no substantial question of law had been raised in the second appeal.

The three questions framed at admission — relating to the timing of the Section 8 application, the requirement of the original arbitration agreement, and the maintainability of civil proceedings in absence of the original partnership deed — were all answered against the appellant. The Court concluded that the First Appellate Court was justified in referring the matter to arbitration and the trial court had erred in rejecting the plaint outright under Order VII Rule 11.

Arbitration Clause Prevails — Civil Suit Dismissed

The High Court conclusively held that:

“There is an arbitration clause in the partnership deed and arbitral proceedings have been pending since 2007. The institution of the civil suit in 2011 was impermissible and amounts to forum shopping.”

Thus, both the Second Appeal and Cross Objections were dismissed. The judgment and decree of the First Appellate Court were affirmed. The Court did not impose costs, and all pending applications stood closed.

Date of Decision: 27.01.2026