Arbitration clause and instalment claim: statutory Section 8 requirements must be met, and an unsupported defence is not a triable issue.

A memorandum of understanding providing payment in instalments was construed to require the final instalment within 30 days of closure of the public issue, and the earlier confirmation requirement was held not to govern that claim. The defendants' plea that the plaintiffs had lost the right to recover the amount was treated as unsupported by contemporaneous material or any contractual term, and therefore not a bona fide triable defence. On arbitration, the text states that Section 8 requires a written application before the first statement, supported by the arbitration agreement or a certified copy, and that a civil court cannot refer the matter suo motu in the absence of such compliance. The dispute was therefore not referred to arbitration.

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Issues: (i) Whether the defendants had shown a substantial defence or triable issue so as to avoid payment of the third instalment claimed under the memorandum of understanding; (ii) Whether, because the agreement contained an arbitration clause, the Court was bound to refer the parties to arbitration of its own motion under the Arbitration and Conciliation Act, 1996.

Issue (i): Whether the defendants had shown a substantial defence or triable issue so as to avoid payment of the third instalment claimed under the memorandum of understanding.

Analysis: The agreement provided for payment in distinct instalments, and the last instalment was payable within 30 days of closure of the public issue. The confirmation requirement was confined to the earlier instalment and did not govern the amount claimed in the suit. The record also showed no material supporting the defendants' plea that the plaintiffs had lost the right to claim the amount because the defendants had themselves procured the subscription. In the absence of any contemporaneous correspondence or contractual term depriving the plaintiffs of the claim, the defence was treated as an afterthought and not a serious triable issue.

Conclusion: The defendants failed to establish a bona fide defence against the claim for the third instalment.

Issue (ii): Whether, because the agreement contained an arbitration clause, the Court was bound to refer the parties to arbitration of its own motion under the Arbitration and Conciliation Act, 1996.

Analysis: Section 8 requires a written application made before submission of the first statement, together with the arbitration agreement or certified copy, and contemplates reference to arbitration only when those statutory conditions are satisfied. Section 5 does not oust civil court jurisdiction in the absence of such compliance. As no application invoking the arbitration clause had been made, the Court held that it could not suo motu direct a reference to arbitration.

Conclusion: The request to send the dispute to arbitration was rejected.

Final Conclusion: Conditional leave to defend was granted on deposit of the amount ordered, and the suit was directed to continue subject to the stipulated conditions.

Ratio Decidendi: A reference to arbitration under Section 8 is mandatory only when the statutory application requirements are satisfied, and an arbitration clause by itself does not authorise the Court to refer the parties suo motu.

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