Introduction:

In the recent decision of the Delhi High Court delivered on 12th June 2025, in RFA(COMM) 130/2025, a Division Bench comprising Justices Shalinder Kaur and Navin Chawla upheld a commercial court’s decree against R. Santosh, owner of the now-defunct Sharada Talkies, in favor of One97 Communications Ltd., a fintech and telecom service provider. The crux of the legal dispute was a recovery suit filed by the Respondent for the return of ₹5,00,000 advanced as an interest-free, refundable security deposit under a marketing and ticketing agreement. The appeal arose from the appellant’s failure to file a written statement within time, subsequent rejection of his objections under Order VII Rule 11 CPC, and his belated invocation of an arbitration clause under Section 8 of the Arbitration and Conciliation Act, 1996, which the High Court deemed not maintainable once the written statement right had been forfeited. The court emphasized the procedural timeline under the Commercial Courts Act, 2015, holding that applications invoking arbitration cannot be entertained after crucial procedural lapses, and particularly not after the respondent has led uncontroverted evidence.

Arguments by the Appellant:

The appellant, R. Santosh, primarily contended that the Commercial Court’s decree, dated 25.11.2024, was flawed due to lack of substantive documentary evidence proving that the ₹5,00,000 was ever paid to him. Despite two opportunities granted on 12.12.2023 and 22.01.2024, the Respondent failed to furnish bank statements or a money transfer acknowledgment conclusively proving payment. He argued that the decree rested solely on a self-prepared statement of account and the untested testimony of the Respondent’s sole witness (PW-1), whom he did not cross-examine due to procedural developments. Importantly, the appellant insisted that the existence of an arbitration clause in the Ticketing Agreement mandated that the dispute be referred to arbitration. He criticized the trial court for dismissing his Order VII Rule 11 CPC application and for failing to consider Section 8 of the Arbitration Act in proper legal perspective. Furthermore, he argued that the parties’ contractual relationship and the legal dispute arising therefrom fell squarely within the purview of the arbitration clause, making a civil suit non-maintainable and warranting reference to an arbitral tribunal under Section 8, despite delays.

Arguments by the Respondent:

In response, One97 Communications Ltd. (plaintiff before the trial court) submitted that the suit for recovery was rightly decreed in their favor because the claim was substantiated by sufficient contractual and documentary evidence. The plaintiff relied on the Addendum Agreement dated 04.01.2017, the Ticketing Agreement, the statement of accounts, and the termination notice issued on 13.12.2022, all filed along with the plaint. The plaintiff’s witness, examined as PW-1, filed an affidavit detailing the transaction and verifying the deposit. As the appellant failed to file a written statement and did not cross-examine PW-1, the Respondent argued that the evidence stood unchallenged and had to be accepted as true in law. Moreover, the Respondent emphasized that the invocation of arbitration was an afterthought, made only after the closure of the written statement stage and post-evidence. This belated application, they argued, was clearly barred by the statutory timelines provided under the Arbitration and Conciliation Act, 1996 and the Commercial Courts Act, 2015, as confirmed by judicial precedents like Hitachi Payments Services (P) Ltd. v. Shreyans Jain. Hence, they urged the court to treat the appeal as a frivolous delay tactic, seeking to overturn a properly decreed and procedurally sound judgment.

Court’s Observations and Judgment:

The Delhi High Court, after closely examining the procedural and substantive contentions, concluded that the appellant had no valid defence left to oppose the decree passed by the trial court. First, the court found that the appellant’s failure to file a written statement within the prescribed time limit under Order VIII Rule 1 CPC and the Commercial Courts Act, 2015, meant that he had forfeited his right to contest the suit’s factual allegations. Once that right was lost, the appellant could no longer seek a reference to arbitration under Section 8 of the Arbitration and Conciliation Act. The court relied heavily on the Supreme Court’s ruling in Hitachi Payments Services (P) Ltd. v. Shreyans Jain (2025), which categorically held that an application under Section 8 must be made before the first statement on the substance of the dispute is submitted, and definitely before the right to file the written statement is closed. Here, the Section 8 application came not only after the limitation period but also after the plaintiff had led its evidence unopposed.

The court further analyzed the relevance of the arbitration clause and held that the appellant could not claim the benefit of arbitration at such a belated stage. Unlike in Madhu Sudan, where objections under Section 8 were raised before the filing of the written statement, in this case, the objection was raised much later, thus rendering the provision inapplicable. The court also referenced the case of R.K. Roja, noting that while the Supreme Court had indeed cautioned courts to decide Order VII Rule 11 CPC applications at the threshold, it had also warned against using such applications to circumvent consequences of procedural default, such as forfeiture of the right to defend. The appellant’s plea, according to the bench, was a textbook example of seeking to “recover a lost chance” under the guise of procedural objections.

Importantly, the court noted that the evidence led by the Respondent remained unchallenged and unrebutted, which meant that the burden of proof shifted to the appellant, particularly after he claimed that the ₹5,00,000 security deposit was never paid to him. The court found this claim to be contradictory and legally untenable because the appellant did not dispute the execution of the agreements under which the payment was allegedly made. Additionally, while the appellant claimed the payment was made to someone else (Mysore Talkies), he failed to substantiate this claim with any evidence. In such a situation, the trial court was right in concluding that the Plaintiff had proved its case on the basis of credible, uncontroverted evidence.

Thus, the Division Bench held that the appeal lacked merit both on facts and in law. The appellant’s conduct—failure to file a written statement, abstaining from cross-examination, and only later invoking arbitration—demonstrated clear procedural negligence and did not warrant any indulgence from the court. In light of these findings, the High Court dismissed the appeal, upholding the trial court’s decree directing refund of ₹5,00,000 to the Respondent.