IN THE GAUHATI HIGH COURT (THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) PRINCIPAL SEAT AT GUWAHATI (CIVIL REVISIONAL JURISDICTION) CRP No. 380 of 2014 M/S Shriram Transport Finance Company Ltd. and 3 others. Petitioners -Versus- Smti. Ruma Saha Opposite party. BEFORE HON BLE MR. JUSTICE N. CHAUDHURY For the petitioner s : Mr. A. Dhar, Advocate. For the Opp. party : Mr. P. Sen, Advocate. Date of hearing : 27.04.2016. Date of Judgment : 27.04.2016. JUDGMENT & ORDER (Oral) 1. In this application under Article 227 of the Constitution of India the petitioners have challenged the order dated 14.07.2014 passed by learned Civil Judge, Bongaigaon in Title Suit No.42/2011 rejecting the Page 1 of 9
application filed under Section 8(1) of the Arbitration and Conciliation Act, 1996. 2. The respondent herein as plaintiff instituted Title Suit No.42/2011 in the court of learned Civil Judge, Bongaigaon praying for declaration of final notice of demand dated 19.05.2011 issued by the defendants as illegal, void, inoperative etc. and for consequent permanent injunction. The defendants appeared and before presenting the defence filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (herein after, for short, the Act ) stating that there is an arbitration agreement between the parties within the meaning of Section 7 of the Act and the dispute brought to the civil court comes within the arbitration clause. Producing a copy of the agreement the defendants therefore, prayed that the dispute should be referred to arbitration under the existing arbitration clause. The arbitration clause referred to in the aforesaid application are as follows :- All disputes, differences and/or claims arising out of these presents or as to the construction, meaning or effect hereof or as to the rights and liabilities of the parties hereunder shall be settled by Arbitration to be held in Guwahati in accordance with the Provisions of the ARBITRATION AND CONCILIATION ACT, 1996, or any statutory amendments thereof or any statute enacted for replacement thereof and shall be referred to the Sole Arbitration of a person to be nominated/appointed by Page 2 of 9
Sriram. The award including the interim award/s of the Arbitrator shall be final and binding on all parties concerned. The Arbitrator may lay down from time to time the procedure to be followed by him in conducting arbitration proceeding and shall conduct arbitration proceedings in such manner as he considers appropriate. Any proceedings to be initiated in any court of law in pursuance of this arbitration shall be instituted and held in the court at Guwahati only. 3. The plaintiff submitted objection against this application wherein the plaintiff did not dispute existence of arbitration clause or arbitrability of the dispute. It is the case of the plaintiff that she has already made full payment of the debt as per the repayment schedule to the defendant company on 14.03.2011 and so no further final notice ought to have been issued by the defendants claiming arrear amount. A perusal of the accounts would go to show that the plaintiff had already made payment in full as per the schedule. The plaintiff, however, has not raised any objection that the defendants played fraud against the plaintiff or that any malpractice has been committed in the accounts book. The plaintiff has also failed to point out as to how an arbitrator cannot decide the dispute pending before the learned civil court. But even thereafter the learned court after hearing the parties and considering the arbitration clause as well as the pleadings of the parties rejected the application holding that plaintiff is justified in filing the suit against the defendant company Page 3 of 9
seeking relief as the notice issued to the plaintiff by the defendants is illegal, void and invalid. Virtually the merit of the suit has been decided at the time of rejecting the application under Section 8 of the Act. This order dated 14.07.2014 has been called in question in the present revision petition. 4. I have heard Mr. A. Dhar, learned counsel for the petitioners and Mr. P. Sen, learned counsel for the opposite party. I have perused the documents annexed to the petition and the judgments relied upon by the learned counsel for the parties. 5. In the case of Hindustan Petroleum Corpn. Ltd. vs. Pinkcity Midway Petroleums, reported in (2003) 6 SCC 503, the Hon ble Supreme Court has held that once an application is filed under Section 8 of the Act pointing out that there is arbitration clause, in that event, in view of the mandatory language of section 8 of the Act the court is required to refer the dispute to arbitration. Paragraph 14 of the judgment is instructive in this regard and it is accordingly quoted herein below :- 14. This Court in the case of P. Anand Gajapathi Raju and Ors. v. P. V. G. Raju (Dead) and Ors. [ (2000)4 SCC 539] has held that the language of Section 8 is peremptory in nature. Therefore, in cases where there is an arbitration clause in the agreement, it is obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to Page 4 of 9
an arbitrator. Therefore, it is clear that if, as contended by a party in an agreement between the parties before the Civil Court, there is a clause for arbitration, it is mandatory for the Civil Court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the agreement is accepted by both the parties as also by the courts below but the applicability thereof is disputed by the respondent and the said dispute is accepted by the courts below. Be that as it may, at the cost of repetition, we may again state that the existence of the arbitration clause is admitted. If that be so, in view of the mandatory language of Section 8 of the Act, the courts below ought to have referred the dispute to arbitration. 6. In the subsequent case of Sundaram Finance Limited and another vs. T. Thankam, reported in AIR 2015 SC 1303 [= 2015 STPL(Web) 136 SC], the Hon ble Supreme Court held that once application is filed under Section 8 the approach of the court should not be to see whether civil court has jurisdiction to try the suit but to see whether the jurisdiction of the civil court stands ousted thereby because there is a lot of difference between the two approaches. Once it is brought to the notice of the court that its jurisdiction has been taken away in terms of procedure prescribed by the special law, in that event, the special law should be allowed to operate in view of the established maxim generalia specialibus non derogant. The aforesaid observation has been made in paragraph 15 of the judgment and the same is also quoted below for ready reference :- Page 5 of 9
15. Once an application in due compliance of Section 8 of the Arbitration Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction. It should be to see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. 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 of the procedure under the special statute. The general law should yield to the special lawgeneralia special bus non derogant. In such a situation, the approach shall not be to see whether there is still jurisdiction in the civil court under the general law. Such approaches would only delay the resolution of disputes and complicate the redressal of grievance and of course unnecessarily increase the pendency in the court. 7. It appears that although it is an established position of law that once an application is filed under Section 8 of the Act and there is no dispute as to arbitrability of the dispute or arbitration of the arbitral clause, in that event, it is the duty of the court to refer it to arbitrator, yet, a different stand was taken in some cases where allegation as to fraud or malpractice has been made out. This is because in case complicated questions of law arises and/or allegation of fraud or malpractice is alleged, in that event, an arbitrator may not be competent to decide those questions and under such circumstances in a given case the civil court may reject an application under Section 8 of the Act. Such an occasion arose before the Hon ble Supreme Court in the case of N. Radhakrishnan vs. Maestro Engineers and Page 6 of 9
others, reported in (2010) 1 SCC 72. In paragraph 26 of that judgment the Hon ble Supreme Court has noticed that respondents had alleged commission of malpractice in the accounts book and manipulation in the finance of the partnership firm. Under such allegations the Hon ble Supreme Court did not feel that it was a fit case for referring to arbitration. 8. In the case of Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak reported in AIR 1962 SC 406 the Hon ble Supreme Court observed that when there is serious allegation of fraud against a party and the party who is charged with such fraud desires that the matter should be tried in open court, in that event, it would be a sufficient cause for the court not to order an arbitration agreement to be filed and not to make the reference. The aforesaid observation made in paragraph 17 of Abdul Kadir Shamsuddin Bubere (supra) though passed prior to enactment of the 1996 Act, yet, was considered by the Hon ble Supreme Court in the case of N. Radhakrishnan (supra) and paragraph 17 was quoted therein. Paragraph 23 of the judgment in N. Radhakrishnan (supra), therefore, is equally necessary for the purpose of guidance. Accordingly, paragraph 23 of the judgment in N. Radhakrishnan (supra) is quoted below :- 23. The learned counsel appearing on behalf of the respondents on the other hand contended that the appellant Page 7 of 9
had made serious allegations against the respondent alleging that they had manipulated the accounts and defrauded the appellant by cheating the appellant of his dues, thereby warning the respondents with serious criminal action against them for the alleged commission of criminal offences. In this connection, reliance was placed in a decision of this Court in the case of Abdul Kadir Shamsuddin Bubere vs. Madhav Prabhakar Oak and Another,[ AIR 1962 SC 406] in which this court under para 17 held as under: "17. There is no doubt that where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open court, that would be a sufficient cause for the court not to order an arbitration agreement to be filed and not to make the reference..." In our view and relying on the aforesaid observations of this Court in the aforesaid decision and going by the ratio of the above mentioned case, the facts of the present case does not warrant the matter to be tried and decided by the Arbitrator, rather for the furtherance of justice, it should be tried in a court of law which would be more competent and have the means to decide such a complicated matter involving various questions and issues raised in the present dispute. 9. As has been discussed above, the plaintiff in the present case has not made any endeavour to bring the present case within the ambit of N. Radhakrishnan (supra) and Abdul Kadir Shamsuddin Bubere (supra). It is not the case of the plaintiff that there is complicated question of fact or that fraud has been perpetrated on her. From the trend of pleadings made by the plaintiff either in the Page 8 of 9
plaint or in the objection filed against the application under Section 8 of the Act, it appears that it is not the case of that nature which cannot be decided by an arbitrator. Accounts book was produced which will make the position clear as to whether the plaintiff had already made repayment as per the schedule. The learned court, therefore, committed jurisdictional error in not exercising the discretion vested on it under Section 8 of the Act in view of the law laid down by the Hon ble Supreme Court in the case of Hindustan Petroleum Corpn. Ltd. (supra). The aforesaid provision being mandatory the impugned order is vitiated and accordingly it is set aside. The learned court shall refer the parties to arbitration as per the arbitration clause referred to above. 10. The revision petition stands allowed. No order as to cost. JUDGE T U Choudhury Page 9 of 9