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GYAN CHANDRA GARG versus PREM CHANDRA SINGHAL & OTHERS

High Court of Judicature at Allahabad

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Gyan Chandra Garg v. Prem Chandra Singhal & Others - CIVIL REVISION No. - 386 of 2007 [2007] RD-AH 18631 (5 December 2007)

This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).

HIGH COURT OF JUDICATURE AT ALLAHABAD

Court No.6

Civil Revision No. 386 of 2007

Gyan Chandra Garg, Vs. Sri Prem Chandra Singhal and others

~~~~

Hon. Dilip Gupta, J.

The plaintiff has filed this Civil Revision for setting aside the judgment and order dated 3.9.2007 passed by the Judge Small Cause Courts in Original Suit No. 816 of 2001 by which issue No.7 has been decided holding that the suit is barred under the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') and the plaintiff should take recourse to the arbitration proceedings under the provisions of the Act.

The Original Suit had been filed for dissolution of the Firm and for accounting. A further relief was also claimed for restraining the defendant from transferring the property of the Firm and for cancellation of the sale deed dated 27.8.2003. A written statement was filed on behalf of defendant No.1 on 25.5.2004. A written statement was also filed on behalf of defendant No.10 on 20.9.2005. In the written statement filed on behalf of defendant No.10 it was pointed out in paragraph 34 that there was an agreement between the parties in which clause 18 provided for referring the dispute to arbitration and, therefore, the suit was barred. Similar statement was also made in paragraph 39 of the written statement.

Clause 18 of the agreement dated 1.4.1992 is as follows:-

"18. That any dispute or difference arising between the parties or any of them or the representatives of any other partner or partners touching these presents of the construction of application thereof or any account or division of assets, debts, liabilities concerning the partnership business, the rights duties or liabilities of any partners in connection therewith (in respect of which dispute or differences or provisions for settlement thereof shall have been made by any of these provisions thereof) shall be referred to the Arbitration of a single Arbitrator, in the case the parties agree upon, otherwise to the Arbitration of more Arbitrators, one to be appointed by each party to the dispute in case of equality in the opinion of Arbitrators, the Arbitrators shall among themselves elect a Chairman who shall have additional vote to decide the dispute."

The Court below in view of the aforesaid arbitration clause contained in the agreement dated 1.4.1992 held that the suit was not maintainable and the parties should take recourse to the provisions of the Act.

I have heard Sri Arvind Srivastava, learned counsel for the revisionist and Sri A.K. Gupta, assisted by Sri Ashish Agrawal, learned counsel appearing for the defendant-opposite parties.

Sri Arvind Srivastava, learned counsel for the revisionist submitted that the finding recorded by the Court below while deciding issue No.7 that the suit was not maintainable in view of the arbitration clause 18 contained in the agreement dated 1.4.1992 is perverse. He further submitted that even otherwise, under Section 8 of the Act, a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration but in the present case no application was submitted by defendant No.10 for referring the parties to arbitration and nor was any such statement made in the written statement.

Sri A.K. Gupta, learned counsel appearing for the opposite parties, however, submitted that there is no infirmity in the order passed by the Trial Court and in view of the specific averments made in paragraphs 34 and 39 of the written statement, the Court was justified in requiring the plaintiff to take recourse to arbitration proceedings under the provisions of the Act.

It is not in dispute that a separate application under Section 8 of the Act had not been filed by defendant No.10 for referring the parties to arbitration. Emphasis is only on the averments made in paragraphs 34 and 39 of the written statement filed by defendant No.10. It has, therefore, become necessary to examine the averments made in the said paragraphs of the written statement. Paragraph 34 of the written statement merely states that there is an agreement between the parties and clause 18 of the said agreement provides for arbitration and, therefore, the suit is barred under the provisions of the Act and Order 7 Rule 11 C.P.C. Paragraph 39 of the written statement merely states that the suit is barred under the provisions of the Act.

Learned counsel for the opposite parties has placed reliance upon the provisions of Section 8 of the Act. Section 8 of the Act is quoted below:-

"8. Power to refer parties to arbitration where there is an arbitration agreement.-(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

This section does not provide that the suit is barred. The Supreme Court in Sukanya Holdings (P) Ltd. Vs. Jayesh H. Panda and another (2003) 5 SCC 531 while interpreting the provisions of Section 8 of the Act observed as follows:-

"For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part I of the Act, the judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Further, the matter is not required to be referred to the Arbitral Tribunal, if:(I) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or(3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that the Arbitration Act does not oust the jurisdiction of the civil court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under sub-sections (1) and (2) of Section 8 of the Act." (emphasis supplied)

It is, therefore, clear that the Arbitration Act does not oust the jurisdiction of the Civil Court to decide the dispute in a case where the parties to the arbitration agreement do not take appropriate steps as contemplated under sub-sections (1) and (2) of Section 8 of the Act. It needs to be mentioned that defendant No.10 in paragraph 34 of the written statement had not made any averment for referring the parties to arbitration. In such circumstances, the Court could not have directed the parties to take recourse to arbitration proceeding under the provisions of the Act. Thus, the suit was not barred under the provisions of the Act. The findings to the contrary recorded by the Court below are, therefore, liable to be set aside.

Thus, for all the reasons stated above, the judgment and order dated 3.9.2007 passed by the learned Judge, Small Cause Courts cannot be sustained. The Civil Revision is, accordingly, allowed and the judgment and order dated 3.9.2007 is set aside. The parties shall bear their own costs.

Dt/-5.12.2007

Sharma


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Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites

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