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Naved Alam & Another v. Sri Zaheer & Another - CIVIL REVISION No. 13 of 2006 [2006] RD-AH 2011 (25 January 2006)


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Court No. 54

CIVIL REVISION No. 13 of 2006

Naved Alam and another Vs. Sri Zaheer and another.

Hon. Mrs. Poonam Srivastava, J.

Heard Smt. Rama Goel, learned counsel for the revisionists and Sri P.N. Saxena Senior Advocate, assisted by Sri Brijesh Chandra Naik, Advocate for the caveator-respondents.

This is a revision under Section 115 C.P.C. challenging the order dated 24.12.2005 passed in Original Suit No. 767 of 2004- Naved Alam Vs. Zaheer Alam and others deciding the preliminary issue vide application 72-Ga and objections 80-Ga. The plaintiff-revisionists instituted a suit for permanent injunction that the partnership firm Ajnam Century Cold Storage is situated at Mohalla Habibul Baradari of which the plaintiff and the defendants are partners. In addition to this,  there is another firm Century Corporation situated in close proximity. The property by two different firms have been acquired at different places. The defendants are trying to transfer the property of the firm claiming sole ownership and, therefore, the necessity for an injunction in respect of the property shown in the schedule A which includes immovable property, machinery, money deposited in the Bank, residential house etc. cold storage and other articles of the factory. The defendants filed written statement asserting that the defendant no. 1 was appointed as sole arbitrator and, therefore, the suit is not maintainable. The deed of partnership was brought on record and paragraph 9 of the partnership deed, which is also brought on record as Annexure-6 relating to the cold storage and other allied agro products, perusal of paragraph 9 of the partnership deed shows that the parties have agreed to get their disputes decided by an arbitrator. Paragraph 9 of the agreement deed is quoted below:-

"That if any dispute arises between the parties, their legal heir or heirs or their representative or representatives, the same shall be referred to Arbitration and the provisions of Indian Arbitration Act 1940 shall be applicable."

Besides, Annexure-5 is also an agreement appointing the defendant no. 1 Sri Zaheer Alam as the sole Arbitrator in respect of the property owned by M/s Century Corporation and M/s Greatant Trading Corporation, duly signed by all the partners. This agreement was executed in the month of February, 1995. The court below taking into consideration the agreement dated 1.2.1995 as well as paragraph 9 of the partnership deed, referred the matter to the Arbitrator and allowed the application while rejecting the objections of the revisionists. Smt. Rama Goel has emphatically argued that the agreement dated 1.2.1995 is a very old agreement, subsequent to which the old firm was dissolved. New firm has come into existence and, therefore, the said agreement pertaining to the year 1995 can not be relied upon while making the reference to the Arbitrator. Besides, she has argued that since the arbitration clause vide paragraph 9 of the partnership deed is only in respect of the business of cold storage and other allied agro products and, therefore, the agreement of another firm can not be made applicable to the dispute which has come into existence in respect of the other firms namely M/s Ajnam Century Corporation as well. Reliance has been placed on the Apex Court decision in the case of Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya and another, A.I.R. 2003 Supreme Court, 2252. The argument on the basis of the aforesaid decision is that the language used in Section 8 of the Arbitration and Conciliation Act, 1996 is " in a matter which is the subject matter of an arbitration agreement". Court is required to refer the parties to arbitration in respect of only the matter for which the parties have agreed for a reference to the Arbitrator and which comes within the ambit of arbitration agreement but if the matter lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, no reference can be made. Bifurcation of cause of action i.e. subject matter of suit or in some cases bifurcation of suit between parties to the arbitration agreement and certain other who are not parties to the agreement is not permissible, therefore, in the instant case she has emphatically argued that so far existence of the arbitration clause is concerned, it is only in respect of one of the firms namely Century Cold Storage and other allied agro products alone and, therefore, it was wrong on the part of the court below to come to a conclusion that there an arbitration agreement between the parties. This has been disputed by Sri P.N. Saxena, Senior Advocate. The agreement dated 1.2.1995 is an agreement in respect of both the parties to the effect that the matter will be decided by the sole Arbitrator Zaheer Alam, father of the partners. No award has been given consequent to the aforesaid arbitration agreement which has also not been called off. Since the agreement is still in existence and it relates to both the firms, the court was fully competent to refer the dispute to the Arbitrator.

I have perused the agreement of the year 1995 which is absolutely clear that the parties had agreed to the sole Arbitrator and had also resolved to abide by the decision of the sole Arbitrator. This agreement has not been rescindent till date and, therefore, I am of the view that the court below was absolutely correct in relegating the parties to get their controversy resolved by the sole arbitrator. It has been argued next that the sole arbitrator agreed upon in the year 1995 is defendant no. 1 and, therefore, he can not be expected to act impartially and in the circumstances, it is clear that reference made to him is a farce. The plaintiffs can not expect any impartial judgment or award from the sole arbitrator who is arrayed as one of the contesting defendants in the suit. Perusal of the plaint will show specific allegations are levelled against him. Smt. Rama Goel has cited a decision of the Apex Court in the case of Bihar State Mineral Dev Corporation and another Vs. Encon Builders (I) Pvt. Ltd., 2003(3) Civil Court Cases, 462 (S.C.). Paragraph 18 of the said decision is quoted below:

"Actual bias would lead to an automatic disqualification where the decision maker is shown to have an interest in the outcome of the case. Actual bias denotes an arbitrator who allows a decision to be influenced by partiality or prejudice and thereby deprives the litigant of the fundamental right to a fair trial by an impartial tribunal."    

On the basis of the aforesaid principle, it is submitted that the sole arbitrator is the contesting defendant and, therefore, the appointment of the arbitrator is not tenable in law. Besides, she apprehends that the property in question will be alienated in the event no injunction is granted in favour of the plaintiffs. I am in full agreement that the defendant no. 1 is the person who was agreed upon by the parties to act a sole arbitrator in the year 1995 and the suit has been instituted arraying the said arbitrator as one of the defendants but the order challenged in this revision is only making a reference and relegating the dispute to the sole arbitrator, this Court in exercise of revisional jurisdiction can not appoint an arbitrator different from what has been agreed upon between the parties. It is always open for the aggrieved parties to approach Hon'ble The Chief Justice for appointment of an impartial arbitrator under the provisions of the Act No. 26 of 1996 and also to ensure that the property in question is protected as an interim measure. This Court in exercise of powers under Section 115 C.P.C. can not give direction on the subsequent questions raised by Smt. Rama Goel.

In the circumstances, I do not feel that any jurisdictional error has been committed by the court below in relegating the parties to get their dispute resolved by an arbitrator in view of the facts and circumstances of the arbitration clause in the partnership deed as well as an agreement between the parties in respect of the two firms. I am not inclined to interfere in this revision and is accordingly dismissed.




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