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Madhya Pradesh High Court · body

2003 DIGILAW 72 (MP)

Lahar Publicity Service v. Union of India (UOI)

2003-01-13

S.P.KHARE

body2003
Judgment ( 1. ) THIS is a revision by the defendant against the order by which its application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter, to be referred to as the New Act) for referring the parties to arbitration in view of the arbitration agreement between the parties, has been rejected. ( 2. ) THE plaintiff filed the suit for recovery of Rs. 4,66,764/- from the defendant It was stated in the plaint that the defendant is an accredited agency appointed by the plaintiff for collecting advertisements for being telecast by the plaintiff. According to the plaintiff, an amount of Rs. 3,89,619/- is due from the defendant as telecasting charges. The plaintiff has also claimed interest at the rate of 18% per annum on this amount. ( 3. ) THE defendant submitted an application supported by an affidavit stating therein that there is an arbitration clause in the agreement dated 1-12-1999 and, therefore, the parties should be referred to arbitration in terms of the arbitration clause. ( 4. ) CLAUSE 5 of the agreement is as under :-" ( 5. ) IN the event of any question, dispute or difference arising under these presents or in connection therewith (except as to any matters the decision of which is specially, provided for by these presents), the same will shall be referred to the sole arbitration of an officer appointed to the Director General, Doordarshan. It will be no objection that the arbitrator is a Prasar Bharati employee, that he has to deal with the matters to which these presents relate or that in the course of his duties as a Prasar Bharati employee he has expressed views on all or any of the matters in dispute or difference. The award of the arbitrator shall be final and binding on the parties to these presents. " 5. Section 8 of the New Act provides as under :- "8. Power to refer parties to arbitration when 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. Power to refer parties to arbitration when 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. " ( 6. ) THE Trial Court held that the action brought by the plaintiff is a matter which is covered by the arbitration clause in the agreement. It has also held that the defendant has applied before submitting the written statement, for referring the parties to arbitration. The application was rejected on the ground that there is no "dispute between the parties". The Trial Court found that the plaintiff had served notices on the defendant for payment of the telecasting charges and the defendant by his letter dated 12-2-2002 had asked the plaintiff to send "detailed account statement of our agency alongwith the outstanding dues (if any) so that we may be able to prepare a payment plan for the same". The plaintiff by its letter dated 15-4-2002 sent the statement of account to the defendant. Thereafter there was no response from the defendant. There was no payment of the amount claimed by the plaintiff. ( 7. ) IN Kalpana Kothari v. Sudha Yadav, AIR 2002 SC 404 , the Supreme Court has interpreted Section 8 of the New Act and pointed out the difference between this provision and Section 34 of the Arbitration Act, 1940. Thereafter there was no response from the defendant. There was no payment of the amount claimed by the plaintiff. ( 7. ) IN Kalpana Kothari v. Sudha Yadav, AIR 2002 SC 404 , the Supreme Court has interpreted Section 8 of the New Act and pointed out the difference between this provision and Section 34 of the Arbitration Act, 1940. The Supreme Court has held that Section 34 of the 1940 Act provided for filing an application to stay legal proceedings instituted by any party to an arbitration agreement against any other party to such agreement, in derogation of the arbitration clause and attempts for settlement of disputes otherwise than in accordance with the arbitration clause by substantiating the existence of an arbitration clause and the judicial authority concerned may stay such proceedings on being satisfied that there is no sufficient reason as to why the matter should riot be referred to for decision in accordance with the arbitration agreement, and that the applicant seeking for stay was at the time when the proceedings were commenced and still remained ready and willing to do all things necessary to the proper conduct of the arbitration. This provision under the 1940 Act had nothing to do with actual reference to the arbitration of the disputes and that was left to be taken care of under Sections 8 and 20 of the Act. In striking contrast to the said scheme underlying the provisions of the 1940 Act, in the new 1996 Act, there is no provision corresponding to Section 34 of the Old Act and Section 8 of the 1996 Act mandates that the judicial authority before which an action has been brought in respect of a matter, which is the subject-matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. The provisions of the 1996 Act do not envisage the specific obtaining of any stay as under the 1940 Act, for the reason that not only the direction to make reference is mandatory but notwithstanding the pendency of the proceedings before the Judicial Authority or the making of an application under Section 8 (1) of the 1996 Act, the arbitration proceedings are enabled, under Section 8 (3) of the 1996 Act to be commenced or continued and an arbitral award also made unhampered by such pendency. ( 8. ) IN Wellington Associates Ltd. v. Kirit Mehta, 2000 Arb. W. L. J. 188 (SC) : AIR 2000 SC 1379 , it has been laid down by the Supreme Court that the conditions which are required to be satisfied under Sections 8 (1) and 8 (2) of the New Act before the Court can exercise its powers are :- (1) There is an arbitration agreement; (2) A party to the agreement brings an action in the Court against the other party; (3) Subject-matter of the action is the same as the subject-matter of the arbitration agreement; (4) The other party moved the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. ( 9. ) IT is clear from the words of Section 8 of the New Act that Sub-section (1) uses the word "shall" and thus makes it obligatory on the part of the judicial authority to refer the parties to arbitration if action brought before it is a matter which is covered by the arbitration agreement, provided such request is made not later than submitting to the Court the first statement on the substance of the dispute. ( 10. ) IN the present case the plaintiff served notices claiming telecasting charges and the defendant did not respond. That means the defendant was not prepared to pay the amount. Thus a difference or dispute arose between the parties. The ingredients of Section 8 of the New Act are fully satisfied in the present case. The action brought by the plaintiff is a matter which is covered by arbitration clause. The defendant has applied for referring the parties to arbitration before submission of his written statement. There is admittedly an arbitration agreement between the parties covering the subject-matter for which the suit has been filed. The action brought by the plaintiff is a matter which is covered by arbitration clause. The defendant has applied for referring the parties to arbitration before submission of his written statement. There is admittedly an arbitration agreement between the parties covering the subject-matter for which the suit has been filed. Therefore, the Trial Court ought to have referred the parties to arbitration as per arbitration clause in the agreement. The very filing of the suit implies that there is dispute between the parties. Once it is held that the subject-matter of the action is covered, by the arbitration agreement, then it was mandatory for the Court to refer the parties to arbitration in view of the language used in Section 8 of the New Act and as per interpretation placed upon it by the Supreme Court. ( 11. ) THE Trial Court in the impugned order has placed reliance upon the two decisions of the Supreme Court in Inder Singh v. Delhi Development Authority, AIR 1988 SC 1007 and State of U. P. v. Janki Sharan Kailash Chandra, AIR 1973 SC 2071 to show that there was no "dispute" between the parties. The learned Counsel for the respondents has also relied upon these decisions before this Court. He has also cited the decisions of the Division Bench of this Court in Dilip Construction Co. v. Hindustan Steel Ltd. , AIR 1973 MP 261 and of Andhra Pradesh High Court in Rai and Sons v. Poysha Industries, AIR 1972 AP 302 . All these cases arose under the Arbitration Act, 1940. As already stated, the Scheme of Act of 1940 was different from the Scheme under the New Act. If the conditions provided in Section 8 of the New Act are satisfied, then the Court has no option but to refer the parties to arbitration. As already stated, in the present case, the arbitration agreement between the parties covers the "action" brought by the plaintiff and, therefore, it has to be decided by the arbitrator to be appointed as per arbitration agreement. The Supreme Court has observed in Sundaram Finance Ltd. v. NEPC India Ltd. , 1999 Arb. W. LJ. 183 (SC) : AIR 1999 SC 565 , that the 1996 Act is very different from the Arbitration Act, 1940. The Supreme Court has observed in Sundaram Finance Ltd. v. NEPC India Ltd. , 1999 Arb. W. LJ. 183 (SC) : AIR 1999 SC 565 , that the 1996 Act is very different from the Arbitration Act, 1940. The provisions of this Act have, therefore, to be interpreted and construed independently and in fact reference to 1940 Act may actually lead to misconstruction. In other words the provisions of 1996 Act have to be interpreted being uninfluenced by the principles underlying the 1940 Act. In order to get help in construing these provisions it is more relevant to refer to the UNCITRAL Model Law rather than the 1940 Act. ( 12. ) THE Trial Court has erroneously held that there is no "dispute" between the parties. The plaintiff served the notices on the defendant to pay telecasting charges, the defendant asked for the details, these were supplied to him and then the defendant became silent. On these facts it must be held that by his conduct the defendant raised the dispute. One party asserted its right and the other repudiated it. It was, therefore, necessary for the plaintiff to resort to the arbitration clause in the agreement for settlement of the dispute. The plaintiff could not bring action in the Court giving a go-by to the arbitration agreement. The dispute in this context is analogous to a "cause of action" before a Court. Failure to perform his part of the contract and to pay the amount claimed on the facts of the present case leads to the inference of repudiation and denial of the right of the other party. Failure or refusal to pay under the contract certainly gives rise to the dispute. ( 13. ) THE revision is allowed. The impugned order is set aside and the Trial Court is directed to refer the parties in the suit to arbitration as per Clause 5 of the agreement dated 1-124999.