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2006 DIGILAW 3238 (MAD)

Tata Finance Ltd. v. T. R. S. Vijairam

2006-11-27

K.VENKATARAMAN

body2006
Judgment :- The present revision is directed against the order of the learned Additional District Munsif, Madurai Town, dated 28.10.2004, made in I.A.No.946 of 2001 in O.S.No.710 of 2001. 2. The first defendant who has unsuccessfully contested the application under Section 8 (1) of the Arbitration and Conciliation Act, 1996, (hereinafter called the Act,) is the petitioner before this Court. The respondents 1 and 2 who are the plaintiffs 1 and 2 in O.S.No.710 of 2001, have filed the suit against the petitioner herein as well as against three others. Though the suit has been filed against the defendants 1 to 4, the plaintiffs have prayed for relief only against the defendants 1 to 3 only. The prayer in the suit that has been sought for by the respondents 1 and 2 herein is as follows:- "Declaring that the agreements No.313904 dated 06.08.1998 and No.314235 dated 07.10.1998 are null and void, illegal, inoperative and not binding upon the plaintiffs and consequently for a permanent injunction restraining the defendants 1 to 3, their men, agents and successors-in-office from in any way enforcing the aforesaid agreements by conducting arbitration proceedings through the 3rd defendant or any other person and directing the defendants to pay the costs of this action to the plaintiffs." 3. The entire basis of the said suit appears to be on the footing that the agreement between plaintiffs 1 and 2 on one hand and the defendants 1 and 2 on the other was not due to the free will of the documents to the parties. Further, it has been alleged in the plaint that the signatures in the said agreement was obtained in a fiduciary capacity under undue influence and also by misrepresentation and fraudulent attitude. It is useful to extract some of the passages in the said plaint:- "The plaintiffs submit the said agreement was not mutually agreed between the parties and it was not the result of free will of parties to the documents. The plaintiffs had not agreed to the place of arbitration out of free will and consent. It is useful to extract some of the passages in the said plaint:- "The plaintiffs submit the said agreement was not mutually agreed between the parties and it was not the result of free will of parties to the documents. The plaintiffs had not agreed to the place of arbitration out of free will and consent. The plaintiffs submit that the alleged agreement dated 06.08.1998 was not the result of mutual consent of parties and obtained in a fiduciary capacity under undue influence and also by misrepresentation and fraudulent attitude of the last and 4th defendants and without any free consent of parties and as such the said document is void and is liable to be set aside and the plaintiffs are not bound by the terms of the agreement. It is submitted that the plaintiffs are not aware of the said agreement and it is also not binding upon the plaintiffs for the very same reasons submitted above. The said agreement dated 07.10.1998 is also void inoperative and not binding upon the plaintiffs. In the circumstances the agreements No.313904 dated 06.08.1998 and No.314235 dated 07.10.1998 are null and void, illegal, inoperative and not binding upon the plaintiffs." 4. Thus, the entire plea that has been raised by the plaintiffs 1 and 2 is that the agreement between them on one hand and the agreement between the defendants 1 and 2 is null and void. 5. In the said suit, the first defendant has filed the application under Section 8(1) of the said Act, to refer the parties to Arbitration as per Arbitration clause in the said agreement. The plaintiffs 1 and 2 who are the respondents 1 and 2 herein have resisted it. The Court below dismissed the application on the ground that the plaintiffs 1 and 2 stating that the agreement is not valid and binding on them have filed the suit. The Court below further has held that such matters have to be decided only by the Civil Court and not by the Arbitrator. 6. I have heard the learned counsel for the petitioner as well as the respondents 1 and 2. The petitioner has given up the respondents 3 and 4. 7. The Court below further has held that such matters have to be decided only by the Civil Court and not by the Arbitrator. 6. I have heard the learned counsel for the petitioner as well as the respondents 1 and 2. The petitioner has given up the respondents 3 and 4. 7. Mr.M.Subash Babu, learned counsel appearing for the petitioner vehemently contended that the Court below should not have dismissed the application filed by the petitioner under Section 8(1) of the Act, in view of the fact that there is a clause regarding Arbitration in the agreement between the petitioner and the respondents 1 and 2. Further, the learned counsel has contended the factum whether there was a valid agreement or not could also could be decided by the Arbitrator. In this connection, the learned counsel for the petitioner drawn my attention to Section 16 of the said Act, which reads as follows:- "The Arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose." 8. Thus, according to the learned counsel for the petitioner, even the question whether the arbitration agreement is valid or not can be gone into by the Arbitrator. Further, the learned counsel has drawn my attention to the Judgment rendered by the Principal Court reported in (2004) 2 M.L.J. 134 (NIIT limited Vs. Ashish Deb and another), wherein their Lordships have dealt with the Section 16 of the Act and has held as follows:- The above said Section 16 has now put the controversy with regard to the competence of the arbitrator to rule on its own jurisdiction and the validity of the agreement at rest. Under the said provision, the arbitrator is competent to rule its own jurisdiction, including ruling on any objections, with respect to the existence or validity of the arbitration agreement. 9. Thus, Section 16 of the Act gives ample power to the Arbitrator to decide even the validity of the agreement. It is obligatory to the Court to refer the matter for Arbitration in terms of the Arbitration agreement. 9. Thus, Section 16 of the Act gives ample power to the Arbitrator to decide even the validity of the agreement. It is obligatory to the Court to refer the matter for Arbitration in terms of the Arbitration agreement. Though the respondents 1 and 2 namely plaintiffs 1 and 2 have challenged the validity of the agreement on the ground that fraud was played upon them, the same can also be decided by the Arbitrator in view of the powers given under Section 16 of the Act. 10. The learned counsel for the respondents has drawn my attention to the Judgment reported in (1999) 5 SCC 688 (Haryana Telecom Ltd., Vs. Sterlite Industries (India) Limited). 11. The subject matter in that Judgment was in respect of winding up of a company. That is the reason why the Apex Court has held only such disputes or matters in which the Arbitrator is competent or empowered to decide, can be referred to Arbitration. The Apex Court further held that an Arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company. As far as such power may be empowered by the Court by the Companies Act. 12. Thus, it could be seen that the Apex Court has held that the Arbitrator has no power to decide the matter in which the power is conferred only on the Court by the Companies Act. The said Judgment will not have any bearing with regard to the facts and circumstances of the present case. 13. The other Judgment that has been cited by the learned counsel for the respondents 1 and 2 is reported in (2006) 4 MLJ 1112 (Sporting Pastime India Ltd., Chennai and another Vs. Kasthuri & Sons Ltd., Chennai). That is also a case where it deal with the company application which is nothing to do the facts and circumstances of the present case. 14. The learned counsel for the respondents 1 and 2 also relied upon the Judgment reported in (2003) 5 SCC 531 (Sukanya Holdings (P) Ltd., Vs. Kasthuri & Sons Ltd., Chennai). That is also a case where it deal with the company application which is nothing to do the facts and circumstances of the present case. 14. The learned counsel for the respondents 1 and 2 also relied upon the Judgment reported in (2003) 5 SCC 531 (Sukanya Holdings (P) Ltd., Vs. Jayesh H.Pandya and another), wherein the Honble Apex Court has held as follows:- "Where a suit is commenced in respect of a matter which falls partly within the arbitration agreement and partly outside and which involves parties some of whom are parties to the arbitration agreement while some are not so, held Section 8 is not attracted." 15. By referring the said Judgment, the learned counsel for the respondents 1 and 2 has submitted that when the suit can be filed in respect of the matter which falls partly within the Arbitration agreement and partly out side and which involves parties some of whom are parties to the Arbitration agreement while some or not, so, Section 8 of the Act will not be attracted. I am unable to subscribe my views in respect of the said submission made by the learned counsel for the respondents 1 and 2. As already pointed out the main ground for attack by the plaintiffs 1 and 2 in the suit that has been laid by them was that the agreement entered into between the plaintiffs 1 and 2 and the first defendant is null and void, illegal, in operative and not binding upon the plaintiffs. Further more, the plaintiffs 1 and 2 have prayed for the Judgment and decree only for declaration that the agreement entered into between the plaintiffs 1 and 2 and the first defendant dated 07.10.1998 are null and void etc., There is no prayer claiming any relief against the fourth defendant. Thus, the facts and circumstances of the case as reported in (2003) 5 SCC 531 and the facts and circumstances in the present civil revision petition are totally different. 16. Thus, looking at any angle, the order of the Court below negativing the prayer that has been asked for by the petitioner for referring the matter to Arbitrator, who has already been appointed, is totally erroneous and against the provisions of the Act. 16. Thus, looking at any angle, the order of the Court below negativing the prayer that has been asked for by the petitioner for referring the matter to Arbitrator, who has already been appointed, is totally erroneous and against the provisions of the Act. Hence, the order of the learned District Munsif, Madurai Town dated 28.10.2004 made in I.A.NO.946 of 2001 in O.S.No.710 of 2001 is liable to be set aside and accordingly set aside. 17. The application in I.A.No.946 of 2001, is ordered and the learned District Munsif, Madurai Town, is directed to refer the matter to the Arbitrator as per the clauses 25 and 29 of the agreement and decide the issue including the issue raised by the respondents 1 and 2/plaintiffs 1 and 2, within a period of four months from this date. 18. With the above direction, the civil revision petition is ordered accordingly. However, there is no order as to costs. Consequently, connected C.M.P is closed.