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2007 DIGILAW 226 (DEL)

VIMONI INDIA (P) LTD. v. RITU GUPTA

2007-02-02

J.M.MALIK

body2007
JUDGMENT J.M. Malik. J.-In this appeal, the appellant has picked up a conflict with the finding of the 1st Appellate Court wherein, it dismissed the application moved by the appellant under Section 8 of the Arbitration and Conciliation Act, 1996, for the appointment of the Arbitrator. The parties entered into a lease deed/tenancy agreement on 11.12.2002 and arbitration clause finds place at Clause 16 of the agreement, which is reproduced as follows: "That it is further agreed by the Lessor and the Lessee that if any dispute/ misunderstanding arises out of this agreement or violation thereof the matter will be referred to Arbitrator, decided by both the parties and if Arbitrator will fail to decide the issue, the Delhi Courts have the jurisdiction to decide the issue." 2. The Trial Court held that Clause 16 is not applicable to the vacating of premises by the Lessee. Para 11 of his judgment dated 20.7.2006 is reproduced as follows: ........it will be clear that the parties had agreed to refer the matter to the Arbitrator in case of any dispute/misunderstanding arising out of this agreement or violation thereof. There are so many terms In this agreement. As per Clause 10 the Lessee (defendant) was to carry out day-to, day repairs. replacing the broken glasses, fuses, fused lamps, etc. The Lessor (plaintiff) was to remain responsible for payment of the municipal taxes. The lessee was to permit the Lessor or his agent to enter upon the premises for inspection and to carry out repairs. Besides these terms there are such like other terms. In my view, Clause 16 was to deal with these terms and conditions and not the condition of the effect of non-vacating of the premises by the defendant after the expiry of terms of lease. In this regard the judgment Bhagwan Dos Mengi, AIR 1961 Jammu & Kashmir 39 (V 48 C 16) relied on by Counsel for the plaintiff can be relied on. I mean or refer the other judgments as they are distinguishable on facts. The application of the defendant is, therefore, dismissed." 3. I have heard the learned Counsel for the parties. Learned Counsel for the respondents vehemently argued that when the suit for recovery of possession was filed, Clause 8 of the Arbitration Act pales into insignificance because the arbitration clause is not applicable to the recovery of possession by the respondents. The application of the defendant is, therefore, dismissed." 3. I have heard the learned Counsel for the parties. Learned Counsel for the respondents vehemently argued that when the suit for recovery of possession was filed, Clause 8 of the Arbitration Act pales into insignificance because the arbitration clause is not applicable to the recovery of possession by the respondents. He also pointed out that since the lease period had expired, therefore, the arbitration clause is not admissible. In order to bring his point home, he has cited the following two authorities reported in H.K. Bagchi v. Mahanagar Telephone Nigam Limited, 56 (1994) Delhi Law Times 587 and R.C. Aggarwal v. Delhi Tourism & Transportation Development Corporation Ltd., 128 (2006) DLT 548 (DB)= 2003 (66) DRJ 92 . In the later authority, it was held: "The arbitration agreement has to be in writing duly signed by the parties. In the instant case the arbitration agreement upon which the respondent is banking became dead a1most 20 years back. Merely because the plaintiff has not taken the remedy for 10-15 long years and letters after letters were sent and ultimately he served the legal notice does not mean that he is left remediless. The only remedy available to the plaintiff is by way of suit and not through arbitration as claimed by the respondent/applicant." It was further held: "There is no dispute as there is unvarying unanimous current of opinion that the arbitration clause in any agreement is incorporated with the sole intention of resolving the disputes that would arise during the currency of the agreement." 4. I am of the considered view that the above said authorities do not create propitious conditions for the respondents. On the other hand, the Counsel for the appellant cited authorities reported in Shree Subhlaxmi Fabrics Pvt. Ltd. v. Chand Mal Baradia and Others, III (2005) SLT 488=II (2005) CLT 23 (SC)=JT 2005 (11) SC 155; Trans World Finance & Real Estate Co. Pvt. Ltd. v. Union of India, 97 (2002) DLT 767=2002 V AD (Delhi) 214;A.K. Jaju v. Avni Kumar, 104 (2003) DLT 904=AIR 2003 Delhi 364; Rasthtriya Ispat Nigam Ltd. and Another v. Verma Transport Co., II (2007) SLT 79=1 (2007) CLT 277 (SC)= (2006) 7 SCC 275 ; Indian Drugs & Pharmaceuticals Ltd. v. Indo Swiss Synthetics Gem Mfg. Co. Pvt. Ltd. v. Union of India, 97 (2002) DLT 767=2002 V AD (Delhi) 214;A.K. Jaju v. Avni Kumar, 104 (2003) DLT 904=AIR 2003 Delhi 364; Rasthtriya Ispat Nigam Ltd. and Another v. Verma Transport Co., II (2007) SLT 79=1 (2007) CLT 277 (SC)= (2006) 7 SCC 275 ; Indian Drugs & Pharmaceuticals Ltd. v. Indo Swiss Synthetics Gem Mfg. Co. Ltd. and Others, I (1996) CLT 153 (SC)=( 1996) I SCC 54; Ravi Engineering Works v. Narang Steel Rolling Mills and Another, 1994 (2) Punjab & Haryana High Court 73. I also came across few authorities which are discussed in the next paras. 5. The position was illuminatingly highlighted by the Apex Court. in Hindustan Petroleum Corporation Ltd. v. M/s. Pinkcity Midway Petroleums, IV (2003) SLT 553=III (2003) CLT 17 (SC)= AIR 2003 SC 2881 , wherein it was observed: "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 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 lower Courts. 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. Section 16 has empowered the Arbitral Tribunal to ru1e on its own jurisdiction including rule on any objection with respect to the existence or validity of the arbitration agreement. It is clear from the language of the section, that if there is any objection as to the applicability of the arbitration clause to the facts of the case, the same will have to be raised before the concerned Arbitral Tribunal. The Civil Court should not embark upon an inquiry in regard to the applicability of the arbitration clause to the facts of the case," 6. The Civil Court should not embark upon an inquiry in regard to the applicability of the arbitration clause to the facts of the case," 6. In case Shree Subhlaxmi Fabrics Pvt. Ltd. v. Chand Mal Baradia and Others (supra), it was held: "Section 16 of the Act is important and it provides that the Arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or authority of the arbitration agreement. " 7. In Damodar Valley Corporation v. K.K. Kar, 1974 Supreme Court Reports 240, it was held: "(i) Where in a contract there is an arbitration clause, notwithstanding the plea that there was a full and final settlement between the parties, that dispute can be referred to the arbitration. The High Court was in error in directing the dismissal of the appellants petition in toto. The question whether there has been a full and final settlement of a claim under the contract is itself a dispute arising upon or in relation to or in connection with the contract. These words are wide enough to cover the dispute sought to be referred." 8. In Sukanya Holdings pvt. Ltd. v. Jayesh H. Pandya and Another, III (2003) SLT 194=II (2003) CLT 154 (SC)= AIR 2003 SC 2252 , it was held: "It would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and other is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a suit was contemplated, the Legislature would have used appropriate language to perm it such a course. Since there is no such indication in the language, it follows that bifurcation of the subject matter of an action brought before a judicial authority is not allowed. Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and other to be decided by the Civil Court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and other to be decided by the Civil Court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums." 9. In Trans World Finance & Real Estate Co. Pvt. Ltd. v. Union of India (supra), Court explained the following facts: "The above arbitration agreement between the parties leave absolutely no doubt that the parties have clearly intended that any dispute arising in relation to the said lease shall be referred to and got adjudicated upon through alternate dispute resolution mechanism through the sole arbitration of the Members (Service), Department of Communication, New Delhi. Therefore, it does not lie in the mouth of the petitioner to urge that the petitioner does not want to invoke the said arbitration agreement and the matter must be decided through judicial authority. Such a course is not permissible in law." 10. The view taken by this Court in case A.K. Jaju v. Avni Kumar (supra), further goes to embolden the case of the appellant. 11. In Rashtriya Ispat Nigam Ltd. and Another v. Verma Transport Co. (supra), it was observed: "In the instant case, the existence of a valid agreement stands admitted. There cannot also be any dispute that the matter relating to termination of the contract would be a dispute arising out of a contract and, thus, the arbitration agreement contained in Clause 44 of the contract would be squarely attracted. Once the conditions precedent contained in the said proceedings are satisfied, the judicial authority is statutorily mandated to refer the matter to arbitration. What is necessary to be looked into there for, inter alia, would be as to whether the subject-matter of the dispute is covered by the arbitration agreement or not." 12, In Indian Drugs & Pharmaceuticals Ltd. v. Indo Swiss Synthetics Gem Mfg. Co. Ltd. and Others (supra), it was observed: "This shows that the arbitration clause would perish in case where either there is substitution of a new contract, or rescission or alteration of the original contract. The present is apparently and admittedly not such a case. Co. Ltd. and Others (supra), it was observed: "This shows that the arbitration clause would perish in case where either there is substitution of a new contract, or rescission or alteration of the original contract. The present is apparently and admittedly not such a case. Therefore, what has been stated in this decision cannot assist the respondents. On the other hand, the ratio of Kishorilal Gupta squarely applies. We, therefore, hold that Clause 19 dealing with arbitration did survive despite the contract having come to an end with effect from 1.4.1984." 13. In Ravi Engineering works v. Narang Steel Rolling Mills and Another (supra), it was held: "In terms of proposition, where performance of the contract has come to an end, but the contract is still in existence for certain purposes in respect of disputes arising under it or in connection with it, the arbitration clause survives and further action in terms thereof has to be taken. In my view it is proposition No. (iv), which is applicable to the facts and circumstances of the present case." 14. It is thus clear like a day that instant controversy does not fall within the realm of Court. The Act clearly indicates the legislative intent to minimise supervisory role of Courts to ensure that the intervention of the Court is minimal. Consequently, I accept the appeal, set aside the order passed by the Trial Court and direct it to dispose of application under Section 8 of the above said Act in accordance with law and appoint an Arbitrator as per terms and conditions of the agreement. The parties are directed to appear before the Trial Court on 20.2.2007. The Trial Court record be sent back immediately with a copy of this judgment. CM No. 10658/2006 and 11717/2006 in FAO No. 197/2006 In view of the disposal of the appeal, no further orders are required to be passed in the applications. The same are disposed of. Appeal disposed of.