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2011 DIGILAW 1334 (CAL)

Tata Finance Limited v. Moloy Biswas

2011-09-23

SYAMAL KANTI CHAKRABARTI

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JUDGMENT SYAMAL KANTI CHAKRABARTI 1. IN the instant revisional application under Article 227 of the Constitution order no. 34 dated 27th November, 2006 passed by the learned Civil Judge (Junior Division) at Silugiri rejecting an application filed by the petitioner under Section 5 and 8 of the Arbitration and Conciliation Act, 1996 in Title Suit No. 181 of 2004 has been assailed. 2. THE defendants/petitioners claimed that there was a hire - purchase agreement between the petitioner and the opposite party no. 1 in terms of which a vehicle was let out to the opposite party no. 1 for a total hire-purchase price of Rs. 1,98,578/-. In terms of such agreement the opposite party no. 1 was required to pay the amount in monthly instalments as hirer. But he failed to pay the sum regularly. In such case there was provision in such agreement that the lender/ petitioner will be at liberty to repossess the vehicle from the hirer and would dispose of the same in satisfaction of their outstanding claims. Accordingly the petitioner in the instant case exercised such right and repossessed the vehicle. Then the opposite party no. 1 filed a writ petition before the Hon’ble High Court being W. P. No. 11124(W) of 2004 which was, however, dismissed on 06.08.2004. Thereafter, the opposite party no. 1 filed a civil suit being Title Suit No. 99 of 2004 before the learned Civil Judge (Junior Division), Siliguri against the petitioner and the opposite party no. 2. He filed also similar suit earlier which was, however, withdrawn on application filed under Order 23 Rule 1 CPC by order dated 4th May, 2005 without any leave to file fresh suit on self-same cause of action. But the opposite party no. 1 filed the second suit impleading the opposite party no. 2, Beekay Automobiles as third defendant which has been registered as T. S. No. 181 of 2004. In such second suit the petitioner filed an application under Section 5 and 8 of the Arbitration and Conciliation Act, 1996 for refereing the dispute to the learned Arbitrator in terms of the agreement entered by and between the parties as aforesaid. But the learned Trial Court by order no. 34 dated 27.11.2006 has dismissed such application on the ground that the defendant no. But the learned Trial Court by order no. 34 dated 27.11.2006 has dismissed such application on the ground that the defendant no. 2 Beekay Automobiles is not a party to the arbitration agreement and that the entire subject matter of the suit is not the subject-matter of the arbitration agreement. Therefore, it is contended that such an order is not sustainable in law inasmuch as it amounts to denial of a statutory right conferred upon a party to an agreement under Section 8 of the Arbitration and Conciliation Act, 1996. Learned Lawyer for the petitioner has referred to and relied upon the principles laid down in (a) 2004(4) SCC 539 [P. Anand Gajapati Raju and Ors. Vs. .V.G. Raju (Dead) and Ors.]; (b) 2003(6) SCC 503 [Hindustan Petroleum Corpn. Ltd. Vs.- Pinkcity Midway Petroleum]; (c) 2006(7) SCC 275 Rashtriya Ispat Nigam Ltd. and Anr. Vs. Verma Trans]; and (d) 2007(1) Arb LR 235 Agri Gold Exims Ltd. Vs. Sri Lakshmi Kuits and Wovens and Ors.] in support of his contention that where there exists an agreement of arbitration it is mandatory for the Courts to refer such disputes to arbitration in accordance with the Act. 3. LEARNED Lawyer for the petitioner has also drawn my attention to the principles laid down in AIR 1974 AP 278 [M/s. Srivenkateswara Constructions and Ors. Vs.- Union of India] and AIR 1975 Cal 222 [Biswanath Rungta Vs.- O.I. Engineering] to substantiate his further contention that by impleading necessary parties to the suit a party cannot avoid arbitration agreement and get the dispute adjudicated by a Civil Court. Such steps or actions are contrary to the very object of the said Act. 4. LEARNED Lawyer for the plaintiff/ opposite party on the contrary has claimed that the petitioners have not approached this Hon’ble Court with clean hands and suppressed material facts and withheld vital documents which would be evident from the series of facts narrated in paragraphs 3(a) to 3(k) of the affidavit-in-opposition filed by him. As the parties to the Title Suit No. 181 of 2004 and parties to the aforesaid agreement are not same the learned Court below has rightly dismissed the application which should not be interfered with. In fact, the plaintiff/opposite party no. 1 withdrew the earlier suit and filed a fresh suit in order to incorporate some subsequent events in the plaint to avoid future completion and multiplication of suits. In fact, the plaintiff/opposite party no. 1 withdrew the earlier suit and filed a fresh suit in order to incorporate some subsequent events in the plaint to avoid future completion and multiplication of suits. In such case the question of granting leave by the Court at the time of withdrawal of the earlier suit being Title Suit NO. 99 of 2004 was not a legal necessity. He has referred to and relied upon the principles laid down in AIR 1985 PandH 219 (Giridhari Lal Bansal Vs. The chairman, Bhakra Bes Management Board and Ors.), AIR 2002 Cal 22 (Anadi Mohan Rashit and Ors. Vs. Nalin Sarkar Street School and Ors.) AIR 1992 Ker 85 (P.A. Muhammed Vs. Central Bank and Anr.) etc. in support of such contention. He has further contended that in fact, there has been specific allegation in the plaint against the defendant no. 3 in the later suit giving rise to fresh cause of action at a later stage. Therefore, the legality and propriety of filing the subsequent suit cannot be called in question and decided while considering an application under Section 5 and 8 of the Arbitration and Conciliation Act, 1996. Despite pendency of such suit the petitioner has disposed the vehicles in question without prior leave of the learned Court below and suppressing this fact they preferred the application under Section 5 and 8 of the Act. While such dispute was subjudice in the Civil Court and pending revisional application against such order of dismissal dated 27.11.2006 the petitioner has referred the matter to the Arbitrator and submitted their claim on 21.05.2007. Ignoring the request of the plaintiff/opposite party no. 1 the learned Arbitrator has proceeded with the arbitration and in the letter dated 28.11.2007 has informed that the learned Arbitrator has already passed an award and the plaintiff/ opposite party was directed to pay to the petitioners a sum of Rs. 2,74,909/- along with interest payable at the rate of 18% per annum with effect from the date of the award till realisation of the amount and thus the application has become redundant. In the above context the learned Court below has rightly rejected the application under Section 5nand 8 of the Act which should not be interfered with in this revisional application and the same is liable to be dismissed. 5. In the above context the learned Court below has rightly rejected the application under Section 5nand 8 of the Act which should not be interfered with in this revisional application and the same is liable to be dismissed. 5. IT appears that, another application under Article 227 of the Constitution has been field on 15.11.2010 being CAN 414 of 2010, wherein the defendant/ petitioner has prayed for dismissing the revisional application being CO No. 848 of 2007 being infractuous in the event of an award being passed by the learned Arbitrator as per letter being Annexure A/5 therein. Paragraph 6 of the said letter is quoted below: "6. The Learned Arbitrator, after considering the relevant aspects of the matter and upon having granted you, the opportunity of being heard, was pleased to pass an Award, As per the said Award, you both the addressees have been directed, inter-alia, to pay a sum of Rs. 274909/- along with interest computable @18% p.a. with effect from the date of the Award till realization, to our client." 6. BUT Learned Lawyer for the petitioner Mr. Debasish Roy has submitted before the Hon’ble Court on 14.09.2010 that no Award has yet been passed by the learned Arbitrator and under instruction from his client has further submitted that the letter which was produced by Mr. Talukdar, learned Advocate on behalf of the opposite party indicating that an Award has already been passed in the said arbitration proceeding is not a correct state of fact as the Award has not yet been passed by the learned Arbitrator in the said proceeding. Under the aforesaid circumstances this Hon’ble Court by order dated 14.09.2010 has decided that the revisional application is required to be considered on merit as contested application and stayed further proceedings of Title Suit No. 181 of 2004 till disposal of such revisional application and thus disposed of the said application being CAN 414 of 2010. No body has moved any higher authority against the said order of disposal of CAN 414 of 2010 dated 14.09.2007 and as such the said order has reached its finality and at present it is beyond the ken of revisional jurisdiction to decide such question of existence of any Award passed or not. No body has moved any higher authority against the said order of disposal of CAN 414 of 2010 dated 14.09.2007 and as such the said order has reached its finality and at present it is beyond the ken of revisional jurisdiction to decide such question of existence of any Award passed or not. Moreover, statutory remedy is available if any party is aggrieved by such award which is an independent right and as such disposal of this revisional application on merit will not cause any prejudice to either of the parties who are at liberty to take recourse to due process of law. From the impugned order I find that while rejecting such prayer the learned Trial Court has relied upon the ratio of the Hon’ble Court reported in 2000(4) SCC 539 . In the said case the Hon’ble Court has held that the following rights and contentions required to be satisfied before allowing any application under Section 8(1) and 8(2) of the Act of 1996: a) There is an arbitration agreement, b) a party to the agreement brings an action in the Court against the other party, c) subject-matter of the action is the same as the subject-matter of the arbitration agreement and d) the other party moves the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. Keeping in view the above principle the learned Court below has tried to decide the matter but held that though there is existence of arbitration clause in the hire-purchase agreement between the parties, all the parties of the present suit are not parties in the said hire-purchase agreement. The cause of action of the present suit arose on 23.03.2004 when the vehicle was seized and taken by the defendants forcibly from the custody of the plaintiff. The prayer of the plaintiff in the instant suit includes a decree of declaration and a decree of mandatory injunction against the defendant no. 3 who is not a party to the said hire-purchase agreement but is a necessary party to the present suit. 7. WHILE rejecting such prayer the learned Trial Court has also laid much emphasis upon the word in a matter used in Section 8 of the Act which should be the subject-matter of an arbitration agreement. 3 who is not a party to the said hire-purchase agreement but is a necessary party to the present suit. 7. WHILE rejecting such prayer the learned Trial Court has also laid much emphasis upon the word in a matter used in Section 8 of the Act which should be the subject-matter of an arbitration agreement. But a matter which lies outside the arbitration agreement to which there is no contractual obligation between the parities by such arbitration agreement there is no question of application of Section 8 of the Act and the entire subject-matter of the suit cannot be the subject-matter of the arbitration agreement and as such he holds that the entire subject-matter of the suit will not come within the purview of the aforesaid hire-purchase agreement and in terms of the principles laid down by the Hon’ble Supreme Court reported in 2003 SAR (Civil) 410 the provisions of Section 8 and 5 of the Act will not attract and govern the case in the facts and circumstances of the present case. So he has rejected the same. 8. FROM the findings of the learned Court below it is apparent that the learned Court was very much aware of the existence of arbitration clause in the hire-purchase agreement between the plaintiff and the defendant nos. 1 and 2 which is quoted below: Clause 25 of the arbitration agreement: "25. All disputes, differences and/or claims arising out of these presents or as to the construction, meaning or effect hereof or as to the rights and liabilities of the parties hereunder shall be settled by Arbitration to be held in Mumbai in accordance with the provisions of the Arbitration and Conciliation Ordinance, 1996 or any statutory amendments thereof or any statute enacted for replacement thereof and shall be referred to the sole arbitration of a person to be nominated by the Owners in the event of death, refusal, neglect, inability or incapacity of the person so appointed to act as an Arbitrator, the Owners may appoint a new arbitrator. The award including interim award/s of the arbitrator shall be final and binding on all parties concerned. The award including interim award/s of the arbitrator shall be final and binding on all parties concerned. The arbitrator shall not give any reason for his award including interim order/s. The arbitrator may lay down from time to time the procedure to be followed by him in conducting arbitration proceedings and shall conduct arbitrator in such manner as he considers appropriate." It is also admitted that one of the parties has intended to refer the matter to the Arbitrator which is also one of the four conditions laid down by the Hon’ble Apex Court in the case reported in 2000(4) SCC 539 . Only the addition of a third party to the subsequent suit and relief claimed against him outside the purview of the arbitration agreement cannot forfeit the entire right of the aggrieved party conferred under Section 8 of the Act. It is apparent on the face of record that a part of the plaintiffs claim is outside the domain of the arbitration agreement as well as the learned Arbitrator and so the learned Civil Court can entertain such prayer which is within its jurisdiction. But he cannot altogether deny such right which is not sustainable in law. 9. IN this connection the provisions of Section 16 of the Arbitration and Conciliation Act, 1996 regarding jurisdiction of Arbitral Tribunal is quoted below: "16. Competence of arbitral tribunal to rule on its jurisdiction. (1) 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, - (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. (5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34." 10. FROM the aforesaid provisions of the new Act it is now crystal clear that now the Arbitral Tribunal may rule on its own jurisdiction and may also rule on any objection with respect to the existence or validity of the arbitration agreement and for this purpose he may treat an arbitration clause which forms part of a contract as an agreement independent of the terms of contract. Therefore, at present stage such a question of jurisdiction and the extent of jurisdiction may be determined by the learned Arbitral Tribunal if referred to by the parties in such arbitral proceedings. Therefore, I hold that the rejection of the entire application by the learned Trial Court is not sustainable in law and as such I find that there is sufficient merit in this revisional application which is allowed. The impugned order is set aside. The application filed by the defendant nos. 1 and 2 under Section 5 and 8 of the Arbitration and Conciliation Act, 1996 is allowed. The rights and contentions of the respective parties regarding extent of jurisdiction of the learned Tribunal is left open for consideration by the learned Arbitrator himself keeping in view the ambit of Clause 25 of the hire-purchase agreement quoted above. 1 and 2 under Section 5 and 8 of the Arbitration and Conciliation Act, 1996 is allowed. The rights and contentions of the respective parties regarding extent of jurisdiction of the learned Tribunal is left open for consideration by the learned Arbitrator himself keeping in view the ambit of Clause 25 of the hire-purchase agreement quoted above. After determination of his own jurisdiction the remaining claim of the plaintiff against the defendant no. 3 may be determined by the learned Trial Court in accordance with law if the findings of the learned Arbitrator on such jurisdiction is accepted by both the parties and reaches its finality. 11. INTERIM stay order granted earlier shall stand vacated and the revisional application is thus disposed of.