Research › Search › Judgment

Kerala High Court · body

2014 DIGILAW 110 (KER)

Rubber Board v. Rosin Constructions

2014-02-06

K.HARILAL

body2014
JUDGMENT : K. Harilal, J. Does the mere inclusion of an arbitration clause in the agreement automatically bar jurisdiction or cause to ouster jurisdiction of the civil court, rendering the decree, if passed, null and void. What are the reasons which make a decree null and void? These are the questions that emerge for consideration in this Writ Petition (Civil). 2. The petitioner is the decree holder in E.P. No. 352/2004 and the respondents in E.A. No. 278/09 filed therein by the judgment debtor, who is the 1st respondent herein. The above E.P. was filed for realisation of an amount of Rs.1,42,563/- with 6% interest per annum. In the suit, the respondents filed an application as I.A. No. 2365/1998 under Section 8 of the Arbitration and Conciliation Act, 1996, to refer the matter for arbitration. But, after filing the above application, the respondents did not turn up for contesting the matter on merits. Accordingly, the court below set the respondents ex parte and passed Ext. P1 judgment and Ext. P2 decree. By virtue of Exts. P1 and P2, the petitioner was allowed to realise a sum of Rs.1,42,563/- with interest @ 6% per annum from the date of suit till the realisation together with cost. The petitioner filed the above Execution Petition before the Sub Court, Kottayam, for executing Ext. P2 decree. The Sub Court issued notice to the respondents in the Execution Petition and the 2nd respondent entered appearance and filed Ext. P4 objection. In Ext. P4 objection, the 2nd respondent challenged the maintainability of the E.P., contending that the decree passed in the suit is not an executable one. As per clause 17 of the agreement, the dispute between the petitioner and the respondent has to be resolved through arbitration proceedings. Therefore, in short, the decree passed in violation of the arbitration clause is null and void. The respondents filed E.A. No. 278/2009 under Section 47 of the Code of Civil Procedure, praying to drop the execution proceedings as the E.P. is not maintainable for the above said reasons. After considering the objection raised by the 2nd respondent, the Execution Court passed Ext. P6 order accepting the objection raised by the respondents and dismissed the Execution Petition. The legality, propriety and correctness of the said order are under challenge in this Writ Petition. 3. Sri. After considering the objection raised by the 2nd respondent, the Execution Court passed Ext. P6 order accepting the objection raised by the respondents and dismissed the Execution Petition. The legality, propriety and correctness of the said order are under challenge in this Writ Petition. 3. Sri. Joseph Markos, the learned senior counsel for the petitioner advanced arguments assailing the findings of the court below that the decree sought to be executed is a nullity. According to him, the matter involved in the suit is not a subject matter of the arbitration clause in the agreement entered into between the plaintiff and the defendants. The learned counsel for the petitioner further drew my attention to Section 8 of the Law of Arbitration and Conciliation Act 1996 and pointed out that whether the matter in issue involved in the suit would be a subject of an arbitration agreement is also a disputed and debatable issue, when the petitioner opposes the reference to arbitration. It is a question of fact, for which the application of mind of the court is required under Section 8 of the Arbitration and Conciliation Act 1996. No reference to Arbitrator can be made unless the pre-requisite conditions provided under Section 8 of the said Act are satisfied. The learned senior counsel cited decision in Branch Manager, Magma Leasing and Finance Limited and Another v. Potluri Madhavilata and Another ( (2009) 10 SCC 103 : 2009 SCACTC 517 (SC) : 2009(4) Arb. LR 1 (SC)) to fortify the above point. So, mere inclusion of the arbitration clause does not bar the jurisdiction of the civil court and, it cannot be held that the decree is null and void due to the lack of inherent jurisdiction. But, the court below went wrong and found that the decree sought to be executed is a nullity in view of the mere inclusion of the arbitration clause in the agreement entered into between the plaintiff and defendants. Though the 2nd defendant had entered appearance and filed an objection raising the contentions, he was set ex parte in his absence and the decree sought to be executed was an ex parte decree. The 2nd defendant who was set ex parte at the trial stage cannot turn round and come to the Execution Court, contending that the decree sought to be executed is null and void. 4. The 2nd defendant who was set ex parte at the trial stage cannot turn round and come to the Execution Court, contending that the decree sought to be executed is null and void. 4. Per contra, the learned counsel for the respondents advanced arguments justifying the impugned order. According to him, mere inclusion of the arbitration clause in the agreement automatically bars jurisdiction of the Civil Court Consequently, the decree passed in violation of the arbitration clause is null and void, and that would render the judgment unenforceable. Thus, the Execution Petition is not maintainable under law. The learned counsel further cited the decision in Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleum's ( AIR 2003 SC 2881 : 2003(2) Arb. LR 666 (SC)) to fortify his argument. According to him, where there is an arbitration clause, the civil court has no option, other than referring the matter for arbitration. So, inclusion of arbitration clause is sufficient to cause ouster of jurisdiction of the Civil Court. 5. I have given my anxious consideration to the rival contentions advanced at the Bar. Let us consider the first question in controversy referred above. 6. The nature and extent of the jurisdiction and the bar of jurisdiction of the civil court, are matters enunciated under Section 9 of the Code of Civil Procedure. The maxim "Ubi Jus ibi remedium" is the fundamental principle underlying in Section 9 of the Code of Civil Procedure. According to Section 9 of the Code of Civil Procedure, the civil courts shall have jurisdiction to try all suits of civil nature excepting suits of which their cognizance is either expressly or impliedly barred by any law for the time being inforce. A suit is expressly barred, when it is barred by any enactment for the time being inforce and it is impliedly barred, where the statue specifically provides a specific remedy ousting the jurisdiction of civil court without express exclusion or where the same is barred by general principles of law provided for ousting the jurisdiction of the civil court, even if there is no such express exclusion. 7. Let us examine, Section 8 of the Arbitration and Conciliation Act, 1996 also. It will be worthwhile to quote the Section 8 of the said Act, and to analyse the requirements under the Section. Section 8 of Arbitration and Conciliation Act, 1996 reads as under. "8. 7. Let us examine, Section 8 of the Arbitration and Conciliation Act, 1996 also. It will be worthwhile to quote the Section 8 of the said Act, and to analyse the requirements under the Section. Section 8 of Arbitration and Conciliation Act, 1996 reads as under. "8. Power to refer parties to arbitration where 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. In Branch Manager, Magma Leasing and Finance Limited & Anr. v. Potluri Madhavilata and Anr. ( (2009) 10 SCC 103 ), the Apex Court considered the statutory requirements under Section 8 of the Arbitration and Conciliation Act to refer the dispute to Arbitrator and held as follows: An analysis of Section 8 would show that for its applicability, the following conditions must be satisfied: (a) that there exists an arbitration agreement; (b) that action has been brought to the court by one party to the arbitration agreement against the other party; (c) that the subject-matter of the suit is same as the subject-matter of the arbitration agreement; (d) that the other party before he submits his first statement of the substance of the dispute, moves the court for referring the parties to arbitration; and (e) that along with the application the other party tenders the original arbitration agreement or duly certified copy thereof. Section 8 is in the form of legislative command to the court and once the prerequisite conditions as afore stated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfilment of the conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration. There is nothing on record that the prerequisite conditions of Section 8 are not fully satisfied in the present case. As a matter of fact, on fulfilment of the conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration. There is nothing on record that the prerequisite conditions of Section 8 are not fully satisfied in the present case. The Trial Court, in the circumstances, ought to have referred the parties to arbitration as per arbitration Clause 22. 8. According to this decision, an application of the mind of the court is required to see whether the above said pre-requisite conditions are satisfied or not. If the prerequisite conditions are satisfied, then no option is left to court and the court has to refer the parties to arbitration. What is stated in the decision ipso facto does not cause ouster of jurisdiction, without the application of the mind of the court, and satisfaction thereunder as regards pre-requisite conditions. But, in the instance case there is nothing on record that the pre-requisite conditions of Section 8 are fully satisfied in the present case. 9. In Rajasthan State Road Transport Corporation & Anr. v. Bal Mukunda Bairwa (2009 (1) KLT Suppl. 1194 (SC) : (2009) 4 SCC 299 ) a three-Judge Bench of the Apex Court held that: The mere conferment of special jurisdiction on a tribunal in respect of the said matter does not in itself exclude the jurisdiction of civil courts. The statute may specifically provide for ousting the jurisdiction of civil courts, even if there was no such specific exclusion, if it creates liability not existing before and gives a special and particular remedy for the aggrieved party, the remedy provided by it must be followed. The same principle would apply if the statute had provided for the particular Forum in which the remedy could be had. Even in such cases, the Civil Court's jurisdiction is not completely ousted. A suit in a civil court will always lie to question the order of a Tribunal created by a Statute, even if its order is, expressly or by necessary implication made final, if the said Tribunal abuses its powers or does not act under the Act but in violation of its provisions. In the decision in State of Andhra Pradesh v. Manjeti Laxmi Kantha Rao (dead) by L.R.S. & Ors. In the decision in State of Andhra Pradesh v. Manjeti Laxmi Kantha Rao (dead) by L.R.S. & Ors. ( AIR 2000 SC 2220 ) the Apex Court held that: The normal rule of law is that civil courts have jurisdiction to try all suits of civil nature except those of which cognizance by them is either expressly or impliedly excluded as provided under Section 9 of the Code of Civil Procedure but such exclusion is not readily inferred and the presumption to be drawn must be in favour of the existence rather than exclusion of jurisdiction of the civil courts to try a civil suit. The test adopted in examining such a question is (i) whether the legislative intent to exclude arises explicitly or by necessary implication, and (ii) whether the statute in question provides for adequate and satisfactory alternative remedy to a party aggrieved by an order made under it. 10. The learned counsel for the respondents placed reliance on AIR 2003 SC 2881 , (supra) and drew my attention to the finding that in a case where there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of the agreement; so the inclusion of arbitration clause amounts to an implied ouster of jurisdiction. But it was a case wherein, one of the parties filed an application under Section 8 of the Arbitration and Conciliation Act along with the copy of the agreement containing arbitration clause and urged for referring the matter to Arbitrator; but the court below rejected the said prayer on merits. In short, it was a case wherein prerequisite condition under sub-sections (1) and (2) of Section 8 of the said Act were satisfied. But in the instance case he was set ex parte. In the above decision nowhere it is stated that the civil court shall not have jurisdiction to try a suit, when there is an arbitration clause in the agreement, and inclusion of arbitration clause in the agreement automatically bar jurisdiction of the civil court. The decision in AIR 2003 SC 2881 , (supra) cannot be taken isolatedly and interpreted to mean that the said decision makes automatic exclusion of jurisdiction of the civil court merely on the reason that reference to Arbitrator is made obligatory. It becomes obligatory, when the pre-requisite conditions are satisfied. The decision in AIR 2003 SC 2881 , (supra) cannot be taken isolatedly and interpreted to mean that the said decision makes automatic exclusion of jurisdiction of the civil court merely on the reason that reference to Arbitrator is made obligatory. It becomes obligatory, when the pre-requisite conditions are satisfied. It cannot be equated with the exclusion or ouster of jurisdiction of the civil court, particularly in the light of the latest decision in Branch Manager, Magma Leasing And Finance Limited & Anr. v. Potluri Madhavilata & Anr. ( 2009 10 SCC 103 ). In this decision, the Apex Court held that reference can be made, where pre-requisite conditions as stipulated under sub-sections (2) and (3) of Section 8 of the Arbitration and Conciliation Act are satisfied. Put it differently, reference to Arbitrator is obligatory if pre-requisite conditions under sub-sections (1) and (2) of Section 8 of the Arbitration and Conciliation Act are satisfied. Automatic exclusion of jurisdiction shall not be readily inferred on the mere inclusion of arbitration clause in view of the above said decision also. 11. Here, I must remember that according to Section 5, of the Arbitration and Conciliation Act, not withstanding anything contained in any law for the time being in force, in matters governed by Part I, no judicial authority shall intervene except where so provided in Part I. This Section does not absolutely bar the jurisdiction of the Civil Court; but makes the intervention wherever so provided in Part I only i.e., the scope of intervention seems to be minimized in the new Act. Here also no ouster or express exclusion of the jurisdiction of the civil court; but the scope of jurisdiction is made restricted. The legislature in its wisdom did not think it fit to make absolute exclusion of the jurisdiction of the Civil Court. 12. The next question is, what are the reasons which make a decree null and void? Here also no ouster or express exclusion of the jurisdiction of the civil court; but the scope of jurisdiction is made restricted. The legislature in its wisdom did not think it fit to make absolute exclusion of the jurisdiction of the Civil Court. 12. The next question is, what are the reasons which make a decree null and void? The scope and extent of the jurisdiction of the execution court under Section 47 of the Civil Procedure Code in the matter of execution of a decree passed in nullity was considered by the larger bench of this Court in Antony v. Thandiyode Plantations (Pvt.) Ltd., 1995 (2) KLT 512 (FB)) held as follows: The executing court can go behind a decree only if there was lack of inherent jurisdiction and not on the ground that there was erroneous exercise of jurisdiction. It will not be open to a party to challenge a judgment when it is sought to be enforced on the ground that the judgment is based on wrong conclusions or on erroneous findings or on wrong application of law. As the remedy of the aggrieved party in such cases is to challenge the same in appeal or revision as the case may be and not to challenge it when it is sought to be enforced. 13. The above view is supported by the decision in Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman & Ors. (1970) 1 SCC 670 ) as follows: When a decree which is a nullity, for instance, where it is passed without bringing the legal representative on the record of a person who was dead at the date of the decree, or against a ruling prince without a certificate, is sought to be executed an objection in that behalf may be raised in a proceeding for execution. Again, when the decree is made by a Court which has no inherent jurisdiction to make objection as to its validity may be raised in an execution proceeding if the objection appears on the face of the record where the objection as to the jurisdiction of the Court to pass the decree does not appear on the face of the record and requires examination of the questions raised and decided at the trial or which could have been but have not been raised, the executing Court will have no jurisdiction to entertain an objection as to the validity of the decree even on the ground of absence of jurisdiction. 14. In the light of the above decisions, it can be held that where the objection as to the jurisdiction of the court to pass the decree does not appear on the face of the record and requires examination of the questions raised and decided at the trial or which could have been but have not been raised, the executing court will have no jurisdiction to entertain an objection as to the validity of the decree even on the ground of absence of jurisdiction. The executing court can go behind the decree and find a decree in executable, only if the decree was passed in lack of inherent jurisdiction and cannot be on the ground that judgment was based on wrong conclusion and decree was passed in erroneous exercise of jurisdiction. 15. In the light of the above analysis, I hold that mere inclusion of an arbitration clause in an agreement does not ipso facto or automatically cause to ouster or barring the jurisdiction of civil court rendering the decree, if passed, a nullity. The exclusion of civil court jurisdiction shall not be readily inferred under Section 8 of the Arbitration and Conciliation Act. Put it differently, it cannot be held that the decree was passed in nullity due to lack of inherent jurisdiction and thereby the decree is not an executable one. 16. Coming to the instance case, going by the impugned order, the learned Additional Sub Judge observed that though the defendant had not filed a written statement, and he was set ex parte and an ex parte decree was passed. 16. Coming to the instance case, going by the impugned order, the learned Additional Sub Judge observed that though the defendant had not filed a written statement, and he was set ex parte and an ex parte decree was passed. After setting him ex parte he had filed an interlocutory application stating that the matter involved in the suit is subject of arbitration under the agreement and thus Civil Court has no jurisdiction to try the suit. According to the judgment debtor, the decree passed without considering that matter even as a preliminary issue is sufficient to arrive at a finding that the decree was passed in nullity, though the defendant was set ex parte. I am unable to accept the above findings of the court below. In the light of the above decision, I am of the opinion that jurisdiction of the Civil Court was an issue ought to have been examined at the trial side particularly in view of the fact that the defendant was set ex parte and an ex parte decree was sought to be executed. The decree passed in such circumstance cannot be held to be a nullity; but at the most it may be an erroneous exercise of the jurisdiction only. It cannot be held that there was a lack of jurisdiction, rendering the decree null and void. The judgment debtor ought to have filed an application to set aside the ex parte order or appealed against the decree passed, ex parte and he could have satisfied the Trial Court or the appellate court that the matter requires reference under the arbitration clause as the pre-requisite conditions required for reference to arbitrator under Section 8 of the Act are satisfied. But the executing court has exceeded its jurisdiction conferred under Section 47 of the Civil Procedure Code i.e., the executing court went behind the decree and examined the sustain ability of the decree. 17. Therefore, the decree cannot be held to be a nullity and the same is an enforceable decree. Consequently, I set aside the impugned order under challenge and executing court is directed to restore the Execution Petition on the files and proceed in accordance with the law. The WP (C) is allowed. Writ Petition allowed.