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2014 DIGILAW 3107 (MAD)

M. Vijaya v. Dinesh Kumar

2014-09-04

S.VIMALA

body2014
Judgment Even where the parties might have agreed upon arbitration as the forum for settlement of their disputes, by the very nature of the dispute where the cause or dispute is claimed to be inarbitrable, whether the Court is bound to refer / refuse to refer, the matter to arbitration? 1.1. When the concept of separability of the arbitration agreement from the underlying contract has been statutorily recognised under Section 16 of The Arbitration Act, 1996,whether the reference to arbitration can be claimed to be invalid, when the validity and the enforceability of under relying contract alone is challenged? 1.2. Where the dispute raised (suit for injunction), is covered by the Specific Relief Act, which did not contain any exclusionary clause for the arbitral jurisdiction, whether the reference to arbitration can be claimed to be invalid? 2. The plaintiff is the Revision Petitioner. These are the issues raised in this revision petition 2.1. The plaintiff filed the suit in O.S.No.3366 of 2010 against respondents 1 to 3 / defendants 1 to 3 and one Srinivasalu, seeking the relief of injunction restraining the defendants from interfering with the peaceful possession and enjoyment of the property and dispossessing the plaintiff from the property without due process of law. 2.2. Defendants 1 to 3 filed a petition, under Section 8 of The Arbitration and Conciliation Act, 1996, (hereinafter will be referred to as "the Act") in I.A.No.16856 of 2010 in O.S.No.3366 of 2010, praying to refer the case to arbitration for resolving the dispute and consequently, to dismiss the suit. 2.3. In the supporting affidavit filed in support of the said Interlocutory Application, it is stated by defendants 1 to 3 that the plaintiff, along with his co-owners, entered into an agreement, dated 18.12.2007, agreeing to sell the suit property in favour of defendants / petitioners therein, and the agreement provides that all disputes and differences between the parties shall be resolved by arbitration under the provisions of the Act. 2.4. The Court, by the order, dated 24.11.2010, allowed the said Interlocutory Application. Challenging the same, this Civil Revision Petition has been filed. 3. The main contentions of the learned counsel for the Revision Petitioner / plaintiff are as under:- (i) There was no consensus Ad Idem between the petitioner and the respondents herein towards the execution of alleged sale agreement and therefore, Section 8 of the Act would not apply. Challenging the same, this Civil Revision Petition has been filed. 3. The main contentions of the learned counsel for the Revision Petitioner / plaintiff are as under:- (i) There was no consensus Ad Idem between the petitioner and the respondents herein towards the execution of alleged sale agreement and therefore, Section 8 of the Act would not apply. (ii) The signature in the agreement was obtained by the fourth defendant by misrepresentation, but he has not been made as a party in the petition (I.A.No.16856 of 2010) filed under Section 8 of the Act. (iii) Suit in O.S.No.3366 of 2010 had been filed for the relief of injunction and it is not a suit for declaration as to the validity or otherwise of the agreement of sale and therefore, the agreement cannot be relied upon. 4. In order to appreciate the contentions raised, it is necessary to look into clause 11 of the sale agreement, dated 18.12.2007, which reads as follows:- "11. All Controversies, disputes, differences, claims, claims in tort arising out of or in connection with or in relation to this contract including its existence, validity or termination(emphasis supplied by the court) shall be referred to and finally resolved by arbitration of Sole Arbitrator nominated by the Counsel of National and International Commercial Arbitration (CNICA)....." 5. A perusal of the terms and conditions of the agreement, especially, Clause 11, would go to show that, Clause 11 is a comprehensive one, i.e., it is an all encompassing clause, providing for resolution of all the disputes, differences, claims and controversies, which would arise, not only with reference to terms of the sale agreement, but also disputes arising out of or in connection with or in relation to this sale agreement. It is also with reference to its existence, validity or termination. 6. Contenting that despite the existence of arbitration clause, in the sale agreement, it cannot be referred to arbitration, the learned counsel for the revision petitioner relies upon the decision reported in AIR 2014 SUPREME COURT 1534 (Ranjit Kumar Bose v. Anannya Chowdhury). 6.1. That was a case where there was an eviction dispute between landlord and tenants. 6. Contenting that despite the existence of arbitration clause, in the sale agreement, it cannot be referred to arbitration, the learned counsel for the revision petitioner relies upon the decision reported in AIR 2014 SUPREME COURT 1534 (Ranjit Kumar Bose v. Anannya Chowdhury). 6.1. That was a case where there was an eviction dispute between landlord and tenants. Section 6 of the West Bengal Premises Tenancy Act (37 of 1997), which begins with a non-obstantive clause provides that, notwithstanding anything to the contrary contained in any other law, for the time being in force, or in any contract, no order or decree or the recovery of possession of any premises shall be made by the Civil Judge, having jurisdiction in favour of the landlord against the tenant, except on a suit being instituted by such landlord on one or more of the following grounds:- .......... Considering the words, "notwithstanding anything in any contract" in Section 6 of the Tenancy Act, it was held that Section 6 of the Tenancy Act would override the arbitration clause in the arbitration agreement. That was not the case here. 6.2. The Specific Relief Act, under which the dispute (suit for injunction), has been raised before the court did not contain any exclusionary clause for the arbitral jurisdiction i.e no provision under The Specific Relief Act, provide for overriding the arbitration clause in the arbitration agreement. 7. Yet another decision relied upon by the learned counsel for the petitioner / plaintiff is the one reported in 2010 (2) CTC 327 : (2010) 1 SCC 72 (N.Radhakrishnan v. Maestro Engineers), whereunder it has been held that cases (accounts of the partnership firm) in which serious allegations of fraud are made, those matters cannot be dealt with properly by the arbitrator. 7.1. This decision, i.e., N.Radhakrishnan's casehas been considered by the Hon 'ble Supreme Court in the case of Swiss Timings Limited v. Organizing Committee, Common Wealth Games, 2010, reported in 2014 (7) SCALE 515 : (2014) 6 SCC 677 (relied upon by the learned counsel for the respondents / defendants), decided on 28.05.2014, and in the said case, it has been held that N.Radhakrishnan's case, cited supra,is per incuriam on two grounds: (i) Firstly, the judgment in Hindustan Petroleum Corporation Limited, though referred, has not been distinguished, but at the same time, is not followed also. (ii) Secondly, Section 16 of the Arbitration Act, 1996, was not brought to the notice of this Court. 7.2. It would be appropriate to quote Section 16 of THE ARBITRATION AND CONCILIATION ACT, 1996 "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. (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. 7.3. Therefore when the clause providing for arbitrarion (which forms part of a contract) shall be treated as an agreement, independent of the other terms of the contract, then just because the agreement to sell is disputed, reference to arbitration cannot be declined. 8. 7.3. Therefore when the clause providing for arbitrarion (which forms part of a contract) shall be treated as an agreement, independent of the other terms of the contract, then just because the agreement to sell is disputed, reference to arbitration cannot be declined. 8. Contending that the term "arbitrability" has different meanings in different contexts and that there are three facets of arbitrability relating to the jurisdiction of Arbitral Tribunal and the dispute raised herein will not fall under the scope of Arbitral Tribunal, the decision reported in (2011) 5 Supreme Court Cases 532 (Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and others) is relied upon by the learned counsel for the petitioner / plaintiff:- "34. ....: (i) Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts). (ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the 'excepted matters' excluded from the purview of the arbitration agreement. (iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim and the counter claim filed before the arbitral tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of arbitration agreement, will not be 'arbitrable' if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such joint list of disputes, does not form part of the disputes raised in the pleadings before the arbitral tribunal." 8.1. Normally, all disputes relating to rights in personam are considered to be fit for arbitration and all disputes relating to rights in rem are considered to be not fit/amenable to the jurisdiction of arbitration. However, there are exceptions to it. 8.2. The Act does not specifically exclude any category of dispute as being not arbitrable. Normally, all disputes relating to rights in personam are considered to be fit for arbitration and all disputes relating to rights in rem are considered to be not fit/amenable to the jurisdiction of arbitration. However, there are exceptions to it. 8.2. The Act does not specifically exclude any category of dispute as being not arbitrable. The well recognised examples of non-arbitrable disputes have been catelogued in paragraph 36 of Booz Allen's case, cited supra, which reads thus: "36. The well recognized examples of non-arbitrable disputes are : (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes." 8.3. Every civil or commercial dispute either contractual or non-contractual is capable of being adjudicated by arbitration unless the jurisdiction of arbitrial tribunal is excluded expressly or by necessary implication. 8.4. This dispute is a civil dispute arising out of a commercial sale agreement. The existence of sale agreement is not under dispute, but the validity and enforceability of the agreement is in dispute. 9. Further, it is not the case of the petitioner / plaintiff that this dispute will fall under the excepted matters which are excluded from the purview of the arbitration agreement. But, it is the case of the plaintiff that even though the subject matter of the dispute is the one falling within the scope of arbitration agreement, it will not be arbitrable, as the relief sought for in the suit is not for specific performance, but for the relief of injunction. 10. Whether this contention could be accepted is the issue to be considered. 11. Admittedly, O.S.No.3366 of 2010 contains pleadings with reference to the alleged sale agreement in paragraphs 6, 7 and 9 of the plaint. The execution of sale agreement is admitted. But the contention is that, the fourth defendant got the signature from the plaintiff by misrepresentation that he is arranging to obtain home loan from the Government. The relevant lines read as under:- "4. .... The execution of sale agreement is admitted. But the contention is that, the fourth defendant got the signature from the plaintiff by misrepresentation that he is arranging to obtain home loan from the Government. The relevant lines read as under:- "4. .... It is not in dispute that the plaintiff herein is also one of the signatory to the agreement...." 11.1. The further allegation is that, the fourth defendant has been compelled by defendants 1 to 3 to prepare the plaintiff to execute the sale deed in their favour. But in the relief portion, the plaintiff has sought for only injunction restraining the defendants from interfering with the possession and enjoyment of the property. The relief with regard to the invalidity of the sale agreement as claimed in the pleadings, has been omitted in paragraph 9. Having regard to the sum and substance of the plaint, one would expect the relief regarding the sale agreement as such, more especially when it is stated in paragraph 7 of the plaint that the fourth defendant, along with other defendants, had got the sale deed executed baring the plaintiff. 11.2. Sensing that, any prayer directly pertaining to the sale agreement would lead to the consequence of the dispute being preferred to arbitration, no relief has been asked with reference to validity or otherwise of the sale agreement. The plaint has been couched in such a language and the relief sought for has been phrased in such a manner that it would appear as though the subject matter of the suit is with reference to the right of the plaintiff to be in possession of the property and not with reference to sale agreement. 11.3. A perusal of the entire plaint would go to show that the relief sought for cannot be granted, without considering the validity and enforceability of the agreement. 11.4. True, it is that, without filing the suit for specific performance, defendants cannot make any claim over the property, by having the sale agreement alone in their favour. The sale agreement does not involve any transfer of right in rem, but creates only a personal obligation. 11.4. True, it is that, without filing the suit for specific performance, defendants cannot make any claim over the property, by having the sale agreement alone in their favour. The sale agreement does not involve any transfer of right in rem, but creates only a personal obligation. Equally, when the defendants are armed only with an agreement, which does not create any right in rem, then, the defendants cannot also throw away the plaintiff from the suit property, unless possession had already been handed over as per the terms and conditions of the agreement. 12. Under such circumstances, the suit for injunction filed, without seeking any relief with reference to the sale agreement, is only an attempt to thwart the dispute being taken to arbitration. Therefore, the contention that the dispute is inarbitrable cannot be accepted. 13. To shut out the arbitration at the initial stage would destroy the very purpose for which the parties had entered into arbitration. Even assuming that the sale agreement is not enforceable, the concept of separability of the arbitration agreement from the underlying contract has been statutorily recognised under Section 16 of The Arbitration Act, 1996. Therefore, the order passed by the Court below, referring the matter to arbitration, is perfectly valid and did not require any interference. 14. In the result, this Civil Revision Petition is dismissed. No costs. Consequently, the connected MP is closed.