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2015 DIGILAW 1120 (HP)

Ram Transport Finance Co. Ltd. v. Krishan Lal

2015-08-18

TARLOK SINGH CHAUHAN

body2015
JUDGMENT : Tarlok Singh Chauhan, J. The petitioner has invoked the jurisdiction of this Court under Article 227 of the Constitution of India taking exception to the order dated 4.4.2014 passed by learned Civil Judge (Junior Division), Kandaghat, District Solan, H.P. in CMA No. 46-K/6 of 2014 whereby he dismissed the application filed by the petitioner under Section 8 read with Section 5 of the Arbitration and Conciliation Act, 1996 (for short ‘Act’) for referring the matter to the arbitral Tribunal. 2. The respondent/plaintiff filed a suit against the petitioner /defendant under Sections 38 and 39 of the Specific Relief Act for permanent prohibitory and mandatory injunction and claimed the following reliefs: “(i) A decree for permanent prohibitory injunction may kindly be passed in favour of the present plaintiff and against the defendant, restraining the defendant from lifting/taking the vehicle No. HP-13-0986 from the possession of the plaintiff forcibly and from putting the same for sale either by himself or through their employee, officials, agents, servants and representatives etc. in the interest of justice. (ii) Further a decree for mandatory injunction may kindly be passed in favour of the plaintiff and against the defendant directing the defendant to supply and disclose the exact statement of loan account of the plaintiff and show correct total outstanding loan amount in the loan account of the plaintiff intends to one time settlement with the defendant and also issue to NOC regarding the clearance of the loan taken by the plaintiff in the interest of justice.” 3. The petitioner filed an application under Section 8 read with Section 5 of the Act for referring the dispute to the Arbitration in terms of the Clause 15 of the loan agreement. The learned Court below rejected the application on the ground that the relief claimed in the suit did not dispute or even question the agreement entered into between the parties on 31.3.2011 and, therefore, the dispute being independent of the agreement arrived at between the parties could not be referred to the arbitration. 4. This order has been questioned on number of grounds as taken in the memorandum of the petition. 5. I have heard learned counsel for the parties and have gone through the records of the case carefully. 6. The Loan-cum-Hypothecation Agreement is not disputed even by the respondent and Clause 15 thereof reads as under: “15. 4. This order has been questioned on number of grounds as taken in the memorandum of the petition. 5. I have heard learned counsel for the parties and have gone through the records of the case carefully. 6. The Loan-cum-Hypothecation Agreement is not disputed even by the respondent and Clause 15 thereof reads as under: “15. Arbitration: All disputes, differences and/or claims arising out of these presents or as to the construction, meaning or effect here of or as to the rights and liabilities of the parties hereunder shall be settled by arbitration to be held in Ludhiana in accordance with the provisions of the Arbitration and Conciliation Act, 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/appointed by Shriram. In the event of death, refusal, neglect, inability or incapability of the persons so appointed to act as an arbitrator, Shriram may appoint a new arbitrator. The award including the interim awards of the arbitrator shall be final and binding on all parties concerned. The arbitrator may lay down from time to time the procedure to be followed by him in conducting arbitration proceedings and shall conduct arbitration proceedings in such manner as he considers appropriate. Any proceedings to be initiated in any court of law in pursuance of this arbitration shall be instituted and held in the Court at Ludhiana only.” 7. In the event of the borrower i.e. the defendant committing any act of default, Clause 6 of the agreement comes into operation which apart from creating other rights in favour of the petitioner also creates its right to take possession of the assets as is evident from the perusal of Clause 6 (b), which reads thus: “6(b). In the event of the borrower i.e. the defendant committing any act of default, Clause 6 of the agreement comes into operation which apart from creating other rights in favour of the petitioner also creates its right to take possession of the assets as is evident from the perusal of Clause 6 (b), which reads thus: “6(b). Repossession of Asset: To take possession of the hypothecated assets from where so ever it may be and remove the hypothecated asset including all accessories, bodywork and fittings and for the said purpose, it shall be lawful for Shriram or Shriram authorized representatives, servants, officers and agents forthwith or at any time and without notice to the Borrower to enter upon the premises, or factory, office, garage or godown where the hypothecated assets shall be lying or kept and to take possession or recover or receive the same and if necessary to break open such place of storage; Shriram will be within its rights to use a tow-van to carry away the assets. Any damage to the land or building or factory, office, godown or other equipment/assets kept there, caused by removal of the asset shall be the sole responsibility of the Borrower. Shriram shall be authorized to cause any operations involving the asset to be stopped in order to take possession of the hypothecated asset. Shriram shall not be liable for any damage or loss caused to the Borrower on account of the same.” 8. The moot question, therefore, is as to whether the respondent/plaintiff by clever drafting of the plaint purporting to be a suit for injunction can avoid the conditions as incorporated in the agreement including Clause 15 providing for arbitration and Clause 6 granting certain rights to the petitioner in the event of default of the respondent including its right to take over possession of the assets. 9. It is more than settled that clever drafting, illusions of cause of action are not permitted in law and a clear right to sue should be shown in the plaint. 9. It is more than settled that clever drafting, illusions of cause of action are not permitted in law and a clear right to sue should be shown in the plaint. The respondent though has innocently claimed that the suit was simpliciter for injunction but the intent thereof is only to tide over and defeat Clause 6 of the agreement, which as noticed above apart from creating any rights in favour of the petitioner also creates a right to take repossession of the assets in the event of the borrower i.e. the respondent committing any act of default. 10. That apart, once the respondent does not dispute the existence of a loan agreement, then the relationship inter se them would be governed only by the agreement and the respondent could not have resorted to a pre-emptary and preventive action by resorting to the provisions of the Specific Relief Act so as to defeat the applicability of Clause-6 (supra). The suit in such circumstances would, therefore, ordinarily be not maintainable in view of the arbitration clause as contained in Clause 15 of the agreement. 11. It only those suits which are outside the purview of the arbitration clause for example, damages etc. that could be maintained by the plaintiff, but in no event a suit claiming injunction so as to defeat the provisions of Clause-6 of the agreement could be maintained. 12. Learned senior counsel for the respondent would then argue that after filing of the petition before this Court, the petitioner has filed its written statement, therefore, the instant petition is not maintainable since the petitioner has already submitted its defence. Notably, the learned counsel for the petitioner has not disputed the filing of the written statement. 13. The Hon’ble Supreme Court in Rashtriya Ispat Nigam Limited and another vs.Verma Transport Co. (2006) 7 SCC 275 has held that the expression “first statement on the substance of the dispute” contained in Section 8 (1) of the 1996 Act must be contradistinguished with the expression “written statement”. It was held that it implies submissions of the party to the jurisdiction of the judicial authority. It was further held that if an application is filed before actually filing the first statement on the substance of the dispute, the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the Court. It was held that it implies submissions of the party to the jurisdiction of the judicial authority. It was further held that if an application is filed before actually filing the first statement on the substance of the dispute, the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the Court. It was held that in view of the changes brought about by the 1996 Act, what is necessary is disclosure of the entire substance in the main proceeding itself and not taking part in the supplemental proceedings. It was also held that waiver of a right on the part of a defendant to the lis must be gathered from the fact situation obtaining in each case. In the case before the Hon’ble Supreme Court, the court had already passed an interim ex parte injunction and the appellants were bound to respond to the notice issued by the Court and while doing so, they raised a specific plea of bar of the suit in view of the existence of an arbitration agreement. It was further held that filing of a reply to the injunction application could not have been a ground to refuse to entertain the plea taken by the appellants that the suit should be referred to the Arbitral Tribunal. It was held as under: “33. Filing of a reply to the injunction application could also not have been a ground to refuse to entertain the plea taken by the Appellants that the suit should be referred to arbitral tribunal particularly when in its reply to injunction application, the appellant categorically stated : "1. That the present application under Order 39 Rules 1 and 2 read with Section 151 CPC is liable to be dismissed on the short ground that the plaintiff has himself admitted the existence of the arbitration clause and therefore, the present application under Order 39 Rules 1 and 2 read with Section 151 CPC is not maintainable and consequently the order of this Hon'ble Court is liable to be vacated." 36. The expression 'first statement on the substance of the dispute' contained in Section 8(1) of the 1996 Act must be contra-distinguished with the expression 'written statement'. It employs submission of the party to the jurisdiction of the judicial authority. The expression 'first statement on the substance of the dispute' contained in Section 8(1) of the 1996 Act must be contra-distinguished with the expression 'written statement'. It employs submission of the party to the jurisdiction of the judicial authority. What is, therefore, is needed is a finding on the part of the judicial authority that the party has waived his right to invoke the arbitration clause. If an application is filed before actually filing the first statement on the substance of the dispute, in our opinion, the party cannot be said to have waived his right or acquiesced himself to the jurisdiction of the court. What is, therefore, material is as to whether the petitioner has filed his first statement on the substance of the dispute or not, if not, his application under Section 8 of the 1996 Act, may not be held wholly unmaintainable. We would deal with this question at some details, a little later. 38. In Janki Saran Kailash Chandra (supra), an application for time to file written statement was considered to be a step in the proceedings. We have noticed hereinbefore the respective scope of Section 34 of the 1940 Act vis-a-vis the scope of Section 8 of the 1996 Act. In view of the changes brought about by the 1996 Act, we are of the opinion that what is necessary is disclosure of the entire substance in the main proceeding itself and not taking part in the supplemental proceeding. 39. By opposing the prayer for interim injunction, the restriction contained in sub-section (1) of Section 8 was not attracted. Disclosure of a defence for the purpose of opposing a prayer for injunction would not necessarily mean that substance of the dispute has already been disclosed in the main proceeding. Supplemental and incidental proceeding are not part of the main proceeding. They are dealt with separately in the Code of Civil Procedure itself. Section 94 of the Code of Civil Procedure deals with supplemental proceedings. Incidental proceedings are those which arise out of the main proceeding. In view of the decision of this Court in Food Corporation of India (supra), the distinction between the main proceeding and supplemental proceeding must be borne in mind. 40. Section 94 of the Code of Civil Procedure deals with supplemental proceedings. Incidental proceedings are those which arise out of the main proceeding. In view of the decision of this Court in Food Corporation of India (supra), the distinction between the main proceeding and supplemental proceeding must be borne in mind. 40. We may notice that a distinction has been made between supplemental proceedings and incidental proceedings by one of us in Vareed Jacob v. Sosamma Geevarghese and Others [(2004) 6 SCC 378].” 14. In Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited and others (2011) 5 SCC 532 it was held that mere filing of objections/counter affidavit opposing application for interim relief does not amount to a statement on substance of dispute. It was held as under: “25. Not only filing of the written statement in a suit, but filing of any statement, application, affidavit filed by a defendant prior to the filing of the written statement will be construed as `submission of a statement on the substance of the dispute', if by filing such statement/application/affidavit, the defendant shows his intention to submit himself to the jurisdiction of the court and waive his right to seek reference to arbitration. But filing of a reply by a defendant, to an application for temporary injunction/attachment before judgment/appointment of Receiver, cannot be considered as submission of a statement on the substance of the dispute, as that is done to avoid an interim order being made against him. 28. In this case, the counter affidavit dated 15.12.1999, filed by the appellant in reply to the notice of motion (seeking appointment of a receiver and grant of a temporary injunction) clearly stated that the reply affidavit was being filed for the limited purpose of opposing the interim relief. Even in the absence of such a disclaimer, filing a detailed objection to an application for interim relief cannot be considered to be submission of a statement on the substance of the dispute resulting in submitting oneself to the jurisdiction of the court." 15. From the aforesaid exposition of law it can conveniently be held that filing of written statement would amount to “submission of a suit on the substance of the dispute” whereby the petitioner has shown its intention to submit itself to the jurisdiction of the Court and has thereby waived its right to seek reference to the arbitration. From the aforesaid exposition of law it can conveniently be held that filing of written statement would amount to “submission of a suit on the substance of the dispute” whereby the petitioner has shown its intention to submit itself to the jurisdiction of the Court and has thereby waived its right to seek reference to the arbitration. Therefore, the matter was although arbitrable and was required to be referred to the arbitration, but the petitioner by filing the written statement has shown its intention to submit itself to the jurisdiction of the Court and thereby waived its right to seek reference to arbitration. 16. Having said so, I find no merit in this petition and the same is dismissed, leaving the parties to bear their own costs. Interim order dated 7.10.2014 is vacated. Pending application(s) if any, stands disposed of.