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2015 DIGILAW 1175 (KAR)

G. R. Amarnath v. M. N. Narasimha Murthy Naik

2015-10-09

B.V.NAGARATHNA, SUBHRO KAMAL MUKHERJEE

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Judgment This is an appeal under Section 4 of the Karnataka High Court Act, 1961, challenging the judgment and order dated September 11, 2014, passed by the Hon’ble Single Judge in Writ Petition No.44184 of 2014. 2. The plaintiff No.1 instituted Original Suit No.132 of 2013 before the learned Additional Senior Civil Judge, Second Court at Tumkur, inter alia, for a decree for declaration and perpetual injunction. 3. In the suit the defendants entered appearance and took out an application under Section 8 of the Arbitration and Conciliation Act, 1996, contending, inter alia, that there is an arbitration agreement between the parties and, therefore, the parties should be referred to arbitration. 4. The learned trial judge accepted the prayer of the defendant No.2 who filed the application under the said Section 8 and referred the parties to arbitration. The learned judge, also, recorded that the suit has been disposed of. 5. It seems that there is some confusion prevailing. There is a marked difference between the provisions of the Arbitration Act, 1940 and the Arbitration and Conciliation Act, 1996. 6. Section 34 of the 1940 Act and Section 8 of the 1996 Act read as under: “34 Power to stay legal proceedings where there is an arbitration agreement where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings.” “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 subsection (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 subsection (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.” 7. The 1996 Act makes a radical change from the 1940 Act. Under Section 34 of the 1940 Act, the court could not automatically refer the dispute to an Arbitral Tribunal. After finding that there was no sufficient reason that the dispute should not be referred and no step in relation thereto was taken by the applicant, the court could stay the suit. Section 8 of the 1996 Act contemplates some departure from Section 34 of the 1940 Act. While the said Section 34 contemplated stay of the suit, the said Section 8 mandates a reference. Exercise of discretion by the court has been taken away completely. The reference is now mandatory. 8. We could profitably look into the decisions of the Supreme Court of India in P. ANAND GAJAPATHI RAJU AND OTHERS versus P.V.G. RAJU (DEAD) AND OTHERS reported in (2000) 4 SCC 539 , KALPANA KOTHARI (SMT) versus SUDHA YADAV (SMT) AND OTHERS reported in (2002) 1 SCC 203 , HINDUSTHAN PETROLEUM CORPORATION LIMITED versus PINKCITY MIDWAY PETROLEUMS reported in (2003) 6 SCC 503 and RASHTRIYA ISPAT NIGAM LIMITED AND ANOTHER versus VERMA TRANSPORT COMPANY reported in (2006) 7 SCC 275 on the aforesaid aspect of the matter. 9. Section 34 of the Arbitration Act, 1940, contemplates stay of suit at the discretion of the trial court. If the power is exercised, the suit is permanently stayed. Nevertheless, there was no bar to deal with interlocutory applications in the suit. Under Section 39 of the said Act, provision was made to file an appeal against an order staying or refusing to stay legal proceedings where there was an arbitration agreement. If the power is exercised, the suit is permanently stayed. Nevertheless, there was no bar to deal with interlocutory applications in the suit. Under Section 39 of the said Act, provision was made to file an appeal against an order staying or refusing to stay legal proceedings where there was an arbitration agreement. Section 8, of the Arbitration and Conciliation Act, 1996, on the contrary, is on a different footing. No discretion is left with the trial court. If there has been an arbitration agreement, the court is bound to refer the parties to arbitration, provided, however, the requirements of said Section 8 are satisfied. With the order referring the parties to arbitration, a suit is neither disposed of nor stayed, but, it becomes non est. The parties are relegated before the arbitral tribunal. 10. No appeal is provided against such an order under the provisions of the 1996 Act. Therefore, it is not necessary for the parties aggrieved to wait till the award is passed by the arbitral tribunal and to challenge the order referring the parties to the arbitration or to seek a reference before the arbitrator himself to rule on his jurisdiction under Section 16 of the said Act. 11. As no appeal is provided in the Arbitration and Conciliation Act, 1996 against an order passed under Section 8 of the Act and as the trial court where the suit is filed is subordinate to the High Court, certainly, petition under Article 227 of the Constitution of India is maintainable before this Court. Moreover, under Article 227 of the Constitution of India the power may, in proper cases, be exercised suo moto, that is, without any application from the party aggrieved. The jurisdiction under Article 227 of the Constitution of India cannot be taken away by legislation as the power vested in the High Court under Article 227 of the Constitution of India is part of basic structure of the Constitution of India. 12. Although, the Hon’ble Single Judge dismissed the writ petition under Article 227 of the Constitution of India, inter alia, on a presumption that the suit was disposed of, we are unable to entertain the appeal, in view of a Full Bench decision of this Court in TAMANNA AND OTHERS versus MISS RENUKA AND OTHERS reported in ILR 2009 KARNATAKA 1207. Although, the Hon’ble Single Judge dismissed the writ petition under Article 227 of the Constitution of India, inter alia, on a presumption that the suit was disposed of, we are unable to entertain the appeal, in view of a Full Bench decision of this Court in TAMANNA AND OTHERS versus MISS RENUKA AND OTHERS reported in ILR 2009 KARNATAKA 1207. It has been held that no appeal would lie under Section 4 of the Karnataka High Court Act, 1961, against the order of the Hon’ble Single Judge passed in exercise of the power conferred under Article 227 of the Constitution of India in a matter arising against an order made deciding an issue, passed by the court subordinate to the High Court, in the course of a suit or other proceeding not finally disposed of, and where it does not attract Section 115 of the Code of Civil Procedure, 1908. Therefore, we are dismissing the writ appeal as not maintainable. However, we expressly reserve the right of the parties to take appropriate recourse before the appropriate forum, including filing of a review petition, in accordance with law. We make no order as to costs.