Research › Search › Judgment

Gauhati High Court · body

2015 DIGILAW 1501 (GAU)

Hatigarh Tea Estate Limited v. Ajit Chaliha

2015-12-08

N.CHAUDHURY

body2015
JUDGMENT : This is an application under section 115 read with section 151 of the Code of Civil Procedure challenging the order dated 16.02.2004 passed by the learned Civil Judge (Senior Division), Dibrugarh dismissing the application filed under section 8 of the Arbitration and Conciliation Act, 1996. 2. The opposite party herein, as plaintiff, instituted Title Suit No. 2/2004 in the Court of learned Civil Judge (Sr. Divn.) at Dibrugarh on 19.01.2004 stating that he is a tea planter and a partner of M/s. Hatigarh Tea Estate. Pursuant to a decision arrived at by the Board of Directors and defendants on 08.11.2002 at Kolkata, the suit factory was leased out to the plaintiff on 10.01.2003 by entering into a deed of agreement as well as of Memorandum of Understanding. It was agreed to by the parties that the suit factory would be leased out to the plaintiff for a term of 5 years w.e.f. 10.01.2003. Plaintiff claimed to have obtained possession over the suit factory on 10.01.2003 pursuant to an agreement and made renovation and repairs by investing money by incurring expenditure to the tune of Rs. 12,00,000/-. The plaintiff also purchased and installed necessary machineries in the factory to raise the capacity of the factory. In the process, the plaintiff spent more than Rs. 3,00,000/- for necessary improvement of the factory. He made further expenditure of Rs. 9,00,000/- in making payment of liability to the Assam State Electricity Board and also for repairing and installing of machineries apart from making payment of another sum of Rs. 5,00,000/- as advance in the form of security to take the factory on lease. Sometimes in October, 2003 the defendant No. 2 asked the plaintiff over phone from Kolkata for payment of some more money when the plaintiff requested him to come down to Dibrugarh to settle the accounts for the year 2003 and he agreed to come within a short time. He came to Dibrugarh and met the plaintiff just before Bihu and there was a discussion between them on 13.01.2004. He assured the plaintiff that on 16.01.2004 he would be coming to Dibrugarh again to settle the accounts. In the mean time on 15.01.2004 one Aloke Chowkhani, the defendant No. 2 and one of the Directors of the defendant trespassed into the factory and broke all the 12 locks fitted on the gate. He assured the plaintiff that on 16.01.2004 he would be coming to Dibrugarh again to settle the accounts. In the mean time on 15.01.2004 one Aloke Chowkhani, the defendant No. 2 and one of the Directors of the defendant trespassed into the factory and broke all the 12 locks fitted on the gate. The defendant No. 2 put some guards in addition to the guards of the plaintiff in the factory and restrained the factory manager to come in. Under such circumstances, the plaintiff instituted the suit praying for a decree of declaration and for confirmation of his possession over the suit factory for enforcement of contract entered into by way of Memorandum of Understanding on 10.01.2003, compensation of Rs. 26,00,000/- along with prayer for permanent and mandatory injunction. The plaintiff also filed an application under Order XXXIX Rule 1 and 2 read with section 151 of the Code of Civil Procedure praying for temporary injunction which, however, was rejected by the learned trial court. In the mean time, defendant appeared and filed an “(h). That incase of any dispute or differences regarding any matters relating to this agreement, the same shall be settled amicably and if remains un-settled shall be referred to a common friend and well-wisher of the parties instead of rushing to the court.” 3. This MoU dated 10.01.2003 was followed by another agreement dated 05.02.2003 wherein the same clause exists as Clause 30. According to the defendant, this is an arbitration clause and he made a demand that the matter be referred to arbitration. 4. The plaintiff did not file any objection against the same. However, the learned trial court after hearing the parties, passed the impugned order on 16.02.2004 rejecting the prayer for referring the matter to arbitration and holding that there was no arbitration clause in the agreement and that Clause 30 of the agreement dated 05.02.2003 as well as Clause (h) of MoU dated 10.01.2003 do not constitute an arbitration agreement within the meaning of section 7 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’). This order dated 16.02.2004 has been called in question in the present revision petition by the defendant. 5. I have heard Mr. GN Sahewalla, learned senior counsel assisted by Ms. B Sarma for the petitioner and Mr. NC Das, learned senior counsel assisted by Ms. K Das for the plaintiff opposite party. This order dated 16.02.2004 has been called in question in the present revision petition by the defendant. 5. I have heard Mr. GN Sahewalla, learned senior counsel assisted by Ms. B Sarma for the petitioner and Mr. NC Das, learned senior counsel assisted by Ms. K Das for the plaintiff opposite party. I have perused the records. 6. Mr. Sahewalla, learned senior counsel for the petitioner, would argue that the recital of clause 30 of the agreement as well as clause (h) of the MoU dated 10.01.2003 indicates the intention of the parties that the matter is to be heard by a third party in case a dispute arises. Placing reliance on the judgment of this Court in the case of SPM Engineers Ltd. v. Guwahati Municipal Corporation reported in 2002 (3) GLT 70, the learned senior counsel would argue that it is the intention of the parties which has to be gathered from the recital of the arbitration clause. Even in aforesaid reported case, this court had held that intention of the parties is the deciding factor as to whether concerned clause constitutes an arbitration agreement within the meaning of section 7 of the Act. He has also placed reliance in the case of State of U.P. v. Tipper Chand reported in AIR 1980 SC 1522 . In that case, the Hon’ble Supreme Court considered a case of Jammu & Kashmir where the concerned clause referred not only to a dispute to the parties to a contract but also specifically mentioned of a reference to the Superintendent Engineer and under such circumstances, the Supreme Court interpreted that such an agreement was an arbitration agreement. Here, in the present case, Clause 30 of the agreement (Clause (h) of MoU dated 10.01.2003) refers to dispute or difference between the parties. Since there is a mention of the word ‘dispute’, this would constitute an arbitration agreement, Mr. Sahewalla argued. 7. Per contra, Mr. NC Das, learned senior counsel, would argue that the word ‘dispute’ is not the sine qua non for deciding arbitration agreement within the meaning of Section 7 of the Act. He placed reliance on a judgment of the Hon’ble Supreme Court in the case of K.K. Modi v. K.N. Modi and others reported in (1998) 3 SCC 573 . NC Das, learned senior counsel, would argue that the word ‘dispute’ is not the sine qua non for deciding arbitration agreement within the meaning of Section 7 of the Act. He placed reliance on a judgment of the Hon’ble Supreme Court in the case of K.K. Modi v. K.N. Modi and others reported in (1998) 3 SCC 573 . In that case, the Hon’ble Supreme Court considered the attributes of an arbitration agreement in paragraph 17 and held that unless and until the aforesaid attributes exist in an agreement, it cannot be construed to be an arbitration agreement within the meaning of the Act. I have perused the aforesaid judgment of the Hon’ble Supreme Court and noted the contents of paragraph 17. Paragraph 17 of the judgment gives a light as to what should be the attributes of an arbitration agreement. For ready reference paragraph 17 of the judgment is given below:- “17. Among the attributes which must be present for an agreement to be considered as an arbitration agreement are: (1) The attribution agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement, (2) That the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the court or from a statute, the terms of which make it clear that the process is to be an arbitration, (3) The agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal, (4) That the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides, (5) That the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly, (6) The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.” 8. The first attribute mentioned in paragraph 13 indicates that arbitration agreement must contemplate the finality of the decision of the arbitrator. It says that decision of the arbitral tribunal will be binding on the parties to the agreement. The first attribute mentioned in paragraph 13 indicates that arbitration agreement must contemplate the finality of the decision of the arbitrator. It says that decision of the arbitral tribunal will be binding on the parties to the agreement. As referred to in earlier judgment including the judgment of Hon’ble Supreme Court in the case of State of Uttar Pradesh v. Tipper Chand (supra) as well as the judgment of this court in the case of SPM Engineers Ltd (supra), all those agreements which were held to be arbitration agreement, contained a clause to the effect that the decision to be given by the third party resolving the dispute between the parties to the agreement would be final and binding on the parties. In the case of Tipper Chand (supra), the Hon’ble Supreme Court held that mention of the word ‘dispute’ would indicate that the parties intended to refer the dispute to an arbitrator. On the other hand, in the case of K.K. Modi (supra), the Hon’ble Supreme Court held that once it is referred to the arbitrator, the decision has to be binding and final on the parties to the agreement. If the law laid down by the Hon’ble Supreme Court in both the cases are read together then what transpires is that the mention of the word ‘arbitrator’ or ‘arbitration’ in the agreement may not be necessary. The intention of the parties at the time of agreement has to be understood from reading of the agreement in entirety. It is to be seen as to whether parties intended resolution of a prospective dispute by way of arbitration. Even if the agreement does not specifically mention the word ‘arbitration’ but it is shown that the parties wanted to get difference or dispute between them by such or other person or body of persons and once such resolution is made by such person or persons, the same would be final and binding on the parties, in that event such an agreement or such a claim in an agreement would be construed to be an arbitration agreement. The two essential ingredients of an arbitration agreement, therefore, are:- (i) authority conferred by both parties on a person or body of persons to resolve and decide a future dispute or difference arising between them; and (ii) once a decision is given by such person or body of persons on a dispute referred by the parties, such decision would be binding on the parties as final. 9. In the case in hand, what has been mentioned in the concerned clause is that the parties should not rush to the court before making an attempt to get the same resolved amicably. The clause provides that in case of dispute or difference, the matter is to be decided amicably between them. If such an amicable settlement is not possible in that event, the matter would be referred to a common friend and well wisher of both the parties instead of rushing to the court. Nowhere it is stated that even if the common friend or well wisher fails to bring out any settlement, the parties shall not rush to the court. What has been intended to be pre-empted is rushing to the court immediately on arsing of a dispute but not for closing the door for litigation between them finally. The intention of the parties is apparent that there shall be an endeavour for amicable settlement between them and then a common friend and well wisher shall make an attempt to resolve the dispute. The court does not say anything as to what will happen after the common friend or well wisher fails. The inevitable conclusion is that if the common friend fails to patch up the dispute between the parties, the recourse open to the parties to approach the competent court of law for getting the dispute resolved would be there. This being the position, the recital of the clause is to be understood as not to mean an arbitration clause. There is neither a finality clause which would be binding on them nor is there any total prohibition for approaching the court of law. Under such circumstances, the learned trial court has not committed any error in holding that Clause 30 of the agreement does not constitute an arbitration clause. The impugned order passed by the learned trial court does not warrant any interference. The revision petition fails. It is, accordingly, dismissed. 10. No order as to costs. Under such circumstances, the learned trial court has not committed any error in holding that Clause 30 of the agreement does not constitute an arbitration clause. The impugned order passed by the learned trial court does not warrant any interference. The revision petition fails. It is, accordingly, dismissed. 10. No order as to costs. Send down the lower court records immediately. 11. Interim order, if any, stands automatically vacated.