Advanced Enterprise v. T. V. S. Motor Company Ltd.
2017-12-19
A.K.GOSWAMI
body2017
DigiLaw.ai
JUDGMENT : Arup Kumar Goswami, J. 1. Heard Mr. P.K. Garodia, learned counsel appearing for the petitioners. Also heard Mr. D. Baruah, learned counsel, appearing for the respondents. 2. The petitioners filed a suit in the court of the learned Civil Judge No. 1, Kamrup (Metro), registered as Title Suit No. 534/2016, for a decree declaring that the letter dated 01.06.2016 and the letter dated 23.11.2016 issued by the defendants are illegal, unauthorized and void; for a declaration that the defendants are under an obligation to renew the dealership agreement with the plaintiffs at least with year to year on and from 01.01.2017; permanent injunction, etc., or, alternatively, for a decree of Rs. 45,108,563.75 as compensation, damages and amount due from the defendants with up-to-date interest @ 18% per annum against the defendants jointly and severally. 3. The letter dated 01.06.2016 (part of Annexure-2 series) is a letter by which the proprietor of the petitioner was notified that the agreement would stand renewed from 1.10.2016 to 31.12.2016 on the same terms and conditions of the dealership agreement dated 1.4.2014. It was mentioned therein that the dealership agreement dated 1.4.2014 had come to an end by efflux of time on 31.3.16 and thereafter, it was mutually extended by letter dated 17.2.2016 for three months with effect from 1.4.2014 to 30.6.2016 and was again extended for a further period from 1.7.2016 to 30.9.2016. By the letter dated 23.11.2016 (part of Annexure-5 series), the proprietor of the firm was informed that the respondents did not intend to renew or extend the dealership agreement after 31.12.2016 and, therefore, they were placing on record the fact that the petitioners ceased to be the Authorized Main Dealer (AMD) of the respondent No. 1 with effect from 01.01.2017. Accordingly, the petitioners were advised to follow the stipulations as contained therein. 4. At this stage, it will be relevant to indicate that the agreement dated 01.04.2014 had not been placed on record by the petitioners. During the course of the hearing, Mr. Baruah has placed before the Court a copy of the agreement dated 01.04.2014 for the period from 01.04.2014 to 31.03.2016 (wrongly recorded as "31.03.216"). The original of the aforesaid agreement was also shown to the Court as well as to Mr. Garodia. 5.
During the course of the hearing, Mr. Baruah has placed before the Court a copy of the agreement dated 01.04.2014 for the period from 01.04.2014 to 31.03.2016 (wrongly recorded as "31.03.216"). The original of the aforesaid agreement was also shown to the Court as well as to Mr. Garodia. 5. In the title suit, the respondents filed an application (Annexure-9) under Section 8 of the Arbitration and Conciliation Act, 1996 (for short, "the Act"), for referring the parties to arbitration. 6. Mr. Baruah has submitted that the aforesaid Section 8 application was filed at a very initial stage on 03.01.2017. Subsequently, the respondents filed an application under Order VI Rule 17 read with Section 151 of the CPC for amendment of the aforesaid Section 8 application and the same was allowed by an order dated 01.08.2017. He submits that in the suit the petitioners had enclosed Dealership Agreements dated 1.4.2003 and 1.4.2009, wherein there were arbitration clauses. It is submitted by Mr. Baruah that the aforesaid amendment was occasioned by the fact that the dealership agreement dated 01.04.2014 had not been placed on record by the plaintiff while filing the suit and drawing attention of the Court to the objection filed by the petitioners, he submits that as a plea was taken by the petitioners that the agreement dated 1.4.2014 was only relevant for the suit, to bring on record the agreement dated 1.4.2014, the amendment petition was filed by the petitioners. 7. Mr. Garodia submits that the copy of the dealership agreement dated 01.04.2014 was not available when the suit was filed. 8. When the Section 8 application was pending consideration, the petitioners filed an application under Order I Rule 10 read with Section 151 CPC, to implead some party defendants in the above-noted suit. In paragraph 5, 6 and 7 of the said petition for impleadment, it is stated as follows: "5. That, subsequently, the plaintiffs came to know that during the subsistence of the dealership agreement with the plaintiffs, the defendants' company fraudulently and illegally with an ulterior motive and behind the back of the plaintiffs has appointed 'M/s. Vinayak Automobiles' as their main authorized dealer for the same business territory of Nagaon and in the same place of plaintiff's business at Khutikatia, Haibargaon, Nagaon, Assam as well in gross contravention of the dealership agreement. 6.
6. That, since its appointment, M/s. Vinayak Automobiles has been working as the main authorized dealer of the defendants' company for the territory of Nagaon District in place of the plaintiffs and the said M/s. Vinayak Automobiles, Khutikatia, Haibargaon, Nagaon, Assam has been running and operating and making all sorts business transaction in relation to buying the products from the defendants' company, to sell/market the same in retail to the customers and to service the product within the territory of Nagaon District now in place of the plaintiffs. Hence, now it has become necessary to implead the said proprietorial firm as well as its proprietor Sri Vikram Karwa as principal defendants into the above suit alongwith the other defendants. 7. That the following proprietorial firm as well as its proprietor are the necessary party to the suit and for adjudicating the suit properly and most conclusively and for passing an effective decree into the above suit and to avoid multiplicity of the suit, the below mentioned firm as well as the person require to be added as defendants." 9. That the plaintiffs/petitioners had filed one more application under Order VI Rule 17 read with Section 151 CPC seeking amendment of the plaint to bring on record the following two paragraphs in the plaint after paragraph 33 and after Clause (iii) of the prayers as "33 A" and "(iii)(a)", respectively. "33(A) That subsequently, the plaintiffs came to know that during the subsistence of the dealership agreement with the plaintiffs, the defendants' company fraudulently and illegally with and ulterior motive and behind the back of the plaintiffs has appointed 'M/s. Vinayak Automobiles' as their main authorized dealer for the same business territory of Nagaon in gross violation of the dealership agreement and the said M/s. Vinayak Automobiles, Khutikatia, Haibargaon, Nagaon, Assam, is operating and making all sorts business transaction in relation to buying the products from the defendants' company, to sell/market the same in retail to the customers and to service the product with the territory of Nagaon District now in place of the plaintiffs." '(iii)(a) - A declaration be passed that the actions of the defendant Nos.
1, 2, and 3 to terminate the dealership of the plaintiffs are highly illegal, unlawful, void and has been made with an ulterior motive to award the dealership business of entire Nagaon territory in favour of M/s. Vinayak Automobiles, Khutikatia, Haibargaon, Nagaon, Assam, as such, the dealership of M/s. Vinayak Automobiles, Khutikatia, Haibargaon, Nagaon, Assam is liable to be cancelled." 10. By an order dated 15.11.2017, passed in Title Suit No. 534/2016, the learned court below declined the prayer of the plaintiffs/petitioners to entertain their application filed under Order I Rule 10 read with Section 151 CPC seeking impleadment as well as under Order VI Rule 17 read with Section 151 CPC seeking amendment of the plaint on the ground that the Section 8 application was pending. The instant application is filed assailing the aforesaid order dated 15.11.17. 11. Mr. Garodia has submitted that it was incumbent on the part of the learned court below to have considered the aforesaid two applications filed by the petitioners before taking up for consideration the application under Section 8 of the Act. He has submitted that if the aforesaid two applications were considered and allowed, the dispute may have been rendered non-arbitrable, in which event, the civil court would have had the jurisdiction to continue with the suit filed by the plaintiff/petitioners. By not considering the applications filed by the plaintiffs/petitioners, the learned Civil Judge has foreclosed such an eventuality. Mr. Garodia has submitted that the learned civil court cannot mechanically refer the parties to arbitration only because of the fact that the application under Section 8 is filed. In this connection, he has placed reliance on the judgment of the Supreme Court in the case of M/s. S.B.P. & Co. Vs. M/s. Patel Engineering Ltd. & Anr., reported in (2005) 8 SCC 618 . He has also placed reliance on the judgment rendered in the case of Booz-Allen & Hamilton Inc Vs. SBI Home Finance Ltd. & Ors., reported in (2011) 5 SCC 532 , with particular reference to paragraph 32 thereof to emphasize that all aspects of arbitrability will have to be decided by the court seized of the suit and the same cannot be left to the decision of the arbitrator. 12. By drawing attention of the Court to the amended Section 8 of the Act, which came into effect on 23.10.2015, Mr.
12. By drawing attention of the Court to the amended Section 8 of the Act, which came into effect on 23.10.2015, Mr. Baruah submits that notwithstanding any judgment, decree, order of the Supreme Court or any Court, a judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement, must refer the parties to arbitration unless it finds, prima facie, that no valid arbitration agreement exists, if a party to the arbitration agreement or any person claiming through or under him applies not later than the date of submitting his first statement on the substance of the dispute. He has invited attention of the Court to amended Section 37 of the Act to submit that provision for appeal is now provided against an order refusing to refer the parties to arbitration under Section 8, whereas, prior to its amendment on 23.10.2015, recourse had to be taken to the revisional Court. Further contention of Mr. Baruah is that the Court, in the context of the application under Section 8 of the Act, has to see as to whether the jurisdiction of the judicial authority is ousted and not whether the judicial authority retains jurisdiction. Accordingly, he submits that the learned civil court was justified in not entertaining the applications filed by the petitioners subsequent to the respondents herein filing the application under Section 8. He also contends that it will be open for the petitioners to take such course of action as may be available in law once the parties are referred to arbitration. Mr. Baruah has further submitted that the dealership was not an exclusive dealership and the petitioner was not the sole and exclusive AMD of the company and the company had reserved the right and discretion to authorise more AMDs and, therefore, no dispute can be raised by the petitioners if the respondents appoint more AMDs in any place or in and around the vicinity where the petitioners carry on its business. Mr. Barua places reliance on the following judgments: M/s. S.B.P. & Co Vs. M/S. Patel Engineering Ltd. (supra), and also on the cases of State of Goa Vs. Praveen Enterprises, reported (2012) 12 SCC 581 , P. Anand Gajapathi Raju & Ors. Vs P.V.G. Raju (Died) & Ors, reported in (2000) 4 SCC 539 , Sundaram Finance Limited Vs.
Mr. Barua places reliance on the following judgments: M/s. S.B.P. & Co Vs. M/S. Patel Engineering Ltd. (supra), and also on the cases of State of Goa Vs. Praveen Enterprises, reported (2012) 12 SCC 581 , P. Anand Gajapathi Raju & Ors. Vs P.V.G. Raju (Died) & Ors, reported in (2000) 4 SCC 539 , Sundaram Finance Limited Vs. T. Thankam, reported in (2015) 14 SCC 444 (paragraphs 8 and 13), Hindustan Petroleum Corpn. Ltd. Vs. M/s. Pink city Midway Petroleums, reported in (2003) 6 SCC 503 (paragraph 14), A. Ayyasamy Vs. A. Paramasivam & Ors., reported in (2016) 10 SCC 318 (para 25, 28, 32, 28, 41, 44 and 45), Hema Khattar & Anr. Vs. Shiv Khera, reported in (2017) 7 SCC 716 (para 33, 34, 35, 36) and Shalini Shyam Shetty & Anr. Vs. Rajendra Shankar Patil, reported in (2010) 8 SCC 329 . 13. I have considered the submission of the learned counsel for the parties and have perused the materials on record. 14. At the outset, it will be appropriate to take note of Section 8 of the Act as it stood prior to its amendment on 23.10.2015. The same reads as follows: "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." 15.
(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." 15. After amendment Section 8 reads as follows: "8.(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 to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. "Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court." 16. A perusal of Section 8 after amendment indicates that a judicial authority has to refer the parties to arbitration notwithstanding any judgment, decree or order of the Supreme Court or any Court, unless the judicial authority finds, prima facie, that no valid arbitration agreement exists. 17. At the very outset, it will be appropriate to take note of the judgment in Shalini Shyam Shetty (supra), wherein the Supreme Court laid down the principles on the exercise of jurisdiction of the High Court under Article 227 of the Constitution of India. 18. Powers under Article 227 of the Constitution of India can be exercised to interfere with "an order to keep the tribunals and courts subordinate to it within the bounds of their authority" to ensure that law is followed by such tribunals and courts by exercising jurisdiction which is vested in them and not by declining to exercise the jurisdiction which is vested in them.
Apart from the above, the High Court can interfere in exercise of its power of superintendence where there has been patent perversity in orders of the tribunal and the courts subordinate to it or where there has been a gross and manifest failure of justice or the basic principles of natural justice have been flouted. Such power cannot be exercised to interfere to correct mere errors of laws or facts or just because there can be another possible view then the one taken by the tribunal or courts subordinate to it. In other words, such exercise of jurisdiction cannot be a routine affair but the power has to be sparingly used and the power being discretionary, the same is to be exercised on equitable considerations. 19. In Anand Gajapathi Raju (supra), the Supreme Court observed that the language of Section 8 is pre-emptory and therefore, it is obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. The application before the Court under Section 8 merely brings to the court's notice that the subject matter of the action before it is subject matter of arbitration agreement 20. In S.B.P. & Co. (supra), the Supreme Court observed that when the defendant to an action before a judicial authority raises a plea that there is an arbitration agreement and the subject matter of the plaint is covered by the agreement and the plaintiff or the persons who has approached the judicial authority for relief disputes the same, the judicial authority, in the absence of any restriction in the Act, has necessarily to decide whether in fact there is in existence a valid arbitration agreement and whether the dispute that is sought to be raised before it is covered by the arbitration clause. The judgment in S.B.P. & Co. (supra) goes to show that the judicial authority has to do something more than merely mechanically referring the parties to arbitration whenever an application is filed under Section 8 of the Act. It was held that the arbitral tribunal is competent to rule on its own jurisdiction under Section 16 of the Act when the parties have gone to arbitral tribunal without recourse to section 8 or section 11 of the Act, but not when the jurisdictional issues are decided under Section 8 or Section 11 of the Act before a reference is made.
The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it. 21. In Praveen Enterprise (supra), the Supreme Court, while elucidating the expression, "reference to arbitration", observed that it can mean reference of disputes between the parties to arbitration or may simply mean referring the parties to arbitration and it is in this context had observed that Section 8 of the Act is an expression of refereeing the parties to arbitration. It was held that Section 8 merely requires the judicial authority before whom an action is brought in a matter with regard to which there is arbitration agreement, to refer the parties to arbitration. When the judicial authority finds that the subject matter of a suit is covered by a valid arbitration agreement between the parties to the suit, it will refer the parties to arbitration by refusing to decide the action brought before it and leaving it to the parties to have recourse to their remedies by arbitration. 22. In Booz-Allen (supra), the Supreme Court laid down that where issues of arbitrability arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the Court seized of the suit and if cannot be left to the decision of the arbitrator. It laid down that even if there is an arbitration agreement between the parties and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application under Section 8 of the Act, to refer the parties to arbitration, if the subject matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or a tribunal. 23.
23. The issue of arbitrability arises in the context as to whether the disputes, having regard to their nature, can be resolved by a private for a chosen by the parties or whether they would exclusively fall within the domain of public for a. Adjudication of certain categories of proceedings are reserved by the legislature exclusively by public for a as a matter of public policy and certain categories of cases, may, by necessary implication stand excluded from the purview of private for a. Disputes relating to rights and liabilities which arise out of criminal offence, matrimonial disputes relating to divorce, judicial separation, etc. eviction or tenancy matters covered by special statutes are some of the disputes which are reserved to be determined by the public for a. 24. In Pinkcity Midway Petroleums (supra), the Supreme Court reiterated the proposition that language of Section 8 being pre-emptory in nature, where there is an arbitration clause of the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be done in their original action after such an application is made except to refer the dispute to an arbitrator. 25. In Sundaram Finance (supra) the same proposition is again reaffirmed when the Supreme Court stated that when there is an agreement between the parties to refer the disputes or differences arising out of agreement to arbitration, and in case either of the parties, ignoring the terms of the agreement, approaches the civil court and the other party in terms of Section 8 of the Act moves the court for referring the parties to arbitration before the first statement on the substance of the dispute is filed, in view of the pre-emptory language of Section 8 of the Act, it is obligatory for the court to refer the parties to arbitration in terms of the agreement. 26. In Sundaram Finance (supra), another dimension was added with regard to the approach that should be adopted by the court while considering an application under Section 8. The Supreme Court laid down that once an application in due compliance with Section 8 of the Act is filed, the approach of the civil courts should be not to see whether the court can still retain jurisdiction but to see whether the court's jurisdiction is ousted. 27.
The Supreme Court laid down that once an application in due compliance with Section 8 of the Act is filed, the approach of the civil courts should be not to see whether the court can still retain jurisdiction but to see whether the court's jurisdiction is ousted. 27. In Hema Khattar (supra), the Supreme Court stated that the civil court has no jurisdiction to entertain the suit after an application under Section 8 of the Act is made for arbitration. It is further held that in such a situation refusal to refer the dispute to arbitration will amount to causing irreparable injuries to the parties. 28. In Ayyasamy (supra), Supreme Court held that mere allegation of fraud simpliciter may not be a ground to nullify the effect of arbitration between the parties and only in those cases where the court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by a civil court on appreciation of the voluminous evidence that needs to be produced, the court can side track by dismissing the application under Section 8 and proceed with the suit on merits. The principles laid down in Sundaram Finance (supra) with regard to approach of a court while dealing with an application under Section 8 was reiterated. Once the parties agree to refer the dispute to arbitration, the court must discourage and discountenance litigative strategies designed to avoid recourse to arbitration and that any other approach would place in uncertainty the institutional efficacy of arbitration and therefore, such a consequence must be eschewed. 29. The judgments discussed above go to show that Section 8 contains a mandate that where an action is brought before a judicial authority in a matter which is the subject of an arbitration agreement, the parties shall be referred by it to arbitration, if a party or a person claiming through a party to the arbitration agreement applies not later than the date of submitting the first statement on the substance of the dispute. The only exception is where the authority finds, prima facie, that there is no valid arbitration agreement.
The only exception is where the authority finds, prima facie, that there is no valid arbitration agreement. Section 8 contains a positive mandate and obligates the judicial authority to refer parties to arbitration in terms of the arbitration agreement. While dispensing with the element of judicial discretion, the statute imposes an affirmative obligation on every judicial authority to hold down parties to the terms of the agreement entered into between them to refer disputes to arbitration. 30. Having said so, this court makes it clear that no opinion has been expressed by this Court as to whether in the instant case the parties are to be referred to arbitration as the Section 8 application is pending consideration before the civil court. 31. Coming to the legality and validity of the order dated 15.11.2017, I am of the considered opinion that after an application under Section 8 is filed, court cannot expand its role to find out on the basis of applications filed subsequent to the filing of the application under Section 8 as to whether such applications, if considered favourably, would vest the court with jurisdiction to proceed with the suit. The Supreme Court has made it clear that the approach of the court should not be to find out if the court can still retain jurisdiction but to see as to whether its jurisdiction is ousted. There is a paradigm shift in the approach to be adopted when an application under Section 8 is filed. 32. Going by the dicta in Hema Khattar (supra), where the Supreme Court had unequivocally observed that civil court has no jurisdiction to entertain the suit after an application under Section 8 of the Act is made, any entertainment of any application subsequent to the filing of the application under Section 8 of the Act would be akin to the court continuing to entertain the suit which is not permissible in law. That will tantamount to the court exploring and embarking upon an enquiry to find out whether it can retain jurisdiction. If any development had taken place subsequent to filing of the suit the petitioners will not be without any remedy in law and therefore, the question of prejudice also does not come into picture. 33. In view of the above discussions, this application fails and the same is dismissed. No cost.