K. G. Nanjundaiah S/o Gangappa v. P. C. Rajanna S/o late P. V. Channaveerabhadraiah
2017-11-24
B.VEERAPPA
body2017
DigiLaw.ai
ORDER : 1. This is the plaintiff’s Writ Petition against the order dated 26.03.2016 made in O.S.No.369/2007 on the file of Senior Civil Judge & JMFC, Doddaballapura dismissing the suit as not maintainable and referring the matter to the arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 on the questions framed by the trial Court, dated 07.09.2015. 2. The petitioner who is the plaintiff before the trial Court filed suit in O.S.No.369/2007 for dissolution of the partnership firm “M/s.Sri.Siddalingeshwara Rice Mill” which is constituted as per the Partnership Deed dated 27.03.1989 and to direct the defendants 1 to 3 to render the Accounts of the Partnership Firm till the date of dissolution and to divide the assets and liabilities of the Partnership Firm and to allot the share of immovable schedule property to the plaintiff to an extent of his share capital held in the Partnership Firm defendant No.4, as he contributes the same as a capital to the firm, contending that the plaintiff and defendant No.3 have jointly acquired the land bearing Sy.No.48/2 of Kurubarahalli, Kasaba Hobli, Doddaballapur Taluk, measuring 2 acres 5 guntas under a registered sale deed dated 26.03.1987 morefully described in the schedule to the plaint. The plaintiff and defendants are friends. They intended to start the business of Rice Mill under a partnership basis at Doddaballapur Town in the land belonging to the petitioner/plaintiff and respondent No.3/defendant No.3. Accordingly, they constituted a partnership firm under the name and style “M/s.Sri Siddalingeswahra Rice Mill” on 27.03.1989 as per the provisions of Indian Partnership Act, which was duly registered with the Registrar of Firms. 3. It is the further case of the plaintiff that though in the partnership firm, it is mentioned that the management of the firm shall be looked after by the plaintiff, but the defendant Nos.1 to 3 were managing the same as the plaintiff and the defendants are good friends and initially the defendants were furnishing the accounts of the firm and later, they were not informing the day to day business affairs of the firm and they are not disclosing the statement of account, profit and loss of the firm and audit report to the plaintiff inspite of the repeated request and demand made by him. Therefore, he issued legal notice and thereafter, filed a suit for the relief as sought for. 4.
Therefore, he issued legal notice and thereafter, filed a suit for the relief as sought for. 4. The defendants filed written statement and admitted the Partnership between the parties and contended that accounts have been submitted to the plaintiff. Later, the plaintiff retired from the partnership firm. Hence, the very suit is not maintainable and sought for dismissal of the suit. 5. Based on the pleadings, the trial Court by an order dated 07.09.2015 framed two issues: 1. Whether the suit is maintainable as the partnership deed is unregistered? 2. Whether the suit is maintainable before this Court even though an arbitration clause is incorporated in the unregistered partnership deed dated 27.03.1989 at Page No.5 and Clause No.17? 6. The arguments was heard by the trial Court on 07.09.2015. After hearing both the parties, by the impugned order, the trial Court held that the suit filed by the plaintiff is not maintainable, in view of Arbitration Clause 17 of the partnership deed and referred the dispute to the Arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. Hence, the present Writ Petition is filed. 7. I have heard the learned counsel for the parties to the lis. 8. Sri.V.F.Kumbar, learned counsel for the petitioner vehemently contended that the impugned order passed by the trial Court rejecting suit of the plaintiff is erroneous and contrary material on record. He would further contend that in terms of Section 8 of the Arbitration and Conciliation Act, the defendants are entitled to raise the question of maintainability of the suit before filing their written statement and after filing the written statement, the defendants are not entitled to raise such contentions with regard to the said facts. But admittedly in the present case, the defendants have not filed any application with regard to invoking the provisions of Section 8 of the Arbitration and Conciliation Act, 1996, but the said questions are raised by the Court and the conclusion drawn by the trial Court that the suit is not maintainable in view of the arbitration clause is not sustainable and the same is liable to be quashed. In support of his contentions, learned counsel relied upon the judgment of the Hon’ble Supreme Court in the case of BOOZ ALLEN AND HAMILTON INC. VS. SBI HOME FINANCE LTD AND ORS reported in AIR 2011 SC 2507 . 9.
In support of his contentions, learned counsel relied upon the judgment of the Hon’ble Supreme Court in the case of BOOZ ALLEN AND HAMILTON INC. VS. SBI HOME FINANCE LTD AND ORS reported in AIR 2011 SC 2507 . 9. Per contra, Sri.M.R.Narayan, learned counsel for the respondents-defendants does not dispute the law on the point. He submits that under the provisions of Section 8 of the Arbitration and Conciliation Act, 1996, 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 written statement can be referred to arbitration. The said submission is placed on record. 10. In view of the rival contentions urged by the learned counsel for the parties, the only point that arises for consideration is: “Whether the impugned order passed by the trial Court holding that the suit is not maintainable in view of arbitration clause 17 of the partnership deed and referring the matter to the arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 is justified in the facts and circumstances of the case?” 11. I have given my anxious consideration to the arguments advanced by the learned counsel for the parties and perused the impugned order and material on record carefully. 12. It is not in dispute that the plaintiff filed a suit for dissolution of partnership firm “M/s.Sri.Siddalingeshwara Rice Mill” which was constituted as per partnership deed dated 27.03.1989. The petitioner and the respondents were friends. Hence, they intended to start the rice mill under the partnership basis. Since the respondents were not furnishing accounts of the firm, the petitioner issued legal notice and filed suit for the relief sought for. 13. The defendants admitted the partnership firm and denied the plaint averments and contended that the defendants submitted the accounts to the plaintiff and later, the plaintiff retired from the partnership deed and hence, the very suit is not maintainable. 14. Based on the pleadings, the trial Court framed two issues for consideration and after hearing both the parties held that the suit is not maintainable and refereed the matter to the arbitration. 15. The provisions of Section 8 of the Arbitration and Conciliation Act, 1996 reads as under: “8.
14. Based on the pleadings, the trial Court framed two issues for consideration and after hearing both the parties held that the suit is not maintainable and refereed the matter to the arbitration. 15. The provisions of Section 8 of the Arbitration and Conciliation Act, 1996 reads as under: “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 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.] (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: [Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under subsection (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.] (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.” 16. A careful perusal of the said provision makes it clear that 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 other person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, it is only the Court that can refer the matter before filing the written statement. 17. Admittedly, in the present case, the defendants have not filed any application to refer the matter to arbitration, before filing of the written statement.
17. Admittedly, in the present case, the defendants have not filed any application to refer the matter to arbitration, before filing of the written statement. The trial Court proceeded to pass the impugned order based on the wrong interpretation of Section 8 of the Arbitration and Conciliation Act, 1996. The Hon’ble Supreme Court while considering the provisions of Section 8 of the Arbitration and Conciliation Act, 1996 in the case of BOOZ ALLEN AND HAMILTON INC. VS. SBI HOME FINANCE LTD AND ORS reported in AIR 2011 SC 2507 at Para 19, it held as under: “19. Though section 8 does not prescribe any time limit for filing an application under that section, and only states that the application under section 8 of the Act should be filed before submission of the first statement on the substance of the dispute, the scheme of the Act and the provisions of the section clearly indicate that the application thereunder should be made at the earliest. Obviously, a party who willingly participates in the proceedings in the suit and subjects himself to the jurisdiction of the court cannot subsequently turn round and say that the parties should be referred to arbitration in view of the existence of an arbitration agreement. Whether a party has waived his right to seek arbitration and subjected himself to the jurisdiction of the court, depends upon the conduct of such party in the suit. When plaintiffs file applications for interim relief like appointment of a receiver or grant of a temporary injunction, the defendants have to contest the application. Such contest may even lead to appeals and revisions where there may be even stay of further proceedings in the suit. If supplemental proceedings like applications for temporary injunction on appointment of Receiver, have been pending for a considerable time and a defendant has been contesting such supplemental proceedings, it cannot be said that the defendant has lost the right to seek reference to arbitration. At the relevant time, the unamended Rule 1 of Order VIII of the Code was governing the filing of written statements and the said rule did not prescribe any time limit for filing written statement.
At the relevant time, the unamended Rule 1 of Order VIII of the Code was governing the filing of written statements and the said rule did not prescribe any time limit for filing written statement. In such a situation, mere passage of time between the date of entering appearance and date of filing the application under section 8 of the Act, can not lead to an inference that a defendant subjected himself to the jurisdiction of the court for adjudication of the main dispute. The facts in this case show that the plaintiff in the suit had filed an application for temporary injunction and appointment of Receiver and that was pending for some time. Thereafter, talks were in progress for arriving at a settlement out of court. When such talks failed, the appellant filed an application under section 8 of the Act before filing the written statement or filing any other statement which could be considered to be a submission of a statement on the substance of the dispute. The High Court was not therefore justified in rejecting the application on the ground of delay.” 18. In view of the provisions of Section 8 of the Arbitration and Conciliation Act, 1996 and the law declared by the Hon’ble Supreme Court, the impugned order passed by the trial Court cannot be sustained and the trial Court is not justified in referring the matter to the arbitrator holding that the suit is not maintainable. 19. In view of the aforesaid reasons, the Writ Petition is allowed. The impugned order dated 26.03.2016 made in O.S.No.369/2007 on the file of Senior Civil Judge & JMFC, Doddaballapur is quashed. The matter is remanded to the trial Court with a direction to proceed with the suit on merits and pass appropriate orders, strictly in accordance with law.