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2017 DIGILAW 953 (HP)

Dharam Veer v. IndusInd Bank Pvt. Ltd.

2017-08-22

TARLOK SINGH CHAUHAN

body2017
Tarlok Singh Chauhan, J. (Oral). This petition under Article 227 of the Constitution of India takes exception to the order passed by the learned Civil Judge (Sr. Division), Solan on 11.4.2016 whereby the application under Section 8 read with Section 5 of the Arbitration and Conciliation Act filed by the defendant/respondent (for the sake of convenience hereinafter referred to the defendant) has been allowed thereby holding the suit of the plaintiff/petitioner (for the sake of convenience hereinafter referred to the plaintiff) to be not maintainable. Certain undisputed facts may be noticed. 2. The plaintiff filed a suit against the defendant for permanent prohibitory injunction restraining the defendant from selling his vehicle bearing No. HP-64-5584 and a decree of mandatory injunction was also sought seeking direction against the defendant to supply correct statement of account disclosing correct particulars regarding rate of interest and overdue charges alongwith miscellaneous charges. 3. The vehicle in question was purchased by the plaintiff. The same had been financed to the tune of Rs.11,20,000/- by the defendant. The loan was to be paid over a period of 5 years with Rs.25,500/- as EMI. However, the plaintiff failed to pay an amount of Rs.90,178/- and it was alleged that the defendant had forcibly taken the possession of the vehicle, constraining the plaintiff to file the suit. 4. On notice being served upon the defendant, it instead of filing written statement filed an application under Section 8 read with Section 5 of the Arbitration and Conciliation Act (for short the ‘Act’) stating therein that there was arbitration clause in the agreement, therefore, the suit was not maintainable. 5. This application was considered by the learned Court below and after coming to a categorical conclusion that there was arbitration clause at Clause No. 23 of the agreement, held the suit to be not maintainable with liberty reserved to the parties to refer the dispute to the Arbitrator. I have heard learned counsel for the parties and have gone through the materials placed on record. 6. At the outset, it may be observed that the plaintiff, in fact, has not challenged the legality or propriety of the order passed by the learned Court below as is evident from the grounds of the petition, which are reproduced hereinbelow:- “(a) That it is submitted that the learned trial Court below has allowed the application for returning the plaint. At the outset, it may be observed that the plaintiff, in fact, has not challenged the legality or propriety of the order passed by the learned Court below as is evident from the grounds of the petition, which are reproduced hereinbelow:- “(a) That it is submitted that the learned trial Court below has allowed the application for returning the plaint. However, it is submitted that the applicant, who has taken a vehicle on loan from the defendant, has paid most of the money to the defendant and now by way of blackmailing tactics, the defendant has lifted the vehicle and are going to auction the same and simultaneously issued arbitration notice to the applicant. (b) That it is submitted that the applicant is ready and willing to pay the balance amount however, the defendant is liable to be directed firstly not to auction the vehicle in question and further not to initiate arbitration proceedings against the defendant who is a poor person having no financial means that too when the only source of earning income i.e. vehicle has been lifted away by the defendant. (c) That it is submitted that the defendant is totally using blackmailing tactics to harass the plaintiff as the defendant knows well that the plaintiff is a poor person having no means and further when the only source of earning livelihood has been snatched by the defendant, how he will earn or pay the installments of the vehicle. (d) That it is also submitted that since the vehicle is in unauthorized possession of the defendant since the date of illegal taking over the same on 28.12.2014, the plaintiff is also not liable to pay any installment on the loan.” 7. Once the order, whereby the suit of the plaintiff has not been assailed, it can conveniently be held that the same has attained finality and therefore, cannot be interfered with at least on the ground as taken in the petition. 8. The power of superintendence conferred by Article 227 is to be exercised most sparingly and with circumspection that too in appropriate cases in order to keep the Subordinate Courts within the bounds of their authority and not for correcting mere errors. 9. 8. The power of superintendence conferred by Article 227 is to be exercised most sparingly and with circumspection that too in appropriate cases in order to keep the Subordinate Courts within the bounds of their authority and not for correcting mere errors. 9. In D.N. Banerji v. P.R. Mukherjee, 1953 AIR (SC) 58, the Hon’ble Supreme Court held as under: “Unless there was any grave miscarriage of justice or flagrant violation of law calling for intervention, it is not for the High Court under Articles 226 and 227 of the Constitution to interfere.” 10. In Waryam Singh and another v. Amarnath and another 1954 AIR (SC) 215, a Constitution Bench of the Hon’ble Supreme Court has examined the scope of Article 227 of the Constitution and observed as under:- “This power of superintendence conferred by Article 227 is, as pointed out by Harries, C.J. in Dalmia Jain Airways Ltd. V. Sukumar Mukherjee, 1951 AIR (Cal) 193 to be exercised most sparingly and only in appropriate cases in order to keep the Subordinate Courts within the bounds of their authority and not for correcting mere errors.” 11. In Mohd. Yunus v. Mohd. Mustaquim and others, 1984 AIR (SC) 38, the Hon’ble Supreme Court held that the High Court has very limited scope under Article 227 of the Constitution and even errors of law cannot be corrected in exercise of power of judicial review while exercising such power. The powers can be used sparingly when it comes to the conclusion that the Authority/Tribunal has exceeded its jurisdiction or proceeded under erroneous presumption of jurisdiction. It was further held that High Court cannot assume unlimited prerogative to correct all species of hardship or wrong decision. For interference, there must be a case of flagrant abuse of fundamental principles of law or where order of Tribunal etc. has resulted in grave injustice. 12. In Nibaran Chandra Bag v. Mahendra Nath Chughu 1963 AIR (SC) 1895, the Hon’ble Supreme Court held that interference under Article 227 of the Constitution, finding of facts recorded by Authority should have found to be perverse or patently erroneous and de hors factual and legal position on record. 13. has resulted in grave injustice. 12. In Nibaran Chandra Bag v. Mahendra Nath Chughu 1963 AIR (SC) 1895, the Hon’ble Supreme Court held that interference under Article 227 of the Constitution, finding of facts recorded by Authority should have found to be perverse or patently erroneous and de hors factual and legal position on record. 13. In Rena Drego v. Lalchand Soni and others, 1998 (3) SCC 341 , the Hon’ble Supreme Court has categorically held that the power under Article 227 of the Constitution is of the judicial superintendence which cannot be used to up-set the conclusions of facts, howsoever erroneous those may be, unless such conclusions are so perverse or so unreasonable that no Court could have ever reached them. 14. Similar reiteration can be found in Chandra Bhushan v. Beni Prasad and others 1999 (1) SCC 70 ; Savitrabai Bhausaheb and others v. Raichand Dhanraj Lunja 1999 (2) SCC 171 ; and Savita Chemical (P) Ltd. V. Dyes and Chemical Workers Union and another, 1999 (2) SCC 143 . 15. In Union of India and others v. Himmat Singh Chahar, 1994 (4) SCC 521, wherein the Hon’ble Supreme Court held that power under Article 227 of the Constitution is not in the nature of power of appellate authority enabling re-appreciation of evidence. It should not alter conclusion reached by Competent Statutory Authority merely on the ground of insufficiency of evidence. 16. In Ajaib Singh v. Sirhind Co-operative Marketing cum Processing Service Society Ltd., 1999 (6) SCC 82 , the Hon’ble Supreme Court held that there is no justification for High Court to substitute its view for the opinion of Authorities/Courts below as the same is not permissible in proceedings under Articles 226/227 of the Constitution. 17. In Mohan Amba Prasad Agnihotiri v. Bhaskar Balwant Aheer, 2000 AIR (SC) 931, the Hon’ble Supreme Court held that the jurisdiction of High Court under Article 227 of the Constitution is not appellate but supervisory. It cannot interfere with the finding of facts recorded by Courts below unless there is no evidence to support findings or findings are totally perverse. 18. In Union of India v. Rajendra Prabhu, 2001 (4) SCC 472 , the Hon’ble Supreme Court held that High Court in exercise of its extraordinary powers under Article 227 of the Constitution, cannot re-appreciate evidence nor it can substitute its subjective opinion in place of findings of Authorities below. 19. 18. In Union of India v. Rajendra Prabhu, 2001 (4) SCC 472 , the Hon’ble Supreme Court held that High Court in exercise of its extraordinary powers under Article 227 of the Constitution, cannot re-appreciate evidence nor it can substitute its subjective opinion in place of findings of Authorities below. 19. In Shalini Shyam Shetty and another v. Rajendra Shankar Patil, 2010 (8) SCC 329 , the Hon’ble Supreme Court observed that powers of interference under Article 227 is to be kept to the minimum to ensure that wheel of justice does not come to a halt and fountain of justice remains pure and unpolluted in order to maintain public confidence in functioning of Tribunals and Courts subordinate to High Court. 20. Similar reiteration can be also found in Kokkanda B. Poondacha and others v. K.D. Ganapathi and another, 2011 AIR (SC) 1353, and Bandaru Satyanarayana v. Imandi Anasuya, 2011 (12) SCC 650. 21. In Abdul Razak (D) through Lrs. And others v. Mangesh Rajaram Wagle and others, 2010 (2) SCC 432 , the Hon’ble Supreme Court reminded that while exercising jurisdiction under Article 226 or 227, High Courts should not act as if they are exercising an appellate jurisdiction. 22. In Commandant, 22nd Battalion, CRPF and others v. Surinder Kumar 2011 (10) SCC 244 , the Hon’ble Supreme Court reiterated that only in an extreme case, where on the face of it there is perversity or irrationality, there can be judicial review under Article 226 or 227. 23. From the aforesaid conspectuous of law, it can conveniently be held that the supervisory jurisdiction under Article 227 of the Constitution of India is exercised for keeping the Subordinate Courts within the bound of the jurisdiction. When a Subordinate Court has assumed a jurisdiction which it does not have or has failed to exercise jurisdiction which it does have or jurisdiction though available is exercised by the Court in a manner not permitted by law and failure of justice or grave injustice has occasioned thereby the High Court may step into exercise its supervisory jurisdiction. When a Subordinate Court has assumed a jurisdiction which it does not have or has failed to exercise jurisdiction which it does have or jurisdiction though available is exercised by the Court in a manner not permitted by law and failure of justice or grave injustice has occasioned thereby the High Court may step into exercise its supervisory jurisdiction. The supervisory jurisdiction is not available to correct mere errors of fact or law unless the following requirement is satisfied:- (i) The error is manifest and apparent on the face of the proceedings such as when it is based on ignorance or utter disregard to the provisions of law, and to grave injustice or gross failure of justice has occasioned thereby. (ii) The power to issue a writ of certiorari and the supervisory jurisdiction are to be exercised sparingly and only in appropriate cases where the judicial conscious of the High Court dictates which too act lest gross failure of justice or grave injustice has occasioned. 24. Judged in the light of aforesaid exposition of law, it would be noticed that apart from invoking the jurisdiction of this Court on sympathetic ground, the petitioner has no legal or factual grounds to stand upon in the instant case. 25. That apart, the petitioner cannot dispute that the loan agreement has a specific Arbitration Clause contained in Clause 23 of the Agreement which reads thus:- “23. Law, Jurisdiction, Arbitration 23.1 All disputes, differences and/or claim arising out of or touching upon this Agreement whether during its subsistence or thereafter shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996, or any statutory amendments thereof and shall be referred to the sole Arbitration of an Arbitrator nominated by the Lender. The award given by such an Arbitrator shall be final and binding on all the parties to this agreement. 23.2 Dispute for the purpose of Arbitration includes default committed by the Borrower as per clause 14 of this Agreement. It is a term of this agreement that in the event of such an Arbitrator to whom the matter has been originally referred to dying or being unable to act for any reason, the Lender, at the time of such death of the arbitrator or of his inability to act as arbitrator, shall appoint another person to act as arbitrator. It is a term of this agreement that in the event of such an Arbitrator to whom the matter has been originally referred to dying or being unable to act for any reason, the Lender, at the time of such death of the arbitrator or of his inability to act as arbitrator, shall appoint another person to act as arbitrator. Such a person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. 23.3 The venue of Arbitration proceedings shall be at Chennai and the language shall be in English. 23.4 The Arbitrator so appointed herein above, shall also be entitled to pass an Award on the hypothecated asset and also on any other securities furnished by or on behalf of the Borrower/Coborrower. The Arbitrator is further entitled to pass any interim directions on the custody of the Asset as well as sale of the asset, or any other directions as may be appropriate to protect the interest of the parties pending resolution of the dispute. 23.5 All notices and other communications on the Lender and the Borrower(s) shall be to the following address, respectively; For Lender: Consumer Finance Division Office: IndusInd Bank Ltd., No. 354, G.N. Chetty Road, T. Nagar, Chennai-600017 For Borrower and Co-Borrower: The residential address stated in this Agreement unless change of address was notified by the Borrower or Co-Borrower.” 26. That petitioner is not in a position to dispute the aforesaid arbitration clause, and therefore, the Court has a mandatory duty to refer the dispute arising between the contracting parties to the arbitrator and the Civil Court has no jurisdiction to continue with this suit once an application under Section 8 has been filed. 27. Reference in this regard can conveniently be made to the judgment of Hon’ble Supreme Court Hindustan Petroleum Corpn. Ltd. vs. Pinkcity Midway Petroleums (2003) 6 SCC 503 , wherein it has been held as under:- 12. For deciding the question whether the Courts below were justified in coming to the conclusion that they could go into the question of the existence or validity of the arbitration agreement, we will have to first consider the relevant clauses found in the Dealership Agreement. Clause 40 of the said agreement reads thus : "40. For deciding the question whether the Courts below were justified in coming to the conclusion that they could go into the question of the existence or validity of the arbitration agreement, we will have to first consider the relevant clauses found in the Dealership Agreement. Clause 40 of the said agreement reads thus : "40. Arbitration (a) Any dispute or difference of any nature whatsoever any claim, cross-claim, counter-claim or set off or regarding any right, liability, act, omission or account of any of the parties hereto arising out of or in relation to this agreement shall be referred to the Sole Arbitration of the Chairman and Managing Director of the Corporation who may either himself act as the Arbitrator or nominate some other Officer of the Corporation to act as the Arbitrator. The dealer will not be entitled to raise any objection to any such arbitrator on the ground that the Arbitrator is an officer of the Corporation. (b) In the event of the Arbitrator to whom the matter is originally referred being transferred, he shall be entitled to continue the arbitration proceedings notwithstanding his transfer unless the Chairman and Managing Director at the time of such transfer or at any time thereafter, designates another Officer to act as Arbitrator in his place in accordance with the terms of this agreement. (c) In the event of the arbitrator, to whom the matter is originally referred vacating his office or being unable or refusing to act for any reason, the Chairman and Managing Director at the time of vacation of office or inability or refusal to act, shall designate another Officer to act as Arbitrator in accordance with the terms of this agreement. (d) The Arbitrator newly nominated by the Chairman and Managing Director under Clauses (b) or (c) above shall be entitled to proceed with the reference from the point at which it was left by his predecessor. (e) It is an express term of this contract that no person other than the Chairman and Managing Director or a Director nominated as aforesaid shall act as Arbitrator. If for any reason, Chairman and Managing Director is unable or unwilling or refuses or fails to act as an Arbitrator or nominate an Arbitrator then the matter shall be referred to the Director (Marketing) who shall appoint a Officer of the Corporation to act as an Arbitrator. If for any reason, Chairman and Managing Director is unable or unwilling or refuses or fails to act as an Arbitrator or nominate an Arbitrator then the matter shall be referred to the Director (Marketing) who shall appoint a Officer of the Corporation to act as an Arbitrator. It being fully understood and agreed by and between the parties hereto that the vacancy should not be supplied within the meaning of sub-section 1(b) of Section 8 of the Arbitration Act, 1940 (Act No. 10 of 1940). (f) The award of the Arbitrator so appointed shall be final, conclusive and binding on all parties to the agreement subject to the provisions of the Arbitration Act, 1940. (g) The award shall be made in writing and published by the Arbitrator within 12 months after entering upon the reference or within such extended time not exceeding one further year as the parties shall agree in writing. The parties hereto shall be deemed to have irrevocably given their consent to the Arbitrator to make and publish the award within the period referred to hereinabove and shall not be entitled to raise any objection or protest thereto under any circumstances whatsoever. (h) It is hereby expressly agreed that the powers of the Arbitrator appointed in the matter hereinabove mentioned shall include the power to make interim award/awards as the circumstances of the case may justify to appoint a receiver, commissioner or custodian by whatever name called to take possession of the property in dispute during the pendency of the proceedings and subject to such final order as may be passed by the Arbitrator and shall also have the power to issue such further orders from time to time as he may deem fit, on an application being made to him by any of the parties to the dispute where it is apprehended that the property to which it relates is in danger of being wasted, damaged, deteriorated or parted with or rights of other parties are likely to be created thereon. (i) The Arbitrator shall be at liberty to appoint, if necessary, any accountant or engineer or other technical person to assist him and to act on the opinion taken from such person. (i) The Arbitrator shall be at liberty to appoint, if necessary, any accountant or engineer or other technical person to assist him and to act on the opinion taken from such person. (j) The Arbitrator shall be entitled to direct anyone of the parties to pay the costs of the other party in such manner and to such extent as the Arbitrator may in his discretion determine and shall also be entitled to require on or both the parties to deposit funds in such proportion to meet the Arbitrator's fees and expenses as and when called upon to do so. (k) The venue of the Arbitration shall be as decided by the Arbitrator." 13. A perusal of this clause clearly shows that the parties to the Dealership Agreement had agreed to refer their dispute arising out of the agreement, of whatever nature it may be, to an arbitrator as contemplated in that agreement. Section 8 of the act in clear terms mandates that a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement to refer such parties to arbitration, the language of this Section is unambiguous. 14. This Court in the case of P. Anand Gajapathi Raju and others v. P. V. G. Raju (Dead) and others ( 2000 (4) SCC 539 ) has held that the language of Section 8 is peremptory in nature. Therefore, in cases where there is an arbitration clause in 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 decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, it is clear that if as contended by a party in an agreement between the parties before the Civil Court, there is a clause for arbitration, it is mandatory for the Civil Court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the agreement is accepted by both the parties as also by the Courts below but the applicability thereof is disputed by the respondent and the said dispute is accepted by the Courts below. Be that as it may, at the cost of repetition. We may again state that the existence of the arbitration clause is admitted. Be that as it may, at the cost of repetition. We may again state that the existence of the arbitration clause is admitted. If that be so, in view of the mandatory language of Section 8 of the Act, the Courts below ought to have referred the dispute to arbitration. 28. Subsequently, in case Branch Manager, M/s Magma Leasing & Finance Ltd., & Anr. v. Potluri Madhavilata & Anr., AIR 2010 SC 488 , the Hon’ble Supreme Court has categorically held that Section 8 of the Act in the form of legislative command to the Court where once the condition prescribed therein are satisfied the Court must refer the parties to arbitration, no other option is left to the Court. It will be profitable to refer to the relevant observations, which reads thus:- “20. The next question, an incidental one, that arises for consideration is whether the trial court must refer the parties to arbitration under Section 8 of the Act, 1996. 21. Section 8 reads thus: “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.” 22. An analysis of Section 8 would show that for its applicability, the following conditions must be satisfied: (a) that there exists an arbitration agreement; (b) that action has been brought to the court by one party to the arbitration agreement against the other party; (c) that the subject matter of the suit is same as the subject matter of the arbitration agreement; (d) that the other party before he submits his first statement of the substance of the dispute, moves the court for referring the parties to arbitration; and (e) that along with the application the other party tenders the original arbitration agreement or duly certified copy thereof. 23. 23. Section 8 is in the form of legislative command to the court and once the pre-requisite conditions as afore-stated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfillment of conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration. 24. There is nothing on record that the pre-requisite conditions of Section 8 are not fully satisfied in the present case. The trial court, in the circumstances, ought to have referred the parties to arbitration as per arbitration clause 22.” 29. In view of the aforesaid discussion, I find no merit in this petition and the same is accordingly dismissed, leaving the parties to bear their own costs. Pending application(s), if any also stands disposed of.