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2025 DIGILAW 471 (KER)

Jacob George S/o. George v. Macworld Industries Ltd (Ll08375)

2025-03-05

BASANT BALAJI

body2025
JUDGMENT : (BASANT BALAJI, J.) The 2 nd defendant in O.S.No.25 of 2018 on the files of the Subordinate Judges Court, Kottarakkara, is the petitioner herein. The 1 st respondent is the plaintiff, and the 2 nd respondent is the 1 st defendant. 2. Brief facts of the case are that the plaintiff filed the suit for the realisation of money to the tune of Rs.8,59,28,232/-, from the defendants and their assets jointly and severally. The parties are referred to as they appear in the original suit. The 1 st defendant is the proprietor of Emmanuel Cashew Industries, which is engaged in processing raw cashew nuts into cashew kernels and exporting the same from India to other countries. The 2 nd defendant is the proprietor of a trading house named J. J. Trading. The 1 st defendant introduced the 2 nd defendant to the plaintiff’s company, and based on the request made by the defendants, the plaintiff entered into an agreement in December 2016 for the purchase of raw cashew nuts from the defendants. Based on the undertaking, the defendant agreed to sell 1250 metric tonnes of raw cashew nuts to the plaintiffs for a total value of USD 2,174,400/-. The defendant furnished security for the proper conduct of the business by depositing the original title deed of immovable property with the plaintiff. Accordingly, the plaintiff transferred the entire amount of USD 2,174,400/- to the defendants’ account. Unfortunately, only 485.436 metric tonnes of raw cashew nuts were shipped instead of the agreed quantity of 1250 metric tonnes. The plaintiff demanded a refund of the balance amount, and the plaintiff issued a notice to the defendant claiming the amount as per the notice dated 15.01.2018, which the defendant acknowledged, but they did not settle the amount, and therefore, the suit was laid. 3. On entering appearance, the defendants filed Ext.P2 application challenging the maintainability of the suit regarding jurisdiction. The plaintiff filed an objection to the said application as Ext.P3. A similar application was filed by the 1 st defendant, as I.A.No.190 of 2019. Both the applications were considered together, and a common order was passed as Ext.P4, holding that the trial court has jurisdiction to try the suit, and the matter cannot be referred for arbitration. The petitioner challenges the same before this Court in this original petition filed under Article 227 of the Constitution of India. 4. Heard Sri. Both the applications were considered together, and a common order was passed as Ext.P4, holding that the trial court has jurisdiction to try the suit, and the matter cannot be referred for arbitration. The petitioner challenges the same before this Court in this original petition filed under Article 227 of the Constitution of India. 4. Heard Sri. Shaji Thomas, learned counsel for the petitioner, Sri.Kevin Thomas, learned counsel for the 1 st respondent, and Sri Krishnanunni, learned Senior Counsel for the 2 nd respondent. 5. The counsel for the petitioner argues that the suit filed as Ext.P1 cannot be entertained by the Sub-Court, Kottarakkara, for the reason that Ext.P5 is the purchase contract entered into between the plaintiff and the 2 nd defendant in Malaysia. The Port of loading is Dar Es Salam, Tanzania and the Port of discharge is Ho Chi Minh City, Vietnam. There is a further clause regarding the governance of the laws, which stipulates that the Rules and laws of Malaysia shall govern the contract, and the same shall be applicable in the unlikely event that the seller and buyer are unable to resolve the disputes through amicable mutual discussion. An arbitration clause is also provided, which states that any dispute arising out of or in relation to this contract, if not settled amicably by both parties, shall be finally settled by the International Arbitration Centre in Vietnam, in accordance with its Arbitration Rules. Therefore, the Courts in India do not have jurisdiction to entertain the present suit as the rules are to be governed by the laws of Malaysia, and there is also an arbitration clause. 6. Learned senior counsel appearing for the 2 nd respondent argued that the agreements between the plaintiff and the 2 nd defendant were executed on 15.11.2016, 13.12.2016, 22.12.2016, and 23.12.2016, whereas Ext.P6 was executed on 24.04.2017 in a stamp paper purchased on 16.11.2016. Therefore, Ext.P6 cannot be taken as an undertaking, as it is much before the execution of the agreement for purchase of raw cashew nuts. He supported the arguments of the counsel for the petitioner that since there is an arbitration clause in the purchase contract, the Civil Court has no jurisdiction, and the matter has to be referred for arbitration. 7. He supported the arguments of the counsel for the petitioner that since there is an arbitration clause in the purchase contract, the Civil Court has no jurisdiction, and the matter has to be referred for arbitration. 7. Learned counsel appearing for the 1 st respondent/plaintiff argued that the agreements are executed between the purchasing contractor and the 1 st defendant and not with that of the 1 st defendant. 8. Ext.P6 undertaking is by the 1 st defendant, who is not a party to the purchase contract, but the said undertaking is given to revoke the arbitration clause in the agreement executed between the plaintiff and the 2 nd defendant, in view of the balance amount payable. The 1 st defendant also had mortgaged immovable property having an extent of 56.95 Ares and the cashew factory situated in block No.027 Rs-survey No.133/7 of the Edamulakkal Village, Kottarakkara Taluk, and the Cashew Factory No.E-1/863 to 82 among other items of immovable property covered by the original title deeds which an equitable mortgage had already given possession. 9. As far as the plaintiff is concerned, the 1 st defendant, on behalf of the 2 nd defendant, has agreed to waive the arbitration clause in the agreements. Therefore, the suit is maintainable against the defendants and as of now there is no contract between him and the 1 st defendant, and there is no agreement which enables arbitration. Therefore, a suit is perfectly maintainable against defendants 1 and 2. 10. The court below had gone through the four agreements relied on by the plaintiff, and it was found that there are arbitration clauses in the two agreements out of the four ones. However, the arbitration clause has been revoked by Ext.P6, which was undertaken by the 1 st defendant on behalf of the 2 nd defendant. Therefore, the Civil Court alone has the jurisdiction to try the suit for recovery of money. It is worthwhile to note that the 1 st defendant does not deny the execution of Ext.P6. It is true that the 2 nd respondent has not signed the said document. 11. As mentioned earlier, there are arbitration clauses in two agreements. A perusal of Ext.P6 would show that the said arbitration clauses are revoked by the 1 st defendant for and on behalf of the 2 nd defendant. It is true that the 2 nd respondent has not signed the said document. 11. As mentioned earlier, there are arbitration clauses in two agreements. A perusal of Ext.P6 would show that the said arbitration clauses are revoked by the 1 st defendant for and on behalf of the 2 nd defendant. In Ext.P6, an extent of 56.95 Ares of property and two cashew factories are mortgaged; the original title deeds of the property belonging to the 1 st defendant attached are produced by the plaintiff himself, which probabilize the execution of the revocation agreement. The court below has relied on Section 20 of the Code of Civil Procedure, whereby, a suit can be filed within the local limits of whose jurisdiction, the defendant or each of the defendants actually and voluntarily resides or carries on business, or personally works for gain. 12. The 1 st defendant is residing in Kottarakkara in Kollam, and he has received the notice at the address shown in the cause title. Therefore, there is no dispute as to the residence of the 1 st defendant. The property of the 1 st defendant, which is mortgaged, is also within the jurisdiction of the said court. The court below has also taken note of the fact that though the 2 nd defendant is permanently residing in Sharjah, in the vakalath filed before the court, it is the address in Kollam, which is within the local limits of the said court. It also reveals that the 2 nd defendant is also residing within the limits of the said court. 13. He further argued that the petition filed by the defendants as Ext.P2, though filed under Section 8, requests the court to hear the maintainability of the suit regarding jurisdiction. 14. Section 8 of the Arbitration and Conciliation Act, deals with the power to refer the parties to arbitration where there is an arbitration agreement. As per Sub-section (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 when submitting his first statement on the substance of the dispute, refer the parties to arbitration. Sub- clause (2) reads that, 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. 15. The defendant has not produced the original arbitration agreement or has not sought to refer the parties to arbitration. Therefore, the Court below cannot take Ext.P2 as an application filed under Section 8 of the Arbitration Act. The court was only called upon to hear the maintainability of the suit regarding jurisdiction. Thus, the court below cannot be found fault for not referring the matter under Section 8 of the Arbitration Act. The counsel for the 1 st defendant relied on the judgment of the Apex Court in Sukanya Holdings Pvt. Ltd., v. Jayesh H. Pandya and Others ( AIR 2003 (SC) 2252 ), and argued that the court is required to refer the parties to arbitration in respect of a matter which the parties are agreed to refer and it comes within the ambit of the arbitration agreement. Where a suit is commenced as to a matter, which lies outside the arbitration agreement and is also between some other parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The word ‘a matter’ indicates that entire subject matter of the suit should be subject to the arbitration agreement. The 1 st defendant is not a party to the purchase agreement; therefore, even if there is an arbitration clause in the purchase agreement or contract, the same is not binding on the 1 st defendant. Therefore, only a civil suit can lie against the first defendant for the money claim. 16. The Apex Court in Sukanya’s case cited (supra), also it was held in paragraphs 16 and 17 as follows; 16. The next question which requires consideration is even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act? In our view, it would be difficult to give an interpretation to section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject matter of an action brought before a judicial authority is not allowed. 17. Secondly, such bifurcation of suit in two parts, one to be decided by the arbitral tribunal and other to be decided by the Civil Court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums. Thus, overall consideration of the facts and circumstances of the case, taking note of the fact that there is no agreement between the plaintiff and the first defendant and also taking note of Ext.P6, the court below is fully justified in holding that it has jurisdiction to try the suit, and the matter cannot be referred to the arbitration court. Hence, I fully concur with the reasoning given by the subordinate Judge in Ext.P4. Therefore, the Original Petition (C) is only to be dismissed, and I do so.