TMI Blog2006 (8) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... itration and Conciliation Act, 1996 (for short, the 1996 Act) is in question in these appeals which arise out of a judgment and order dated 10.02.2003 passed by a learned Single Judge of the High Court of Punjab Haryana, dismissing the Civil Revision Application filed by the Appellants herein from a judgment and order dated 03.10.2002 passed by the Civil Judge (Junior Division), Jalandhar and order dated 15.09.2004 refusing to review the said order. FACTS : The Appellant No.1 is a Public Sector Undertaking. It is engaged, inter alia, in the business of manufacturing and marketing of iron and steel products. The Respondent is a partnership firm. It is engaged in the business of consignment agents. It has its office at Jalandhar. A contract was entered into by and between the parties hereto in regard to the handling and storage of iron and steel materials of the Appellant at Ludhiana. The Appellants contend that one Shri Anil Verma, Partner of the Respondent-Firm had constituted various firms and companies and obtained several consignment agency contracts from the Appellant pertaining to Delhi, Faridabad, Chandigarh and Ludhiana etc. who conspired with certain officials of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng thereby they have subjected themselves to the jurisdiction of the Civil Court. The defendants have not spelt out as to what is the dispute or difference between the parties. Rather, they have straightaway black listed the plaintiff firm, without giving them any notice regarding any dispute or difference, which was mandatory. From the perusal of the record, it is very much clear that there is no dispute or difference between the present firm and the company with regard to any of the transactions in the business between both of them. Rather, the company is at a dispute with a person, who no more exists as a partner in the plaintiff firm. The company also wrote appreciation letter to the Plaintiff firm for their cooperation for achieving the desired targets for the year 2001-02. The same was made possible because of untiring efforts made by the plaintiff of the present case. In the present case, the straightaway of black listing the firm is not justified, even the principal of natural justice goes in favour of the respondent/plaintiff" A Revision Application filed by the Appellants before the High Court thereagainst was dismissed by the impugned judgment, inter alia, on the premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the arbitration agreement, the application under Section 8 of the 1996 Act was not maintainable. (3) The Appellants having filed the reply to the interim application of the Respondent and their counsel having made a specific statement that he wanted to argue on both the applications together i.e. application under Order 39, Rules 1 and 2 read with Section 151 of the Code of Civil Procedure as also the application under Section 8 of the 1996 Act, joined the process of the suit in their defence and subjected themselves to the jurisdiction of the Civil Court. (4) The Appellants have not spelt out the dispute and differences between the parties and have straightaway blacklisted the Respondent-Firm. (5) Anil Verma against whom the allegations had been made having resigned, the application under Section 8 was not maintainable. (6) The original arbitration agreement or the certified copy of the agreement having not been annexed with the application, the same was not maintainable. The 1996 Act makes a radical departure from the 1940 Act. It has embodied the relevant rules of the modern law but does not contain all the provisions thereof. The 1996 Act, however, is not as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (Protocol and Convention) Act, 1937 and Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 contained similar provisions. The expression steps in the proceedings , however, used in Article 8 of the Rules and Section 8 of the 1996 Act in contrast to the aforementioned provisions and in particular Section 34 of the 1940 Act, may be noticed : Article 8 of the Model Rules is as under : "(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. (2) Where, in such case, arbitral proceedings have already commenced, the arbitral tribunal may continue the proceedings while the issue of its jurisdiction is pending with the court." Section 8 of the 1996 Act 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 agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If at any time any question, dispute or difference whatsoever shall arise between the company and the Consignment Agent upon or in relation to or in connection with the contract, either party may forthwith give to the other notice in writing of the existence of such question, dispute or difference and the same shall be referred to the adjudication of an arbitrator to be nominated by the Chief Executive of the Company. The award of the arbitrator shall be final and binding on both the parties and the provisions of the Indian Arbitrator Act, 1940 and the rules thereunder and any statutory modification thereof shall be deemed to apply to and be incorporated in this contract." The scope and purport of such a clause was considered in Heyman and Another v. Darwins Ltd. [(1942) 1 All ER 337] and it was stated : "The answer to the question whether a dispute falls within an arbitration clause in a contract must depend on (a) what is the dispute, and (b) what disputes the arbitration clause covers. To take (b) first, the language of the arbitration clause in this agreement is as broad as can well be imagined. It embraces any dispute between the parties "in respect of " the agreement or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stay of the suit; Section 8 of the 1996 Act mandates a reference. Exercise of discretion by the judicial authority, which was the hallmark of Section 34 of the 1940 Act, has been taken away under the 1996 Act. The direction to make reference is not only mandatory, but the arbitration proceedings to be commenced or continued and conclusion thereof by an arbitral award remain unhampered by such pendency. [See O.P. Malhotra s The Law and Practice of Arbitration and Conciliation , 2nd Edition, pp. 346-347] Scope of the said provision fell for consideration before a Division Bench of this Court in P. Anand Gajapathi Raju and Others v. P.V.G. Raju (Dead) and Others [(2000) 4 SCC 539], wherein this Court held : "In the matter before us, the arbitration agreement covers all the disputes between the parties in the proceedings before us and even more than that. As already noted, the arbitration agreement satisfies the requirements of Section 7 of the new Act. The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the arbitration clause by substantiating the existence of an arbitration clause and the judicial authority concerned may stay such proceedings on being satisfied that there is no sufficient reason as to why the matter should not be referred to for decision in accordance with the arbitration agreement, and that the applicant seeking for stay was at the time when the proceedings were commenced and still remained ready and willing to do all things necessary to the proper conduct of the arbitration. This provision under the 1940 Act had nothing to do with actual reference to the arbitration of the disputes and that was left to be taken care of under Sections 8 and 20 of the 1940 Act. In striking contrast to the said scheme underlying the provisions of the 1940 Act, in the new 1996 Act, there is no provision corresponding to Section 34 of the old Act and Section 8 of the 1996 Act mandates that the judicial authority before which an action has been brought in respect of a matter, which is the subject-matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. The provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the defendants without following the basic principles of natural justice are intending to terminate the consignment agency contract of the plaintiff and to blacklist the plaintiff on alleged ground that one of Ex-partner of the plaintiff is claimed to be guilty of misrepresentation of overcharging the freight by misrepresentation from the different company. Anyhow this is no ground to do so." The principal grievance of the Plaintiff-Respondent was the action on the part of the Appellants terminating the contract. Grounds on which the order of termination were based, had been questioned in the plaint. Such contentions could well be raised before the Arbitrator. Shri Anil Verma was also acting on behalf of the partnership firm. It has not been found that he had no authority to represent the firm. His subsequent resignation as a partner was irrelevant for the purpose of consideration in regard to the maintainability of the application under Section 8 of the 1996 Act. Filing of a reply to the injunction application could also not have been a ground to refuse to entertain the plea taken by the Appellants that the suit should be referred to arbitral tribunal particularly when in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deserved advantage. Such could not be the underlying purpose of Section 34. Therefore, in our opinion, to effectuate the purpose underlying Section 34 the narrow construction of the expression "taking any other steps in the proceedings" as hereinabove set out appears to advance the object and purpose underlying Section 34 and the purpose for which the Act was enacted. The expression first statement on the substance of the dispute contained in Section 8(1) of the 1996 Act must be contra-distinguished with the expression written statement . It employs submission of the party to the jurisdiction of the judicial authority. What is, therefore, is needed is a finding on the part of the judicial authority that the party has waived his right to invoke the arbitration clause. If an application is filed before actually filing the first statement on the substance of the dispute, in our opinion, the party cannot be said to have waived his right or acquiesced himself to the jurisdiction of the court. What is, therefore, material is as to whether the petitioner has filed his first statement on the substance of the dispute or not, if not, his application under Section 8 of the 1996 Act, may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be deprived of by technical pleas. The court must go into the circumstances and intention of the party in the step taken. The court must examine whether the party has abandoned his right under the agreement. In the light of these principles and looking to the substance of the application dated January 4, 1985, we cannot form an opinion that the defendants have abandoned their right to have the suit stayed and took a step in the suit to file the written statement." Waiver of a right on the part of a defendant to the lis must be gathered from the fact situation obtaining in each case. In the instant case, the court had already passed an ad interim ex pare injunction. The Appellants were bound to respond to the notice issued by the Court. While doing so, they raised a specific plea of bar of the suit in view of the existence of an arbitration agreement. Having regard to the provisions of the Act, they had, thus, shown their unequivocal intention to question the maintainability of the suit on the aforementioned ground. The submission of the learned counsel for the Respondents that the two different causes of action having been raised, namely, illegal termination of contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed. Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and the 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 also 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." Such a question does not arise herein as the parties herein are parties to the arbitration agreement and the question in regard to the jurisdiction of the arbitrator, if any, can be determined by the arbitrator himself in terms of Section 16 of the 1996 Act. Strong reliance has been placed by Mr. Rai on a decision of this Court in Union of India v. Birla Cotton Spinning and Weaving Mills Ltd. [AIR 1967 SC 688] contending that when the dispute arises de hors the agreement, Section 8 of the 1996 Act would not be applicable. The said decision has no application in the instant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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