TMI Blog2007 (3) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... nable by the arbitrator in terms of the relevant arbitration agreement or is it for the civil court to decide as to whether the provisions for arbitration, appearing in the agreement between the parties concerned, are attracted to the dispute or not? Yet another import ant question, which the present revision petition has raised, is this: Can a civ il court decline to refer a dispute, raised in a suit, for arbitration despite e xistence of the provisions for arbitration contained in the agreement between th e parties concerned and, if so, when can the civil court decline to refer the di spute to arbitration? 3. Before answering the questions, which have been raised in the present re vision, the material facts, which are not in dispute and various stages, which h ave led to the present revision, need to be noted and are, therefore, set out, i n brief, as follows:- ( i) An agreement was arrived at, with effect from 01-05-1997, between th e plaintiff-opposite party herein, which was a company registered under the Comp anies Registration Act, and Rhone Poulenc India Limited (hereinafter referred to as RPIL ), which was also, at the relevant point of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay High Court, the RPIL would cease to have any legal existence inasmuch as it would stand merged i nto M/S Nicholas Piramal India Ltd. By this letter, dated 20-07-2001, the RPIL f urther informed the plaintiff Company that with effect from three months from th e date of the said letter, or the date of the order of the Bombay High Court, wh ichever is earlier, the contract agreement existing between the plaintiff Compan y and the RPIL, appointing the former as the clearing and forwarding agent of th e latter, would stand terminated and that all the dues, thereafter, would be set tled by M/S Nicholas Piramal India Ltd. (i.e., the defendant Company) on receivi ng possession of the stock and relevant records from the plaintiff Company. When the arrangement for merger, as indicated hereinbefore, was pending in the Bomba y High Court, the plaintiff Company raised its objection to the said merger by f iling affidavit. However, by an order, dated 27-09-2001, the Bombay High Court, in Company Petition No. 685/2001, which arose out of Company Application No. 252 /2001, passed an order approving, inter alia, amalgamation of the RPIL into the defendant Company. The relevant part of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inue to be in full f orce and elect and may be enforced by or against NPIL. ( v) In terms of the arrangement for merger, which was sanctioned by the Bombay H igh Court by its order, dated 27-09-2001, aforementioned, not only the assets an d liabilities of the erstwhile RPIL came to be vested in the defendant Company, but even the arbitration clause, which existed between the plaintiff Company and the RPIL became, under the said sanctioned arrangement of merger, an agreement between the plaintiff Company, on the one hand, and the defendant Company, on th e other. ( vi) Before, however, the merger was sanctioned on 27-09-2001, the plaintiff Com pany instituted Title Suit No. 241/2001, in the Court of the Civil Judge (Sr. Di vn.) No. 2, Guwahati, against the RPIL, contending, inter alia, that the letter/ notice, dated 20-07-2001, aforementioned issued by the RPIL informing the plaint iff Company that the agreement existing between them, whereunder the plaintiff C ompany had been appointed as clearing and forwarding agent of the RPIL, would ce ase to exist, with effect from three months from the date of the said letter or the date of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in thereby loss of good will. With the allegations so made again st the defendant Company, the plaintiff Company sought for, inter alia, a decree for ₹ 20 crores, against the defendant Company, as compensation with interest . ( ix) The defendant Company appeared in the Money Suit No. 73/2003 and filed a pe tition therein setting out the facts, which had led to the merger of the RPIL in to the defendant Company and further indicating therein that in terms of Clause 17 of the agreement, dated 01-05-1997, there exists an arbitration clause betwee n the parties and, hence, the dispute, raised in the suit, needs to be referred to arbitration in terms of Section 8 of the said Act. This application gave rise to Misc. (J) Case No. 70/2004. Objection to the prayer for referring the disput e to arbitration was raised by the plaintiff Company and after hearing the learn ed counsel for the parties concerned, the learned Court below passed the impugne d order, dated 19-02-2005, whereby the defendant Company s petition for referrin g the dispute to arbitration was dismissed. The defendant Company is, now, befor e this Court with the help of the present revision petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( 4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) of sub-section (3), admit a later plea if it considers the delay justified. ( 5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting t he plea, continue with the arbitral proceedings and make an arbitral award. ( 6) A party aggrieved by such an arbitral award may make an application for sett ing aside such an arbitral award in accordance with section 34. 6. While considering the question as to whether the impugned order is susta inable it is important to note that in paragraph Nos. 4 and 5 of their objection , raised against the defendant Company s prayer to refer the dispute to arbitrat ion, the defendant Company averred as under: 4. That the statement made in para 4 are not correct and they are not admitted. The clause 17 of the agreement dated 01.05.1997 is irrelevant for deciding the present suit and the said clause can not be invoked in deciding the present suit . The subject matter of the suit cannot be said to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... athi Raju v. P.V.G. Raju has held t hat the language of Section 8 is premptory 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 i s 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 civi l 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 a rbitral clause in the Agreement is accepted by both the parties as also by the c ourts 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 a dmitted. If that be so, in view of the mandatory language of Section 8 of the Ac t, the courts below ought to have referred the dispute to arbitration. 15. The question then would arise: what would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear from the language of the section, as interpreted by the Constitu tion Bench judgment in Konkan Rly. That if there is any objection as to the appl icability of the arbitration clause to the facts of the case, the same will have to be raised before the Arbitral Tribunal concerned. Therefore, in our opinion, in this case the courts below ought not to have proceeded to examine the applic ability of the arbitration clause to the facts of the case in hand but ought to have left that issue to be determined by the Arbitral Tribunal as contemplated i n clause 40 of the Dealership Agreement and as required under Sections 8 and 16 of the Act. ( Emphasis supplied) 9. In the background of the fact that in the present case, the existence of arbitration clause has been admitted by the plaintiff Company, the learned trial Court, in the face of the authoritative pronouncements in Konkan Rly reported, in 2002 (2) SCC 388,. coupled with what has been held in Pinkcity Midway Petroleums (supra), had no jurisdiction to decide whether the subject-matter of the suit attracted the arbitration clause or not. To put it differently, it is really for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not f all within the realm of the said compromise decree. Had it been the case, in the said money suit, that the compromise decree had not been acted upon, the remedy lied in executing the decree and not in instituting a fresh suit. When the plai ntiff Company has itself instituted the suit, it cannot, in the same breath, con tend that the disputes and differences between the parties have been fully and f inally settled. Logically, therefore, one has no option but to hold that the dis pute raised in the present Money Suit, is not covered by the compromise decree a nd since the dispute is not covered by the terms of decree, and there is an arbi tration clause, it is not the civil Court, which can decide as to whether the ar bitration clause is applicable to the disputes raised in the suit or not. The ju risdiction for determination of such a question lies with the arbitrator, for, i t is the arbitrator, who can decide applicability of the arbitration to the fact s of a given case. 13. Situated thus, it is clear that the learned trial Court committed seriou s error of jurisdiction in declining to refer the parties to arbitration. Such a n order is not only without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, had it been made in favour of the defendant Company, would have brought to an end the suit. 17. Coupled with the above, it is worth noticing that by their petition made under Section 8, the defendant Company has contended, inter alia, that a civil court has, in the face of the arbitration clause existing in the agreement reach ed by and between the parties, no jurisdiction to decide the lis. In consequence of the dismissal of the said petition, the logical conclusion is that the learn ed trial Court has assumed jurisdiction to try the suit, though the defendant Co mpany contended that learned trial Court had no jurisdiction to try the suit. In such circumstances, it clearly follows that since the defendant Company s contention was legally correct, the learned trial Court had no jurisdiction to deal w ith the suit any further. By the impugned order, the learned Court below, it is clear, has refused to exercise, though it had, jurisdiction to refer the parties to arbitration. 18. There is yet another angle from which the maintainability of the revision can be considered. When a civil court does not have jurisdiction to entertain a suit after an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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