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TMI Blog2007 (3) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... s determinable 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 time, a company registe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order, dated 27-09-2001, aforementio ned reads as follows:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the Bombay High Court sanctioning the arrangement of me rger, whichever was earlier, was illegal. By this suit, the plaintiff Company so ught for, inter alia, a decree declaring that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est . (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 petition. 4. I have heard Mr. D Barua, learned counsel for the defendant Company-peti tioner, and Mr. RL Yadav, learned counsel for the plaintiff Company-opposite par ty. 5. Let me, now, turn to the question as to whether the impugned order is su s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be the subject matter of clau se 17 of the agreement dated 01.05.1997. 5. That regarding the statement made in paragraph 5 it is stated that the willin gness of the defendant cannot be a ground to invoke the clause 17 of the alleged agreement. The subject matter of the suit will only be decided by court of Civi l nature and so the matter cannot be referred to Arbitration. 7. From a careful reading of what the plaintiff Company has stated, in thei r said objection petition, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause 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 be the role of the civil court whe n an argument is raised that such an arbitration clause does not apply to the fa cts of the case in hand? Learned counsel for the appellant contends that it is a matter which should be raised before the arbitrator who is competent to adjudic ate upon the same and the civil court should not embark upon an inquiry in regar d to the applicability of the arbitration clause to the facts of the case. While learned counsel appearing for the respondent contends that since the applicabil ity of the arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership 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 the arbitrator to decide, under Section 16 of the said Act, if the arbitration clause applies to the subject-matter of the suit or not. Unless, therefore, t he plaintiff Company could show that the decisions, in Kankan Rly. (supra) and Pinkcity Midway Petroleums (supra), were not applicable to the facts of the case at hand, the learned trial Court had no option, but to refer the parties to arbi tration. 10. Contending that to the facts of the case at hand, the decision in Pinkci ty Midway Petroleums (supra) and Kankan Rly, (supra), are not attracted, Mr. Yad av has referred this Court to the case of Nathani Steels Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, 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 jurisdiction but shall, if allowed to survive, cause serious miscarriage of justice. 14. It has also been contended by Mr. RL Yadav that even if a part of the di spute is triable by a civil Court, such a dispute cannot be referred to arbitrat ion. The proposition of law so put forward cannot be doubted. In the present cas e, however, it is crystal clear that no part of the dispute, raised in the suit, is exclusively determinable by the civil Court and/or not covered by the arbitr ation clause. In such circumstances, particularly, when the existence of the arb itration clause has been admitted, the learned trial Court had no option, but to refer the parties to arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 application, under Section 8 of the said Act, is made for arbitration, it follows, as a corollary, that the Court, which refused to refer the parties to arbitration, has failed to exercise jurisdiction. This would amount to failure of justice and cause irreparable injury to the party concerned. In such circumstances, one can have no escape from the conclusion that the impugned order, whereby the learned trial Court has refused to refer the parties to arbitration in terms of Section 8 is an order, which would be revisable under Section 115 of the CPC, if the impugned order is held to be contrary to the provisions of Sections 8 and 16 of the said Act. I am guided to adopt these views from the observations made in Pinkcity Midway Petroleums (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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