Calcutta High Court
Idcol Cement Ltd. vs P. Roy Chowdhury And Company And Ors. on 29 June, 2004
Equivalent citations: 2005(1)CHN158
Author: Subhro Kamal Mukherjee
Bench: Subhro Kamal Mukherjee
JUDGMENT Subhro Kamal Mukherjee, J.
1. The plaintiff instituted this C. S. No. 298 of 2001, inter alia, praying for a decree for Rs. 22,84,357.18 paise as against the defendant Nos. 1 to 3 jointly and severally; decree for Rs. 16,71,252.72 paise as against the defendant Nos. 4 to 16 jointly and severally; mandatory injunction directing the defendant Nos. 1 to 3 and each one of them to render true and faithful accounts of all the dealings and transactions entered into by the defendant Nos. 1 to 3 as the agent of the plaintiff and for the decree for such sum as might be found due and payable upon such accounts being taken; mandatory injunction directing the defendant Nos. 1 to 3 to allow inspection of the stocks, books and registers of the said defendants maintained in connection with the dealings and transactions entered into by defendant Nos. 1 to 3 as the agent of the plaintiff, interim interest and interest upon judgment at the rate of 24% per annum.
2. The plaintiff alleged in the plaint that the plaintiff carried on business as manufacturer of cement and the defendant No. 1 was a partnership firm and the defendant Nos. 2 and 3 were its partners. The plaintiff appointed the defendant Nos. 1 to 3 as its handling, clearing and selling agent at Cossipore for cement manufactured by the plaintiff. Time to time agreements were entered into by and between the plaintiff and the defendant Nos. 1 to 3. the last of such- agreement was dated August 10, 1997. One of the terms of the said agreement was that the defendant Nos. 1 to 3 would not sell cement on credit and would sell cement against advance payment only. In violation of the said agreement, the defendant Nos. 1 to 3 made various limited credit sales to different customers including defendant Nos. 4 to 16. After giving adjustments for all money paid by the defendant Nos. 1 to 3, the said defendant Nos. 1 to 3 were liable to pay Rs. 22, 84, 357. 18 paise to the plaintiff. The defendant Nos. 4 to 16 being the purchaser of the said materials were jointly and severally liable to the plaintiff.
3. In paragraph 13 of the said plaint it was stated by the plaintiff that the plaintiff made the defendant Nos. 4 to 16 as parties to the instant suit so that the question as to which of the defendants were liable and to what extent might be determined between the parties, It was stated that such adjudication was necessary inasmuch as the defendant Nos. 1 to 3 were contending that the purchasers were liable to the plaintiff while the purchasers, namely, the defendant Nos. 4 to 16, were contending that the defendant Nos. 1 to 3 were liable to the plaintiff.
4. In said suit the defendant No. 2, namely, Panchu Gopal Roy Chowdhury, files this application being G. A. No, 4418 of 2003. In this application various prayers are made but Mr. Pratik Prakash Banerjee, learned advocate for the petitioner, at the time of hearing of this application limited his prayer concerning the relief to refer the parties to arbitration.
5. A copy of the agreement dated August 10, 1997 is annexed to this application. Undisputedly, the agreement contains an arbitration clause. The clause 43 of the said agreement, which contains the arbitration clause, runs as under:
"43. Any dispute or difference arising out of or in connection with this agreement shall be referred to arbitration under Section 11 of the Arbitration and Conciliation Act, 1996. The Managing Director or any other Chief Officer nominated by him shall be the Arbitrator and the said arbitration proceeding shall be binding on both the parties."
6. My attention has been drawn that the defendant Nos. 1 and 2 filed an application under Article 226 of the Constitution of India, inter alia, claiming renewal/extension of the said agreement dated August 10, 1.997. The said writ petition was registered as W. P. No. 1697 of 1999. The plaintiff filed an affidavit- in-opposition in the said writ application taking the plea that the disputes raised in the said writ application were covered by the arbitration clause appearing in the agreement dated August 10, 1997. It was contended that the writ petition was not maintainable having regard to the fact that the parties agreed to a particular mode for settling their disputes.
7. Pinaki Chandra Ghosh, J. by judgment and order dated February 15, 2000 dismissed the said writ petition inasmuch as alternative remedy was available to the writ petitioners.
8. The writ petitioners preferred an appeal being A. P. O. No. 298 of 2000 and a Division Bench of this Court on September 23, 2003 dismissed the appeal, inter alia, holding that if the respondent in the writ application had terminated the agreement illegally, the writ petitioners had remedy in arbitration proceeding or they could file civil suit for damages.
9. In the aforesaid background, Mr. Pratik Prakash Banerjee, learned advocate, appearing in support of this application, argues that the language of arbitration agreement is such that any dispute between the parties is to be referred to arbitration. He submits that the defendant Nos. 4 to 16 are claiming through defendant Nos. 1 to 3 and, therefore, the dispute should be referred to arbitration. He submits that the plaintiff has filed the present suit in order to avoid arbitration and since the petitioner applies for an order to refer the parties to arbitration on the ground that undisputedly there is an arbitration agreement, the parties should be referred to arbitration. Mr. Banerjee submits that the disputes crop up out of the agreement dated August 10,1997 and as the disputes raised in the suit covered by the arbitration agreement, the parties should be referred to arbitration. Mr. Banerjee submits that the plaintiff in a matter, which is the subject of an arbitration agreement, brings this present action in the Civil Court and, therefore, this Court must refer the parties to arbitration in view of mandatory language of Section 8 of the Arbitration and Conciliation Act, 1996 ('the said Act of 1996' in short). Mr. Banerjee in this connection relied upon the decision of the Supremo Court of India in the case of Hindustan Petroleum Corporation Limited v. Pinkcity Midway Petroleums, . It is submitted that when there is an objection before the Civil Court as to the applicability of the arbitration clause, the same will have to be raised before the arbitral tribunal under Section 16 of the said Act of 1996 and the Civil Court cannot proceed to examine the applicability of the arbitration agreement to the facts of the case. Mr. Banerjeee, finally, argues that the defendant Nos. 4 to 1.6 are unnecessary parties in the suit inasmuch as by suing the defendant Nos. 1 to 3 the plaintiff can recover its alleged dues. By adding unnecessary parties, the reference to arbitration cannot be avoided. Mr. Banerjee submits that it is settled law that a party to an arbitration agreement cannot defeat agreement between the parties merely by joining third parties in the suit. Mr. Banerjee in this connection cites the decisions in the cases of Satyendra Nath Mitra v. Union of India, , Lotus Oil Company v. Calcutta Soap Works, , Hindustan Steel Works Construction Ltd. v. Bharat Spun Pipe Co., , Biswanath Rungta v. Oriental Industrial Engineering Co. Pvt. Ltd. and Ors., , Srivenkateswara Constructions and Ors. v. Union of India, .
10. Mr. Abhrajit Mitra, learned advocate for the plaintiff not only disputes the contentions raised by Mr. Banerjee, but also submits that this application by Panchu Gopal Roy Chowdhury, the defendant No. 2, in his individual capacity, is not maintainable. The arbitration agreement is an independent contract. The agreement was between the plaintiff and the defendant No. 1- firm. The application by the defendant No. 2 in his individual capacity is not, therefore, maintainable. He submits that one partner can file an application in the name of the firm although other partners do not join him. Nevertheless, the name of the firm should be mentioned as the petitioner in the cause title. Mr. Mitra in support of his contentions cites the decisions in the cases of Bhadreswar Coal Supply Co. v. Satis Chandra Nandi & Co. and Ors., , Bhagwanji Morarji Goculdas v. Alembic Chemical Works Co. Ltd. and Ors., , Sohanlal Pachisia & Co. v. Bilasray Khemani and Ors., and Garden Finance Limited v. Prakash Industries Lid. and Anr., reported in 2002(1) Arb. LR 122.
11. In reply Mr. Banerjee submits that one partner can sue in his own name and it is not necessary that he must take out the application in the name of the firm. Mr. Banerjee, in support of his contentions, cites the decisions in the cases of Radha Kanta Pal and Ors. v. Pulin Krishna Pal and Ors., reported in 42 CWN 310, In re: Kuver Bank Ltd. v. Stale of West Bengal, reported in 63 CWN 21 and Purushottam Umedbhai and Co. v. Manilal and Sons, .
12. Supreme Court of India in P. Anand Gajapathi Raju and Ors. v. P. V. G. Raju (dead) and Ors., laid down the following conditions, which were required to be satisfied under sub-sections (1) and (2) of Section 8 of the said Act of 1996 before the judicial authority can refer the parties to arbitration:
"(1) there is an arbitration agreement;
(2) a party to the agreement brings an action in the Court against the other party;
(3) subject-matter of the action is the same as the subject-matter of the arbitration agreement;
(4) the other party moves the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute."
13. In the said decision it was, further, held that the language of Section 8 of the said Act of 1996 was peremptory and it was, 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 arising therefrom.
14. Supreme Court of India in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya and Anr., held that the said Act of 1996 did not oust the jurisdiction of the Civil Court to decide the dispute in a case where parties to the arbitration agreement did not take appropriate steps as contemplated under sub-sections (1) and (2) of Section 8 of the Act of 1996. There was no provision in the said Act of 1996 that when the subject-matter of the suit included subject-matter of arbitration agreement as well as other disputes, the matter was required to be referred to arbitration. There was, also, no provision for splitting the cause or the parties and referring the subject- matter of the suit to arbitration, There was no provision as to what was required to be done in a case where some parties to the suit were not parties to the arbitration agreement. It has been held that the subject-matter of the suit ought not to be bifurcated. Any bifurcation of the subject-matter of the suit, one to be decided by the arbitral tribunal and the other to be decided by the Court/judicial authority would lead to anomalous results. The Supreme Court of India noticed that this would inevitably lead to delay and increase the cost of litigation between the parties. The possibility of two fora passing conflicting orders could not, also, be ruled out if such bifurcation of distinct causes of action was permitted.
15. This application filed by Panchu Gopal Roy Chowdhury in his individual capacity is not maintainable. Panchu GopalRoy Chowdhury could maintain this application if the application was filed in the name of the firm although his other partner did not join him. The application is required to be filed for and on behalf of the firm and not by one of the partner in his individual capacity. Merely because Panchu Gopal Roy Chowdhury signed the agreement dated August 10, 1997 for and on behalf of the firm, it cannot be said that he can maintain this application in his individual capacity. The decisions cited by Mr. Banerjee in the cases of Radha Kanta Pal (supra), In re: Kuver Bank Limited (supra) and Purushottam Umedbhai and Company (supra) are not applicable in the facts and circumstances of the case inasmuch as in none of those decisions it was held that a partner can sue in his own name and need not to take out the action in the name of the firm. On the contrary, in Kuver Bank Limited (supra) it was held a plaintiff bringing a suit against a firm might implead all the members of the firm and likewise members of the firm could sue jointly on behalf of the firm by individual name. Such a suit would nonetheless be a suit against the firm or by the firm. Panchu Gopal Roy Chowdhury takes out this application not for and on behalf of the firm. Therefore, this application is not maintainable in law.
16. On merits, also the petitioner has failed to make out any case to refer the parties to arbitration. The defendant Nos. 4 to 16 are admittedly not parties to the arbitration agreement and, therefore, they cannot be dragged to the arbitration proceeding on the strength of an agreement to which they were not parties.
17. The submission of Mr. Banerjee that the defendant Nos. 4 to 16 are unnecessary parties and the plaintiff impleads them in She suit in order to avoid arbitration proceeding is not factually correct. In paragraph 13 of the plaint it is stated that the plaintiff made the said defendant Nos. 4 to 16 parties to the suit so that the question as to which of the defendants are liable and to what extent may be determined between the parties. Such adjudication is necessary as the defendant Nos. 1 to 3 are contending that the defendant Nos. 4 to 16 are liable to the plaintiff while the defendant Nos. 4 to 16 are contending that the defendant Nos. 1 to 3 are liable to the plaintiff.
18. Mr. Banerjee relies upon the decision of the Supreme Court of India in Hindustan Petroleum (supra) and submits that when there is an objection before the Civil Court as to the applicability of the arbitration clause to the facts of the case, the same will have to be raised before the arbitral tribunal under Section 16 of the said Act of 1996 and the Civil Court cannot proceed to examine the applicability of the arbitration agreement to the facts of the case. Mr. Abhrajit Mitra, learned advocate, appearing for the plaintiff submits, on the contrary, that in the said decision Supreme Court of India did not consider the earlier decision in Sukanya Holding (supra).
19. The decision in Hindustan Petroleum Corporation Limited (supra) has no application. In that case the existence of the arbitration clause was admitted and there was no third party involved. The Supreme Court of India, therefore, observed that if there was any objection as to the applicability of the arbitration clause to the facts of the case, the same would have to be raised before the arbitral tribunal concerned and the Civil Court could not proceed to examine the applicability of the arbitration agreement to the facts of the case.
20. When the subject-matter of the suit/legal proceeding includes subject- matter of the arbitration agreement as well as the disputes, the parties cannot be referred to arbitration.
21. I, accordingly, reject this application without, however, any order as to costs.
22. Put up the other application being G, A. No. 1669 of 2004 filed by the plaintiff in the monthly combined list of cases for the month of July, 2004 under the heading 'Motion New'.
23. All parties are to act on a xerox signed copy of this judgment on usual undertakings.
Later:
24. After the judgment is pronounced, Mr. Pratik Prakash Banerjee, learned advocate for the petitioner, prays for stay of the operation of this order. The paryer is considered and rejected.