Kerala High Court
Vellapally Brothers vs Union Of India Represented By
Author: Thomas P.Joseph
Bench: Thomas P.Joseph
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE THOMAS P.JOSEPH
MONDAY, THE 11TH DAY OF MARCH 2013/20TH PHALGUNA 1934
OP(C).No. 2695 of 2012 (O)
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I.A.NO.3123 OF 2008 IN OS.351/2008 of I ADDL.SUB COURT, KOZHIKODE
PETITIONER(S):
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1. VELLAPALLY BROTHERS,
DESIGNERS, ENGINEERS AND CONTRACTORS, POST BOX NO.45
VELLAPALLY LANE, K.K.ROAD
KOTTAYAM-686001 AND ANOTHER.
2. MATHEW ALEX VELLAPALLY
VELLAPALLY LANE
K K ROAD
KOTTAYAM - 686 001
BY ADVS.SRI.RAJIV ABRAHAM GEORGE
SRI.EAPEN ABRAHAM GEORGE
RESPONDENT:
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UNION OF INDIA REPRESENTED BY
THE EXECUTIVE ENGINEER
CENTRAL PUBLIC WORKS DEPARTMENT, CALICUT.
BY ADV. SRI.P.PARAMESWARAN NAIR,ASG OF INDIA
THIS OP (CIVIL) HAVING BEEN FINALLY HEARD ON 11-03-2013, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
OP(C).No. 2695 of 2012 (O) 2
APPENDIX
PETITIONER(S) EXHIBITS
EXT-P1 TRUE COPY OF THE PLAINT IN O.S.351 OF 2008 FILED BY THE
RESPONDENT IN THE COURT BELOW.
EXT.P2 TRUE COPY OF THE I.A.3123 OF 2008 IN O.S.351 OF 2008 FILED
BY THE PETITIONERS IN THE COURT BELOW.
EXT.P3 TRUE COPY OF THE ORDER DATED 1.2.2012 IN I.A.3123 OF 2008 IN
O.S.351 OF 2008 OF THE COURT BELOW.
EXT.P4 TRUE COPY OF THE I.A.1122 OF 2012 FILED BY THE PETITIONERS
IN THE COURT BELOW.
EXT.P5 TRUE COPY OF 1123 OF 2012 FILED BY THE PETITIONERS IN THE
COURT BELOW.
EXT.P6 TRUE COPY OF ORDER DATED 23.2.2012 IN I.A.1122 OF 2012 OF
THE COURT BELOW.
EXT.P7 TRUE COPY OF ORDER DATED 23.2.2012 IN I.A.1123 OF 2012 OF
THE COURT BELOW.
EXT.P8 TRUE COPY OF ORDER DATED 23.2.2012 IN O.S.351 OF 2008 OF
THE COURT BELOW.
EXT.P9 TRUE COPY OF ORDER DATED 23.2.2012 IN O.S.351 OF 2012 OF
THE COURT BELOW.
EXT.P10 TRUE COPY OF THE DECREEE IN O.S.351 OF 2008 OBTAINED BASED
ON COPY APPLICATION DATED 254.2.2012 BY THE PETITIONERS.
EXT.P11 TRUE COPY OF I.A.5066 OF 2012 TO SET ASIDE THE EX PARTE
DECREE DATED 23.2.2012 IN O.S.351 OF 2008
EXT.P12 TRUE COPY OF I.A.5065 OF 2012 IN O.S.351 OF 2008 TO CONDONE
THE DELAY IN FILING APPLICATION TO SET ASIED EXT PARTE
DECREE DATED 23.2.2012.
RESPONDENTS' EXHIBITS :NIL
true copy /
P.A to Judge
THOMAS P.JOSEPH, J.
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O.P(C).No.2695 of 2012
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Dated this the 11th day of March, 2013
J U D G M E N T
Ext.P3, order dated 01.02.2012 on I.A.No.3123 of 2008 in O.S.No.351 of 2008 rejecting request of petitioners/ defendants to refer the dispute for arbitration in accordance with clause 25 of the agreement between the parties is under challenge.
2. Petitioners and respondent entered into a contract for construction of terminal building at Karipur airport in the year, 1985. Dispute arose between the parties which was referred to arbitration in accordance with clause 25 of the agreement executed between the parties. Arbitrator passed award on 14.12.1990. First petitioner filed O.P(Arb).No.7 of 1991 in the Sub Court, Kozhikode to make that award a decree of Court. Respondent filed O.P(Arb). No.54 of 1992 to set aside the award. Learned Sub Judge, by common judgment dated 03.11.1995 allowed O.P(Arb).No.7 of 1991 and dismissed O.P(Arb).No.54 of 1992. First petitioner filed E.P.No.190 of 1996.
3. Respondent challenged the common judgment in C.R.P.No.513 of 1997 and M.F.A.No.1606 of 1996. In M.F.A.No.1606 of 1996, respondent obtained an interim order for O.P(C).No.2695 of 2012 2 stay of execution of the decree on condition of his depositing `.10,00,000/- in the executing court within two months from the date of that order, with liberty to first petitioner to withdraw the amount on furnishing bank guarantee. First petitioner furnished bank guarantee and withdrew the sum of `.10,00,000/-. Later, C.R.P.No.513 of 1997 and M.F.A.No.1606 of 1996 were allowed on the ground that the arbitrator who vacated office on 30.11.1990 had no authority to publish the award on 14.12.1990. It was directed that a new arbitrator could be appointed within one month in accordance with clause 25 of the agreement.
4. Petitioners did not pursue the matter further. That matter ended there. First petitioner repaid the sum of `.10,00,000/- as per cheque dated 11.11.2005. First petitioner filed application in the executing court for release of the bank guarantee. Respondent resisted that application on the ground that it has suffered damages due to deposit of the amount. Executing court rejected that objection observing that if at all respondent has suffered damages, remedy is to file a suit for recovery of such damages.
5. Respondent filed O.S.No.351 of 2008 in the Sub Court, Kozhikode for recovery of damages by way of interest on the sum of `.10,00,000/- at the rate of 12% from 22.11.1997 till 12.12.2005. O.P(C).No.2695 of 2012 3
6. Petitioners filed application in O.S.No.351 of 2008 under Sec.8 of the Arbitration and Conciliation Act, 1996 (for short, "the Act") contending that the dispute involved is arbitrarable in view of clause 25 of the agreement and hence the civil court has no jurisdiction to entertain the suit. Application was resisted by the respondent. Learned Sub Judge, by Ext.P3, order dismissed the application, taking the view that the issue involved in the suit is not a 'dispute' coming within clause 25 of the agreement. Ext.P3, order is under challenge.
7. Learned counsel for petitioner has contended that the dispute as understood by the parties by clause 25 of the agreement is wide enough to cover any dispute referable to the contract. It is also contended that at any rate it is for the arbitrator, by virtue of the power conferred on him under Sec.16 of the Act to decide whether the 'dispute' is arbitrarable or not and that the civil court cannot decide that question. Learned counsel has referred me to Sec.8 of the Act to contend that once the requirements of that section are complied the civil court is bound, unlike the discretionary power vested with it under Sec.34 of the Arbitration Act, 1940 (for short, "the Old Act") to refer the parties to arbitration. It is contended that learned Sub Judge appears to have been carried away by the observation made by the executing court O.P(C).No.2695 of 2012 4 in E.P.No.190 of 1996 that for damages if any suffered by the respondent, it should file separate suit. Learned counsel has placed reliance on the decisions in Renusagar Power Co. Ltd Vs. General Electric Company and Anr. (AIR 1985 SC 1156), Hindustan Petroleum Copn.Ltd VS. Pinkcity Midway Petroleums ((2003)6 SCC 503), Rashtriya Ispat Nigam Ltd and Anr. Vs. Verma Transport Co. ((2006) 7 SCC 275), Agri Gold Exims Ltd. Vs. Sri Lakshmi Knits & Wovens & Ors. ((2007)3 SCC 686), Bharat Sewa Sansthan Vs. U.P.Electronics Corpn. Ltd. ((2007)& SCC 737) and Branch Manager, Magma Leasing and Finance Limited and Anr. Vs. Potluri Madhavilata and Anr. ((2009) 10 SCC 103).
8. Learned counsel further pointed out that immediately after Ext.P3, order was passed, petitioners filed I.A.Nos.1122 and 1123 of 2012 to enlarge time to file written statement and to stay further proceedings in the suit. I.A.No.1122 of 2012 was dismissed as per Ext.P6, order dated 23.02.2012 and on the same day, learned Sub Judge proceeded to pass Ext.P8, ex parte decree in favour of respondent. It is submitted that petitioners have, as a matter of abundant caution filed I.A.No.5066 of 2012 to set aside the ex parte decree and I.A.No.5065 of 2012 to condone the delay if any in filing O.P(C).No.2695 of 2012 5 I.A.No.5066 of 2012. Those applications are pending decision before learned Sub Judge.
9. Learned counsel argued that if this Court accepts Ext.P2, application preferred by petitioners under Sec.8 of the Act, all proceedings initiated by the learned Sub Judge subsequent thereto are without jurisdiction and hence Ext.P8, ex parte decree passed on 25.02.2012 also would fall to the ground notwithstanding that petitioners have filed I.A.Nos.5065 and 5066 of 2012 which are pending decision.
10. Learned counsel for the respondent argued that claim for damages made by the respondent in O.S.No.351 of 2008 has nothing to do with the dispute referred to in clause 25 of the agreement and hence Sec.8 of the Act has no application. The suit, as observed by the executing court in E.P.No.190 of 1996 while releasing the bank guarantee is maintainable. Further argument learned counsel has advanced is that even before the arbitrator (if the dispute is referred), petitioner can have no justifiable cause to show against claim for damages made by the respondent. According to the learned counsel, by the amount remaining idle from the date of deposit until it was repaid to the respondent, it has suffered damages which petitioners is liable to pay. Learned counsel also argued that so far as the ex parte judgment and decree O.P(C).No.2695 of 2012 6 dated 23.02.2012 are not challenged in this proceeding, even if this original petition is allowed, that would have no bearing on the ex parte judgment and decree dated 23.02.2012.
11. I referred to the objection respondent raised when petitioners requested release of bank guarantee following repayment of the sum of `.10,00,000/- to the respondent and that request being objected by the respondent on the ground that it has suffered damages. In Ext.P3, order, rejecting Ext.P2, application learned Sub Judge refers to the observation made by the executing court while allowing E.A.No.442 of 2006 (for release of bank guarantee) that in case respondent has suffered damages, it is open to the respondent to file a suit for recovery of the same. The said observation of the executing court does not mean that if otherwise Sec.8 of the Act is applicable, court below had jurisdiction to entertain the suit. Question whether Sec.8 of the Act is applicable to the facts of the case or not, should depend on the facts and not on the observation executing court has made while disposing of E.A.No.442 of 2006.
12. Sec.5 of the Act states that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I of the Act, no judicial authority shall intervene except where so provided in Part I. By Sec.5, legislature has taken O.P(C).No.2695 of 2012 7 away power of the Court to interfere in a matter when there is an agreement for arbitration, except in the manner provided under the Act. Sec.8 of the Act states that a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
13. It is not disputed that at the earliest point of time, petitioners filed Ext.P2, application along with a copy of the agreement entered into between the parties requesting learned Sub Judge to refer the dispute for arbitration.
14. Clause 25 of the agreement entered into between the parties say that except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in anyway arising out of or relating to the contract, designs, drawings, specifications, estimates instructions, orders or the conditions or otherwise concerning the work, or the execution or failure to execute .......... shall be referred to the arbitrator. O.P(C).No.2695 of 2012 8
15. It is not disputed that there was a dispute between the parties coming under clause 25 of the agreement and which was referred to the arbitrator which resulted in the award dated 14.12.1990. That award was later set aside by this Court as per common order in C.R.P.No.513 of 1997 and M.F.A.No.1606 of 1996. There was also a direction to appoint a fresh arbitrator within one month as per clause 25 of the agreement. It is a different matter that after the common order, petitioners did not think it necessary, for whatever reason it be to pursue their claim. It is also not disputed that it is as per the conditional order of stay granted by this Court as per order in C.M.P.No.5583 of 1996 that respondent deposited `.10,00,000/- in the executing court. A further fact which is not disputed is that the said order enabled first petitioner to withdraw the amount on furnishing bank guarantee. Accordingly first petitioner furnished bank guarantee and withdrew the amount.
16. Consequent to C.R.P.No.513 of 1997 and M.F.A.No.1606 of 1996 being allowed and petitioners electing not to proceed with their claim further, first petitioner repaid the amount as per cheque dated 11.11.2005 which according to the respondent, was encashed on 12.12.2005. It is therefore that respondent has claimed damages by way of interest @12% from 22.11.1997 to 12.12.2005. O.P(C).No.2695 of 2012 9
17. Prima facie, it appears to me that the claim for damages being with respect to the amount deposited by the respondent pursuant to the order passed by this Court on C.M.P.No.5583 of 1996, it is not as if the dispute involved in this case has absolutely no reference at all to the dispute involved in C.R.P.No.513 of 1997 and M.F.A.No.1606 of 1996. Notwithstanding that petitioners did not elect to proceed with their claim by appointing an arbitrator pursuant to the common order in C.R.P.No.513 of 1997 and M.F.A.No.1606 of 1996, question may arise whether petitioners ere correct in their claim originally made before the arbitrator and whether respondent was liable to settle that claim so that respondent, on facts and law is entitled to make a claim for damages. But, it is not necessary for me to pronounce final verdict on this question since as seen from various decisions, it is within the power of the arbitrator to decide that question.
18. In Renusagar Power Co. Ltd Vs. General Electric Company and Anr. and Agri Gold Exims Ltd. Vs. Sri Lakshmi Knits & Wovens & Ors. (supra) it is held that the dispute which is referable to the arbitrator has a wide amplitude. In Hindustan Petroleum Corpn.Ltd VS. Pinkcity Midway Petroleums (supra) it is held, referring to Sec.16 of the Act that an objection regarding applicability of the arbitration clause in the agreement to the facts O.P(C).No.2695 of 2012 10 of the case goes to the root of jurisdiction and has to be raised before the arbitrator for a decision. In Rashtriya Ispat Nigam Ltd and Anr. Vs. Verma Transport Co. (supra) the Supreme Court has stated that Sec.8 of the Act unlike Sec.34 of Old Act is mandatory. Paragraph 25 of the decision refers to the distinction between Sec.34 of the old Act and Sec.8 of the Act and states that the latter provision, once the requirements are satisfied is mandatory and oblige the Court to refer the matter to arbitration. Bharat Sewa Sansthan Vs. U.P.Electronics Corpn. Ltd. (supra) deals with how Sec.8 is to be invoked. Branch Manager, Magma Leasing and Finance Limited and Anr. Vs. Potluri Madhavilata and Anr. (supra) also states that Sec.8 of the Act is mandatory.
19. Going by the decision in Hindustan Petroleum Copn.Ltd Vs. Pinkcity Midway Petroleums (supra) and in view of Sec.16 of the Act, question whether the dispute involved in the suit is arbitrarable by virtue of clause 25 of the agreement or not is a matter which the arbitrator has jurisdiction to decide. In that view of the matter also, Court below was not right in holding that the dispute involved in the case falls outside the scope of clause 25 of the agreement.
O.P(C).No.2695 of 2012 11
20. Having regard to the facts and circumstances of the case I am satisfied that learned Sub Judge was not right in rejecting Ext.P2, application. Instead, Ext.P2, application ought to have been allowed and the parties referred to arbitration.
21. The next question is whether orders passed by the learned Sub Judge subsequent to Ext.P3, order and Ext.P8, ex parte judgment and decree passed on 23.02.2012 would stand?.
22. Various authoritative pronouncements on the point informs me that once an application is preferred under Sec.8 of the Act, it results in a temporary suspension of jurisdiction of the civil court to deal with the suit until that application is decided. Pursuant to Ext.P3, order, petitioners filed I.A.Nos.1122 and 1123 of 2012 requesting to enlarge time to file written statement and stay further proceedings. Those applications were dismissed by Ext.P6, order stating that petitioners have not come to the Court with those applications on time after Ext.P3, order.
23. Learned counsel for petitioners pointed out that application for copy of Ext.P3, order was filed on the next day of date of the order. On 23.02.2012, petitioners were set ex parte and learned Sub Judge passed Ext.P8, ex parte judgment and decree.
24. True that petitioners have filed I.A.Nos.5065 and 5056 of 2012 to set aside the ex parte decree and condone the delay, if any. O.P(C).No.2695 of 2012 12 But, steps taken by the petitioners by filing I.A.Nos.1122 and 1123 of 2012 or even I.A.Nos.5065 and 5056 of 2012 cannot be understood as submitting to the jurisdiction of learned Sub Judge. For, in Ext.P2, application petitioners contended that in view of clause 25 of the agreement, learned Sub Judge has no jurisdiction to entertain the suit.
25. I found that Ext.P3, order is erroneous, that Ext.P2, application ought to have been allowed and the parties referred to arbitration,. It follows that learned Sub Judge had no jurisdiction to continue with the suit from the date of Ext.P2, application. When Ext.P2, application is allowed by this Court, it relates back to the date of Ext.P2, application. It follows that Ext.P6, order followed by Ext.P8, ex parte judgment and decree are all passed by the learned Sub Judge without jurisdiction. Therefore, notwithstanding that I.A.Nos.5065 and 5066 of 2012 are pending, it follows that the ex parte judgment and decree passed by the learned Sub Judge goes along with allowing Ext.P2, application.
26. Consequence of allowing Ext.P2, application under Sec.8 of the Act is that no suit was brought. So far as refund of court fee paid by the respondent is concerned, I make it clear that it is open to the respondent to file appropriate application in the Court below and if any such application is preferred, learned Sub Judge has to O.P(C).No.2695 of 2012 13 decide that application as if no suit was brought and pass appropriate orders after hearing the parties and as provided under the law.
Resultantly this original petition is allowed as under:
(I) Ext.P3, order dated 01.02.2012 on I.A.No.3123 of 2008 in O.S.No.351 of 2008 of the sub Court, Kozhikode is set aside.
(II) I.A.No.3123 of 2008 is allowed. Parties to O.S.No.351 of 2008 are referred to arbitration in accordance with clause 25 of the agreement entered between the parties.
(III) Respondent could take appropriate steps for appointment of arbitrator in accordance with the contract between the parties and as the law provides.
(IV) In consequence of this order, Ext.P6,
order and Ext.P8, ex parte judgment and decree
passed by the learned Sub Judge, Kozhikode in
O.S.No.351 of 2008 will stand set aside.
Sd/-
THOMAS P.JOSEPH, JUDGE
Sbna