Calcutta High Court (Appellete Side)
Nemai Maity vs Netai Maity on 14 March, 2014
Author: Debasish Kar Gupta
Bench: Debasish Kar Gupta
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
Appellate Side
Present:
The Hon'ble Justice Debasish Kar Gupta
And
The Hon'ble Justice Ishan Chandra Das
F.M.A. No.2331 of 2013
Nemai Maity
Versus
Netai Maity
For the appellant. : Mr. Surojit Nath Mitra,
Mr. S. Sarkar,
Mr. S.K. Singh.
For the respondent. : Mr. Haradhan Banerjee,
Mr. Amitava Pain,
Mr. Subhrangshu Datta,
Mr. Partha Pratim Mukherjee.
Judgment on: 14-03-2014.
Debasish Kar Gupta, J. :
This appeal is directed against an order dated April 20, 2013 passed by the Additional District & Sessions Judge, 4th Court, Howrah. The impugned order was passed in accordance with the provisions of Section 9 of the Arbitration and Conciliation Act, 1996, restraining the appellant/opposite party, his men and agents and employees from encumbering and/or transferring and/or disposing of the schedule mentioned property of the firm, running under the name and style of 'M/s. Supplier Syndicate', pending dispute between the parties in this regard.
The facts of this case in a nutshell are as under:
A deed of partnership was executed by and between the parties on December 31, 1997 in respect of the business running under the name and style 'M/s. Supplier Syndicate'. On the basis of the above deed of partnership, the respondent was entitled to get 25 per cent share and the appellant was entitled to 75 per cent share of the above partnership business. The above deed of partnership contained a condition that in case of any dispute or difference which might arise by and between the partners in respect of the accounts or the rights and liabilities of the partners or any matter relating to the firm should be referred to arbitration and the arbitrator and his decision should be submitted within the meaning of Arbitration Act, 1940.
On or about March 22, 2010, the respondent/plaintiff served a notice through his learned Advocate to the appellant/opposite party alleging that the respondent/plaintiff was entitled to 25 per cent share in the profit and losses of the above partnership firm aggregating a sum of Rs.60,00,000/- for 13 years. The appellant/opposite party replied to the above notice by a communication dated April 13, 2010 refuting the allegations made therein. By a further communication dated June 21, 2010, the respondent/plaintiff sought to appoint one Mridul Roy, a retired Judge, for acting as an arbitrator invoking the provisions of Clause 21 contained in the deed of partnership dated December 31, 1997. The appellant/opposite party had acknowledged the notice but he did not give reply to the same.
The respondent/plaintiff ultimately filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 in August, 2010 before the learned Court below. The impugned order was passed on April 20, 2013, restraining the appellant/opposite party from encumbering and/or transferring and/or disposing of the schedule mentioned property of the firm pending dispute between the parties.
It is submitted on behalf of the appellant that the application under Section 9 was liable to be dismissed on the ground of delay. According to the appellant, the alleged partnership deed was executed on December 31, 1997. It was nothing but a mere paper document. It was never acted upon. According to the appellant, the Arbitration Act, 1940 was repealed on August 22, 1996. The new Arbitration and Conciliation Act, 1996 came into force since the old act had been repealed. According to the appellant, there was a delay of about 11 years of alleging that the appellant/opposite party misappropriated the income and profit of the partnership under reference during the above period. According to the appellant, manifest intention to take recourse to arbitration proceeding was not in existence at the time of filing the application under Section 9 of the Arbitration and Conciliation Act, 1996. Therefore, the application under Section 9 of the Arbitration and Conciliation Act, 1996 was not maintainable due to the lack of jurisdiction of the learned Court below to entertain and decide pendente lite the lis between the parties.
The learned Advocate appearing on behalf of the appellant relied upon the decisions of Firm Ashok Traders & Anr. vs. Gurumukh Das Saluja & Ors., reported in (2004) 3 Supreme Court Cases 155, State of Orissa & Anr. vs. Damodar Das, reported in (1996) 2 Supreme Court Cases 216 and Tata Finance Limited vs. Pragati Paribahan & Ors., reported in AIR 2000 Calcutta 241.
On the other hand, it is submitted on behalf of the respondent/plaintiff that the point of limitation was not raised at the very outset. According to him, the above ground of limitation was not taken in the written statement filed by the appellant. Drawing attention of this Court towards the notice dated March 22, 2010 issued by the respondent and the reply thereto dated April 13, 2010 of the appellant/opposite party, it is submitted by him that there was no delay in filing the application under Section 9 of the Arbitration and Conciliation Act, 1996 in the month of August, 2010. It is further submitted by the learned Advocate appearing on behalf of the respondent/plaintiff that arbitral proceeding means a proceeding before the arbitrator and not an application for referring the matter to arbitration in view of the provisions of Section 43 of the Arbitration and Conciliation Act, 1996. It is further submitted by him that the arbitral proceeding commenced on and from the notice dated June 21, 2010 proposing the name of Mridul Roy, a retired Judge, for appointment as an arbitrator.
The learned Advocate appearing for the respondent relied on the decisions of Wazir Chand Mahajan & Anr. vs. The Union of India, reported in AIR 1967 Supreme Court 990, Punam Chand Jain vs. the General Assurance Society Ltd. & Anr., reported in AIR 1974 Calcutta 335, Raj Kumar Sharma vs. Prasanta Kumar Chandra & Ors., reported in 2007 (2) CLJ (Cal) 35, Sundaram Finance Ltd. vs. NEPC India Ltd., reported in (1999) 2 Supreme Court Cases 479, SBP & Co. vs. Patel Engineering Ltd. & Anr., reported in (2005) 8 Supreme Court Cases 618 and Nepa Limited vs. Manoj Kumar Agrawal, reported in AIR 1999 Madhya Pradesh 57 in support of his above submissions.
We have heard the learned counsel appearing for the respective parties and we have given our anxious consideration to the facts and circumstances of this case. In accordance with the provisions of Section 43 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'said Act, 1996'), the Limitation Act, 1963 is applicable to arbitrations as it applies to proceedings in Court. Therefore, the objection with regard to filing the application under Section 9 of the said Act, 1996 is taken up for consideration.
The dispute with regard to non-payment of any income of M/s. Supplier Syndicate as also misappropriation of the entire income of M/s. Supplier Syndicate was raised by the respondent/plaintiff by a notice dated March 22, 2010. Admittedly, the above claim was lodged alleging violation of the provisions of a deed of partnership dated December 31, 1997. But on the date of issuing the notice, the business of M/s. Supplier Syndicate was in existence and according to the respondent/plaintiff, he was entitled to the benefit arising out of that business even on the date of the above notice. Therefore, the application under Section 9 of the said Act, 1996 was not liable to be dismissed in limine on the basis of the above objection raised by the appellant/opposite party. Necessary to point out that the above point of limitation was not taken by the appellant/opposite party before the learned Court below even in its written statement. For the purpose of adjudication of the scope of filing the application under Section 9 of the said Act, 1996, the provisions of Section 9, Sub-section (1) to (5) of Section 11 and Section 21 of the said Act, 1996 are quoted below:
"9. Interim measures, etc. by Court.- A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court -
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:-
(a) the preservation, interim custody or sale of any goods which are the subject- matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it."
"11. Appointment of arbitrators.- (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-
section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and -
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-
section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him."
"21. Commencement of arbitral proceedings.- Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."
In accordance with the above provisions of Section 9 of the said Act, 1996, it was not within the scope of the above Section to enquire into the claim and counter-claim made by both parties. The Court may grant interim relief on the basis of an application filed under Section 9 of the said Act, 1996 before or during arbitral proceedings or at any time after making of arbitral award but before its enforcement. According to the provisions of Section 21 of the said Act, 1996 unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
Needless to point out that once a minimum 30 days period expires and a petition under Section 11 is filed, the appointing authority loses a right to appoint an arbitrator in view of the provisions of Sub-section (5) of Section 11 of the said Act, 1996.
Admittedly, the respondent/plaintiff by a communication dated June 21, 2010 sought to appoint one Mridul Roy, a retired Judge, for acting as an arbitrator. In accordance with the provisions of Clause 21 contained in the deed of partnership dated December 31, 1997, it is also not in dispute that the appellant/opposite party did not send any reply to the above request though he had acknowledged the above communication of the respondent/plaintiff. Therefore, in view of the above provisions, the arbitration proceeding in respect of the dispute under reference commenced on and from June 21, 2010.
As per law laid down by the Hon'ble Supreme Court in the matter of Sundaram Finance Ltd. vs. NEPC India Ltd., reported in (1999) 2 Supreme Court Cases 479, an application under Section 9 of the said Act, 1996 seeking interim relief is maintainable even before commencement of arbitral proceeding and the relevant portions of the above decision are set out below:
"19. When a party applies under Section 9 of the 1996 Act, it is implicit that it accepts that there is a final and binding arbitration agreement in existence. It is also implicit that a dispute must have arisen which is referable to the Arbitral Tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties. Mr Subramanium is, therefore, right in submitting that when an application under Section 9 is filed before the commencement of the arbitral proceedings, there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings if, at the time when the application under Section 9 is filed, the proceedings have not commenced under Section 21 of the 1996 Act. In order to give full effect to the words "before or during arbitral proceedings"
occurring in Section 9, it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application under Section 9 can be filed. The issuance of a notice may, in a given case, be sufficient to establish the manifest intention to have the dispute referred to an Arbitral Tribunal. But a situation may so demand that a party may choose to apply under Section 9 for an interim measure even before issuing a notice contemplated by Section 21 of the said Act. If an application is so made, the court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied, the court will have the jurisdiction to pass orders under Section 9 giving such interim protection as the facts and circumstances warrant. While passing such an order and in order to ensure that effective steps are taken to commence the arbitral proceedings, the court while exercising jurisdiction under Section 9 can pass a conditional order to put the applicant to such terms as it may deem fit with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings. What is apparent, however, is that the court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under Section 21 of the 1996 Act."
In view of the above settled principles of law, we are of the opinion that when an application under Section 9 was filed before the commencement of arbitral proceeding, all that was required is that there must be manifest intention on the part of the applicant to take recourse to arbitral proceeding.
The decision of Firm Ashok Traders & Anr. (supra) has no manner of application in this case in view of the distinguishable facts and circumstances of that case that no step for initiation of arbitral proceeding was taken by the party to the above proceeding on the date on which application under Section 9 of the said Act, 1996 was filed.
The decision of Damodar Das (supra) does not help the appellant/opposite party in view of the distinguishable facts and circumstances of the case in our hand that the respondent/plaintiff was not a defaulting party.
The decision of Tata Finance Limited (supra) also does not help the appellant/opposite party in view of the fact that the sheet anchor of the above decision was the judgment delivered by the Hon'ble Supreme Court in the matter of Sundaram Finance Ltd. (supra). Needless to point out that we have arrived at our conclusion on the basis of the ratio laid down by the Hon'ble Supreme Court in the matter of Sundaram Finance Ltd. (supra).
In view of the discussions and observations made hereinabove, this appeal is dismissed.
There will be, however, no order as to costs.
Urgent Photostat certified copy of this judgment, if applied for, be given to the parties, as expeditiously as possible, upon compliance with the necessary formalities in this regard.
I agree. ( Debasish Kar Gupta, J.) (Ishan Chandra Das, J.)