Calcutta High Court
Rajda Industries And Exports Private ... vs Mahesh Kumar Prahladka & Ors on 14 November, 2018
Author: Patherya
Bench: Patherya
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
PRESENT :
THE HON'BLE JUSTICE PATHERYA
G.A. No. 3059 OF 2011
C.S. No. 214 OF 2011
RAJDA INDUSTRIES AND EXPORTS PRIVATE LIMITED & ORS.
VERSUS
MAHESH KUMAR PRAHLADKA & ORS.
For the Petitioners : Mr. S.N. Mookherjee, Sr. Adv.,
Mr. Ratnanko Banerjee, Adv.,
Mr. A.K. Gandhi, Adv.,
Mr. Sounak Sengupta, Adv.
For the Plaintiffs/ : Mr. Jayanta Kr. Mitra, Sr. Adv.,
Respondents Mr. Ashis Chakraborty, Sr. Adv.,
Mr. Tilok Bose, Adv., Mr. Rajesh Upadhyay, Adv.
For the added Plaintiffs : Mr. Abhrajit Mitra, Adv., Mr. Jishnu Chowdhury, Adv.
For Defendants No.13 & 14 : Mr. Sarvapriya Mukhrjee, Adv., Mr. A.K. Roy, Adv., Mr. Shatadeep Bhattacharya, Adv.
For CESC Ltd.; Respondent : Mr. Sabir Sanyal, Adv.,
No.15 Mr. Somnath Bose, Adv.
Heard on : 10.07.2012, 13.07.2012, 19.07.2012,
26.07.2012, 30.07.2012, 02.08.2012,
JUDGEMENT ON : 14th November, 2018
PATHERYA J. :
This application has been filed under Section 8 of the Arbitration and Conciliation Act, 1996, by the defendant nos.1 to 3 and 5 to 12 for the following reliefs:-
a) "C.S. No. 214 of 2011 be referred to arbitration of the Arbitrator to be appointed in terms of the CIC Rules and Regulations;
b) Disputes and claims made in C.S. No. 214 of 2011 be referred to arbitration in the manner as stated hereinbefore;
c) Order of injunction restraining the plaintiffs from taking any steps or any further steps in C.S. No. 214 of 2011;
d) Stay of all further proceedings in C.S. No. 214 of 2011;
e) Ad-interim orders in terms of prayers above;
f) Costs of this application by paid by the plaintiffs;
g) Such further or other order or orders and/or direction or directions be given as to this Hon'ble Court may seem fit and proper."
The defendant applicants are Executive Committee members of the Chatterjee International Centre. The Chatterjee International Committee society (Society) was formed under orders passed in C.S. 528 of 1980 by the Calcutta High Court. In September 2011 the owners and occupiers of the said society filed C.S.214 of 2011 for the following reliefs:-
"(a) A Scheme be framed for convening and conduct of free and fair election of CIC Society after taking into consideration the following factor:-
i) There should be specific Rule for issuance of notice of election in advance to each of the members/flat owners. The notice period should not be less than 21 days.
Provision for nomination of new committee members through process of proposing and seconding.
ii) Thereafter distribution of ballot papers list of members / owners / occupiers showing area proxy form along with notice of meeting.
iii) Dates for withdrawal of nomination filed.
iv) Conduct of election through secret ballot such that votes are cast in accordance with Rule 6.
v) Provision for a neutral, independent Chairperson to conduct the election process.
vi) Opportunity of free and fair attendance of each member and their right to freely express their views at the election meeting and recording of the same by way of minutes.
vii) Counting of votes under independent scrutinizers immediately after the election, followed by declaration of result.
viii) Rules for maintenance of a membership register reflecting the names of each and every flat owner who is paying maintenance charges. The membership register should also reflect the area owned by each flat owner and should be open during fixed hours every day for inspection by all members.
(b) An independent person be appointed to conduct free and fair election of CIC Society on or before 30th September, 2011 or such other date as this Hon'ble Court may deem fit and proper, which person will conduct election after taking into consideration all the factors set out in prayer (a) above;
(c) Perpetual injunction restraining the defendant Nos. 1 to 12 from conducting election of CIC Society or interfering with the election so conducted.
(d) Perpetual injunction restraining the defendant Nos. 1 to 12 from interfering with the affairs of the CIC Society as also dealing with the moneys lying in the bank account or CIC Society or otherwise holding themselves out as members of Executive Committee;
(e) Mandatory injunction directing the defendant No.15 CESC Ltd. to forthwith take over the common electrical installation at 33, Jawaharlal Nehru Road, Kolkata, including the high tension transformer, LT Panel, Air Circuit Braker, Oil Circuit breaker, H.T. Cables, L.T. Panels and Sub meters installed thereat and thereafter provide separate connection to each of the flat owners and distribute the security deposit amongst the flat owners in accordance with the area owned by each flat owner;
(f) Perpetual injunction restraining the defendant Nos. 1 to 12 from interfering with taking over of the common facilities and installation of CESC meters and providing separate electricity connection to all the flat owners;
(g) An enquiry into the loss caused by the defendant Nos. 1 to 12 to CIC Society and all flat owners of Premises No. 33A, Jawaharlal Nehru Road, Kolkata - 700 071 paying maintenance charges to the said Society and decree for such sum and against such person and in favour of such person be made as may be found upon enquiry;
(h) Receiver;
(i) Injunction;
(j) Costs;
(k) Such further or other property."
Counsel for the applicants submits that the subject matter of the suit are certain disputes in the said society and the building. The allegations and the claims made in the said suit according to the applicants is the subject matter of the arbitration agreement which has been set out in Clause or Rule 33 of the Rules and Regulations of the Memorandum of the CIC Society reads as follow:-
"Dispute if any that may arise between the Society and any member and/or between members inter se in connection with maintenance and administration of the building and/or the like, including monetary disputes will be referred to arbitration under the Arbitration and Conciliation Act, 1996 to an arbitration tribunal to be constituted by the Executive Committee of the Society. All references to arbitration shall be made to the Executive Committee of the Society being the sole appointing authority."
The cause of action in the suit filed by the plaintiffs is the subject matter of the arbitration agreement. Therefore, the parties ought to have referred the said disputes to arbitration and C.S.214 of 2011 could not have been filed. By inclusion of defendant nos. 13, 14 and 15 in C.S.214 of 2011 the plaintiffs sought to nullify the arbitration proceedings. The reliefs filed in the suit are primarily against the defendant nos.1 to 3 and 5 to 12 viz. The applicants herein. The defendant nos.13, 14 and 15 is neither a necessary or proper party nor any relief has been claimed against them. It is only to defeat the right of the applicant defendants that the defendant nos.13, 14 and 15 had been added in the suit and to take it out from the purview of the Arbitration Act and disputes raised therein. The applicants defendants previously had also settled through arbitration their disputes and the disputes pending at present in respect of the said society and the other owners including defendant nos. 13 and 14 have also been referred to arbitration. Those disputes which were settled through arbitration, are similar to those which have been raised in C.S.214 of 2011. As the subject matter of the suit is covered by arbitration, the subject matter of the suit be referred to arbitration. As continuation of the instant suit will lead to multiplicity of the proceeding and will lead to conflict of orders, therefore, C.S.214 of 2011 be referred to arbitration and the arbitrator be appointed in terms of the Rules and Regulations of the CIC Society. The disputes and relief made in C.S.214 of 2011 be also referred to arbitration and C.S.214 of 2011 be stayed.
Prayers (d), (e), (f) and (g) in C.S.214 of 2011 deals with management and administration of the society. In support of the said prayer paragraphs 4, 5, 6, 7 & 8 of the plaint is relied on. Paragraph 10 of the plaint deals with the Rules and Regulations of the society in respect of the conduct of the annual general meeting and election of the Executive Committee. Various allegations have been levelled against the members and this can be found in paragraphs 14(g) and (h). Rule 9 of the society deals with the Executive Committee and its parts under Rule
10. Rule 30 deals with the alteration of Rules and Rule 28 deals with the election. Rule 25 deals with proxy. Rule 6 of the society deals with the voting rights and is proportionate to the area of the flat/covered space owned by such members on the basis of one vote for every square foot except the parking space. In C.S.214 of 2011 the plaintiffs anticipated an election meeting to be held in the month of September 2011 and the election notice was served on 12th October, 2011, prior thereto, the plaint was filed on 5th September, 2011 and the plaint was served to the plaintiffs on 21st September, 2011. G.A. 2173 of 2011 was also filed on 5th September, 2011.
'In connection' and 'or the like' is wide in amptitude and the disputes raised are liable to be referred to arbitration. The dispute is between the society and the member or members and is in connection with the maintenance and administration of the building. Therefore, the word 'in connection' and 'or the like' will encompass the arbitration clause and the disputes must be referred to arbitration under the Arbitration and Conciliation Act 1996. Reference is placed on 1984 (4) SCC 679, 2003 (6) SCC 503, 2007 (3) SCC 686 Para-22, 2004 (3) SCC 553 Para-14 and 2006 (7) SCC 275 Paras-19, 33 and 34. The cause of action has been set out in Paragraphs 15 and 16 in the plaint. No allegation has been with regard to the procedure followed for election. The reliefs are contrary to the pleadings and deals with the management and administration of the society.
In opposing the said application Counsel for the plaintiffs submits that suit should suffice by one authority as the parties are multiple in numbers and multiple references would not be possible. The averments in the plaint are to be correct and Clause 33 of the Rules and Regulations of the society are not in dispute. Disputes have arisen between its society and its member/members or between member and members. The dispute in respect of the election is independant, therefore, the suit is maintainable. The conduct of the election is not covered by the arbitration clause as will be as per Regulation 24(g). In fact Regulation 28 (iii) postulates as follows:-
"28. ELECTION
i) The members of the Society shall in a general meeting appoint the members of the Executive Committees in terms of Rule 6 above.
ii) The first Executive Committee shall hold office for a term of 3 (three) years. After the expiry of the said term of 3 (three) years, fresh elections will be held for the Executive Committee for the next 3 (three) years and so on and so forth.
iii) Rules for Election of members of the Executive Committee may be framed by the Executive Committee from time to time.
iv) If the nominations received for membership of the Executive Committee are 7 (seven) or less, there shall be no election but the elected Executive Committee shall have the right to co-opt the balance members of the Executive Committee from amongst the members of the Society."
C.S.214 of 2011 has been filed under Order 1 Rule 8, Code of Civil Procedure and, therefore, is a representative suit. The cause of action which has given a rise to the relief if granted will injure the benefits of all the occupants. Section 9 of the Code of Civil Procedure makes a reference 'to try all civil suit'. Conduct of election is not covered by Rule 33. Reliance is placed on 2003 (5) SCC 531 Paras-3, 7, 12, 13, 14, 15, 17. If the arbitration clause covers the entire suit then it must be stayed. The relief sought is rem in action and not inpersonem and it is only if the issue is raised and the reliefs claimed is covered by an arbitration clause Section 8 of the Arbitration Act 1996 will attract an ouster the jurisdiction of the Civil Court. Reliance is placed on 2000 (4) SCC 539, 2005 (8) SCC 641, 2009 (1) SCC 372, AIR 2011 SC 2507, 2007 (5) SCC 510, 2010 (8) SCC 24. In fact 2010 (1) SCC 72, 2008 (2) SCC 602, 2002 SCC 404, deals with Section 8(2) of the 1996 Act.
The order of M.H.S. Ansari, J. is obiter. In this present suit a scheme is sought and a part of such scheme is the election. Therefore, the principle of res judicata will apply to the applicants filed under Section 8 of the Arbitration Act. Reliance is placed on AIR 1952 Nagpur 238, 2006 (7) SCC 275, 2007 (5) SCC 510. From the order dated 31st July, 2003 passed in C.S.352 of 2002 passed by the Calcutta High Court a SLP was filed and although notice was issued with regard to the election as to whether the observations of the Court regarding existence of the arbitration clause and the binding nature of the arbitration clause was restricted, stay although was refused. It is thereafter on 2nd March, 2009 that a compromise was recorded and on compromise the SLP filed was dismissed. By the order dated 20th October, 2009 the disputes were withdrawn.
Counsel for the added plaintiffs submits that they have been added under Order 1 Rule 8 of the Code of Civil Procedure. The term 'arbitration clause' is covered as per Rule 33 of the Society. A reference was filed on 20th September, 2010 and the application filed was by defendant nos.13 and 14 being G.A.3133 of 2011. Rule 2(v) of the Society deals with the word the term "member" which according to the Rule means is an owner of the flat. Membership was sought and it was rejected thereafter. Clause 33 deals with maintenance of building and election is outside the purview. 2005 (3) CLT 212 is relied on. Leave has been granted under Order 1 Rule 8 of the Code of Civil Procedure and if the said application filed under Section 8 of the 1996 Act is allowed the arbitration clause will be defeated. Reference is placed on AIR 2011 SC2507 and 1994 (5) SCC 570.
Counsel for the applicant in reply submits that Order 1 Rule 8 of the Code of Civil Procedure deals with a representative suit. Therefore no arbitration clause would be attracted to such suit. In the instant case the commonality of interest does not exist. This can be found from the order of M.H.S. Ansari. The payment of maintenance is germane only if the facilities are being used, therefore, arbitration clause will apply. They are not members, therefore, the Rules will not apply too. Settlement was accepted in the arbitration proceedings and, therefore, is a part of this class and not a party. Rules have also been signed by them.
Counsel for the applicant submits that the decision reported in 2005 (7) SCC 510 is distinguishable as Paras-10, 12 and 16 deal with fraud and an application filed under Section 11 of the 1996 Act. The case reported in AIR 1952 Nagpur 238 is not applicable. The Special Writ Petition filed against observations is, therefore, not binding and is incorrect.
Having considered the submissions of the parties the plaintiffs in C.S.214 of 2011 seek to frame a scheme to convene and conduct free and fair election of the Society on various factors. Some of these factors are covered by the Rules and Regulations of the Society and in particular Regulations No.26 and 28. Prayers -
"(d) Perpetual injunction restraining the defendant Nos. 1 to 12 from interfering with the affairs of the CIC Society as also dealing with the moneys lying in the bank account of CIC Society or otherwise holding themselves out as members of Executive Committee;
(e) Mandatory injunction directing the defendant No.15, CESC Ltd. to forthwith take over the common electrical installation at 33, Jawaharlal Nehru Road, Kolkata, including the high tension transformer, LT Panel, Air Circuit Braker, Oil Circuit breaker, H.T. Cables, L.T. Panels and Sub meters installed thereat and thereafter provide separate connection to each of the flat owners and distribute the security deposit amongst the flat owners in accordance with the area owned by each flat owner;
(f) Perpetual injunction restraining the defendant Nos.
1 to 12 from interfering with taking over of the common facilities and installation of CESC meters and providing separate electricity connection to all the flat owners." are dealt with the management and administration of the Society which is covered by the arbitration clause which reads as follows:-
"33. ARBITRATION Dispute if any that may arise between the Society and any member and/or between members inter se in connection with maintenance and administration of the building and/or the like, including monetary disputes will be referred to arbitration under the Arbitration and Conciliation Act 1996 to an arbitration tribunal to be constituted by the Executive Committee of the Society. All references to arbitration shall be made to the Executive Committee of the Society being the sole appointing authority."
The scope of the arbitration is wide in amplitude and all disputes between -
(i) the Society and any member and/or members
(ii) in connection or in like
(iii) with main enance t and administration.
Therefore the reliefs sought in the suit is encompassed by the arbitration clause.
The plaintiffs and defendants are members and the disputes between them is governed by the arbitration clause. Admittedly the Society is not a party in the suit but reliefs are sought against the election of the Society. The said relief can also be adjudicated in the arbitration proceeding. By adding CESC, being the defendant 15 will not maintain the suit. In fact the plaintiffs have sued for themselves as members and all other members of the Society, this also can be governed by the arbitration clause.
Section 8 of the 1996 Act reads as follows:-
"8. Power to refer parties to arbitration where there is an arbitration agreement.
1. A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
2. The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or the certified copy is retained by the other party to that agreement, then, the party so applying shall file such application alongwith a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.
3. Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."
In view of the arbitration agreement couched in Clause 33 mentioned above and supported by Section 8 of the 1996 Act, GA 3059 of 2011 succeeds and is accordingly allowed.
Let a certified copy of this order, if applied for, be given to the parties on priority basis upon compliance of all formalities.
(Patherya, J.)