M/S T.R. Dimond Pvt. Ltd. Thru. Director ... vs Priyanshi Developers Pvt. Ltd. Thru. ... on 7 November, 2019

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Allahabad High Court

M/S T.R. Dimond Pvt. Ltd. Thru. Director ... vs Priyanshi Developers Pvt. Ltd. Thru. ... on 7 November, 2019

2. Present revision is filed by revisionist-defendant against the order dated 01.08.2019 passed by the learned Additional District Judge in SCC Suit No.52 of 2018 whereby the application under Order 7 Rule 11 of the revisionist-defendant filed on the basis Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'Act of 1996') has been rejected.

3. Submission of counsel for revisionist-defendant is that once it is admitted that there is an arbitration agreement between the parties, it is incumbent upon the Court to refer the dispute to the arbitrator under Section 8 of the Act of 1996 and it was not open for him to reject the application. However, counsel for respondent-plaintiff submits that in the given facts and circumstances of this case, the Court has rightly rejected the application filed on the basis of Section 8 of the Act of 1996.

4. The facts of the case are that on 04.04.2013 a lease agreement, as claimed by the respondent-plaintiff, was entered into between the parties which was for a period of nine years, having a lock-in period of three years. Clause 16 of the said lease agreement read:-

"16. That the disputes of any type be solved by the arbitration duly appointed by the both the parties".

5. A dispute arose and, therefore, respondents-plaintiff filed a SCC Suit No.52 of 2018 on 12.12.2018 before the Court of Judge, Small Causes (District Judge), Lucknow for recovery of arrears of rent, damages for use, occupation and ejectment of the revisionist-defendant. On 13.5.2019, revisionist-defendant filed his written statement admitting relationship of lessor and lessee, rate of rent but specifically denied execution or existence of any lease deed. A replica was filed by the respondent-plaintiff on 15.05.2019. On 24.05.2019 an affidavit of examination in chief of P.W.-1 was filed. It is only then the application dated 24.05.2019 was filed under Order 7 Rule 11 C.P.C. The sole ground taken in the application under Order 7 Rule 11 is that the Section 8 of the Act of 1996 clearly provides that when an action is brought in a matter, which is subject to arbitration agreement, before any judicial authority, the said judicial authority is bound to refer the matter to arbitration. The said application is rejected by the learned Additional District Judge on the ground that the said application has been filed much later than filing of the written statement.

6. Counsel for the revisionist-defendant has strongly places reliance upon the judgment of Division Bench of this Court in case of Kapila Krishi Udyog Ltd. Vs. Kamdhenu Cattle Feeds Pvt. Ltd. reported in MANU/UP/4519/2018=2018(11) ADJ 274=2018 (6) AWC 6057 All. The facts of the aforesaid case are that in paragraph-30 and 35 of the written statement, the appellant pleaded as under:-

"30 .........Without prejudice to above contentions, it is further submitted that the disputes in the present Suit are pertaining to the rights of the parties arising out of the Brand sharing Agreement dated 17.05.2015 which specifically has an Arbitration Clause for the resolution of such disputes................."

35. .........Finally, it is also submitted that as the basis of the present suit is violation of the alleged Brand Sharing Agreement, this suit is barred as the said Agreement contains an Arbitration Clause and the Defendant reserves their right to take appropriate legal recourse with respect to the same. The contents of the preliminary submissions and the foregoing paras is reiterated and reaffirmed in this regard."

7. The said written statement was filed on 01.04.2016, thereafter the defendant in the said case filed an application on 29.07.2016 under Section 8 of the Act of 1996, requesting District Judge to refer the dispute for adjudication to an arbitrator. The Court framed two questions which read as under:-

"(I) Whether arbitration agreement, if already filed by the plaintiff before Court below, would justify non filing of original copy of agreement or certified copy along with application filed under Section 8 by defendant"

(II) Whether filing of written statement before filing application under Section 8 of Act, 1996 would exclude application of Section 8?"

8. After considering the law, the Division Bench in paragraph-24 held:-

"24. In the present case also it is admitted fact that agreement was placed on record by plaintiff-respondent itself as an enclosure to the plaint. It is also true that appellant did not submit to the dispute and instead refers to arbitration clause in written statement and clearly pleaded that the suit is barred and matter is liable for arbitration."(emphasis added)

9. Finally the Court in paragraph 27 & 28, given following replies to both the questions:-

"27. We therefore, answer Question-I holding that if agreement containing arbitration clause is already on record, application under Section 8(2) of Act, 1996 filed by defendant cannot be rejected on the ground that it does not accompany original copy or certified copy of the agreement.

28 Question-II is also answered by holding that when objection has been taken in written statement itself referring to arbitration clause in the agreement, it will mean that defendant has not submitted to the jurisdiction of Court and application filed subsequently under Section 8 cannot be said to be a non compliance of Section 8(1) of Act, 1996."

10. In the present case, admittedly, no objections were taken in the written statement with regard to arbitration clause by the revisionist-defendant. Thus, he cannot claim any benefit of the judgment of Division Bench passed in case of Kapila Krishi Udyog Ltd. (supra).

11. Counsel for the revisionist-defendant has also relied upon the judgment of Supreme Court in case of Booz Allen and Hamilton Inc. Vs. SBI Home Finance Ltd. and Ors. reported in (2011) 5 SCC 532 and judgment in case of Vidya Drolia and Ors. Vs. Durga Trading Corporation reported in (2019) SCC Online SC-358. Submission is that as per the aforesaid judgments, once there is an arbitration clause between the parties with regard to a lease deed, it is incumbent upon the Court to refer the matter to the arbitrator. Counsel for the respondent-plaintiff has relied upon the judgment of the Supreme Court passed in case of Emaar MGF Land Limited Vs Aftab Singh decided on December 10, 2018 reported in 2018 SCC Online SC 2771 and judgment of Ameet Lalchand Shah Vs. Rishabh Enterprises reported in AIR 2018 Supreme Court 3041= (2018) 15 SCC Page-678. Both the aforesaid judgments considered the amendment made to Section 8 of the Act of 1996. After considering at length all the case laws, the Supreme Court in Ameet Lalchand Shah case (supra) in paragraph 28 of SCC (paragraph-29 of AIR) has held:-

"28. ?Principally four amendments to Section 8(1) have been introduced by the 2015 Amendments - (i) the relevant "party" that is entitled to apply seeking reference to arbitration has been clarified/amplified to include persons claiming "through or under" such a party to the arbitration agreement; (ii) scope of examination by the judicial authority is restricted to a finding whether "no valid arbitration agreement exists" and the nature of examination by the judicial authority is clarified to be on a "prima facie" basis; (iii) the cut-off date by which an application under Section 8 is to be presented has been defined to mean "the date of" submitting the first statement on the substance of the dispute; and (iv) the amendments are expressed to apply notwithstanding any prior judicial precedent. The proviso to Section 8(2) has been added to allow a party that does not possess the original or certified copy of the arbitration agreement on account of it being retained by the other party, to nevertheless apply under Section 8 seeking reference, and call upon the other party to produce the same.? (Ref: Justice R.S. Bachawat?s Law of Arbitration and Conciliation, Sixth Edition, Vol. I Section 1 to 34 at page 695 published by LexisNexis). " (emphasis added)

12. The judgment of Ameet Lalchand Shah (supra) is followed by the Supreme Court in case of Emmar MGF Land Limited (supra). Even a bare perusal of Section 8 of the Act of 1996 shows that "Section 8(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."

13. Therefore, an application raising objections under Section 8 of the Act of 1996 is to be filed before a party raises its objections under Section 8, not later than the date submitting his first statement on the substance of the dispute, i.e., before submitting his written statement. The written statement was admittedly filed on 13.05.2019 in which in paragraphs 2 and 3 the execution of the lease deed was specifically denied. Further, the defendant-revisionist has also instituted a suit for permanent injunction against the respondent-plaintiff bearing Regular Suit No.2629 of 2014 before the Court of Civil Judge (Senior Division), Lucknow which is pending till date. Thus, revisionist-defendant had not raised his objections with regard to Section 8 of the Act of 1996 in his written statement. On the contrary, he has specifically denied the execution of the lease deed which contains arbitration clause. Even in his earlier suit for permanent injunction, the revisionist-defendant did not take up the plea of arbitration clause in the lease deed. Thus, he cannot take benefit of the judgment of Division Bench case of Kapila Krishi Udyog Ltd. (supra).

14. In view of the aforesaid, I do not find any force in the submissions of the counsel for the revisionist-defendant. The Court below has rightly rejected the application of revisionist-defendant under Order 7 Rule 11, inasmuch as, the suit is no more barred under Section 8 of the Act of 1996, as the objections under Section 8 was not raised prior to submitting his first statement on the substance of the dispute.

15. In view of the aforesaid, the revision is dismissed.

Order Date :- 7.11.2019 Arti/-

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Allahabad High Court