Gujarat High Court
Comed vs Blue on 30 November, 2011
Author: Harsha Devani
Bench: Harsha Devani
Gujarat High Court Case Information System
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CRA/142/2011 18/ 18 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
CIVIL
REVISION APPLICATION No. 142 of 2011
For
Approval and Signature:
HONOURABLE
MS.JUSTICE HARSHA DEVANI
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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COMED
PHARMACEUTICALS LTD - Applicant(s)
Versus
BLUE
STAR LIMITED - Opponent(s)
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Appearance :
MS
MEGHA JANI with MS ANUSHREE KAPADIA
for Applicant
MR MIHIR H
PATHAK for respondent
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CORAM
:
HONOURABLE
MS.JUSTICE HARSHA DEVANI
Date
: 05/08/2011
ORAL
JUDGMENT
By this application under section 115 of the Code of Civil Procedure, 1908, the applicant-original defendant has challenged the order dated 4.4.2011 passed by the learned Senior Civil Judge, Vadodara below exhibit-11 in Special Civil Suit No.626 of 2008 (Summary) and prays that the dispute raised in the said suit be referred for arbitration as per the terms of the arbitration clause stated in the application at exhibit 11.
The facts of the case stated briefly are that the respondent (original plaintiff) instituted a suit for recovery of Rs.42,00,000/- and interest of Rs.15,77,548/- at the rate of 20 per cent thereon in the Court of the learned Additional Senior Civil Judge, Vadodara under the provisions of Order XXXVII of the Code of Civil Procedure, 1908 (the Code) and prayed for a decree for Rs.57,77,548.00/-.
The case of the plaintiff was that under tender document for Heat Ventilation Air Conditioning (HVAC) Work, M/s Doshi Consultants Pvt. Ltd the duly appointed agents and consultants of the defendant, had floated tender inviting offers. The offer of the plaintiff came to be accepted and a binding contract was concluded, pursuant to which orders were placed by the defendant and the plaintiff duly supplied the goods. However, a sum of Rs.42,00,000/- was still outstanding and the defendant deliberately and negligently failed to pay the same despite reminders and subsequently after 15 months for the first time on 30th August, 2008 raised a complaint regarding cooling. Hence, the plaintiff instituted the above suit for recovery of the outstanding amount with interest.
Since the tender document based on which the plaintiff's claim was made in the suit contained an arbitration clause in the "Conditions of contract", the applicant-defendant preferred an application under section 8 of the Arbitration and Conciliation Act, 1996 (the Act), at Exhibit-11. The defendant also made an application that no order as per the summons for judgment be passed and that the hearing of the same be kept in abeyance till the finalization of the application under section 8 of the Act. The plaintiff filed a reply to the said application objecting to the same. Subsequently, the plaintiff filed a purshish stating that without prejudice to its contentions, if the trial court comes to the conclusion that the application exhibit-11 should be allowed, then the plaintiff agrees to refer the dispute in the suit to arbitration on the condition that the defendant agrees to appoint any retired High Court Judge of the Gujarat High Court. By the impugned order, the learned Senior Civil Judge, Vadodara, rejected the application on the ground that the tender agreement in original or a certified copy thereof had not been produced along with the application and as such, the conditions precedent as required under section 8 of the Act were not satisfied. Being aggrieved, the applicant has filed the present civil revision application.
Ms. Megha Jani, learned advocate appearing on behalf of the applicant assailed the impugned order, submitting that the plaintiff's suit itself was based on the tender document which was produced by the plaintiff which contains the arbitration clause. The learned Judge was, therefore, not justified in rejecting the application under section 8 of the Act merely because the original or certified copy of the arbitration agreement had not been produced by the defendant along with the application under section 8 of the Act. It was submitted that in the present case, the suit of the plaintiff is based on the tender document containing the arbitration clause and a copy thereof had been produced by the plaintiff on the record of the suit. That there is no dispute as to the existence, validity or enforceability of the arbitration clause. Hence, it was not necessary for the defendant to produce the arbitration agreement in original or a certified copy thereof along with the application under section 8 of the Act more particularly when the same was already on record. It was submitted that the learned Judge has, therefore, erred in rejecting the application under section 8 of the Act on a technical ground which was not even raised by the plaintiff in its reply and was never put to the defendant till the final hearing.
(5.1) In support of her submissions, the learned advocate placed reliance upon the following decisions :
[a] The decision of the Supreme Court in the case of Rashtriya Ispat Nigam Limited and another v. Verma Transport Company, (2006) SCC 275.
[b] The decision of the Punjab & Haryana High Court in the case of Parampal Singh and others v. Punjab State Ware House Corporation, AIR 2000 P & H 53.
[c] The decision of the Calcutta High Court in the case of ITC Classic Finance Ltd. v. Grapco Mining & Co. Ltd., AIR 1997 CALCUTTA 397.
[d] The decision of the Kerala High Court in the case of N.I.I.T. Ltd. v. Manoharan, 2005 (3) KLT 1025.
[e] The decision of the Kerala High Court in the case of Natarajan v. General Manager, Southern Railways, 2006 (2) KLT 390.
[f] An unreported decision of the Madras High Court in the case of Cash and Gain Finance & Investments v. Manjula Udaya Shankar, rendered in October 2008 in CRP (PD) No.1337 of 2008.
[g] An unreported decision of the Calcutta High Court in the case of Rajeev Maheshwari and others v. Indu Kocher and others, rendered on 6.5.2011 in GA No. 3582 of 2010 and CA No.195 of 2010.
(5.2) Ms. Jani submitted that in the light of the law laid down by the Supreme Court as well as the High Courts in the above referred decisions, the trial court was not justified in rejecting the application made by the applicant merely because the tender document had not been annexed either in original or by way of a certified copy thereof. It was, accordingly, submitted that the application made by the applicant under section 8 of the Act deserves to be allowed and that the matter requires to be referred for arbitration in terms of the arbitration clause.
On the other hand, opposing the application for appointment of arbitrator in terms of the arbitration clause, Mr. Mihir Pathak, learned advocate appearing on behalf of the respondent submitted that even before the trial court, the respondent had agreed to the appointment of the arbitrator, however, the respondent was not agreeable to appointment of an arbitrator in terms of the arbitration clause and that the respondent was ready and willing for a reference of the dispute in the present suit to arbitration on the condition that a retired High Court Judge of the Gujarat High Court be appointed as an arbitrator. Inviting attention to the arbitration clause, it was submitted that under the said clause, the power to appoint an arbitrator is vested in the consultant. Referring to the definition of "consultant", it was pointed out that "Consultant" shall mean "Doshi Consultants Pvt. Limited" (DCPL), and shall include authorized representatives of the Engineering Consultants appointed by the Owner for the project. It was submitted that the consultant appointed by the applicant-defendant would be likely to be biased in favour of the applicant and as such, if the consultant is permitted to appoint the arbitrator in terms of the arbitration clause, the respondent would be likely to be placed at a disadvantage. It was, accordingly, submitted that even if the matter is referred to an arbitrator, the dispute is required to be referred to a retired High Court Judge of the Gujarat High Court and not in terms of the arbitration agreement.
This court has considered the rival submissions advanced by the learned advocates for the respective parties and has perused the record of the case as well as the authorities cited at the bar.
As can be seen from the impugned order passed by the learned Senior Civil Judge, the sole ground on which the application has been rejected, is that the same does not fulfill the requirements of sub-section (2) of section 8 of the Act inasmuch as, the application made by the applicant was not accompanied by the original arbitration agreement or a duly certified copy thereof. Thus the sole question that arises for consideration is whether when the arbitration agreement is already on record and is duly admitted by both the parties, non filing of original arbitration agreement or a duly certified copy thereof along with an application under section 8 of the Arbitration and Conciliation Act, 1996 would amount to non satisfaction of the requirements of sub-section (2) of section 8 of the said Act.
In this regard, it may be germane to refer to the provisions of section 8 of the Act, which reads as under:
"[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 so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
[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.
[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."
Though sub-section (2) of section 8 of the Act mandates that an application referred to in sub-section (1) thereof shall not be entertained unless it is accompanied by the original arbitration agreement or duly certified copy thereof, a perusal of the above-referred decisions on which reliance has been placed by the learned advocate for the applicants makes it amply clear that the issue involved in the present case is no longer res integra, inasmuch as the same has been decided not only by various High Courts but also by the Supreme Court where by it has been held that the provision is not mandatory in nature.
In the case of Rashtriya Ispat Nigam Limited and another v. Verma Transport Company, (supra), the Supreme Court was dealing with a case where the interpretation of section 8 of the Arbitration Act was in question. In the facts of the said case, the revision application preferred by the appellants therein before the High Court had been dismissed inter alia on the premise that the application filed by the appellants was not accompanied by the original arbitration agreement or a duly certified copy thereof and as such, the same was not maintainable. A review application filed there against pointing out that such certified copy had in fact been filed, however, was not entertained. The Supreme Court, after considering various decisions on this issue, held as follows :
"[11] In the instant case, the existence of a valid agreement stands admitted. There cannot also be any dispute that the matter relating to termination of the contract would be a dispute arising out of a contract and, thus, the arbitration agreement contained in clause 44 of the contract would be squarely attracted. Once the conditions precedent contained in the said proceedings are satisfied, the judicial authority is statutorily mandated to refer the matter to arbitration. What is necessary to be looked into therefor, inter alia, would be as to whether the subject matter of the dispute is covered by the arbitration agreement or not."
The court, accordingly, was of the opinion that the application filed by the appellants therein under section 8 of the Act was maintainable.
In the case of Parampal Singh and others v. Punjab State Ware House Corporation (supra), the Punjab & Haryana High Court held thus:
"The provision of the 1996 Act that the copy of the arbitration agreement or duly certified copy thereof should be produced along with the application for referring the matter to the arbitrator cannot be interpreted to mean that if the copy of the same was produced earlier though by the other party, the application should be dismissed. Take for instance, a case where such a copy of the arbitration agreement is produced earlier and the application to refer to the matter to the arbitrator has been filed later on, by the same party viz., the defendant, then it cannot be said that the provision of sub-section (2) of section 8 of the Act was not complied with. This is because the copy of the arbitration agreement was already produced on record by the defendant in the given case. Similarly, in the said case also, a copy of the arbitration agreement had been produced on record by the plaintiffs themselves and the application for referring the matter to the arbitrator was filed by the respondent-defendant. This being the position, the appellants cannot be allowed to raise this technical plea of non-compliance of provisions of sub-section (2) of section 8 of the 1996 Act.
In the facts of the present case, it may be pertinent to note that even the respondent-plaintiff has not raised the plea of non-compliance of the provisions of sub-section (2) of section 8 of the Act. It is the learned Judge who has suo motu, on an interpretation of the provisions of section 8 of the Act, rejected the application filed by the applicant on the ground of non-compliance with the provisions of sub-section (2) of section 8 of the Act.
In the case of ITC Classic Finance Ltd. v. Grapco Mining & Co. Ltd., (supra), the Calcutta High Court held that the court is only concerned to see that the matter on which a suit is instituted is also the subject of an arbitration agreement. In the facts of the said case, the lease agreements were relied upon by both the plaintiff as well as the defendants, and it was not in dispute that the said xerox copies were in fact the true copies of the same. The court was of the opinion that the xerox copies of the lease agreements containing the said arbitration clause that had been annexed to the application under section 8 were in sufficient compliance with section 8(2) of the Act.
In the case of N.I.I.T. Ltd. v. Manoharan, (supra), the Kerala High Court held that the requirement of section 8(2) for the production of the original arbitration agreement or duly certified copy thereof is only to ensure that there is an arbitration clause and to ascertain whether the arbitrator is named and other allied matters. The requirement would be satisfied if the agreement is before the court. It is not relevant whether the plaintiff produced it or the defendant produced it. Whoever produced the document, the fact remains that the document is before the court. When the original document was before the court, the court below was not justified in dismissing the application on the ground that the defendant who made the application for reference did not produce the original or certified copy of the agreement. The court was of the view that such a stand would be too technical and it would tend to defeat the very purpose of the Act. It was further held that an application for reference of a dispute to arbitration is not a matter where any right or title of the contesting parties is attempted to be established or denied. An agreement containing an arbitration clause would be relied on by a party to contend that the matter requires reference to arbitration. By accepting the plea for reference or by rejecting it, the court is not deciding upon any right, title or interest of the parties in respect of any property or matter. The decision on such an application would have the consequence of only deciding the forum where the parties are to litigate. Too rigid an interpretation on the wording of section 8(2) and to hold that even if the plaintiff has produced the arbitration agreement, the defendant also should produce the original or certified copy of the arbitration agreement, would defeat the purpose and object of the Act.
In the case of Natarajan v. General Manager, Southern Railways, (supra), the Kerala High Court was of the view that it would be myopic to read into section 8(2) any invariable mandate that the arbitration agreement or a copy thereof must be produced along with such request. The purpose of such production has got to be borne in mind. It is only to help the court to decide whether as a matter of fact there is such an arbitration agreement or not. The plea for reference under section 8 cannot be made by a party without any bona fide intent or with the sole intention of protracting the proceedings. That is why, it is very specifically stipulated that the arbitration agreement in original or copy must accompany the application for reference under section 8 of the Act. The court was of the view that considering the object and purpose the word "accompany" in section 8(2), need not be read and understood to mean that the arbitration agreement or copy thereof must be annexed to the application. If it is already there before court or if it is not disputed or if it is produced in the event of a dispute when such dispute is raised, it can still be said that the agreement had accompanied the petition. The word "accompany"
used in section 8(2) must be reasonably and realistically understood. In language, one can accompany another in a march even if one does not walk with the other. He can walk ahead or walk behind and can still be said to accompany the other. No artificial or inelastic or rigid meaning need be assigned. The expression "accompany" used by the statute is inherently elastic.
In the case of Rajeev Maheshwari and others v. Indu Kocher and others, (supra) the Calcutta High Court was dealing with a case wherein it was urged by the plaintiffs that in the absence of the application under section 8 of the Arbitration and Conciliation Act, 1996 being accompanied by the original arbitration agreement or a duly certified copy thereof it was incompetent. The court was of the view that it needs to be understood that notwithstanding section 8(2) of the 1996 Act, the mandatory requirement would have to be met if there is a dispute as to the existence of the arbitration agreement. The court observed that the plaint relating to the said suit admitted the partnership deed of 1972 and referred to the arbitration agreement therein. After referring to the decisions of the Supreme Court in Rashtriya Ispat Nigam Limited and another v. Verma Transport Company, (supra), Everest Holding Ltd. v. Shyam Kumar Shrivastava, (2008) 16 SCC 774; N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 as well as Atul Singh v. Sunil Kumar Singh, (2008) 2 SCC 602, the court observed that the judgments rendered in Rashtriya Ispat Nigam Limited and another v. Verma Transport Company, (supra), N. Radhakrishnan v. Maestro Engineers, (supra) and Atul Singh v. Sunil Kumar Singh, (supra), were by two Larger Benches of the Supreme Court. In both Atul Singh v. Sunil Kumar Singh, (supra) and N. Radhakrishnan v. Maestro Engineers, (supra), the preliminary ground for rejecting the applications under section 8 of the Act was other than that under section 8(2) thereof, though the procedural requirement was found to be mandatory. The court found that the decision in Rashtriya Ispat Nigam Limited and another v. Verma Transport Company, (supra), was more apposite in the context of the said case since the arbitration agreement had been referred to in the plaint and the existence thereof has not been questioned by the plaintiffs.
From the principles enunciated in the above referred decisions, it is apparent that though the language of sub-section (2) of section 8 of the Act mandates that the original arbitration agreement or a duly certified copy thereof should accompany the application under sub-section (1) of section 8 of the Act, in effect and substance what the provision mandates is that the arbitration agreement should be on the record and that there should be no dispute as regards the existence of the arbitration agreement. The said provision cannot be read to mean that notwithstanding the fact that the arbitration agreement is on record and there is no dispute as regards the existence of the same, the original arbitration agreement or a duly certified copy thereof has to accompany the application. That would amount to taking a highly technical view of the matter. In the circumstances, if a copy of the arbitration agreement is already found on record produced either by the plaintiff or the defendant and other party does not dispute the same, the non-submission of the original arbitration agreement or a duly certified copy thereof along with the application under section 8(2) of the Act, cannot be said to be non-compliance of the said provision.
In the facts of the present case, it is an admitted position that the respondent-plaintiff had, along with the plaint, submitted a copy of the tender agreement containing the arbitration clause. Before the learned Judge, during the course of hearing of the application under sub-section (1) of section 8 of the Act, the respondent-plaintiff did not dispute the existence of the arbitration clause. In the circumstances, when the plaintiff had already produced a copy of the tender document along with the arbitration clause and did not dispute the existence of the arbitration agreement, the learned Judge was not justified in rejecting the application solely on the ground that the application under section 8 of the Act was not accompanied by the arbitration agreement in original or by a certified copy thereof. Once, the document containing the arbitration clause was produced on record by either of the parties, and neither of the parties had disputed the existence thereof, the learned Judge ought to have referred the matter for arbitration in terms of the arbitration clause.
On behalf of the respondent it has been urged that appointment of an arbitrator in terms of the arbitration clause acts to the prejudice of the respondent and as such the matter be referred for arbitration to a retired High Court Judge of the Gujarat High Court and not in terms of the arbitration clause. In this regard it may be germane to refer to the decision of the Supreme Court in the case of Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd., (2009) 8 SCC 520, wherein it has been held thus:
"13.
Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties. It is quite common for Governments, statutory corporations and public sector undertakings while entering into contracts, to provide for settlement of disputes by arbitration, and further provide that the arbitrator will be one of its senior officers. If a party, with open eyes and full knowledge and comprehension of the said provision enters into a contract with a Government/statutory corporation/public sector undertaking containing an arbitration agreement providing that one of its Secretaries/Directors shall be the arbitrator, he cannot subsequently turn around and contend that he is agreeable for settlement of the disputes by arbitration, but not by the named arbitrator who is an employee of the other party.
14. No party can say he will be bound by only one part of the agreement and not the other part, unless such other part is impossible of performance or is void being contrary to the provisions of the Act, and such part is severable from the remaining part of the agreement. The arbitration clause is a package which may provide for what disputes are arbitrable, at what stage the disputes are arbitrable, who should be the arbitrator, what should be the venue, what law would govern the parties, etc. A party to the contract cannot claim the benefit of arbitration under the arbitration clause, but ignore the appointment procedure relating to the named arbitrator contained in the arbitration clause.
15. It is now well settled by a series of decisions of this Court that arbitration agreements in government contracts providing that an employee of the Department (usually a high official unconnected with the work or the contract) will be the arbitrator, are neither void nor unenforceable. xxxx."
"45.
If the arbitration agreement provides for arbitration by a named arbitrator, the courts should normally give effect to the provisions of the arbitration agreement. But as clarified by Northern Railway Admn. V. Patel Engg. Co. Ltd., (2008) 10 SCC 240, where there is material to create a reasonable apprehension that the person mentioned in the arbitration agreement as the arbitrator is not likely to act independently or impartially, or if the named person is not available, then the Chief Justice or his designate may, after recording reasons for not following the agreed procedure of referring the dispute to the named arbitrator, appoint an independent arbitrator in accordance with Section 11(8) of the Act. In other words, referring the disputes to the named arbitrator shall be the rule. The Chief Justice or his designate will have to merely reiterate the arbitration agreement by referring the parties to the named arbitrator or named Arbitral Tribunal. Ignoring the named arbitrator/Arbitral Tribunal and nominating an independent arbitrator shall be the exception to the rule, to be resorted for valid reasons."
Examining the facts of the present case in the light of the aforesaid decision, the respondent-plaintiff has merely passed a purshish before the trial court stating that in the event the court is inclined to refer the dispute in the suit to arbitration, the defendant is agreeable to the appointment of any retired High Court Judge of the Gujarat High Court. Before this court also the only ground stated for adopting such a course of action is that the appointment of any other person will not serve the interest of justice and the matter will not be decided judicially on the pure merits of the matter. It is not the case of the respondent-plaintiff that the person appointed in terms of the arbitration agreement would in any manner be biased or partial or lack of the independence of impartiality while deciding the dispute. The only ground stated is that the plaintiff apprehends that the appointment of any other person will not serve the interest of justice and the matter will not be decided judicially on the pure merits of the matter. However, the respondent has not stated any basis for the said apprehension. As is apparent from clause 2.12 of the tender document which is the arbitration clause, all the disputes regarding the specifications, designs, drawing instructions and quality of work of quality of material used for the work or any other matter relating to the work shall be referred to the sole arbitration (sic arbitrator) or to be appointed by Consultant. The respondent-plaintiff was a party to the tender document and has agreed to the arbitration clause. In the circumstances, unless a specific case is made out that the person who may be appointed as sole arbitrator by the Consultant would not be impartial or that he would be biased, it is not permissible for the respondent-plaintiff to insist for appointment of any other arbitrator except in terms of the arbitration agreement. As held in the case of Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd., (supra), referring the disputes to the named arbitrator shall be the rule.
For the foregoing reasons, the application succeeds and is, accordingly, allowed. The impugned order dated 4.4.2011 passed by the learned Senior Civil Judge, Vadodara below exhibit-11 in Special Civil Suit No.626 of 2008 (Summary), is hereby quashed and set aside. The application Exhibit-11 made by the applicant is hereby allowed by referring the dispute in the suit to arbitration in accordance with the arbitration clause contained in the tender document. As a consequence, Special Civil Suit No.626 of 2008 (Summary) stands disposed of. Rule is made absolute accordingly with no order as to costs.
[HARSHA DEVANI, J.] parmar* Top