Madras High Court
Sreetel vs The Manager on 29 August, 2017
Author: T.Ravindran
Bench: T.Ravindran
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 29.08.2017 Date of Reserving the Order Date of Pronouncing the Order 18.08.2017 29.08.2017 CORAM THE HONOURABLE MR.JUSTICE T.RAVINDRAN C.R.P.(NPD) (MD) No.713 of 2007 and M.P.(MD) No.1 of 2007 SREETEL rep.by its Proprietor R.Rajakumar Nagercoil Kanyakumari District ... Petitioner -vs- 1.The Manager Feederal Bank Limited Nagercoil Branch Nagercoil 2.Bharathi Cellular Limited (Tamil Nadu Circle) 1168, Avinashi Road P.N.Palayam, Coimbatore ... Respondents PRAYER: Civil Revision Petition is filed, under Article 227 of the Constitution of India, to call for the records relating to the fair and decreetal order, dated 09.03.2007, made in I.A.No.638 of 2006 in O.S.No.613 of 2005, on the file of the Principal District Court, Nagercoil and to set aside the same. !For Petitioner : Mr.A.Arumugam for M/s.Ajmal Associates ^For Respondents : No appearance :ORDER
Impugning the fair and decreetal orders, dated 09.03.2007, passed in I.A.No.638 of 2006 in O.S.No.613 of 2005, on the file of the Principal District Munsif Court, Nagercoil, the present civil revision petition has been preferred by the plaintiff.
2. The plaintiff has laid the suit against the respondents / defendants seeking for a decree of permanent injunction restraining the first defendant
- Bank from allowing the second defendant to withdraw the guaranteed amount arranged by the plaintiff as per the bank guarantee deed, dated 03.03.2004.
3. On a perusal of the plaint averments, it is found that following the franchise agreement entered into between the plaintiff and the second defendant, as regards the distribution of prepaid sim-cards and recharge coupons, on the plaintiff furnishing unconditional bank guarantee by way of security for payment of various sums that may become due and payable by the plaintiff as the distributor of the second defendant, it is found that the plaintiff has arranged the bank guarantee with the first defendant - Bank so as to pay the amount that may become due and payable to the second defendant in continuation of the above said franchise agreement. Further, according to the plaintiff, inasmuch as the second defendant, without any intimation and against the agreement entered into between them, had stopped the supply of the prepaid sim-cards and recharge coupons in the month of December, 2004 and as no amount is due from the plaintiff to the second defendant, as per the agreement entered into between them above described and apprehending that the second defendant may withdraw the guaranteed amount, which the plaintiff had arranged, with the first defendant ? Bank for the payment to the second defendant in continuation of the agreement entered into between them, however as the fact remains that no amount is due from the plaintiff to the second defendant and in such circumstances, if the second defendant succeeds in getting the amount from the first defendant - Bank guaranteed by the plaintiff, the plaintiff would be put to irreparable loss and hardship and hence, the suit for permanent injunction.
4. It is found that the second defendant, on receipt of the summons with reference to the suit above laid by the plaintiff, preferred an application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter, referred to as ?the Act?) contending that as the franchise agreement entered into between the plaintiff and the second defendant, dated 26.04.2003, which had been extended on 31.03.2005, provides for the settlement of any and all disputes, controversies and conflicts between the parties arising out of the above mentioned agreement or arising out of or relating to or in connection with the above mentioned agreement and the performance or non-performance of the rights and obligations set forth therein or the breach, termination or the invalidity thereof, through the arbitral jurisdiction, according to the second defendant, the plaintiff, who is due to pay sums to the second defendant, pursuant to the above said agreement, is not entitled to institute the suit against the second defendant as such and further, according to the second defendant, the first defendant is only a proforma party, who has nothing to do with the sorting out of the issues between the plaintiff and the second defendant arising out of the above said agreement and as the above said agreement provides for an arbitration clause, the plaintiff should take up the issue only before the Arbitrator concerned as per the agreement entered into between the parties and it cannot be permitted to lay the suit and hence, according to the second defendant, the parties should be referred to the Arbitrator concerned for adjudication and thereby, prayed for the dismissal of the suit.
5. The above said application preferred by second defendant was resisted by the plaintiff contending that the franchise agreement, dated 26.04.2003, is noway connected with the matter and only the agreement, dated 03.03.2004, alone would cover the issue and further, according to the plaintiff, the above said franchise agreement was not extended on 31.03.2005 and further, as the agreement entered into between the parties does not provide for any clause regarding the bank guarantee issue and therefore according to the plaintiff, the application preferred by the second defendant for referring the parties to arbitral jurisdiction does not lie legally and further, according to the plaintiff, inasmuch as the first defendant is not a party to the franchise agreement entered into between the plaintiff and the second defendant and as the relief sought for in the suit pertains only to the first defendant as such, the matter could not be referred to the arbitral jurisdiction by the Court and hence, the application is liable to be dismissed.
6. On a consideration of the rival contentions put forth by the respective parties and also the materials placed, the Court below found acceptance with the case of the second defendant and resultantly, referred the parties to arbitral jurisdiction and thereby, consequently, closed the suit laid by the plaintiff. Impugning the same, the present civil revision petition has been preferred.
7. Insofar as this case is concerned, it is found from the plaint averments set out, that the plaintiff has conveniently not made any reference about the franchise agreement entered into between it and the second plaintiff on 26.04.2003. It is found that only pursuant to the franchise agreement, dated 26.04.2003, which had come into force in respect of the business transaction entered into between the plaintiff and the second defendant, it is found that the plaintiff had been necessitated to furnish the bank guarantee with the first defendant ? Bank for payment of any sum that may become due to the second defendant in respect of the business transaction as contemplated under the above said agreement. Therefore, as found in the agreement, it is seen that the second defendant as such is entitled to enforce the bank guarantee for any sum that may become due to it from the plaintiff arising out of the business transaction. Alleging that the second defendant had stopped the supply of the prepaid sim-cards and recharge coupons without any intimation suddenly and further as no sum is due from the plaintiff to the second defendant pursuant to the agreement entered into between them and apprehending that the second defendant may enforce the bank guarantee, which the plaintiff had made with the first defendant ? Bank pursuant to the agreement entered into between them, according to the plaintiff, it has been necessitated to prefer the suit. It is, thus, found that the first defendant is noway involved in the matter between the plaintiff and the second defendant and it has to only act as per the directions of the second defendant with reference to the enforcement of the bank guarantee furnished by the plaintiff. Thus, it is found that the first defendant is only a proforma party and not a proper and necessary party as such for the settlement of the issues between the plaintiff and the second defendant in respect of the agreement entered into between them.
8. It is not in dispute that the franchise agreement above mentioned contains an arbitration clause and it provides for the settlement of all and any issues connected or in relation to the agreement entered into between the parties only through the arbitral jurisdiction as provided thereunder. When such being the position, the plaintiff, without resorting to the arbitration clause has laid the suit in the civil forum conveniently camouflaging the prayer in such a manner as if the relief is aimed only as against the first defendant and not as against the second defendant. On the other hand, a reading of the plaint averments in toto would only go to show that by way of the suit, the plaintiff only wants the injunction relief as against the second defendant from enforcing the bank guarantee for which it is legally entitled to as per the agreement entered into between the parties and therefore, it is found the suit is mainly aimed as against the second defendant and not as against the first defendant.
9. It is found that adequate and convincing material had been placed before the Court below that the agreement entered into between the parties i.e., the plaintiff and the second defendant was in force on the date of the institution of the suit and extended as per the case of the second defendant. Further, when the arbitration clause provides for the adjudication of any and all the disputes arising between the parties qua the agreement, the contention now put forth by the plaintiff that the agreement does not provide for the settlement of the bank guarantee issue between the parties and therefore, the suit in the Civil Court would lie cannot be accepted. As regards the issue i.e., whether the bank guarantee issue covers under the arbitral jurisdiction, as determined by the Court below, the same should be determined only by the Arbitrator and not otherwise. When the parties have agreed for the settlement of the issues between them by way of arbitration, it is found that as provided under Section 8 of the Act, unless the Court finds that prima facie no valid arbitration agreement exists, the Court has no other option except to refer the parties for arbitral jurisdiction and it should not proceed with the matter to settle the issues arising between the parties as the Court would be doing the same at its own risk without any jurisdiction over the matter. It is, thus, found that as rightly determined by the Court below, the agreement entered into between the plaintiff and the second defendant provides for the arbitration clause, which in turn enjoins the parties concerned to go for arbitration for the settlement of all and any of the issues arising out of the agreement between them, it is found that the Civil Court would not have jurisdiction to proceed with the matter and the Civil Court is bound to refer the parties only to the arbitral jurisdiction. As already adverted to, the contention of the learned counsel for the plaintiff that the first defendant is not a party to the agreement and as the relief sought for in the suit is aimed only as against the first defendant, the Civil Court could proceed further as such cannot be accepted, when it is seen that the first defendant is only a proforma party and the relief sought for in the suit is only to prevent the second defendant from enforcing the bank guarantee, which the plaintiff had furnished with the first defendant ? Bank for honoruing the terms of the agreement entered into between the plaintiff and the second defendant. In such view of the matter, the decision relied upon by the learned counsel for the plaintiff reported in (2003) 5 SCC 531 [Sukanya Holdings (P) Ltd., vs. Jayesh H.pandya and another], in my considered opinion would not be applicable to the facts and circumstances of the case at hand.
10. In the light of the above discussions, I hold that the Court below has rightly allowed the application preferred by the second defendant and consequently, dismissed the suit laid by the plaintiff and in such view of the matter, the impugned order of the Court below does not call for any interference.
11. In conclusion, the civil revision petition fails and it is dismissed. No costs. Consequently, connected miscellaneous petition is closed.
To:
The Principal District Munsif, Nagercoil..