Jharkhand High Court
Chandra Prakash Singh vs The Bihar State Co-Operative Marketing ... on 18 March, 2008
Equivalent citations: [2008(2)JCR448(JHR)], AIR 2008 (NOC) 1935 (JHAR.) = 2008 (2) AIR JHAR R 331, 2008 (2) AIR JHAR R 331, 2008 A I H C 3562, (2009) 1 ARBILR 82
Author: M. Karpaga Vinayagam
Bench: M. Karpaga Vinayagam
JUDGMENT M. Karpaga Vinayagam, C.J.
1. The petitioner has filed this application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking for appointment of an Arbitrator to adjudicate the dispute existing between the petitioner and the respondents No. 1 and 2, namely, Bihar State Co-operative Marketing Union Ltd. and the Managing Director of the Bihar State Co-operative Marketing Union Ltd. with regard to the adjustment of the payment made by the petitioner as per the lease deed dated 23.11.2000.
2. The case of the petitioner is as follows:
(i) The Managing Director of Bihar State Co-operative Marketing Union Ltd. granted the lease of cold storage, namely, Janta Cold Storage to the petitioner for running the Cold Storage situated at Ratu in the district of Ranchi by virtue of the lease deed dated 23.11.2000 for the period of 11 years.
(ii) Thereafter, the possession was given to the petitioner after payment of security amount etc. as per the agreement. The agreement dated 23.11.2000 was modified adding some more conditions through the another agreement dated 24.1.2001.
(iii) The petitioner, on noticing that the cold storage was not in the running condition, approached the Nationalised Bank and obtained a loan for an amount of Rs. 70 lakh to establish the balance construction of cold storage for making it in a running condition interms of the agreement and as per the permission accorded by the respondent.
(iv) The petitioner has paid the rent in terms of the agreement to the respondent No. 2 regularly. As a matter of fact no dues are outstanding. The payment has been made regularly in terms of the agreement dated 23.11.2000 and also the modified agreement dated 24.1.2001. Though, as per the agreement, 2/3rd employees of the respondent have to work in the cold storage, no body turned up. Therefore, the petitioner has engaged their own men.
(v) Besides this, the respondents claimed the wages for their employees to the tune of Rs. 4.10 lakh besides the electrical bill. Claiming total amount of Rs. 13,69,405/- as dues to be paid to the respondents by the petitioner, the respondents, suddenly, by a letter dated 22.12.2004 intimated to the petitioner canceling the lease deed even without serving any show cause notice.
(vi) The petitioner has filed a representation on 29.5.2006 before the respondent No. 2 mentioning all the facts that no dues are outstanding.
(vii) Without considering the entire facts, a further order has been passed by the respondents directing the petitioner to hand over the possession of cold storage to the Senior Range Officer at Ranchi on 3.11.2006.
(viii) Even then, the matter was being discussed on 9.12.2006 and 11.12.2006 at the instance of the respondents. The petitioner made a payment of Rs. 4,00,000/- by way of Demand Draft and a sum of Rs. 3,69,000/- by way of post dated cheques.
(ix) Despite this, steps were taken by the respondents to take over the possession of the cold storage from the petitioner.
(x) On 15.11.2006, the petitioner sent a request to the respondents to refer the disputes to the sole Arbitrator, the Registrar of Co-operative Societies as per the terms of Clause 21 of the agreement.
(xi) Despite the receipt of the same, there was no response. Hence, this application under Section 11(6) of the Arbitration and Conciliation Act praying for appointment of arbitrator for adjudication of the dispute existing between the parties.
3. This Arbitration Application, filed on 19.1.2007 and the same was entertained by this Court on 23.2.2007 and notice ordered to the respondents.
4. During the pendency of this application, an application has been filed under Section 9 of the Arbitration and Conciliation Act, bearing LA. No. 1437 of 2007, stating that the respondents locked their cold storage on 9.5.2007 and as such the petitioner is unable to run the cold storage and therefore, he prayed for interim relief through this application to direct the respondents to remove the lock of the cold storage and hand over the possession of the cold storage to the petitioner for running the cold storage pending the final disposal of this arbitration application.
5. When this application for interim orders came up before this Court on 18.5.2007, a counsel claiming to have been engaged by the respondents submitted that he has no objection for giving concession to this Court for giving interim direction in-favour of the petitioner directing the respondents to deliver possession of the cold storage to the petitioner on the condition that the petitioner should deposit Rs. 7 lakh. The counsel for the petitioner also submitted that he will deposit Rs. 3 lakh immediately and rest will be deposited within a week.
6. Accordingly, on the basis of the concession made by the counsel for the respondents, this Court directed the petitioner to deposit Rs. 3 lakh immediately and deposit further balance amount of Rs. 4 lakh within a week and on such deposit possession of delivery shall be given to the petitioner by the respondents by the order dated 18.5.2007.
7. Immediately, thereafter, the respondents filed a interlocutory application bearing I.A. No. 1589 of 2007 for modification of the interim order, mainly contending that the interim order was fraudulently obtained and the counsel, who was purported to have been engaged by the respondents was never engaged by them and his concession given for granting interim relief was without the consent of the respondents, and therefore, the interim order on the basis of the concession given by the said lawyer to be vacated. It was also submitted by the counsel for the respondent that during the pendency of the 11(6) application filed before this Court, the petitioner is not entitled to any interim relief under Section 9 of the Arbitration Act as the powers conferred for interim relief cannot be invoked by this High Court during the pendency of the 11(6) application, and therefore, on this ground also, interim order passed in favour of the petitioner is to be vacated. This Court, however, said this issue could be decided at the time of final disposal and directed the respondents to file counter in the main application.
8. Accordingly, respondents filed the counter in the main application opposing the arbitration application by giving the details of various circumstances raising very many grounds as against the main prayer as well as interim relief. Those circumstances could be summarized as follows:
(i) The respondents, by the lease agreement dated 23.11.2000 handed over the possession of the Cold Storage to the petitioner,
(ii) Apart from the agreement dated 23.11.2000, another supplementary lease agreement was executed on 24.1.2001 between the parties.
(iii) Under the terms of those two lease agreement, lessee was required to comply with certain terms and conditions.
(iv) As per the lease agreement dated 23.11.2000, lessee was required to give 4 acres of land in favour of the respondents as security. The lessee has failed to do so even after expiry of more than six years.
(v) As per Clause 11 of the lease agreement dated 23.11.2000, it is provided that the rent shall be paid periodically. However, petitioner failed to pay the lease amount for various years. The total rent amount payable as on 1st March, 2007 was Rs. 46,81,135/-.
(vi) In this case lessee has defaulted in payment of lease rent amounting to Rs. 20,23,235/- and towards salary and wages amounting to Rs. 7,80,000/-.
(vii) As per the Clause 10 of the agreement dated 24.1.2001, it is provided that lessee shall not put any structure which would affect the safety of the cold storage without the written permission of the lessor. The petitioner has violated this term also by making a fresh structure without consent of the respondents.
(viii) As per Clause 9 of the agreement dated 24.1.2001, it is provided that in the event of non-payment or delay in payment, the lessor shall give three month's notice to terminate the agreement and to take over possession of the cold storage.
(ix) Seven cheques amounting to Rs. 11,19,389/- issued by the petitioner in favour of the respondents were dishonoured due to insufficiency of funds. The criminal cases have been filed before the Magistrate Court.
(x) Several notices were issued to the petitioner on 11.6.2004, 18.2.2004, pointing out the default in payment of lease rent and other violation, but there was no response.
(xi) Therefore, a show cause notice dated 18.8.2004 was issued seeking explanation as to why the lease agreement be not cancelled by giving three months' notice as per the terms of agreement dated 24.1.2001. Despite service of notice, there was no reply.
(xii) Under those circumstances, after expiry of three months' notice period, a letter was sent on 22.12.2004 cancelling and terminating the lease in the light of the defaults made by the petitioner.
(xiii) Several letters were' sent to the petitioner reminding the cancellation of lease and directing the petitioner to hand-over the cold storage to the respondents. Lastly on 3.11.2006 another letter was sent to the petitioner to hand-over the possession of cold storage. Even for this letter, there was no response.
(xiv) As against the order of cancellation of the lease deed, the petitioner already filed writ petition, WP (C) No. 4740 of 2005 and the same is pending. Furthermore, during the pendency of the writ petition, he filed interlocutory application for staying the operation of the letter giving direction to hand over the possession including the letter dated 3.11.2006. Interim order was not obtained.
(xv) In the light of the fact that the writ Court did not grant any stay of orders of respondents and in view of the fact that the terms in the lease agreement dated 24.1.2001 was breached and the said lease deed provides for taking over the cold storage in case of the said breach of conditions and default in complying with the terms, the respondents approached the Deputy Commissioner to provide protection for taking over possession and accordingly, order was obtained on 5.5.2005 from the Sub-Divisional Officer. Thereupon, possession was taken over in the presence of the Executive Magistrate.
(xvi) At this stage, without mentioning all those things, petitioner rushed to this Court and field arbitration application under Section 11(6) of the Arbitration and Conciliation Act, 1996 and during the pendency of the 11(6) application, he filed an application in I.A. No. 1437 of 2007 under Section 9 and obtained order without mentioning the pendency of the writ petition in WP (C) No. 4740 of 2005 and interlocutory application in IA. No. 2 of 2007 in W.P. (C) No. 4740 of 2005. The said interlocutory application had been subsequently dismissed as withdrawn by the writ Court on 21.1.2008 after taking possession as per the order of this Court on 18.5.2007.
(xvii) Petitioner has never approached Registrar praying him to act as an arbitrator. On the other hand he chose to file writ petition challenging the order of cancellation before the writ Court.
(xviii) Suppressing all those facts, he filed 11(6) application and also obtained interim order under Section 9 of the Act.
(xix) Section 9 of the Act would not be applicable to the High Court as the 'Court' as defined in Section 2(1)(e) of the Act would not apply to this Court.
(xx) Further, the fraud has been played upon the Court since order had been obtained on the basis of concession given by the counsel purported to have been appearing for the respondents, who has actually not been engaged.
(xxi) Hence, this arbitration application is to be rejected.
9. On the basis of the above points, learned Counsel for the parties advanced their arguments at length.
10. I have given my anxious consideration to the rival contentions urged by the counsel for the parties.
11. On perusal of the affidavits filed by the petitioner and also the counter-affidavit filed by the respondents, and on hearing the counsel for parties, it is clear that the respondents have raised three main grounds raising objections for the grant of relief, under Section 11(6) of the Act, sought for by the petitioner in this Arbitration Application and the interim relief granted under Section 9 of the Act. They are as follows:
(i) Even though the petitioner has chosen to challenge the order of cancellation of the lease deed dated 22.12.2004 and the direction for handing over possession dated 3.11.2006 in the writ petition in WP (C) No. 4740 of 2005 and I.A. No. 2 of 2007 before the writ Court, where it is pending, he has rushed to the arbitration jurisdiction and filed an application under Section 11(6) of the Act to seek for appointment of arbitrator without mentioning anything about his having already filed writ petition and about the pendency of the issue before the writ Court, that too after having failed to obtained the interim orders for stay of the cancellation and stay of the direction for hading over the possession from the writ Court. This shows that the petitioner has not come to this Court with the clean hands as he has suppressed material facts in order to obtain the relief which he is not otherwise entitled. On this ground of suppression of fact, the arbitration application is liable to be dismissed.
(ii) The interim order, which has been passed by this Court on 18.5.2007, granting relief, was purported to have been passed under Section 9 of the Act during the pendency of the Arbitration Application under Section 11(6) of the Act. This Section 9 application is not maintainable. Section 9 of the Act would not apply to this High Court while dealing with the application under Section 11(6) because the power under Section 9 can be invoked only by the Court of civil original jurisdiction or High Court having original civil jurisdiction as defined in Section 2(1)(e) of the Act. Jharkhand High Court, admittedly, does not have original civil jurisdiction. That apart, order of interim relief under Section 9 of the Act was obtained from this Court for getting back the possession by playing fraud upon the Court on the basis of the wrong concession made by the counsel for the respondents, who has not been actually engaged by the respondents.
(iii) The application under Section 11(6) of the Act is not maintainable in this case as the basic requirements have not been fulfilled. As per the agreement, Clause 21 provides for the reference to the Registrar, who can be the Sole Arbitrator. The petitioner has never approached either the registrar or the respondents for the arbitration at any time. The petitioner has also not approached the respondent. The contention that he has sent a notice is false. Further, the question of reference to the Arbitrator would not arise now since lease deed itself has been cancelled by the respondents as early as on 22.12.2004. So, this is not in force. In the absence of the agreement being in force, Clause 21 cannot be invoked for appointment of Arbitrator. Further the issue with regard to validity of the order of cancellation and the existence of the lease deed is pending before the High Court. Admittedly, no stay of order of cancellation was obtained. So, the petitioner cannot maintain this application under Section 11(6) of the Act seeking for the appointment of the Arbitrator as per the agreement, which is not in existence.
12. Let us deal with these points one by one.
13. The first point relates to the suppression of material facts by the petitioner and approaching this Court with unclean hands.
(i) It is not disputed that the order of cancellation of lease was passed by the respondents as early as on 22.12.2004. Similarly it is not now disputed that challenging the same, the petitioner rushed to the writ Court and filed WP (C) No. 4740 of 2005 and the same has been entertained on 20.8.2005 by the writ Court. At that time, he did not chose to file any interim application for stay of the order dated 22.12.2004. As such, there was no interim order staying the operation of the order of cancellation of lease.
(ii) During the pendency of the writ petition, the respondents sent letters in pursuance of the agreement dated 24.1.2001, which empowers the respondents to take over the possession after cancellation of the lease deed, reminding and Intimating the cancellation as per the agreement. Respondents sent letters on 23.2.2005, 7.11.2005, 12.12.2005, and, lastly, on 3.11.2006 to the petitioner, directing the petitioner to hand over the cold storage to the respondents or else the possession will be taken back as per the agreement dated 24.1.2001.
(iii) Only at that stage, the petitioner approached the writ Court on 3.1.2007 and filed I.A. No. 2 of 2007, pending disposal of the main writ petition, WP (C) No. 4740 of 2005, seeking for the stay of the impugned order dated 22.12.2004, the order for cancellation of lease deed and also the order dated 3.11.2006, directing the petitioner to hand over the possession. However, writ Court did not pass any interim orders stying the order of the respondents dated 22.12.2004 and 3.11.2006. Having failed in his attempt to get the interim order of stay from the writ Court, the petitioner filed 11(6) application on 19.1.2007 before this Court seeking for the appointment of the Arbitrator, without mentioning the vital fact that as against the order of cancellation of lease and order directing for handing over the possession, the writ petition as well as interlocutory application have already been filed by him and the same are pending before the writ Court in WP (C) No. 4740 of 2005 and I.A. No. 2 of 2007.
(iv) Admittedly, there is no whisper about the pendency of the writ petition in the writ Court where the main issue is pending. It is also not stated in the application as to why he has approached arbitration jurisdiction when the issue relating to the cancellation and direction for handing over the possession is pending before the writ Court. Further during the pendency of the arbitration application, the respondents issued letter dated 5.5.2007 to the district authorities for giving protection for taking possession and obtained possession. At that stage, the petitioner chose to file LA. No. 1437 of 2007 in the present arbitration application, I.A. No. 2 of 2007 in WP (C) No. 4740 of 2005, purported to have been field under Section 9 of the Act for the stay of the order of possession without pursuing the writ jurisdiction where the similar prayer is pending. Curiously, in this application filed under Section 9 of the Act also, the petitioner has not mentioned about the pendency of the I.A. No. 2 of 2007 in PW (C) No. 4740 of 2005 wherein the stay of order dated 3.11.2006 seeking for possession was sought.
(v) It is relevant to notice that even in the subsequent affidavits filed by the petitioner before this Court, the petitioner has not chosen to give any explanation as to why he rushed to the Court when the issue is pending before the writ Court, where he could have pursued for getting interim orders regarding the taking over of possession. Similarly, there is no explanation in any of his affidavits as to why he has suppressed all these facts before this Court regarding the filing of writ petition in WP (C) No. 4740 of 2005 and regarding the pendency of stay application in I.A. No. 2 of 2007 in the writ petition. If these facts had been brought to the notice before this Court, this Court would not have entertained the 11(6) application nor the application under Section 9 of the Act. So, as pointed out by the counsel for the respondents, this is clear suppression of facts. When the petitioner approached this Court without clean hands by suppressing the material facts for the reasons best known to him and obtained the interim order in his favour, which he is not entitled to, this Court will not allow him to enjoy the fruits of the order obtained from this Court on the basis of suppression of facts.
(vi) In this context, it is worthwhile to refer to some of the observations made by the Supreme Court relating to this aspect.
i. S.J.S. Business Enterprises (P) Ltd. v. State of Bihar and Ors. (para 13).
13. As a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of the need of the Courts to deter a litigant from abusing the process of Court by deriving it. But the suppressed fact must be a material one in the sense that had it not been suppressed it would have had an effect on the merits of the case....
ii. Hamza Haji v. State of Kerala and Anr. .
The Courts of law are meant for imparting justice between the parties. One who comes to the Court, must come with clean hands. We are constrained to say that more often than not, process of the Court is being abused. Property-grab-bers, tax-evaders, bank load-dodgers and other unscrupulous persons from all walks of life find the Court process a convenient lever to retain the illegal gains Indefinitely. We have no hesitation to say that a person, whose case is based on falsehood, has no right to approach the Court. He can be summarily thrown out at any stage of the litigation.
iii. B. Srinivasa Reddy v. Karnataka Urban Water Supply & Drainage Board Employees' Assn. and Ors. .
42. ...The Employees' Union has approached this Court by suppressing the material facts and has snatched an order on the basis of wrong averments when the Employees' Union had no locus standt to maintain the writ petition on the date relevant in question. The Court cannot grant any relief to a person who comes to Court with unclean hands and with mala fide intention/motive. The writ petition filed by the Employees' Association is liable to be thrown out on this single factor....
(vii) In view of the above observations, this Court is of the view that the first objection raised by the respondents is a legally valid objection and consequently, I am to hold that petitioner is not entitled to maintain this application and to get the relief sought for in this petition as in my view he suppressed the material facts from this Court, which he ought not to have done.
14. The Second point relates to the maintainability of the interlocutory application in I.A. No. 1437 of 2007 under Section 9 of the Act and obtaining of the interim relief on the basis of the concession given by the counsel for the respondents by playing fraud upon the Court.
(i) As indicated above, eventhough the petitioner chose to file I.A. No. 2 of 2007 in WP (C) No. 4740 of 2005 seeking for the stay of the impugned order directing to hand over the possession dated 3.11.2006, which is already pending in the writ Court, the petitioner filed the interlocutory application on 9.5.2007 seeking for the interim relief in LA. No. 1437 of 2007 during pendency of the Arbitration Application No. 2 of 2007, under Section 9 of the Act seeking for the stay of the order dated 5.5.2007 for getting back the possession. As indicated above, without pursuing this remedy through the LA, No. 2 of 2007 in WP (C) No. 4740 of 2005, which is already pending before the writ Court, and without disclosing the same, petitioner filed this application (LA. No. 1437 of 2007) under Section 9 of the Act seeking for the interim relief for getting the possession back. According to the learned Counsel for the respondents, the interlocutory application under Section 9 of the Act is not maintainable as the said section would not be applicable to this High Court in arbitration jurisdiction during the pendency of the 11(6) application seeking for appointment of arbitrator.
(ii) Let us quote Section 9 of the Act which would provide as follows:
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; of
(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 authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing 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 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.
(iii) So, the reading of the above provision would make it clear that a party may before arbitral proceeding, may apply to the Court for an interim measure of protection and the said Court can grant the said interim relief. But the question is whether the word 'Court' would apply to this High Court.
(iv) Let us now refer to the definition of 'Court' under Section 2(1)(e) of the Act, Section 2(1)(e):
2. Definitions.--(1) In this part, unless the context otherwise requires,
(a) ...
(b) ...
(c) ...
(d) ...
(e) "Court" means the principal civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the question forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil Court of a grade inferior to such principal civil Court, or any Court of Small Causes;
(v) As per Section 2(1)(e), the Court means only the Principal Civil Court of original jurisdiction or High Court of ordinary original civil jurisdiction. This definition would indicate that the Court is only the Civil Court of original jurisdiction or High Court of original jurisdiction not other Courts. Original civil jurisdiction has been given only to some High Courts not other High Courts including the Jharkhand High Court. Admittedly, the Jharkhand High Court is not the Court as defined in Section 2(1)(e) of the Act for deciding the issue under Section 9 of the Act as it is not the High Court having original jurisdiction. Moreover, this Court, under Section 11(6) can only decide the issue relating to appointment of Arbitrator. No issue could be decided by High Court under Section 9 of the Act for providing any interim relief. Similar question was raised before the Hon'ble Supreme Court. In that, an argument was advanced that Court as mentioned in Section 9 means all the High Court and as such every High Court has got powers under Section 9 to grant interim relief during the penency of the arbitration application. But, the said argument was rejected by the Supreme Court in Rodemadan India Ltd. v. International Trade Expo Centre Ltd. of the said judgment reads as under:
25. Finally, it is contended that as recourse had been taken by the petitioner under Section 9 of the Act to obtain interim relief by moving the Delhi High Court by their original petition OMP No. 98 of 2005 dated 24.3.2005, by reason of Section 42 of the Act that Court alone could have Jurisdiction upon the Arbitral Tribunal. In my view, this contention has no merit as I have held earlier, neither the Chief Justice nor his designate under Section 11(6) is a "Court" as contemplated under the Act, Section 2(1)(e) of the Act defines the expression "Court". The bar of jurisdiction under Section 42 is only intended to apply to a "Court" as defined in Section 2(1)(e). The objection, therefore, has no merit and is rejected.
(vi) The above observation clearly makes, it obvious that this High Court cannot entertain this application. At the time of entertaining this application under Section 9 of the Act and passing interim order, this Court had no occasion to go into this question because in view of the fact that the counsel claiming to have appeared for the respondents, has never raised this question regarding maintainability of the petition under Section 9 of the Act, but, on the other hand, gave concession on behalf of the respondents stating that he has no objection for handing over the possession back to the petitioner on condition that he must deposit Rs. 3 lakh initially and Rs. 4 lakh later. Only on the basis of this concession, interim order was passed by this Court without going into the question of maintainability.
(vii) But, it is noticed that immediately after the order was passed, the respondents filed an application in LA. No. 1589 of 2007 before this Court for modification of the interim order contending that the interim order under Section 9 of the Act is fraudulently obtained on the basis of the wrong concession of the counsel who was purportedly said to have been engaged by the respondents, when actually he was not engaged by the respondents, and he was never given any instructions to give concession and further Section 9 application is not maintainable. However, this Court directed the counsel for the respondents to urge this point at the time of final disposal of the 11(6) application. Accordingly, this point is now urged.
(viii) As indicated above, the conjoint reading of Section 2(1)(e) and Section 9 of the Act would clearly indicate that the interim relief could be granted only by the Court having original civil jurisdiction or High Court having original civil jurisdiction and not other Courts that too during the pendency of 11(6) application.
(ix) As indicated above, the counsel, who claimed to have appeared on behalf of the respondents, did not chose to bring, to the notice of the Court. On the other hand, the counsel gave concession for conditional order without opposing the application even without the consent of the respondents. It is specific plea made by the counsel for the respondents that the said counsel, by name, S. Prasad has never been engaged by the respondents and no consent for conditional order has been given by the respondents and as such fraud has been played on this Court and on that basis, order has been obtained.
(x) As correctly pointed out by the present counsel for the respondents if the counsel brought to the notice of the Court regarding the maintainability of the petition under Section 9 of the Act, this Court would not have passed such interim order. In other words, but, for the concession given by the earlier counsel for the respondents, this Court would not have given interim relief and have certainly considered the same on the basis of the merits of the matter including maintainability. This Court was not allowed to adopt this course. On the other hand, it is to be stated that only on the basis of the wrong concession given by the counsel for the respondents the said interim order was passed.
(xi) Now it is pointed out by the present counsel for the respondents that the respondents had never given any vakalatnama to the said S. Prasad nor he obtained any consent to give such concession. This is the specific plea made on behalf of the respondents from the beginning that fraud has been played upon the Court to get the interim order from this Court, which is not invested with the said power to pass such an order. The perusal of interim order purported to have been passed under Section 9 of the Act would show that the lawyer, who claims to have appeared for respondents, had given concession on behalf of the respondents for passing conditional order. It is seen from the records that no vakalatnama on behalf of respondent has been filed. So, without filing vakalatnama it is not known as to how the counsel had emboldened to appear before this Court on behalf of the respondents to give concession in favour of the petitioner for passing a conditional order. Therefore, this Court is unable to brush aside the argument advanced by the present counsel of the respondents that by playing fraud upon the Court by engaging some counsel, as if he was engaged by the respondents to give concession, whereas the said counsel was never engaged by the respondents to appear in this matter. This submission deserves acceptance.
(xii) Two aspects are to be noticed in this case. One is non-filing of vakalatnama on behalf of respondents and another is failure to bring to the notice of the Court by the counsel for respondents regarding maintainability of the petition by the then counsel. Both of these things would clearly show that this Court was made hurriedly to pass an order in favour of the petitioner. This plea made by the present counsel for the respondents has not been emphatically denied nor any material was produced before this Court to show that such a contention was false. Therefore, it is appropriate to give a liberty to the respondents to take appropriate action against the said counsel regarding his conduct in the Bar Council as this Court feels the order has been obtained out of the fraud played upon the Court. Besides holding that fraud has been played upon this Court for getting the interim order, this Court is constrained to hold that the order purported to have been passed under Section 9 of the Act cannot be said to be legal as no such power has been vested with this Court. Therefore, the said order has to be held as non est When this Court holds that the said order dated 18.5.2007 is non est, then consequently, it has to be held that the possession as stood prior to the passing of the interim order, i.e., prior to 18.5.2007 has to be restored. This means that the possession which has been taken in the presence of the Sub-Divisional Officer on the basis of the order passed on 5.5.2007 has to be restored. Consequently, the respondents are entitled to take such other action to take over the possession from the petitioner as empowered by virtue of the agreement dated 24.1.2001 in view of my finding that the interim order dated 18.5.2007 is non est. The petitioner has to ensure that the possession is taken over by the respondents. Thus, on this point also, I hold in favour of the respondents.
15. The third point relates to the maintainability of the application under Section 11(6) of the Act in view of the requirements for invoking the said provision having not been fulfilled.
(i) As per the agreement it is not disputed that Clause 21 provides for reference to Registrar, the sole arbitrator to resolve any dispute.
(ii) According to the respondents, before filing an 11(6) application, it is bounden duty of the petitioner either to approach the Registrar who can be the sole arbitrator for resolving the dispute or to request the respondents for referring to the arbitrator raising various disputes. It is not the case of the petitioner that the disputes are such that it must be resolved by the arbitrator alone. On the other hand, respondents claim that there is a long term violation of clauses of agreement by making default in payment of huge amount, therefore, the agreement itself was cancelled as per the terms in the agreement on 22.12.2004. Challenging the said order of cancellation on the ground that it is not legal, the petitioner approached the writ Court and filed a writ petition to quash the said order. The same was filed on 20.8.2005. He has also filed an interlocutory application for seeking for the stay of the operation of the said order, but interim orders were not obtained.
(iii) According to the respondents a specific plea has been made in their counter-affidavit filed on 24.1.2008 that the petitioner has never sent the notice to the respondents dated 15.11.2006 as alleged by the petitioner asking for the appointment of arbitrator. Similarly, it is not the case of the petitioner that he approached the Registrar seeking for the intervention and to act as Arbitrator to resolve the dispute when the lease agreement was in force.
(iv) As indicated above, the writ petition has been filed as early as on 20.8.2005. In the writ petition, it was never mentioned about the notices having been sent to the respondents for appointment of arbitrator. On the other hand, it was mentioned in the writ petition, after the cancellation of the lease and during the pendency of the writ petition, there were conciliatory talks held between the petitioner and the respondents. In the writ petition he has never mentioned that he sent a notice seeking for the appointment of Arbitrator. Only for the first time he mentioned the same before the High Court in the application filed under Section 11(6) stating that he already sent a notice to the respondents seeking for appointment of the arbitrator as per Clause 21 of the agreement and the respondents refused to respond to the notice despite its service.
(v) If it is true, the petitioner would have either mentioned in the writ petition or he could have immediately approached this Court in 11(6) application instead of filing writ petition. This is not done. Therefore, the contention of the counsel for the respondents that false affidavit has been filed by the petitioner to the effect that he sent notice to the respondents for seeking for appointment of arbitrator in order to satisfy the requirement for filing an application under Section 11(6) assumes significance.
(vi) Admittedly, there is no material produced to prove that such a notice was received by the respondents. As indicated above, if that was a case, that would have been mentioned in I.A. No. 2 of 2007 filed on 3.1.2007 in the writ petition. But, this application did not contain those particulars. Thus, it is clear that particulars, which have not been mentioned in the writ petition or in the interlocutory application in the writ petition, have been first time mentioned in the arbitration application filed on 19.1.2007 in order to invoke the jurisdiction under Section 11(6). It is also to be noticed that challenging the impugned order dated 3.11.2006 directing for handing over the possession, petitioner has filed I.A. No. 2 of 2007 in the writ petition for interim relief on 3.1.2007 itself. No interim order was obtained. Only thereafter, the petitioner filed an application under Section 11(6), the Arbitration Application No. 2 of 2007 on 19.1.2007 and got the arbitration application admitted on 23.2.2007. Only thereupon, that too after the possession was taken over by he respondents through the order dated 5.5.2007, petitioner, instead of pursing the I.A. No. 2 of 2007 in the writ petition, which was pending at that time in the writ Court, has chosen to rush to the arbitration Court and filed LA. No. 1437 of 2007 on 9.5.2007 and obtained the interim orders on the basis of the wrong concession given by the counsel for the respondents, who had not actually been engaged by the respondents. Why he has not pursued the matter for interim relief in the writ petition which is pending ? Why he has not mentioned the reason for coming to this Court without pursing for his remedy in the writ petition ? There is no explanation whatsoever. Further, it is noticed, after obtaining the interim order from this Court and after getting back the possession, he thought it fit to withdraw the interlocutory application, IA No. 2 of 2007, in the writ petition, on 21.1.2008. But, admittedly, the main writ is still pending.
(vii) Now the main aspect which remains to be considered as to whether before invoking 11(6) application, the petitioner has satisfied mandatory requirements.
(viii) To decide the point, it would be desirable at this stage to refer to Section 11(6) of the Act. Section 11(6) reads as under:
11. Appointment of arbitrators (1) ...
(2) ...
(3) ...
(4) ...
(5) ...
(6) Where, under an appointment procedure agreed upon by parties,
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment, procedure provides other means for securing the appointment.
(7) ...
(8) ...
(9) ...
(10) ...
(11) ...
(12) ...
(xiii) In this context, it would be desirable to refer to the various observations made by the Supreme Court with regard to the powers of the Chief Justice while entertaining the application under Section 11(6) to determine the jurisdictional issues.
(i) Paragraph 10 of the decision of the Supreme Court in Rodemadan India Ltd. v. International Trade Expo Centre Ltd. , is relevant, which reads as under:
10. Before examining the facts of the present petition, it is necessary to encapsulate the conditions necessary for the exercise of the designate's power under Section 11(6) and the judicial determinations necessary by the designate at the stage of Section 11(6). In addition to the conditions already enumerated in the section, the judgment in Patel Engg. Provides that:
(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators.
(ii) In the case of SBP & Co. v. Patel Engineering Ltd. and Anr. (2005) 8 SCC 618, the Supreme Court at paragraphs 6 and 9 thereof observed as under:
6. The marginal heading of Section 11 is "Appointment of arbitrators", Sub-section (1) indicates that a person of any nationality may be an arbitrator, unless otherwise agreed to by the parties. Under Sub-section (2), subject to Sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Under Sub-section (3), failing any agreement in terms of Sub-section (2), in an arbitration with three arbitrators, each party could appoint one arbitrator, and the two arbitrators so appointed could appoint the third arbitrator, who would act as the presiding arbitrator. Under Sub-section (4), the Chief Justice or any person or institution designated by him could make the appointment, in a case where Sub-section (3) has application and where either the party or parties had failed to nominate their arbitrator or arbitrators or the two nominated arbitrators had failed to agree on the presiding arbitrator. In the case of a sole arbitrator, Sub-section (5) provides for the Chief Justice or any person or institution designated by him, appointing an arbitrator on a request being made by one of the parties, on fulfillment of the conditions laid down therein.
9. ...While exercising the power or performing the duty under Section 11(6) of the Act, the Chief Justice has to consider whether the conditions laid down by the section for the exercise of that power or the performance of that duty exist. Therefore, unaided by authorities and going by general principles, it appears to us that while functioning under Section 11(6) of the Act, a Chief Justice or the person or institution designated by him, 4s bound to decide whether he has jurisdiction, whether there is an arbitration agreement, whether the applicant before him is a party, whether the conditions for exercise of the power have been fulfilled, and if an arbitrator is to be appointed, who is the fit person, in terms of the provision. Section 11(7) makes his decision on the matters entrusted to him, final.
(xiv) These two decisions would give the following mandatory requirements to be satisfied whereupon the Chief Justice can exercise powers under Section 11(6). The requirements, as contained in the above judgments, are as follows:
(i) While exercising the power or performing the duty under Section 11(6) of the Act, the Chief Justice has to consider whether the conditions laid down by the section for the exercise of that power or the performance of that duty exist.
(ii) Under Section 11(6) of the Act, the Chief Justice is bound to decide whether he has jurisdiction to entertain the request; whether the applicant before him is a party; whether there is a valid arbitration agreement, which is in force, in terms of Section 7 of the Act; whether the person before him is a party to the arbitration agreement; whether there is any dispute subsisting which is capable of being arbitrated upon.
(iii) Dragging a party to an arbitration when there existed no arbitration agreement or when there existed no arbitrable dispute, can certainly affect the right of that parry and even on monetary terms, impose on him a serious liability for meeting the expenses of the arbitration.
(iv) When a statute confers a power or imposes a duty on the highest Judicial authority in the State, namely, Chief Justice, unless shown otherwise, has to act judicially and has necessarily to consider whether his power has been rightly invoked or the conditions for the performance of his duty are shown to exist.
(v) There must be an arbitration agreement between the parties or that there must be default or failure on the part of one party to appoint an arbitrator. Before exercising the power to appoint an arbitrator, the Chief Justice must peruse the relevant record relating to an agreement and failure by one party in making an appointment which would enable him to act.
(vi) The Chief Justice will have the right to decide the preliminary aspects. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators.
(xv) So, these mandatory requirements, as referred to in the Supreme Court decisions would clearly indicate that the Chief Justice, before invoking the power under Section 11(6) has to decide whether there is existence of valid agreement and also other conditions regarding request to other parties to appoint arbitrator and their refusal have got to be established.
(xvi) In this case, this Court is constrained to take the view that these requirements have not been fulfilled. As indicated above, the lease agreements have been admittedly cancelled by the respondents as early as on 22.12.2004. Questioning the validity of the order of cancellation, the petitioner had opted to approach the High Court under Article 226 of the Constitution of India and seeking for a declaration that the order of cancellation is not valid.
(xvii) Admittedly, the said issue is still pending. As indicated above in earlier paragraphs, there is no interim orders passed by the High Court in the writ jurisdiction staying the operation of the order of cancellation. Therefore, it cannot be said that the agreement is in existence now.
(xviii) Unless the question relating to validity of the cancellation is decided by the writ Court, it is not proper for this Court to invoke Section 11(6) powers on the mere reason that Clause 21 of the agreement provides for appointment of arbitrator.
(xix) If such a decision is taken by this Court, it would amount to prejudging the issue, which is pending before the writ Court. The reading of the writ petition would indicate that the main question, which includes the main dispute between the two parties with reference to the outstanding amount and also the validity of the cancellation, are pending before the writ Court. These questions, admittedly, have to be decided only by the writ Court. So, the question of appointment of arbitrator would not arise at this stage.
(xx) Further, as indicated above, the petitioner had never approached earlier requesting the Registrar to act as a Sole Arbitrator.
16. Further, it has not been established that such a request had been made by the petitioner to the respondents to refer to arbitrator when the lease given was in force. Whatever it is, now the question of reference of the dispute to the Arbitrator does not arise, as indicated above, when the main issue relating to the cancellation of the lease deed and allied disputes which resulted in the cancellation of deed are all the matters pending, which have to be decided by the writ Court, and, therefore, this Court is of the view that this application under Section 11(6) of the Act cannot be maintained before this Court. Therefore, on this point also, I hold in favour of the respondents.
17. To sum up:
(i) There is clear suppression of facts on behalf of the petitioner and hence it is held that the petitioner cannot maintain this application under Section 11(6) of the Act.
(ii) The interim order was passed only on the wrong concession given by the counsel, claiming to be appearing on behalf of the respondents. Furthermore, no power under Section 9 of the Act has been vested with this Court. Therefore, the interim order dated 18.5.2007 is held to be non est and consequently, the possession as stood prior to the passing of the interim order i.e., prior to 18.5.2007 is restored. The respondents are at liberty to take such other action to take over the possession from the petitioner as empowered by virtue of the agreement dated 24.1.2001. Respondents are further at liberty to take appropriate action against the said counsel regarding his conduct before the Bar Council as this Court feels the order has been obtained out of the fraud played upon the Court.
(iii) The petitioner has failed to fulfill the mandatory requirements for making a request before this Court for exercise of power under Section 11(6) of the Act. Petitioner had never approached earlier requesting the Registrar to act as a Sole Arbitrator nor did the petitioner make any request to the respondents to refer to arbitrator. Furthermore, the question, which includes the man dispute between the two parties with reference to the outstanding amount and also the validity of the order of cancellation, are pending before the writ Court, which have to be decided only by the writ Court. Therefore, this application under Section 11(6) of the Act is held to be not maintainable before this Court.
18. Hence, this arbitration application is dismissed with a cost of Rs. 10,000/- (Rupees Ten Thousand) to be paid by the petitioner to the respondent.