Rajasthan High Court - Jodhpur
Bhupendra Kumar Paliwal vs Laxman Dass And Anr on 25 March, 2019
Author: Arun Bhansali
Bench: Arun Bhansali
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
S.B. Misc. Application No. 67/2015
Bhupendra Kumar Paliwal son of Shri Damodar Lal Paliwal by
caste Paliwal aged 45 years, resident of Kankroli District
Rajsamand (Raj.)
----Petitioner
Versus
1. Laxman Dass son of Late Shri Bhimdass by caste Rangaswami
resident of Kerlwarakot Peeli Tehsil Kumbhalgarh District
Rajsamand (Raj.)
2. Shri Shyam Sunder Paliwal, Advocate resident of near kabutar
Khana, Rajnagar, Tehsil & District Rajsamand.
----Respondent
For Petitioner(s) : Mr. Narendra Thanvi.
For Respondent(s) : Mr. Salman Agha for the Company.
Mr. Dilip Kawadia for Laxman Das.
HON'BLE MR. JUSTICE ARUN BHANSALI
Order REPORTABLE 25/03/2019 The matter comes up on an application filed by the applicant under Order I Rule 10 CPC seeking impleadment of Kumbhalgarh Fort Resort & Spa Pvt. Limited ('the Company') as party respondent to the present application.
The present application under Section 11 of the Arbitration and Conciliation Act, 1996 ('the Act, 1996') has been filed by the applicant Bhupendra Kumar Paliwal on 22/4/2015 against Laxman Dass and impleading Shyam Sunder Paliwal, Advocate as party respondent seeking appointment of a sole arbitrator for adjudicating the dispute between the parties. The application was made invoking the arbitration agreement contained in Agreement to Sell dated 21/11/2011 for sale of 09 bigha 10 biswa agriculture (Downloaded on 30/06/2019 at 03:20:44 AM) (2 of 10) [CMAP-67/2015] land executed between Laxman Dass (Vendor) and Bhupendra Kumar (Purchaser).
In reply to the application, respondent Laxman Dass inter alia raised objection regarding non-impleadment of Kumbhalgarh Fort Resort & Spa Pvt. Ltd., a subsequent purchaser of the land in question indicating that the applicant Bhupendra Kumar has filed an application under Section 9 of the Act impleading said company as party, wherein, the fact of execution of sale deed dated 17/8/2012 in favour of the company has been indicated.
The application remained pending on account of objection raised about agreement to sell dated 21/11/2011 being deficiently stamped. Whereafter, on 1/5/2018, the present application under Order I Rule 10 CPC has been filed by the applicant seeking impleadment of the company as party respondent with the averments that the applicant to avoid any further complications in the matter seeks impleadment of the company, as in an illegal manner the sale deed regarding the land in question has been executed in its favour despite existing agreement dated 21/11/2011 in favour of the applicant.
A reply to the application has been filed by the company opposing the prayer for impleadment. It is inter alia indicated that there is no arbitration agreement between the applicant and the company and, therefore, in absence of any arbitral dispute, it cannot be impleaded as party to the application. Allegations have been made regarding suppression of material facts, whereby, a notice dated 26/11/2012 was issued to the company threatening reference to arbitration, application suffering from delay and laches, in an application filed by the applicant under Section 9 of the Act, 1996, the company has already taken a stand of lack of (Downloaded on 30/06/2019 at 03:20:44 AM) (3 of 10) [CMAP-67/2015] arbitration agreement between the parties and in a counter suit filed by the company, an application under Order VII Rule 11 CPC filed by the applicant on the ground of existence of arbitration agreement having been rejected, the same operating as res judicata.
Further submissions have been made that in an application filed by the company under Order XXXIX Rule 1 & 2 CPC, the plea of existence of arbitration agreement taken by the applicant has been rejected and, therefore, for all these reasons, the application is liable to be dismissed.
Learned counsel for the applicant - Bhupendra Kumar submitted that an objection has been raised by the respondent Laxman Dass regarding non-impleadment of the company as party respondent, and as the company is a subsequent purchaser i.e. after the agreement dated 21/11/2011 qua the land in question was executed by Laxman Dass in favour of the applicant containing arbitration clause, it be impleaded as party respondent. Submissions have been made that the company was well aware of the agreement dated 21/11/2011 between the parties and, therefore, in terms of Section 19 of the Specific Relief Act, 1963, it is liable for the consequences and, therefore, the application be allowed.
Reliance was placed on Aerens Goldsouk International Ltd. Co. vs. Samit Kavadia & others : 2007 (4) RLW 3283 and Chloro Controls India Pvt. Ltd. vs. Severn Trent Water Purification Inc. :
(2013) 1 SCC 641.
Learned counsel for the company submitted that as there is no arbitration agreement between the applicant and the company, which is sine qua non for impleadment in a present nature (Downloaded on 30/06/2019 at 03:20:44 AM) (4 of 10) [CMAP-67/2015] application for seeking reference of dispute to the arbitration, the application deserves to be dismissed.
Further submissions were made that already the plea regarding arbitration agreement has been raised by the applicant on two occasions, firstly in the application under Order VII Rule 11 CPC in a suit filed by the company and secondly while arguing the application under Order XXXIX Rule 1 & 2 CPC in a suit filed by the company and on both the occasions the determination made by the competent court has been against the applicant, which orders have not been questioned and, therefore, the applicant is bound by such determination.
Reliance was placed on Essar Oil Ltd. vs. Hindustan Shipyard Ltd. & Ors. : (2015) 10 SCC 642, S.N.Prasad vs. Monnet Finance Ltd. & Ors. : (2011) 1 SC 320, Suresh J. Pimparker & Ors. vs. Charkop Om Gayatri CHS Ltd. : 2010 (1) Bom.CR 332, National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED) vs. Earthtech Enterprises Ltd. & Anr. : OMP No.558/2007 decided on 23/4/2009 by Delhi High Court. and Deutsche Post Bank Home Finance Ltd. vs. Taduri Sridhar & Ors. : (2011) 11 SCC 375.
The respondent Laxman Dass though raised objection in the reply regarding non-impleadment of the company, during the course of submissions learned counsel for the said respondent opposed the application for impleadment.
I have considered the submissions made by learned counsel for the parties and have perused the material available on record.
The arbitration agreement as defined under Section 7 of the Act, 1996, which reads as under:
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(5 of 10) [CMAP-67/2015] "7. Arbitration agreement.- (1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not." The term 'party' has been defined in Section 2(h) of the Act, 1996, which reads as under:
"(h) "party" means a party to an arbitration agreement."
A perusal of the agreement dated 21/11/2011 based on which present application seeking reference to arbitration has been filed indicates parties to the agreement and arbitration clause reads as under:
1. Parties to the agreement:
"eSa y{e.knkl firk Lo- Jh Hkhenkl th jaxkLokeh] mez 38 o"kZ] is"kk [ksrh o MªkbZojh] fuoklh dsyokM+k dksy ihiyh] rglhy dqEHkyx<+] ftyk jktleUn ¼jkt-½ tks fd bl bdjkj dk izFke i{kdkj gS ds }kjk Jh HkwisUnz dqekj firk Jh nkeksnjyky th ikyhoky] mez 42 o'kZ] fuoklh fouk;d okfVdk ds ikl] dkadjksyh] rglhy o ftyk jktleUn ¼jkt-½ tks fd bl bdjkj dk f}rh; i{kdkj gS ds i{k esa fuEu izdkj fu'ikfnr dj jgk gWw %&"
2. Arbitration clause:
"9- ;g fd i{kdkjku esa e/; bl bdjkj ds lEcU/k esa fdlh izdkj dk fookn gksus dh fLFkfr esa bl ekeysa dk fuLrkj.k ek/;LFk ,oa lqyg vf/kfu;e ds rgr~ ,dy ek/;LFk ,MoksdsV ";kelqUnj ikyhoky jktleUn }kjk djk;k tkosxk ftlls nksuksa i{kdkj ck/; jgsxsaA "
A perusal of the manner in which the parties have been indicated, the same have been confined to the individuals and the normal practice of giving an extended meaning by way of including the successors in interest is conspicuously absent. Further, in the arbitration clause, there is nothing so as to extend the said clause to the successors in interest.
A plain reading of the definition of `arbitration agreement', as contained in Section 7 reveals that the same pertains to agreement by the parties to submit to arbitration disputes between them. For seeking impleadment of a party to an (Downloaded on 30/06/2019 at 03:20:44 AM) (6 of 10) [CMAP-67/2015] application under Section 11 of the Act, 1996, it is necessary that there must be an arbitration agreement between the parties as in absence thereof, the matter cannot be referred. Apparently, there is no such agreement between the applicant and the company.
Hon'ble Supreme Court while dealing with the issue regarding impleadment of a party to the arbitration, when a person is not a party to the arbitration agreement, in the case of Deutsche Post Bank Home Finance (supra) inter alia laid down as under:
"10. The said order is challenged by the appellant urging the following contentions :
(i) As the first respondent and the developer were the only parties to the construction agreement dated 21.2.2008 containing the arbitration agreement, the appellant could not be dragged into a dispute between them, by impleading it as a party to the petition under section 11 of the Act.
(ii) The designate of the Chief Justice ought to have examined whether both respondents in the petition under section 11 of the Act were parties to the arbitration agreement (clause 7 of the construction agreement dated 21.2.2008) before making an order appointing an arbitrator under section 11 of the Act.
On the contentions urged, the question that arises for our consideration is whether the appellant could be made a party to the arbitration, even though the appellant was not a party to the arbitration agreement contained in clause (7) of the construction agreement dated 21.2.2008.
11. In this case, the first respondent made a demand for damages against the developer in his notice dated 31.7.2009. As the developer refused to comply, the first respondent invoked the arbitration agreement contained in clause (7) of the Construction Agreement dated 21.2.2008 between him and the developer. Therefore, in so far as the disputes between the first respondent and the developer (second respondent) are concerned, the designate of the Chief Justice was justified in appointing an arbitrator. But the question is whether the appellant, a non-party to the construction agreement containing the arbitration agreement as per clause (7), could be roped in, as a party to such arbitration.
12. In Jagdish Chander vs. Ramesh Chander [2007 (5) SCC 719] this court held :
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(7 of 10) [CMAP-67/2015] "The existence of an arbitration agreement as defined under Section 7 of the Act is a condition precedent for exercise of power to appoint an arbitrator/Arbitral Tribunal, under Section 11 of the Act by the Chief Justice or his designate. It is not permissible to appoint an arbitrator to adjudicate the disputes between the parties in the absence of an arbitration agreement or mutual consent."
In Yogi Agarwal vs. Inspiration Clothes & U [2009 (1) SCC 372], this court observed :
"When Sections 7 and 8 of the Act refer to the existence of an arbitration agreement between the parties, they necessarily refer to an arbitration agreement in regard to the current dispute between the parties or the subject- matter of the suit. It is fundamental that a provision for arbitration, to constitute an arbitration agreement for the purposes of Sections 7 and 8 of the Act, should satisfy two conditions. Firstly, it should be between the parties to the dispute. Secondly, it should relate to or be applicable to the dispute."
In S. N. Prasad vs. Monnet Finance Ltd - (2011) 1 SCC 320, this Court held:
"There can be reference to arbitration only if there is an arbitration agreement between the parties. If there is a dispute between a party to an arbitration agreement, with other parties to the arbitration agreement as also non-parties to the arbitration agreement, reference to arbitration or appointment of arbitration can be only with respect to the parties to the arbitration agreement and not the non-parties........
As there was no arbitration agreement between the parties, the impleading of the appellant as a respondent in the proceedings and the award against the appellant in such arbitration cannot be sustained." Therefore, if 'X' enters into two contracts, one with 'M' and another with 'D', each containing an arbitration clause providing for settlement of disputes arising under the respective contract, in a claim for arbitration by 'X' against 'M' in regard to the contract with 'M', 'X' cannot implead 'D' as a party on the ground that there is an arbitration clause in the agreement between 'X' and 'D'.
13. The existence of an arbitration agreement between the parties to the petition under section 11 of the Act and existence of dispute/s to be referred to arbitration are conditions precedent for appointing an Arbitrator under section 11 of the Act. A dispute can be said to arise only when one party to the arbitration agreement makes or asserts a claim/demand against the other party to the arbitration agreement and the other party refuses/denies such claim or demand. If a party to an arbitration agreement, files a petition under section 11 of the Act (Downloaded on 30/06/2019 at 03:20:44 AM) (8 of 10) [CMAP-67/2015] impleading the other party to the arbitration agreement as also a non-party to the arbitration agreement as respondents, and the court merely appoints an Arbitrator without deleting or excluding the non-party, the effect would be that all parties to the petition under section 11 of the Act (including the non-party to arbitration agreement) will be parties to the arbitration. That will be contrary to the contract and the law. If a person who is not a party to the arbitration agreement is impleaded as a party to the petition under section 11 of the Act, the court should either delete such party from the array of parties, or when appointing an Arbitrator make it clear that the Arbitrator is appointed only to decide the disputes between the parties to the arbitration agreement."
(emphasis supplied) The above judgment clearly lays down that existence of arbitration agreement between the parties is a condition precedent for referring a dispute to arbitrator under Section 11 of the Act, 1996. As such, apparently, the issue which arises in the present case stands concluded by the said judgment, which applies on all force to the present dispute.
So far as the judgments in the case of Essar Oil Ltd. (supra), S.N.Prasad (supra), Suresh J. Pimparkar (supra) and NAFED (supra) cited by learned counsel for the company are concerned, though the stray observations made therein may support the plea raised, the same do not deal with similar nature controversy.
Coming to the judgment in the case of Aerens Goldsouk (supra) cited by learned counsel for the applicant, besides the fact that the said judgment turned on its own facts, wherein, a finding was recorded that in view of publication of notice in the newspaper it would be deemed that the non-party had the knowledge and that it had stepped into the shoes of respondent nos. 1 and 2, the said judgment apparently is contrary to the principles laid down in the case of Deutsche Post Bank Home Finance (supra) and, therefore, the same does not advance the case of the applicant.
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(9 of 10) [CMAP-67/2015] In the case of Chloro Controls India (supra), the Hon'ble Supreme Court was dealing with the provisions of Section 45 of the Act, wherein, the provision itself provides for request of one of the parties to agreement or 'any person claiming through or under him', which is not the case as Section 7 is confined to 'the parties to the agreement'. The position may get altered after the amendment of 2015, which came into force with retrospective effect from 23/10/2015 as now Section 8 also has been amended, wherein, instead of earlier provision 'if a party so applies' has been substituted with 'if a party to the arbitration agreement or any person claiming through or under him so applies', which is pari materia with the provisions of Section 45 of the Act. However, the benefit of the said aspect would not be available to the applicant as the present application under Section 11 of the Act, 1996 was filed on 22/4/2015 i.e. before the amended Act came into force w.e.f. 23/10/2015.
Hon'ble Supreme Court while dealing with provision of Section 26 of the Amendment Act in BCCI vs. Kochi Cricket Pvt. Ltd. : (2018) 6 SCC 287 inter alia laid down as under:
"The Scheme of Section 26 is thus clear: that the amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the amendment Act, and to court proceedings which have commenced on or after the amendment Act came into force."
The Hon'ble Supreme Court in the case of Chloro Controls India (supra) itself distinguished between unamended provisions of Section 8, as it then existed, and Section 45 of the Act and observed that any judgment dealing with Section 8 of the Act (Downloaded on 30/06/2019 at 03:20:44 AM) (10 of 10) [CMAP-67/2015] would have no application to the case relating to Section 45 of the Act, as it heavily relied on the phrase under Section 45 of the Act i.e. 'any person claiming through or under him'.
In view of the above discussion, it is apparent that the company is not party to the arbitration agreement and, therefore, cannot be impleaded as party respondent to the present application under Section 11 of the Act and, therefore, the application filed by the applicant under Order I Rule 10 CPC is dismissed.
(ARUN BHANSALI),J 125-baweja/-
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