Kerala High Court
Basheer vs Kerala State Housing Board on 18 November, 2004
Equivalent citations: AIR2005KER64, 2005(1)KLT300
Author: K. Padmanabhan Nair
Bench: K. Padmanabhan Nair
ORDER K. Padmanabhan Nair, J.
1. The plaintiff in O.S.No. 722 of 1991 on the file of Subordinate Judge's Court,. Parur is the revision petitioner. This Civil Revision Petition is filed challenging an order passed by the Court below dismissing an application filed by the petitioner to refer the dispute arising for consideration in the suit for arbitration Under Section 89 of the Code of Civil Procedure. During the pendency of the Civil Revision Petition, the petitioner died and his legal representatives were impleaded as additional petitioners 2 to 7.
2. The original plaintiff was a contractor. He entered into an agreement with the respondent - Kerala State Housing Board for the construction of two blocks of EE7 and 2 blocks of CF6 type flats. The contract was terminated and the work was awarded to another contractor. The plaintiff filed the suit for a declaration that the termination of the contract by the defendant was unlawful and unsustainable and the forfeiture of security deposited was also unlawful. There was a prayer for recovery of an amount of Rs. 4,61,502.19 due under the final bill and an additional amount of Rs. 1,44,908/- as loss of profit or gains prevented. The respondent appeared and filed a written statement contending that the plaintiff was a defaulter and the defendant was compelled to terminate the contract and awarded the work at the risk and cost of the plaintiff. It was contended that the plaintiff was not entitled to get any amount, but amounts were due to the Housing Board. The Housing Board filed O.S.624 of 1993 against the original plaintiff for realisation of an amount of Rs. 11,50,279/-. The deceased revision petitioner appeared in that suit and filed a written statement denying his liability and reiterating his case in the suit filed by him. Both the suits are pending trial.
3. The deceased original revision petitioner filed I.A.2721 of 2002 Under Section 89 of the Code of Civil Procedure stating that the dispute can be settled by appointing an Arbitrator. He had also filed a terms of reference proposed for settlement and prayed that the Court may be pleased to formulate the terms of settlement and refer the case for settlement of the issues in the suit by arbitration Under Section 89 of the Code of Civil Procedure. The respondent opposed that prayer. It was contended that it was a matter to be decided after taking evidence and in case the disputes were referred to arbitration, that will cause irreparable loss and injury to the defendant-Housing Board. The learned Sub Judge dismissed that application. The following is the order:--
"Heard both sides. The other side is objecting this application. I find that elements of settlement which are acceptable to both sides are lacking in this case. Hence LA. dismissed".
The original plaintiff had filed this Civil Revision Petition challenging that order.
4. The learned counsel appearing for the petitioners has argued that the deceased petitioner filed O.S. 722 of 1991 against the respondent for realisation of the amount due under the final bill and also the loss of profit or gains prevented and for other incidental reliefs. It is argued that the respondent filed O.S.624 of 1993, which is a cross suit, for realisation of damages because the work had to be retendered. The petitioner was examined in part as PW1 about 5 1/2 years ago and the chance of the Court taking up the matter is very remote. It is also contended that a large number of documents are to be marked and oral evidence is also to be adduced and the Court may not get time to complete the trial of the case in the near future. It is argued that Section 89 was incorporated in the C.P.C. for alternate resolution of the dispute and the Section makes it obligatory and had clothed the Court with power to formulate the terms of settlement which can be acceptable to both sides and refer the same for arbitration/conciliation/judicial settlement/mediation. It is argued that a statutory duty is cast upon the Court to consider the request and pass appropriate orders.
5. The learned counsel appearing for the respondent has contended that in view of the serious dispute involved in this case, it is only just and proper that the case be tried and decided by the Civil Court itself. It is argued that the crucial question to be considered in this case is who committed the breach and the definite stand taken by the respondent is that it was the petitioner and that is a matter which requires evidence. It is contended that a party to the litigation has no right to file a petition praying that the matter in issue in a suit may be referred for arbitration and if at all the provisions are applicable, it is for the Court to consider and decide which of the four modes is to be adopted in a given case. It is contended that since the suit was filed long prior to the amendment of Section 89 of the Code of Civil Procedure, the provisions contained in Section 89 have no application to the facts of this case.
6. Section 89 of Chapter V of the Code of Civil Procedure, 1908 before it was repealed by Section 49(1) of the Arbitration Act, 1940 contained provisions for settlement of disputes outside the Court. Repealed Section 89 contained provisions for arbitration. It was provided that all proceedings shall be governed by the provisions contained in the Second Schedule to the C.P.Code. Section 89 was repealed by Arbitration Act, 1940 (10 of 1940). The law regarding arbitration has been consolidated in that Act. Section 89 was reintroduced in the parent Act by CP.C. (Amendment) Act, 1999, which came into force on 1.7.2002. In view of the reintroduction of the Section, it is now obligatory for the Court to refer the dispute after issues are framed for settlement either by way of Arbitration, Conciliation, judicial settlement including Lok Adalat or mediation.
7. Section 89(1) reads as follows:--
"Section 89. Settlement of disputes outside the Court. -- Where it appears to the court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may reformulate the terms of a possible settlement and refer the same for--
(a) arbitration;
(b) conciliation;
(c) judicial settlement including settlement through Lok Adalat; or
(d) mediation".
A reading of Section 89(1) of the Code of Civil Procedure shows that a duty is cast upon the Court to refer the dispute either by way of arbitration, conciliation, judicial settlement including settlement through Lok Adalat or mediation if it appears to the Court that there exists elements of settlement. If it is referred to arbitration, the case will be transferred from the file of the Civil Court itself. So far as the three other modes are concerned, in case the parties failed to get the dispute settled, then the suit can be proceeded further in a Court. Clause (d) of Sub-section (2) of Section 89 empowers the Government and the High Courts to make rules to be followed in mediation proceedings to effect the compromise between the parties. In this connection the amendments to O.X of Code of Civil Procedure are also relevant. G.X Rule 1 of the Code of Civil Procedure provides that at the first hearing of the suit the Court shall ascertain from each party or his pleader whether he admits or denies such allegations of fact as are made in the plaint or written statement of the opposite party. Rule 1A, 1B and 1C have been inserted after Rule 1 in O.X by the C.P.C. (Amendment) Act, 1999 with effect from 1.7.2002. These rules were inserted in view of the amendment of Section 9(1) making it obligatory upon the Court to refer the dispute for settlement by way of arbitration, conciliation, etc.. Rule 1A reads as follows:--
"After recording the admissions and denials, the Court shall direct the parties to the suit to opt either mode of settlement outside the Court as specified in Sub-section (1) of Section 89. On the option of the parties, the Court shall fix the date of appearance before such forum or authority as may be opted by the parties".
Rule 1B of O.X provides that where a suit is referred under Rule 1A, the parties shall appear before such forum or authority for conciliation of the suit.
8. Rule 1C of O.X is also very relevant. It reads as follows:--
"Rule 1C. Appearance before the Court consequent to the failure of efforts of conciliation.-- When a suit is referred under Rule 1A and the Presiding Officer of conciliation forum or authority is satisfied that it would not be proper in the interest of justice to proceed with the matter further, then, it shall refer the matter again to the Court and direct the parties to appear before the Court on the date fixed by it".
Rule 1C provides that if the Presiding Officer of conciliation forum or authority is satisfied that it would not be proper in the interest of justice to proceed with the matter further, then he shall refer the matter again to the Court and direct the parties to appear before the Court on the date fixed by him. So, it is evidently clear that in view of the present amendment, a duty is cast upon the Court to consider whether it is possible to refer the parties for a settlement as provided Under Section 89 of the Code of Civil Procedure.
9. Section 89(1) of the Code of Civil Procedure does not contemplate an application by any of the parties to the suit to invoke the power conferred on the Court under that Section. Section 89 of the Code of Civil Procedure does not confer any right to the parties to choose any mode alone and make request to the Court to compel the other party to agree with such a proposal. If the parties are not able to agree regarding the forum, the Court shall apply its mind, take a decision as to which of the four modes is suitable to the facts of the case at hand and refer the dispute to that forum. Of course, the parties to the suit may also make a request to the Court to refer the dispute. A reading of O.X, Rule 1A of the Code of Civil Procedure shows that it is made obligatory on the part of the Court after recording the admission and denials to direct the parties to the . suit to opt either modes of settlement as provided in Section 89(1) of the Code of Civil Procedure. So, even if the parties do not file any petition, the Court has to discharge the duty cast upon it under Rule 1A of O.X of the Code of Civil Procedure. It is clear from a reading of Section 89(1) read with O.X Rule 1A that the Court shall apply its mind and if it is of the opinion that there exist elements of a settlement which may be acceptable to the parties, formulate the terms of settlement and give them to the parties for their observations. It is true that Rule 1A of O.X of the Code of Civil Procedure provides that the Court shall direct the parties to opt either mode of settlement out side the Court as specified in Section 89(1). But, the rule is silent as to what is the procedure to be followed in case both sides fail to reach at a consensus regarding the mode of settlement. But the wording of Section 89(1) is very clear. It provides that the Court may reformulate the terms of possible settlement and refer the same. So, it is for the Court to decide which of the four methods should be adopted and no party can claim, as a matter of right, that his case shall be dealt with in any particular mode provided Under Section 89 of the Code of Civil Procedure.
10. The learned counsel appearing for the petitioner relied on an Article written by Hon'ble Mr. Justice J.L.Gupta, former Chief Justice of this Court, regarding the need for reforms published in I.C.A. Arbitration Quarterly (October-December, 2003). The learned counsel also relied on two articles written on the same subject; one by Hon'ble Mr. Justice K.A.Abdul Gafoor and another one by Senior Advocate Sri. T.P.Kelu Nambiar. He also relied on another Article written by Hon'ble Mr.Justice B.K. Somashekara and published in the India Arbitrator Magazine (October, 2003) about the need to take recourse to arbitral clauses. The counsel appearing for the petitioner invited my attention to the two Articles written by him on this point in the above said journals. He also relied on an Article appearing in the Journal Section of AIR 2004 Page 193, wherein the speech delivered by Hon'ble Mr. Justice Satya Brata Sinha, Judge, Supreme Court of India is reported. His Lordship has opined that the Indian Courts are attuned to resolving conflicts between the parties based on the pleadings presented by them. It is also observed that there needs to be a decentralisation of justice-oriented judicial activism right down to the lowest court in the country. His Lordship has also opined that it must be ensured that in developed countries most of the cases are resolved by Alternative Dispute Resolution (ADR) mechanism by conciliation, mediation and arbitration.
11. In Salem Advocate Bar Assn. v. Union of India, (2003) 1 SCC 49, the Apex Court had considered Section 89 of the Code of Civil Procedure. It was held as follows:--
"The purpose of Section 89 CPC, as inserted by Act 46 of 1999, is to try and see that all the cases which are filed in Court need not necessarily be decided by the Court itself. Keeping in mind the law's delays and the limited number of Judges which are available, it has now become imperative that resort should be had to alternative dispute resolution mechanism with a view to bringing to an end litigation between the parties at an early date. The alternate dispute resolution (ADR) mechanism as contemplated by Section 89 is arbitration or conciliation or judicial settlement including settlement through Lok Adalat or mediation. If the parties agree to arbitration, then the provisions of the Arbitration and Conciliation Act, 1996 will apply and that case will go outside the stream of the Court but resorting to conciliation or judicial settlement or mediation with a view to settle the dispute would not ipso facto take the case outside the judicial system. All that this means is that effort has to be made to bring about an amicable settlement between the parties but if conciliation or mediation or judicial settlement is not possible, despite efforts being made, the case will ultimately go to trial".
The Apex Court further noticed that Section 89 of the Code Civil Procedure is a new provision and even though arbitration or conciliation has been in place as a mode for settling the disputes, this has not really reduced the burden on the Courts. The Apex Court had constituted a Committee for devising a model case management formula as well as rules and regulations which should be followed while taking recourse to the ADR referred to in Section 89 of the Code of Civil Procedure.
12. The learned counsel appearing for the petitioner has argued that the fact that no rules have been made so far is not a ground to deny the benefit conferred on the litigant Under Section 89 of the Code of Civil Procedure. He relied on the decision reported in ONGC Ltd v. Saw Pipes Ltd., (2003) 5 SCC 705, in which it was held that it is the well settled principle of law that the procedural law cannot fall to provide relief when substantive law gives the right. In the decision reported in M.V. Elisabeth v. Harwan Investment & Trading (P) Ltd., 1993 Supp (2) SCC 433, the Apex Court held as follows:-
".........where substantive law demands justice for the party aggrieved and the statute has not provided the remedy, it is the duty of the Court to devise procedure by drawing analogy from other systems of law and practice".
The principle laid down in this case was followed in Sulaikha Clay Mines v. Alpha Clays, 2004 (3) KLT 192. In G.C.D.A. v. Harrisons Malayalam Ltd., 2000 (2) KLT 152 (F.B.) = ILR 2000 (2) Kerala 551 (FB). According to me, that question need not be considered in this case.
13. The difficulty in this case is not the absence of any rule. It is to be noted that one of suits was filed in the year 1991 and the connected suit by the respondent was filed in the year 1993. The issues in O.S.722 of 1991 were framed as early as on 5.1.1993. A reading of Section 89 and O.X of the Code of Civil Procedure shows that the provisions of Section 89 have no retrospective effect Section 32 of Act 46 of 1999 deals with repeal and savings. Section 32(2)(e) reads as follows:-
"(e). Section 89 and Rule 1A, 1B and 1C of O.X of the First Schedule, as inserted in the principal Act by Sections 7 and 20 of this Act, shall not affect any suit in which issues have been settled before the commencement of Section 7; and every such suit shall be dealt with as if Sections 7 and 20 had not come into force."
Since the issues were already settled before the commencement of Section 7 and 20 of the Amendment Act, the provisions of Section 89 and O.X of the Code of Civil Procedure can have no application to this case. So, the order passed by the learned Sub Judge dismissing the petition filed by the plaintiff to refer the matter for arbitration is correct and does not call for any interference.
In the result, the Civil Revision Petition is dismissed. LA. No. 494 of 2003 shall stand dismissed.