Karnataka High Court
Ibc Knowledge Part Private Limited vs Sri P Ravindra Pai on 3 November, 2009
Author: N.Ananda
Bench: N. Ananda
IN THE HIGH COURT OF KARNATAKA AT BANGALORE *s - DATED THIS THE 3 DAY OF NoveMBER 2000 os BEFORE ; sO THE HON'BLE MR. JUSTICE. N. ANANDA C.R.P.No. 13/2007 C]W C.R.P.No.239/2009 BETWEEN: 1 IBC KNOWLEDGE PART PRIVATE LIMITED A COMPANY REGISTERED UNDER THE INDIAN COMPANIES ACT, 1956. : W!ITH ITS REGISTERED GPFICE AT "SHERIFF CENTRE";.5™ FLOOR, NO.73/ 1, ST.MARK'S ROAD, BANGALORE-560001, REPRESENTED BY ITS © DIRECTOR MR. YUNUS ZIA ..» PETITIONER _ (BY. SRIC.S. VYDYANATHAN, SR. ADV. FOR _ SRLM.G.S.KAMAL, ADVOCATE FOR M/S KAMAL & * BHANU, ADVOCATES) AND: my 1 . SRi P- RAVINDRA PAI SOR OF DAYANANDA PAI AGED ABOUT 30 YEARS 2 SRI ASWIN PAI SON OF P SATISH PAI AGED ABOUT 27 YEARS SMT MOHINI D PAI WIFE OF P DAYANANDA PAI AGED ABOUT 57 YEARS... SMT P SABITHA PAI WIFE OF P SATISH PAI | AGED ABOUT 51 YEARS ~. SMT P KAVITHA PAI _ WIFE OF M VIVEK PAI ~ AGED ABOUT 31 YEARS KUM. VIDYA PAI... 8 D/OF P DAYANANDA PAI. AGED ABOUT 25 EARS RESPONDENTS 3, 3-% 6 ARE R/AS
MADHUVAN, No.25, BELLARY ROAD, BYATARAYANAPURA Lo BANQALORE-360 092.
RESPONDENTS 2, 4 fe 5 ARE R/ AD No.9, ASHWINI, 8™ MAIN, RAJAMAHAL VILAS EXTENSION, BAN ALORE-560 080. a are
-. AND IRVESTMENTS M/S BANGALORE HOUSING DEVELOPMENT
-. &. PARTNERSHIP FIRM WITH ITS OFFICE _. AT-'NO.85/ i, KENGAL HANUMANTHAIAH ROAD ~. BANGALORE-560027,
- BY ITS FARTNER MR.ASHWIN PAI M/S NEW INDIA HOTELS AND RESORTS PRIVATE LIMITED "A COMPANY REGISTERED UNDER THE ~--JNDIAN COMPANIES ACT, 1956 WITH ITS OFFICE AT DIAMOND DISTRICT TOWER "B",8TH FLOOR, NO.150, AIRPORT ROAD BANGALORE, REP. BY ITS DIRECTOR MRS.SHARMEEN YUNUS 9 SRI P DAYANANDA PAI SON OF LATE P NARASIMHA PAI AGED ABOUT 63 YEARS _..... wa R/AT MADHUVAN, NO.25, BE SLLARY. KOAD . BYATARAYANAPURA EO BANGALORE-560092 10 SRI SATISH PAI SON OF LATE P. NARASIMHA PAI AGED ABOUT 58 YEARS R/AT ASHWINI, NO., 8TH MAIN ROAD, RAJ MAHAL VILAS EXTENSION BANGALORE-560 080... =. sy. RESPONDENTS (BY SRIYUTHS H.SRINIVAS RAO, ADVOCATE FOR R7; K, P.APPAIAH, ADVOCATE FOR.R8; T.KRISHNA, ADVOCATE FOR M/s. GS.V.ASSOCIATES, ADVOCATES FOR R3 AND R4; Y.S.H.REDDY AND AMARANATH, ADVOCATES FOR R1 AND R2, RS, R6, RO & R1O ARE SERVED) THIS: CRP FILED u/s i15 CPC AGAINST THE ORDER DATED: 22.11.2006 PASSED ON 1A. IN OS.NO. 16311/2006 ON THE FILE OFTHE XXVIII ADDL.CITY CIVIL JUDGE, MAYO HALL, BANGALORE, (CCH.NO.29), REJECTING THE LA. FILED U/S 8 _ OF THE ARBITRATION AND CONCILIATION ACT, * IN OR? No. 239/2009 BETWEEN Ne.
M/S NEW INDIA HOTELS & RESORTS ; PRIVATE, LIMITED A COMPANY REGD. UNDER THE INDIAN COMPANIES ACT, 1956 ~ - WITH.ITS OFFICE AT DIAMOND
-. DISTRICT, TOWER B, 8™ FLOOR,
- NQ.150, AIRPORT ROAD, BANGALORE
-. REP. BY ITS DIRECTOR, MRS. SHARMEEN YUNUS ... PETITIONER \"
(BY SRIYUTHS C.S.VYDYANATHAN, SR. ADVOCATE AND i M.G.S.KAMAL, ADVOCATE FOR M/S KAMAL & BHANU, ADVOCATES) _ | AND: .. ; ma 1 SRI P RAVINDRA PAI S/ OQ DAYANANDA I PAD cas AGED 32 YEARS ms ar 2 SRI ASHWIN PAI s/0 P SATISH PAI AGED 29 YEARS - ne 3 SMT MOHINI D PAI wo . DAYANANDA PAI AGED S9 YEARS 4 SMTP SABF PHA Wi G P, SATISH PAI AGED. ad YEARS ;
5 SMTP KAVIT HA PAL W/o? M VIVEK PAI AGED 32 YEARS | 6 KUM. VIDYA PAI D/O. PF. DAYANANDA PAI AGED 27 YEARS RESPONDENTS i, 3 & 6 ARE R/A:
MADHUVAN, No.2S, BELLARY ROAD
--. BYATARAYANAPURA' BANGALORE-560 092.
PESPONDENTS 2, 4&5 ARE R/A:
No.9, ASHWINI, 87 MAIN, RAJAMAHAL VILAS EXTN., BANGALGRE-560 080.
. % °.M/S BANGALORE HOUSING _ ... DEVELOPMENT AND INVESTMENTS A PARTNERSHIP FIRM PRESENTLY HAVING ITS OFFICE AT NO.10/1, LAKSHMINARAYANA COMPLEX, PALACE ROAD BANGALORE- 560052 8 IBC KNOWLEDGE PARK PRIVATE LIMITED:
A COMPNAY REGD UNDER THE INDIAN ©.
COMPANIES ACT 1956, WITH ITS REGD ~~~ OFFICE AT "SHERIFF CENTRE", 9. | STH FLOOR, NO.73/1 ;
ST. MARKS ROAD, BANGALORE-1.
REP. BY ITS DIRECTOR MR YUNUS ZIA
9. SRI P DAYANANDA PAI | S/O LATE P NARASIMHA PAI AGED 64 YEARS | .
R/A MADHUVAN. NC.25° BELLARY ROAD, BYATARAYANATURA BANGALORE-560092 10 SRI SATISH PAL oe, | S/O LATE P: NARASIMHA PAL AGED 62 YEARS m F/A ASHWINI-NG.9,.
8TH MAIN, RAJ MAHAL VILAS EXTENSION BANGALORE-569080 ~- . RESPONDENTS - (BY SRIYUTHS H.SRINIVAS RAO, ADVOCATE FOR R7; K.P.APPAIAH; ADVOCATE FOR R8; T.KRISHNA, ADVOCATE _ FOR M/s. G.S.V.ASSOCIATES, ADVOCATES FOR R3 AND ~~. R4; Y.S.H. REDDY AND AMARANATH, ADVOCATES FOR R1 » AND R2; RS, R6, R9 & R10 ARE SERVED) THIS CRP FILED U/S 115 OF CPC AGAINST THE ORDER DATED 22.11.2006 PASSED IN O.S.NO. 16311/2006 ON THE FILE.OF THE XXVHE ADDL. CITY CIVIL JUDGE, MAYO HALL, . ©. BANGALORE, REJECTING THE LA. FILED U/S 8 OF >. "ARBITRATION AND CONCILIATION ACT. aan . -. "SESE TWO REVISION PETITIONS COMING ON FOR "DICTATING ORDERS THIS DAY, THE COURT MADE THE
- FOLLOWING:
OR R | C.R.P.No.113/2007 is filed by. the defendant hefore - the trial court challenging the omer ci tine trial Court rejecting the application filed uf 8.8 of the Acbitration. and os Conciliation Act, 1996 (for shert, 'the: Act) inter alia contending that dispute' raised | in the suit falls under Arbitration Clause contained in. . the. Joint Development Agreement dated : 26.12. 2003 "entered into between M/s. Bangalore Housing, Development and Investments (7% plaintiff before the trint conré and M/s.1IBC Knowledge Park Private Limited (1 « defendant 'pefore the trial court).
2, C.R.P.No.239/ 2009 is filed by the Ii defendant challenging the order of the trial Court rejecting the ; application ° nf sa of the Arbitration and Conciliation Act.
Be Since both the petitions have arisen out of the same me _ ate they are together taken for final disposal
4. In this order, parties would be referred to by their 'ranks before the trial Court. 16 all f
5. The brief facts necessary for disposal of these. | petitions are as follows; 9 "™" | | . ; ; : .
That on 26.12.2003, VII- plaintiff (partnership nin) :
entered into a Joimt Development 'Agreement with I defendant in respect of "plaint 'A' schedule property. The plaint 'B' and 'C' schedule properties | are 'part and parcel of 'A' schedule property. The Vi- -plaintift is iS the landowner and I-defendant - is the Developer. in the Joint Development Agreement there isa provision of te-constitution of VII- plaintiff 'firm, 80 'also there in 4 'provision for I-defendant to assign its rights urder tire ¢ Joint Development Agreement. _ 6. it is alleged in the plaint that Vil-plaintiff firm was i te constibsied on 14.02.2004 and 01.04.2004, whereby "plaintts T to Vi were inducted as partners and the shares held: by the partners of Vil-plaintiff are as follows:
aan io Sri P. Dayananda Pai 5%
- (ill-defendant)
2). Sri P.Satish Pai 5% (IV defendant)
3) Sri P.Ravindra Pai 10% rm. Loud t (I-plaintiff}
4)SriP.AshwinPai 10% (H-plaintiff} re
5) Smt.Mohini D.Pai 85% (I1I-plaintiff) -- os:
6) Smt.Sabitha Pai -- 25% :
7) Smt.P.Kavitha Pai we *y 7 "10% (V- plaintiff} = mae
8) Miss.P.Vidya Pai 10%
7. It is alleged in the : plaint that in terms of clause 12 of the reconstituted. Partnership Deed, no partner shall without the written consent of the other release, compound | oF ab abandon any debit due to the firm or dimmish any security to 'the firm without receiving the full amount thereof, lend 'any xooncy or deliver any goods belonging to De ~ the firm 'or transfer or assign cither absolutely or by oe > mortgage or by declaration of trust of his partnership os : interest or do knowingly permit anything to be done whereby akin ered.
the properties of the firm are exposed to the danger of being :
seized attached or taken in executions. | wo . | It is alleged in the plaint that defendants 3 and 4 who are the partners of 7% defendant Firm contrary to the terms :
of re-constituted Partnership Deed dated 1. 4. 2004, have transferred plaint 'C' schedule property which forms part of plaint 'A' schedule F property to I. defendant by virtue of right of assignment exercised by 1 "defendant in terms of Joint Development Agreement 'dated 26. 12. 2003. The plaintiffs have scught for the folowing reliefs:
1) For declaration that the sale deed dated 23.9.2005 executed j in favour of defendant No.2 in respect of . © schedule does not bind the 7% plaintiff and the
- mo plaintiffs 1 to 6.
- 7 2) For : permanent injunction restraining the . defendants from interfering with the peaceful possession of the schedule 'c' po edn rede.
10
3) For costs and such other relicf/s as this Repth :
equity.
8. The II defendant entered appearance "end filed written statement. | |
9. The I defendant entered appearance and before filing written statement made an' application u/S.8 of the Arbitration and Conciliation Act, 1996, invoking arbitration clause contained an. Joint Development Agreement dated 26.12. 2003. .
lo. The learned trial judge on bearing the parties oe dismissed \ application nolding that;- the dispute raised in the os suit doce not fait within the arbitration Clause contained in the Joint "Development Agreement: If defendant against whom relief is sought in suit is not a party to the Joint . - Development Agreement. Il-defendant having filed written os statement has subjected to jurisdiction of the Court. The I- . defendant cannot represent II-defendant to seck dismissal of i. ah. pc. A ll suit by relying on the Arbitration Clause contained in the _ Joint Development Agreement dated 26. 12. 2003. The learned trial judge has held t thet for the purpose of referring the matter to arbitration, cause of action cannot be split, so also parties canvot be bifurcated. The learned trial judge has held that dispute raised - im 'the suit relates to rights of plaintiffs: I to VI and defendants Ili and IV as partoers of Vit-plaintiar fiom. The: I-defendant is a formal party te the . 'suit The sights: of '[-defendant under joint development agrecent have not been disputed by plaintiffs I to VI. Thus, the application filed by I-defendant u/S.8 of _ the Act has been jected by the impugned order. : UL, tee Resantnt aggrieved by the same has filed C.RP.No. 113/207. When the matter was listed for final
- hearing, N i-defendant, who had not filed an application under _ section 8 of the Arbitration and Conciliation Act, 1996 (for a short, 'the Act) has filed C.R.P.No.239/ 2009, challenging the a order made by the trial Court. j al.
; re. pr KR, | 12
12. | have heard Sri C.S. Vaidyanathan, learned senior s Counsel and Sn M.G.S.Kamal, learned.- Counsel for _-- defendants [| & II and Sri Srinivas, learned Connael_ for plaintiffs I to VII.
13. Sn C. S Vaidyanathan, learned senior Counsel for defendants | & II has made the folowing submissions:-
I. The relief sought for relates to transfer of a part of schedule property of the joint development agreement dated 26.1 12. 2.2063. The tight of assignment exercised by defendant No. tin favour of defendant No. 1] flows from. 'the joint _ development agreement. In terms of a clause 36 of joint development agreement dated i 26. 12. .2003, all disputes arising out of joint ; oS . development agreement, including disputes relating to | 7 interpretation of terms of joint development agreement shail be referred to arbitration. The learned trial Judge "has committed an error in holding that II-defendant, who is the assignee of I-defendant is not a party to the joint development agreement. The learned trial Judge mw. fie pod tL.13
without looking into nature of dispute raised ; in the suit has held that the Gispute rained in the suit: does _ not fall within the purview of arbitration clause contained in joint development agreement dated - . 26.12.2003. The filing of written statement does not preclude the parties to take recourse to section 8 of the Act. - Ba II. The provisions of section 8. of the Act and section 89 of C.P.C., are. e analogous, 'During pendency of suit, if it appears to 'the Court thai there exist elements of settlement, the Court shall formulate terms of settlement and. refer the same to arbitration and : - provisions of the Act are applicable to decide such me references.
The | learned senior Counsel] for defendants | & i] has ~ placed reliance on following decisions:-
"aj (2690) 4 SCC 539 (in the case of P.Anand Gajapathi Raju and Others Vs. P.V.G. Raju (dead) and Others | A tO. aa ewok o submissions: -
l4
b) (2006) 7 SCC 275 (in the case of Rashtriye ispat Nigam: .
Ltd. and another Vs. Verma Transport Co.) | | ma -
c) (2003) 6 SCC 503 (in the case of Hizdustan Petieun Corporation Ltd. Vs. Pinkc: ty Midway Petroleum) _ .
d) W.P.LL. Vs. NTPC Ltd. & Others {unreported decision of High Court of Delhi at New eth)
14. The learned Counse! for defendént no.ll, relying on the judgment of. the Supreme Court, 'reported i in 2003(6) SCC 903 (in the | case of Hindustan Petroleum Corporation Ltd. Vs. Pinkcity Midway Fetroteums), would submit question as to whether the dispute raised in the suit falls within the provision . of "arbitration clause contained in joint development "agreement, has to be raised before the | erbitrator, 15, Sri Srinivas, learned Counsel for plaintiffa I to VIl mS ~ would justify the impugned order by wh follaving } hw a par the. ;
I. Hit.
is The dispute raised in the suit is an inter se dispute of - plaintiffs I to VI and defendants I & Vas partners of _ Vil-plaintiff firm, the arbitration clause. contained in | joint development agreement dated 26. i2. 2003 does < not provide for resolution of such dispute. | The I-defendant is a. formal party; HW defendant against whom relief is soughi for by plaintifis had filed written statement 'and had rot made an application under section 8 of tiie Act. 'The Court 'in order to refer the partica te arbitration cannot 'split the cause of action or r segregate patties.
The Court must be. eatisfied that dispute raised in the 8 suit falls within the purview of arbitration clause relied os on by defendants I & II.
16. The jearned Counsel for plaintiffs, referring to 7 averments of plaint would submit plaintiffs I to VII have i - alleged breach of terms and conditions of partnership deed _ Iwconstituted on 14.02.2004 and 01.04.2004. It is alleged in _ the plaint, the transfer effected by defendants Ill & IV in Meo ecda.
favour of II-defendant is in contravention of clause | 12 of 16 partnership deed dated 14.02.2004, which reads thus:-
a The. learned Counsel for plaintiffs has referred to ciause 36 of. "joint development agreement, which reads "12. No partner shall without the written ° consent of the other release, _ compound: or abandon any debit due io the firm or diminish any security to the firm withont receiving the full amount thereof, iene any money, or deliver any goods belonging to the firm or transfer or assign either absolutely or by "mortgage or by declaration of trust of his partnership interest or do kaowingly penmit _anything to be done whereby, the pe operties of the firm are exposed to the danger of being 8 seized attached or taken in executions."
"thus. .
"36. 'Arbitration:
: The parties hereto agree that in the event "of there being any disputes with regards to this 'agreement or interpretation of any of the terms of this agreement, the same shall be referred to the Arbitration in terms hereof: } he S Liur~h
b) qd) 17 Arbitration shall be conducted as follows:
All proceedings in any arbitration . shall he . conducted in English, = The dispute shall be referred ale pane) of two arbitrators, First Party. shal! appoint _ one | arbitrator and Second Party shall appomt one arbitrators and the third i being appointed by the two arbitrators nominated by the parties, The arbitration award shall be final. and binding on the parties, and the parties agreed to be bound. thereby and to act accordingly.
The arbitral tribunal! _may by unanimous agreement, award to a party that substantially prevails: on the merits its costs and reasonable expenses lincuding 'reasonable fees of its = counse)}..
"Seat of such 2rbitration tribunal shall be at Bari galore.
. 1 be: Arbitration Proceedings shall be governed by : - : the Ariitration and Conciliation Act, 1996"
17. The learned Counsel for plaintiffs would submit oo that defendants Ill & IV have executed registered sale deed
-- : dated 23.09.2005 in favour of II-defendant in respect of aw. Lode ;
Ig plaint 'C' schedule property, pursuant to right of acsigament, exercised by I-defendant.
18. The learned Counsel for plaintiffs would 'pubait that the arbitration clause contained in joint developsnent os agreement refers to resolution of dispute that may arise between VII-plaintiff and I-defendant with regard to joint development agreement. dated 26. 12. 2008 or interpretation of any other terms | of joint deveto =pment agreement. Therefore, dispute raised in the suit t due to contravention of terms of partsersbip duted 14, 02.2004 and 01.04.2004 cannot be treated as) a dispute with regard to joint development ; agreemeist "and interpretation of terms of
-- partnership deeds daied 14.02.2004 and 01.04.2004 cannot
- 3 be equated to interpretation of terms of joint development agreement. The plaintifis | to VII have not alleged breach of
-- and conditions of joint development agreement dated 2.2003, Plaintiffs | to VII have not called into question me authority of I-defendant to assign part of its rights in favor of
- I-defendant. What has been called into question in this suit fw. Ae Ad 1 19 is the right of transfer exercised by defendants. Ht IV i contravention of clause 12 of partnership -- deed" dated -- 01.04.2004, Therefore, dispute raised it the suit cannot be referred to arbitration.
19. The learned Counsel for plaintiiis I to VII has placed reliance on the fcllowing decisims:-
I, EH.
IV.
AIR 2003 KARNATAKA. 502, (in 'the case of Ramakrishoo | Theatre lad. Ye. M/s. General Invesiments & Commerciat 1 Corporation Ltd.) AIR. 2607 (NoK} 1715 (CAL) (in the case of Bharat Sanchar Nigam Limited & Others Vs. BMW Industries | Limited. & Others) | AIR 2006 RAJASTHAN 56 (in the case of Mahesh
- Kumar 7 Vs. Rajasthan State Road Transport
- Corporation, Jodhpur) : (2003) 5 SCC 581 (in the case of Sukanya Holdings (P) Ltd. Vs. Jayesh H.Pandya and another 2007(1) Kar.L.J.497 (SC) (in the case of Parkash Singh Badal and another Vs. State of Punjab 20
20. On consideration of submissions made by loaned - - Counsel for parties and bearing in mind the dispute raised in the suit and the terms of arbitration clause contained in joint development agreement and findings reconded by the | tial Court, ! formulate | the 'following "points for determination: - | oe OS
1. Whether the trial Court has' committed material irregularity in "belding, that - I-defendant against whom decree is: $ sought had Med written statement, therefore I- defendant being 4 a formal party cannot take recourse te section 8 of the Act? 2, Whetsee the im Court has committed material | "imegularity in holding that H-defendant is not a : party to athitration clause?
3. Whether the tial Court has exceeded in its jurisdiction in holding that dispute raised in the . suit does not fall within the purview of clause 36 of _ joint development agreement dated 26.12.2003? ™ edvands, Zi
4. Whether II-defendant, who had not filed an application under section 8 of the Act cap maintain . . a civil revision petition against the impugned order? : -
My findings to the above poinis and reasone therefor are as follows: - / :
21. The trial Court has held 'that i I-defendant having filed the written siatement cannot take récourse to section 8 of the Act. la a judgment o of the 'Supreme Court, reported in (2002) ; 1 sce: 203 (a the ease of Kalpana Kothari (SMT) Vs. Sudha Yaday (smh and « others and connected matters), the Supreme Coust has heid section 8 of the 1996 Act mandates _ thai the: judicial authority before which an action has been : 2 brought is in Frspect of a matter, which is the subject-matter of an: arbitration agreement, shall refer the parties to " - arbitration if a party to such an agreement applies not later
- than when submitting his first statement.
22. In the case on hand, plaintiffs | to VII have not ; disputed joint development agreement entered into between yp. eon ~ pede.
plaintiff No.VIT and defendant No.I. The joint nt developmen: . agreement provides to the I-defendant to exercise right of assignment in respect of joint. development "scheduie property, Therefore, authority or. i- defendant i in. assigning its right to IIl-defendant is not seriously disputed.
23. It is contended by plainsifis that the joint development agreement. provides for F reconstitution of VII- plaintiff firm. Ine exercise of such power, Vil-plaintiff firm was reconstituted under - partnership deeds dated 14.02.2004 and 01. 04. 2004, wherein the shares of plaintiffs I to VI and defendants GH to Vi are © shown | as follows:-
A. Sn P. Dayananda Pai. ~ 5% B. Sri P.Satish Pai -- 5% SS ion Sri P. Pavindra Pai 10% D. Sri P. Ashwin Pai 10% _-z. Smt. Mohini D.Pai 25% oR Smit.Sabitha Pai 2%
-- G. Smt. P.Kavitha Pai 10%
-H. Miss P.Vidya Pai 10%
24. The iI-defendant claims to have derived its right © | plaint 'C' schedule property under joint 'development - agreement dated 26.12.2003. Piaintifis ' to: vi ailege thet they have derived rights to plaint © schedule property under :
joint development agreement | dated, 26.12.2003. As per pleadings, II-defendant has become successor in interest of I-defendant in respect of. piaint ce schedule property and plaintiffs | to vl have acquired their 5 rigists in the partnership firm by virtue of reconstitution of Vil-plaintiff firm on 14.02. 2004. and 01. a4. 2004. 'Therefore, the next question for determination i is: ~~ -
. "Whether li-defendant, who claims to have a acquired right to plaint 'C' schedule property
- and whe would be directly affected if a decree is "made in favour of plaintiffs I to VH, should have
- invoked section 8 of the Act before filing written
- statement?"
The I-defendant is a formal party to the suit and no me relief is sought against him. The li-defendant-successor in \ interest of I-defendant in respect of plaint 'C' schedule TS - claw rds 24 property had filed the written statement and i-efendant _ has forfeited its right to invoke section 8 of the Aci.
25. The learned senior - Counse! for defendants | I & i, relying on the judgment of the Supreme court, reported in | (2000) 4 SCC 539 (in the case of. P.Anand Gajapathi Raju and Others Vs. P.V.G. Raju (dees and Others) would submit that filing of written statement" is. not a bar to invoke provisions of section. 8 of the Act. In the aforestated Judgment, the Supreme Court has held: -
. The conditions which are required to be vatisfied: under "aub- -sections (1) and (2) of 'Section 8 before the court can exercise its . - a) there is an arbitration agreement;
2) a party te the agreement brings an action in the "court against the other party;
(3) subject-matter of the action is the same as the subject-matter of the arbitration agreement:
~ (4) the other party moves the court for referring the parties to arbitration before it submits his first Statement on the substance of the dispute.
wis This last provision creates a right in the person bringing the action to have the dispute adjudicated by the court, once the. other party _ has submitted his first statement of defexnce.. Bat | os we if the party, who wants. the matter to be referred : to arbitration applies to the "court after submission of his statement and the party who has brought the action docs not object, as is the case before us, there is no bar on the court referring the partie to arbitration." .
- "undertining supplied by me) Ia the aforestated judpaent, the party who had brought. the action had 'not 'objected for referring parties to arbitration. Thereiore, the | Court has referred the parties to _ arbitration Therefore, what has been held in the aforestated : judgment. is 'not. applicable to the case on hand. in the aforestated j judgment, it is not held that a party could invoke So section 8 of the Act even after filing his written statement.
26. The learned senior Counsel for defendants I & il, : --velying on a judgment of the Supreme Court, reported in (2006) 7 SCC 275 (in the case of Rashtriya Ispat Nigans id. - and another Vs. Verma 'Transport Co.) would 'submit that substance of dispute has to be liberally constmed under the - provisions of section 8 of the asbitration and Conciliation Act, 1996. If the dispute raised in a the: suit is camonflaged to keep it out of purview of avbitration clause, the Court has to lift the veil to look into fo the substance of dispute. In the avorestuted. judgment, Kio is held that power under section g of ibe Act has to be . exercised before a party has submitted its written statement and has subjected to the jurisdiction of the Court.
vIn | the case om hand, I-defendant had filed application | , under section 8 of the Act on 01.08.2006. The II-defendant filed written siatement on 12.09.2006 and subjected to the ! jurisdiction of the Court. In the written statement, H- a defendant has set out its defence. The i-defendant has not
- "stated that dispute raised in the suit falls within the purview of the arbitration clause contained in the joint development ne ' agreement. [f II-defendant had intention to subject the LL WO. ade aed, 27 jurisdiction of the Court, the H-defendant should have :
supported the application filed by. Fedefendant instead of -
filing written statement setting forth its defence, Plaintiffs 1 to VI and defendants MI to IV are the partners of VII-plaintiff firm. Plaintifis 1 to VI have contended that defendants IH & IV have transgresoed their rights to transfer Plaint * c. scheduic property" in favour of IiI- defendant, which is Pan. and parcel of joint development agreement. Defendants: Hi & wv have acted contrary to the terms "of. partnership "deed dated 14.02.2004 and 01.04.2004, Therefore, dispute raised in the suit relates to inter se rights of plaints i to VI and defendants III & IV as 'Pertions of Vii plaintiff-firm in terms of reconstituted pertuership deeds dated 14.02.2004 and 01.04.2004.
. or. The . plaintiffs have not disputed the terms and
- - conditions of joint development agreement. Therefore, it ee cannot be said that plaintiffs have distorted averments of ro. bn pend plaint to make it appear that dispute raised in the : suit does . - not fall within the purview of arbitretioz clause.
28. The learned senior Counsel for sctnteat I te i relying on the judgment of the Supreme Cou reported in (2003) 6 SCC 503 (in 'the case of Hindustan Petroleum Corporation Ltd. Vs. Pinkrity Midway 'Petroleums) would submit that the « Court has to consiter the dispute raised between parties vith reference to entine nature of dispute.
29. in. the discussion made supra, I have narrated the facts and dispute. yaised in the suit. Therefore, it is not possible to bola that dispute raised between plaintiffs I to VI and defendants lit & IV relating to contravention of terms of ws "partuership « deeds dated 14.02.2004 and 01.04.2004 by defendanis J & Iv fails within the purview of arbitration ~ clause contained in joint development agreement.
30. The learned senior Counsel: for defendants 1 & 2 ~~ has submitted that section 89 CPC casts a duty on the Court "to refer the parties to arbitration (one of modes of alternate ro. cob | pw de dispute resolution) if the Court finds there exists an cicment - section 89 CPC are intended for resolution of disputes by alternate modes.
31. In order to appreciate ake above submission, it is necessary to refer to a udgmest of the Supreme Court, reported in (2003) 5 scC page 531, relevant page 536, (in the case of Sukanye Holdings & Lad. Vs. Jayesh H.Pandya and another), wherein the Supreme Court has held:
| "18. Retionce was placed on Section 89 CPC ia "support of the argument that the matter _. should have been referred to arbitration. In our _ view, Section 89 CPC cannot be resorted to for | . . interpreting Section 8 of the Act as it stands on a different footing and it would be applicable even ia cases where there is no arbitration agreement for referring the dispute for arbitration. Further, for that purpose, the court 'has to apply its mind to the condition contemplated under Section 89 CPC and even if application under Section 8 of the Act is a cud, rh.
rejected, the court is required to follow ae procedure prescribed under the said section." we Therefore, the submission of learned senior Counse! for defendants | & H cannot be accepted. |
32. The learned senior Counsel fer defendants 1 & Il, relying on a judgment of the Supreme Court, reported in (2003) 6 SCC page 503 fin the case of Hindustan Petroleum Corporatior -- Ltd. Ve. Pinkcity Matway Petroleums}, would submit, if there is: any" objection: as to the applicability of arbitration clase tc the focts of the case, the same will have to be raised before, the arbitrator and the trial Court has . acted with 'material irregularity in holding that dispute ws raised in. the suit does not fall within the purview of arbitration clause.
33. In the discussion made supra, I have held that II- | . defendant against whom relief is sought had filed written a : . statement to put forward its defence and subjected to the VNU nel neds :
31
jurisdiction of Court. The I-defendant against whem no relief is sought had invoked section 8 of the Act. --
34. In the decision reported in (2003) 5 SCO page 531, relevant page 536 (in the case of Sukanya Holdings (P) Ltd. Vs. Jayesh H.Pandya aud anothes!, the 'Supreme Court has held:- Te ON
16. The. - next - | "question which requires consideration. is. - even if there is no 'provision for partly refercing the dispute to arbitration, whether such a course is: poasible under Section 8 of the Act. Ta our view, it would be difficult to give an interpretation. "to "Section 8 under which bifurcation of the cauise of action, that is to say, 7 : the subject-matter of the suit or in some cases
- ms, bifurcation of the suit between parties who are _ parties io 'the arbitration agreement and others is ". possibic. This would be laying down a totally new procedure not contemplated under the Act. If : bifurcation of the subject-matter of a suit was ". contemplated, the legislature would have used 'appropriate language to permit such a courac. Since there is no such indication in the language, it follows that bifurcation of the -- of _ pda, yu.
an action brought before a judicial authority is a not, a allowed. ;
17. Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal : | and the other to be decided by the civil court | would inevitably delay the proceedings. The whole purpose of speedy © disposal - OF. 'dispute and decreasing the cost: of Titigation would be frustrated by such procedure. 'Tt. would also increase the cost of lnigation and harassment to the parties. and on occasions there i is possibility of conflicting: indgenents and « orders by two different forums, In the case on hand - the II-defendant had not invoked oo section 8 of the Act. On the other hand, I-defendant had
- ; Sled writien, 'statement and subjected to jurisdiction of Court: Therefore, 'the submission of learned senior Counsel _ for defendants I & H cannot be accepted.
35. In view of the foregoing discussion and for the
- _ reasons stated hereinbefore, I hold that Il-defendant, who "claims rights over plaint 'C' schedule property under AY pave le nm.
registered sale deed dated 23.09.2005, executed by os defendants fl! & IV, by submitting. written: statcwent 'he, - forfeited its rights under section 8 of: the: Act. The. Ti. defendant by belatedly filing civil "revision, "petition to :
challenge the impugned order has. made a ale attempt to support the cause of I defendant, _ who is 4 proper party to suit. The, cause cf. action cannot be split and parties cannot be sepregated to refer the parties: to arbitration. The application filed. by I- defendant canaot be construed as the one filed by Ai {-defendant. The trial Court was justified in holding that j iD onder. to make a reference under section 8 of the Act, Court cannot 'pifurcate dispute and segregate a 7 Fe yb eet which had assigned its rights in favour of l-defendant cannot seek for referring H-defendant a 'e arbitration, more particularly when H-defendant has filed The dispute raised in the suit relates to 'breach of - terms of partnership deed dated 14.02.2004 and e1. 04. 2004 | - by defendants Ii] & IV. The H- defendant had not snade an:
application under section 8 of the Act. t herefors, dispute raised in the suit docs not fall within the _puiview of arbitration clause contained ia : the _ joint development agreement dated 26.12.2003. -
36. Under section 89 CPC, the Court could explore the possibiliiy of settlenient and frame.t terms of settlement if it is acceptable to parties. The. provisions of section 89 C.P.C., could be invoked only afer' parties subject themscives to the
--_ jurisdiction of the Act.
: a7. In the re =sult, | pass the following:-
oe ORDER | 'The revision petition is dismissed. However, it is made | ~ clear that observations made in this order shail not be construed as expression of opinion on merits of the case du f YI. oe Bre ee 35 either during subsequent stages of the case or at the stage of _ decision of case on merits. --
-- IUDGE | nas/SNN