Kerala High Court
Natarajan vs General Manager, Southern Railway on 21 February, 2006
Equivalent citations: 2006(4)ARBLR149(KERALA), 2006(2)KLT390
Author: R. Basant
Bench: R. Basant
JUDGMENT R. Basant, J.
1. Can the non production of the arbitration agreement or copy affect the prayer under Section 8 of the Arbitration and Conciliation Act ? Is Section 8(2) mandatory in the sense that even innocuous non compliance must entail rejection of the claim under Section 8 ? These are the questions that arise for consideration.
2. The petitioner is the plaintiff in a suit for recovery of money from the respondents - Southern Railway and its officials. The petitioner had entered into an agreement/ contract with the respondents defendants. In that agreement there is an incorporation by reference, of the General Conditions of Contract of the Indian Railways and Clause 64 of the said general conditions contains a stipulation for arbitration. On receipt of the summons in the suit, the respondents entered appearance and filed a written statement dated 09-02-98. In the written statement a plea regarding stipulation for arbitration was raised specifically. In the last para of the written statement the prayers were summerised in the following words:
Hence it is prayed that the reliefs made in this plaint are dismissed with cost of the defendants and further it is also prayed that the reliefs sought for by the plaintiff and the counterclaim advanced by the defendants may be referred to an Arbitrator who is to be appointed in consonance with the General Conditions of Contract. Clause 64 of the Civil Engineering works of the Southern Railway.
(Emphasis supplied) Later a separate application was filed as I.A.1552/98 under Section 8 of the Arbitration and Conciliation Act, 1996 for making reference. The learned Subordinate Judge by the impugned order produced as Ext.P1 held that Section 8 applied and accordingly referred the parties to arbitration. Ext.P1 order is assailed before me in this Writ Petition.
3. It is contended first of all that the written statement had already been filed and in the light of the said written statement filed, the subsequent application filed under Section 8 is not maintainable as Section 8(1) mandates that application must be filed "not later than when submitting his first statement on the substance of the dispute". It is hence contended that I.A.1552/98 was belated and should not have been entertained.
4. I find no merit in this contention at all. The learned Counsel for the respondent points out that I.A.1552/98 was not a fresh application under Section 8. But it was only a reiteration of the request already made in the written statement to make a reference under Section 8. I have extracted the relevant prayer in the written statement earlier and that according to me clearly shows that the LA. must be reckoned only as the reiteration of the request for reference already made in the written statement as contemplated under Section 8(1) of the Act.
5. The learned Counsel for the petitioner then contends that even assuming that no separate application under Section 8 is necessary and the prayer (application) under Section 8 can be incorporated in the written statement filed by the defendant, the request for reference under Section 8 must fail for the reason that the said application was not accompanied by the original arbitration agreement or a duly certified copy thereof. There is no dispute that the original agreement or duly certified copy thereof was not produced along with the written statement. It was admittedly produced only along with LA. 1552/98.
6. Section 8 of the Arbitration and Conciliation Act reads as follows:
(1). A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under Sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
(Emphasis supplied)
6. The language of Section 8(2) suggests that there is a mandate that the application under Section 8(1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. I agree with the learned Counsel for the petitioner that the language might suggest that it is a mandatory stipulation and production of the arbitration agreement later would make Section 8 in applicable to such an application.
7. But according to me it would be myopic to read into Section 8(2) any invariable mandate that the arbitration agreement or a copy thereof must be produced along with such request. The purpose of such production has got to be borne in mind. It is only to help the court to decide whether as a matter of fact there is such an arbitration agreement or not. The plea for reference under Section 8 cannot be made by a party without any bona fide intent or with the sole intention of protracting the proceedings. That is why it is very specifically stipulated that the arbitration agreement in original or copy must accompany the application for reference under Section 8. Considering the object and purpose the word "accompany" in Section 8(2) according to me, need not be read and understood to mean that the Arbitration agreement or copy thereof must be Annexed to the application. If it is already there before court or if it is not disputed or if it is produced in the event of a dispute when such dispute is raised, it can still be said that the agreement had accompanied the petition. The word "accompany" used in Section 8(2) must be reasonably and realistically understood. In language one can accompany another in a march even if one does not walk with the other. He can walk ahead or walk behind and can still be said to accompany the other. No artificial or inelastic or rigid meaning need be assigned. The expression "accompany" used by the statute is inherently elastic.
8. In the facts of this case, there is virtually no dispute about the existence of the clause for arbitration. Clause 64 of the General Condition has been incorporated by reference in the agreement between the parties. On that aspect virtually there is no dispute at all. The relevant agreement has been produced along with I.A. 1552/98 also. When the decision impugned was taken, the court had before it the application for reference as well as the arbitration agreement. This is not in dispute also. I am in these circumstances of the opinion that the mere fact that the arbitration agreement was not filed with the written statement in which the prayer under Section 8 was made is not a sufficient reason to justify the challenge against Ext.Pl order in this Writ Petition.
9. The learned Counsel for the respondent in particular places reliance on the Para 4 of the decision of Supreme Court in Ardy International (P) Ltd. and Anr. v. Inspiration Clothes & U and Anr. 2006 (1) KLT 616 (SC) = (2006) 1 SCC 417. I extract the relevant portion of para 4 below:
The situation contemplated by Section 8 can arise only at the first instance of an opponent and defendant in a judicial proceeding, or at the highest, suo motu at the instance of the judicial authority, when the judicial authority comes to know of the existence of an arbitration agreement.
10. While considering whether the stipulation under Section 8(2) of the Arbitration and Conciliation Act is mandatory and whether the mere omission to produce the arbitration agreement along with the application under Section 8 would be fatal, the purpose of such stipulation in Section 8 has to be considered. The explanation in para 4 extracted above cannot also be ignored or overlooked.
11. In this context, it will also be relevant to note that even when there is no arbitration agreement, in the light of Section 89 of the amended CPC, the court is obliged to ascertain whether there are elements of a settlement which may be acceptable to the parties and persuade the parties to agree to make a reference to an Arbitrator. That provision must also enter in the mind of the court while considering whether Section 8(2) of the Arbitration and Conciliation Act should be given the rigid interpretation which the petitioner canvasses.
12. My attention has been drawn to another decision of a Single Judge of this Court in N.I.I.T Ltd. v. Manoharan . In para 10 of that decision the court had proceeded to consider whether non-production of the original or certified copy along with the petition is fatal to the prayer for reference under Section 8. Of course in that case, the arbitration agreement was already before the court though it was not produced by the party who claimed reference under Section 8 along with this application. Facts in this case may not squarely fall within the four walls of the said decision. But the said decision is certainly authority for the proposition that the stipulation in S.8(2) deserves reasonable and purposive interpretation and not mechanical and rigid construction. Section 8(2) is mandatory in the sense that it is intended to be complied with. But it is not mandatory in the sense that any failure or delay in producing the arbitration agreement or copy would not ipso facto entail rejection of the prayer for reference of the parties to artbiration. In a case where the existence of the agreement is itself in serious dispute and the party who claimed reference under Section 8 fails to produce such arbitration agreement even when the decision is rendered, it may be open to the court not to refer the parties for arbitration under Section 8. But in the facts of the case where existence of Clause 64 of the General Condition permeating into the agreement between the parties is not in serious dispute at all, I am of the opinion that such a rigid approach to Section 8(2) will not be justified or warranted.
13. I must also be alertly be conscious of the nature, quality and contours of the jurisdiction which I am called upon to exercise. Existence of an arbitration agreement is proved satisfactorily. That the respondents/defendants had made a prayer for reference under Section 8 along with the written statement is established convincingly. That, by way of abundent caution the respondent had filed I.A.1552/98 with the arbitration agreement is again proved satisfactorily. The impugned order according to me, if not under Section 8, would perfectly be justified in view of Section 89 of the CPC. In any view of the matter I am hence satisfied that this is not a fit case where invocation of the jurisdiction under Article 227 is necessary, warranted or justified. The challenge must in these circumstances fails.
14. The learned Counsel for the petitioner points out that though written statement was tiled on 09-02-98, the impugned order-Ext.P1 order was passed only on 20-03-04. That was indeed unfortunate. Any court called upon to consider an application under Section 8 has necessarily got to imbibe the need for expedition, failure to do which will frustrate the very purpose of the provisions of the Arbitration and Conciliation Act. But notwithstanding the delay on the part of the court, I am persuaded to agree that this is a fit case where reference under Section 8 ought to have made. I appreciate the anxiety of the respondent. I need only observe that the Arbitrator and all concerned must realise the adverse consequences which would fall on the petitioner if there is no expeditious disposal of the arbitral proceedings.
15. With the above observations, this Writ Petition is dismissed.