Calcutta High Court
Sri Ghyanshyamdas Baheti vs Jamuna Transport Corporation on 8 March, 2011
Equivalent citations: AIR 2011 CALCUTTA 91, (2011) 3 ARBILR 466, (2011) 4 CIVILCOURTC 431, (2012) 2 CURCC 178
Author: Sambuddha Chakrabarti
Bench: Bhaskar Bhattacharya, Sambuddha Chakrabarti
1
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
(Original Side)
Present:
The Hon'ble Mr. Justice Bhaskar Bhattacharya
And
The Hon'ble Justice Sambuddha Chakrabarti
A.P.O.T. No. 492 of 2010
G.A. No. 2735 of 2010
C.S. No.24 of 2010
Sri Ghyanshyamdas Baheti
Versus
Jamuna Transport Corporation
For the appellants: Mr. Abhrajit Mitra.
For the respondents: Mr. Ratnanko Banerjee.
Heard on:
Judgment on: 08.03.2011
Sambuddha Chakrabarti, J.:
Three plaintiffs who are respondents Nos.1, 2 and 3 in the present appeal, filed a suit being C.S. No.24 of 2010 against the appellant and respondent No. 4, 5 and 6 praying for the following reliefs: 2
a) Decree for declaration that the notice dated 24th November, 2009 and the notice dated 1st January, 2010 are illegal, null and void;
b) Decree for delivery up and cancellation of the notice dated 24th November, 2009 and the notice dated 1st January, 2010 and for the same be adjudged null and void;
c) Decree for declaration that there is no arbitration agreement between the parties for adjudication of any disputes and differences by the defendant No. 4;
d) Decree for declaration that the defendants are not entitled to proceed in arbitration as against the plaintiff;
e) Decree for perpetual injunction restraining the defendants and each one of them from proceeding any further with the arbitration on the basis of the notice dated 24th November, 2009 and 1st January, 2010;
f) Decree for perpetual injunction restraining the defendants and each one of them from taking any step or any further steps on the basis of the purported notice dated 24th November, 2009 and the notice dated 1st January, 2010;
g) Attachment before judgment;3
h) Receiver;
i) Injunction;
j) Cost;
k) Further or other reliefs.
As usual, the plaintiffs took out an interlocutory application being G.A. No.379 in aid of the reliefs in the suit. By the interlocutory application, the plaintiffs, inter alia, had prayed for an order of injunction restraining the defendants in the Suit from taking any step or further step on the basis of the notice dated November 24, 2010, an order of injunction restraining the defendants Nos. to 3 from proceeding with the purported arbitration before the defendant No.4, an order of injunction directing the defendants Nos.1, 2 and 3 to disclose the purported arbitration agreement dated March 15, 2007.
Initially, by an ex parte order dated February 11, 2010, the defendants were restrained from proceeding any further with the purported reference before the defendant No.4 and the said order further directed the defendants to produce the arbitration agreement. The interim order was extended thereafter from time to time, directions for affidavit were given and the original Memorandum of Understanding was directed to be kept on the record. Ultimately, by judgment 4 and order dated July 16, 2010 the learned Trial Judge allowed the interlocutory application being G. A. No.379 of 2010 by restraining the first three defendants from acting in pursuance of the purported arbitration agreement contained in the Memorandum of Understanding, dated March 15, 2007 in any manner whatsoever. This order has been impugned in the present appeal.
Brief facts leading to the filing of the present suit is necessary to be appreciated.
Respondent No.1 is a transporter company under the control of the members of the Baheti family. It is in fact a fight between the brothers of the Baheti family. A dispute between the brothers led to a proceeding before the Company Law Board which ultimately was settled and the terms thereof were filed before the Company Law Board. The appellant herein claims that at the time of settlement three Memoranda of Understanding were signed between the respective parties. The first two Memoranda of Understanding by themselves do not pose much problem for the present purpose. The 3rd memorandum according to the appellant contained an arbitration clause.
The plaintiffs' case was that by a notice dated November 24, 2009 an Advocate representing the defendants brothers invoked the arbitration clause for the settlement of certain disputes and claimed that this clause was incorporated in the 3rd Memorandum of Understanding, dated March 15, 2007. In the said letter the learned Advocate had delineated the subject matter of dispute which 5 were to be resolved through the process of arbitration in terms of the Memorandum, dated March 15, 2007, and as per clause 4 of the said agreement, appointed Sri D.R. Shelke who is the respondent No.6 to this appeal, as the sole arbitrator to resolve the disputes and differences between his clients and the plaintiffs.
On behalf of the plaintiff Nos.2 and 3, M/s Choudhury & Company gave a reply to the said notice by a letter dated January 4, 2010. It was specifically mentioned in the said letter that the question of referring the matter to arbitration or appointing any arbitrator did not and could not arise as there existed no arbitration agreement between the parties. The M/s. Choudhury & Company also by the said letter called upon the defendants to produce the purported arbitration agreement/Memorandum of Understanding, dated March 15, 2007, and all allegations in the notice were denied. In the mean time, the respondent No.6 i.e. Mr. D.R. Shelke, had issued a notice dated January 1, 2010, inter alia, stating that he was appointed as the sole arbitrator to resolve the disputes between the parties and he gave a notice that a preliminary meeting of arbitration was to be held on January 14, 2009 and requested the plaintiffs to be present there. Again M/s. Choudhury & Company by letter at January 13, 2010 on behalf of the plaintiffs Nos.2 and 3 informed the respondent No.6 that there was no Memorandum of Understanding dated March 15, 2007 containing any arbitration clause and that on the said date terms of settlement were entered upon in respect of a separate dispute which has been finally disposed of by the 6 Company Law Board and the said terms of settlement did not contain any arbitration agreement. The respondent No.6 was informed by the said letter that his appointment as the sole arbitrator was wholly without jurisdiction.
By another letter dated January 15, 2010 respondent No.6 again requested the plaintiffs to be present in the first meeting of the arbitration to be held on February 1, 2010. To the said letter the minutes of the purported arbitration sittings on January 14 was also annexed. And again by a letter dated January 29, 2010 the plaintiffs through their learned Advocates reiterated their earlier stand and requested Mr. Shelke to satisfy himself whether there was any arbitration clause in the Memorandum of Understanding, dated March 15, 2007.
In this backdrop, the respondent Nos.1, 2 and 3 herein filed the instant suit for the reliefs mentioned earlier and an interlocutory application was also filed. The plaintiffs specifically contended that the defendants were threatening the plaintiffs with malicious proceedings by way of arbitration and, therefore, they were entitled to a declaration that the defendants were not entitled to proceed with arbitration in terms of the notice dated November 24, 2009 issued by their learned Advocate for the defendants or in terms of the notice dated January 1, 2010 issued by the respondent no. 6 herein.
The respondents Nos.1 and 2 filed an Affidavit-in-opposition to the said interlocutory application of the plaintiffs (G.A. 379 of 2010) denying the allegation contained in the application. It was, inter alia, stated in the said 7 Affidavit that the dispute before the learned arbitrator i.e. the respondent No.6 herein, was connected with the dispute between the Baheti brothers and the plaintiff No.1 i.e. Jamuna Transport Corporation Limited, was a separate legal entity and had no concern with the inter se dispute between the brothers. It was alleged that the present application in the name of the first plaintiff was not maintainable. The specific case made out by the respondents Nos.1 and 2 was that on March 15, 2007, three agreements were prepared. Of them, the 3rd agreement was between the plaintiffs Nos.2 and 3 as well as the defendant Nos.1, 2 and 3 which was executed in Alipore Court before the Notary Public. With the said Affidavit, a copy of the agreement was also produced. The purported arbitration clause was also quoted in the said Affidavit. It has been contended that the said arbitration clause was inserted as it was thought fit to avoid litigation and heavy expenses attached therewith. The defendants had further contended that the arbitration clause was invoked to settle all the disputes between the brothers inter se and the invocation of the arbitration clause was within the framework of law and the appointment of the sole arbitrator was within the framework of the agreement. It was submitted that the High Court did not have jurisdiction to decide the issues which is specifically covered under Section 16 of the Arbitration and Conciliation Act, 1996. The defendants claimed that the conduct of the plaintiffs in not appearing before the learned Arbitrator was improper and the petition seeking injunction before the High Court was misconceived as no part of the cause of action had arisen within the jurisdiction of the High Court. The defendants further denied having any collusion and 8 conspiracy between themselves. The defendants further denied the allegation that they had committed any fraud or any abuse of the legal process. It was also contended that the plaintiffs had no prima facie case and the balance of convenience also was not in their favour. The defendants further alleged that these issues could be raised before the learned Arbitral Tribunal only and not before any court of law. It was their contention that since there was specific remedy, the jurisdiction of a civil court was barred except to the extent of specific references as provided under Section 5 of the Arbitration and Conciliation Act, 1996.
In their Affidavit-in-Reply, the plaintiffs denied the allegations of the defendants in their Affidavit-in-Opposition and reiterated the submissions made by them. The plaintiffs after getting a copy of the purported Memorandum of Understanding had launched their sharp and pointed attack calling it a totally manufactured one and never to have been executed between the parties. The specific case of the plaintiffs was that the defendant Nos.1, 2 and 3 had manufactured and fabricated the document and this document was never signed by the plaintiffs. In the alternative, it was stated that this document had been fabricated by using blank papers which were signed by the plaintiff Nos.2 and 3 and the defendant Nos.1, 2 and 3 in connection with a proceeding before a First Class Magistrate at Pune. The further specific case of the plaintiffs was that it is not understood when the two terms of settlement, both dated March 15, 2007, were finalized at the office of M/s. Choudhury & Company, why on the same date 9 the 3rd memorandum should be executed at the Judge's Court Room at Alipore. The purported Arbitral Tribunal did not have jurisdiction to decide any issue raised in the proceeding. The plaintiffs in their reply have narrated the reasons which made the purported document wholly unreliable.
It may also be mentioned that the 1st and 2nd defendants filed an interlocutory application being G.A. No.906 of 2010 for rejection of the plaint and/or dismissal of the suit and the plaintiffs filed an application being G.A. No.2143 of 2010 for extension of the interim order. By the order impugned, G.A. No.379 of 2010 has been allowed, the application being G.A. No.906 of 2010 has been dismissed and G.A. No.2143 of 2010 has been disposed of without any further order.
By the G.A. No.906 of 2010 the 1st and 2nd defendants had inter alia prayed for the rejection of the plaint and the dismissal of the suit. It was the contention of the defendants that the disputes mentioned in the plaint were covered by the arbitration agreement dated March 15, 2007 the validity of which has been challenged in the suit. The defendants contended that the existence and validity of an arbitration agreement cannot be determined in a civil suit and the said civil suit is barred under the provisions of the Arbitration and Conciliation Act, 1996. For such reasons the defendants had prayed for the rejection of the plaint and the dismissal of the Suit.
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The main questions that cropped up for consideration in this appeal were whether a civil court can restrain a party by an order of injunction from proceeding further pursuant to an agreement for arbitration and whether in the facts of the present case, the learned Single Judge was justified in passing an order of injunction.
Mr. Mitra, the learned advocate appearing for the appellant, has strongly contended that a civil court has no jurisdiction to grant injunction restraining the proceedings before an arbitral tribunal by virtue of Section 5 of the Arbitration and Conciliation Act, 1996 (the Act, for short). In support of such contention, Mr. Mitra has relied upon the following decisions: Kvaerner Cementation India-vs-Bajrang Agarwal reported in 2001 (6) Supreme 265 and C.D.C. Financial Services (Maurtious Limited)-vs-B.P.L. Communications Ltd. (2003) 12 S.C.C. 140, Secur Industries Limited-vs-Godrej and Boyce manufacturing Com. Ltd. reported in (2004) 3 S.C.C. 447, S.B.P. and Company-vs-Patel Engineering (2005) 8 S.C.C. 618, Roshan Lall Gupta-vs-Parashram Holdings Pvt. Ltd. 2009 (1) Arb. L.R. 304, Girish-vs-Continental Steel Corporation reported in 2009 (1) Mah. L.J. 439.
Mr. Mitra further argued that the plaintiffs had submitted to the jurisdiction of the Arbitral Tribunal by calling upon it to cause production of the original Memorandum of Understanding to satisfy itself with regard to the genuineness of the arbitration clause therein before taking further steps in the 11 matter and then without waiting for a response, had filed a suit. If the plaintiffs had waited for a few more days they could have received the minutes of the meeting. The letter written by the plaintiffs on January 29, 2010, according to Mr. Mitra, was in fact, an application under Section 16 of the Act to determine the existence and validity of the arbitration agreement. The appellants contended that on this ground alone the suit is liable to be dismissed. Mr. Mitra has also submitted that the Memorandum of Understanding is apparently duly executed as the allegation of want of signature has been given up and there is no explanation why the plaintiffs Nos.2 and 3 should leave blank signed papers with Mr. J.N. Singh and there is also no explanation about the circumstances leading to such an act on their part. In support of this contention Mr. Mitra has relied on Asghar Ali-vs-Chedda, reported in A.I.R. 1982 Allahabad 186. Mt. Mitra further relied on the decision of United Dominion Trust-vs.-Western, reported in 1975 (3) All E.R. 1017 in support of his further contention that when any person signs and makes over a blank paper to a person, there is always a presumption that the person to whom it is made over is authorised to fill up the same and a decision cannot be taken at this stage on the basis of the allegation that the plaintiffs had signed the documents and made over the same to Mr. J.N. Singh, the learned Advocate. Mr. Mitra in support of his contention relied on the case of Madhai Das-vs-Telco, reported in 2005 (3) CHN. 252 and Saunders-vs- Angelia Building Society, reported in 1970 (3) All E R 1961.
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To the plaintiffs' assertion that the first eight pages of the agreement were on different coloured engrossed papers whereas the signature page was on a different coloured engrossed paper, the appellant's answer is that the same is a question of fact. The plaintiffs had inspected the original document before they filed the Affidavit-in-Reply in the Court below and have not taken this point in their Reply. Moreover, the differences of colour of engrossed-papers is an indication of the genuineness of the Memorandum of Understanding. If the defendants had intended to create a document by filling up blank papers they would have used all the blank signed papers and not used different coloured engrossed papers. To the contention of the respondents that the arbitration agreement appears to be tailor-made to exclude subsequent proceedings before the Company Law Board, the appellants have argued that it is the plaint case that three of the brothers being the defendants have all teamed up against the plaintiffs Nos.2 and 3 and all these three brothers have jointly brought into existence the Memorandum of Understanding dated March 15, 2007. The appellant responds that if that was the case, then it will be most unnatural that instead of Kolkata, where two of the three defendants reside the site of arbitration would be in Aurangabad where only one of the three brothers resides. To the allegations of the plaintiffs/respondents that on 15 March, 2007 all the five brothers were together and there was no such reason to have such an arbitration agreement empowering the three brothers to appoint an arbitrator, the appellant contended that this is not a case pleaded in the Court below and moreover, this term was only natural since the arbitration agreement concerned the affairs of 13 Jamuna Transport Corporation Ltd. which was a company governed by usual corporate principle of majority rule and it was also only natural that three out of the five directors would be entitled to ensure a reference.
Since in this appeal the principal question that has cropped up for consideration is about the jurisdiction of a civil court to issue an order of injunction in respect of an arbitration proceeding and since the suit is pending we need not at this stage enter into any debatable factual issue which shall be decided in the suit itself upon evidence. The question is whether the respondents herein have been able to make out a prima facie case for the grant of injunction and whether there is any bar for a civil court to grant an order of injunction in respect of an arbitration proceeding.
Before dealing with the abovementioned question, we should keep in our mind the scope of interference at the instance of an appellate court while hearing an appeal against a discretionary order in the nature of temporary injunction, appointment of receiver etc. It is now an established law that in such an appeal, the appellate court generally does not interfere with the discretion exercised by the learned Trial Court unless it appears to the appellate court that while exercising such discretion, the learned Trial Judge has wrongly applied the principles for grant of such discretion or unless it is established that such discretion has been unreasonably or capriciously exercised. In deciding such an appeal, it would not be proper for an appellate Court to interfere with the discretion exercised by the Trial Court solely on the ground that if it considered 14 the matter at the trial stage, it might have come to a contrary conclusion. (Uttar Pradesh Co-operative Federation Ltd. vs. Sunder Bros. Delhi, reported in AIR 1967 SC 249). In a subsequent case of Manjunath Anandappa Urf Shivappa Hansi vs. Tammanasa and others, reported in AIR 2003 SC 1391, the Supreme Court reiterated the aforesaid principles which are required to be followed while hearing an appeal against a discretionary order by observing that "an appellate power interferes not when the order appealed is not right but only when it is clearly wrong. The difference is real, though fine."
Bearing in mind the aforesaid principles, we now propose to consider whether the learned Single Judge was justified in granting the injunction in the facts and circumstances of the case.
At very outset, we propose to consider whether a civil suit is prima facie barred when the plaintiff alleges fraud in execution of the alleged arbitration agreement.
By this time it is now a settled law that if somebody alleges fraud in entering into an agreement containing an arbitration clause, he should go before the civil court for avoiding the agreement. (Atul Singh vs. Sunil Kumar Singh, reported in 2008(2) SCC 602; India Household and Healthcare Ltd. vs. LG Household and Healthcare Ltd., reported in AIR 2007 SC 1357). Therefore, a civil suit challenging the purported arbitration agreement as the outcome of fraud is maintainable and thus, no question of rejection of plaint arises. We do not feel it 15 necessary to deal with the decisions of various High Courts which are inconsistent with the principles laid down in the above there Supreme Court decisions.
Next question is whether we should interfere with the discretion exercised by the learned Single Judge in granting injunction.
As regards the formation of opinion of fraud in obtaining the alleged agreement of arbitration, at the stage of granting injunction the Court formed its opinion only on the basis of affidavits and thus, at this stage, there is no scope of detailed enquiry. The answer on the question of fraud can be finally given only when full evidence will be led by the parties and persons allegedly responsible for the fraud will be exposed to cross-examination by the plaintiff. Although Mr. Mitra laboriously tried to impress upon us by referring to a large number of decisions that in this case the agreement of arbitration was not vitiated by fraud, we are of the opinion that those decisions can be appropriately applied when full- fledged oral and documentary evidence will be led by the parties and those will be scrutinized in the light of the Evidence Act. We principally do not dispute the propositions laid down in those decisions as those principles are well-settled. However, at this stage, we are only concerned with the question as to whether a prima facie case i.e. an arguable case to go for trial has been made out. For the purpose of getting an order of temporary injunction of the nature involved herein, it is not necessary to prove a concrete full-proof case of fraud. From the materials on record, in our view, the learned Single Judge was justified to hold that the 16 plaintiff has made out a prima facie case of fraud having regard to the conduct of the parties and the nature of the agreement including the colour of the various pages of the agreement and the manner of putting signature by the parties. It may be that at the time of trial, by production of oral and other documentary evidence the court may come to a conclusion different from the one now taken, but we are unable to hold that the prima facie view taken by the learned Single Judge was not a reasonable or possible view so as to interfere.
Once we hold that a prima facie case has been established, the balance of convenience and inconvenience is definitely in favour of granting the injunction prayed for by the plaintiffs and unless such injunction is granted there will be unnecessary multiplicity of proceedings in future causing injury to the plaintiff which may be found to be even irreparable. On the other hand, if the suit fails and if ultimately it is held that the arbitration agreement is not vitiated, the defendants may be adequately compensated for the delay caused for the disposal of the dispute between the parties and it appears that the learned Single Judge was quite conscious of such step as would appear from the concluding part of the order impugned where His Lordship has already assessed the costs of 6000 gold mohurs to be paid by the plaintiffs jointly and severally to the two defendants if the suit fails in the long run.
On consideration of the entire materials on record we, therefore, find no reason to interfere with the order passed by the learned Single Judge. The appeal is thus dismissed.
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In the facts and circumstances, there will be however no order as to costs.
Urgent Xerox certified copy, if applied for, will be supplied within seven days from the date of the application.
(Sambuddha Chakrabarti, J.) I agree.
(Bhaskar Bhattacharya, J.)