Bombay High Court
Girish Manubhai Parekh vs M/S.Continental Steel Corporation & ... on 10 October, 2008
Author: Anoop V. Mohta
Bench: Anoop V.Mohta
dgm
gm IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO.2686 OF 2007
IN
S.C. SUIT NO.4142 OF 2006
OF BOMBAY CITY CIVIL COURT AT BOMBAY
WITH
C.A. NO.3180 OF 2007
Girish Manubhai Parekh ...Appellant
Vs.
M/s.Continental Steel Corporation & ors...Respondents.
Mr.Jayesh Bhatt for the Appellant.
Mr.G.S.Godbole with Mr.Suresh Gole for the
Respondents.
ig CORAM : ANOOP V.MOHTA, J.
DATED : 10th October, 2008.
JUDGMENT:
By consent, heard finally.
2. This is the First Appeal filed by the original plaintiff against the order dated 22.03.2007 passed in Regular Civil Suit No.4142/2006 by the learned Judge of Bombay City Civil Court at Bombay, whereby in Notice of Motion, by consent of the parties, a preliminary issue of maintainability of the Suit was raised and decided against him by holding that Suit is not maintainable in view of the scheme and object of The Arbitration and Conciliation Act, 1996 (for short, "The Arbitration Act, 1996").
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3. On 26.02.2007 the Court has framed the following issues:
Whether defendants prove that in view of Arbitration Act this Hon'ble Court has no jurisdiction to entertain and try the present Suit?
4. The relevant events and facts are as under:
.
In November, 2001, Respondents 1 to 5 requested the Appellant to import waste paper on their behalf and made on account payment of Rs.10,00,000/-. Appellant imported goods worth about Rs.21,66,230/- on behalf of Respondents 1 to 5.
5. On 28.04.2004 the Appellant become entitled to receive Rs.13,82,835/- as his share of profit in the said import business in view of various amounts already paid by him to Respondents 1 to 5.
6. On 29.04.2005, the Advocate for Respondents 1 to 5 addressed letter to the Appellant contending that the Appellant allegedly executed alleged writing dated ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 3 ) 01.04.2003 interalia admitting his alleged liability to pay Rs.31,80,000/- to the Respondents 1 to 5 with interest at 24% and also allegedly agreeing to refer the matter to Arbitrator to be appointed by Respondents 1 to 5 in the event of non payment. By the said letter the said Advocate threatened to refer the matter to alleged Arbitrator Mr.Bharat B. Jain if payment was not made as per alleged Arbitration Agreement. On 11.05.2005 Appellant through his Advocate denied having executed alleged writing dated 01.04.2003 and asked for inspection of the same.
amount. On
ig21.07.2005
The appellant has not paid the
Mr.Bharat B. Jain Advocate
claiming to be sole Arbitrator allegedly appointed by
Respondents 1 to 5 as per said alleged writing dated
01.04.2003, fixed meeting for Arbitration. Number of
letters were thereafter exchanged between the parties
where Appellant pointed out that the alleged
Arbitration was without any authority and the said
alleged writing dated 01.04.2003 is a forged one.
7. On 07.12.2005 Mr.Bharat B. Jain Advocate addressed letter recording that he was withdrawing from Arbitration as his conscience did not allow to continue as Arbitrator in view of serious allegations of forgery and pendency of criminal case in respect thereof.
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8. On 16.12.2005 Mr.Piyush M. Shah, Advocate addressed letter claiming to be appointed by Respondents 1 to 5 as Arbitrator under alleged writing dated 01.04.2003. The Appellant pointed out the relevant facts to Mr.Piyush M. Shah but he persisted in going on with the alleged Arbitration.
9. On 20.02.2006 Mr.Piyush M. Shah addressed letter directing Appellant to deposit Rs.20,000/- with him on account of alleged Arbitration fee.
10. On 21.08.2006 Respondent no.6 passed an ex-parte Order in the alleged Arbitration proceeding for forwarding the alleged confirmation letter dated 01.04.2003 to handwriting expert.
11. On 12.09.2006 the Appellant filed the Suit.
12. On 29.09.2006 the Judge of the City Civil Court passed order recording that next date for Arbitration is not fixed and directing Respondent no.6 to give notice if he wanted to fix any meeting for hearing.
Liberty was granted to the Appellant to move Court for ad-interim relief if such notice is received. Such ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 5 ) notice has thereafter not been issued till date.
13. The relevant Section 16 of Arbitration Act, 1996 is reproduced as under:
16. Competence of arbitral tribunal to rule on its jurisdiction. - (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose.-
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract;
and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 6 ) sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.
14. A Constitutional Bench of the Apex Court in SBP & Co. v. Patel Engineering Limited & another, while dealing with Section 11(6) & (7) and Section 16 of the Arbitration Act has observed as under:
"19.
recognition Section 16 is of Kompetenz-Komopetenz.
the said to be principle The fact that the the of arbitral tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can and possibly, ought to decide them,. This can happen when the parties have gone to the arbitral tribunal without recourse to Section 8 or 11 of the Act. But where the jurisdictional issues are decided under these Sections, before a reference is made, Section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made.
The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it ....."
15. Subsequently, the Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd. and others, reported in (2006) 11 SCC 181 while dealing ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 7 ) with Sections 16, 34 & 37 has observed in para 51 as under:-
"51. After the 1996 Act came into force, under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by; the arbitrator would be the subject matter of challenge under Section 34 of the Act. In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal thereagainst was provided for under section 37 of the Act."
The said principle has further been reiterated by Apex Court in National Thermal Power Corporation Limited vs. Siemens Atkeingesellschaft reported in (2007) 4 SCC 451.
16. Therefore, taking overall view of the scheme of Section 16, one thing is very clear that Arbitrator has power to decide the applications with regard to the existence of arbitration agreement and objection in respect of jurisdiction. The Arbitrator having once taken decision and rejected the objection with regard to the jurisdiction and observed further that there is existence of arbitration agreement between ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 8 ) the parties and proceed accordingly, such order cannot be challenged except the remedy as available under Section 34 and or Section 37 of the Arbitration Act as referred above.
17. Another important facet is Section 5 of the Arbitration Act which is reproduced as under:
"S. S. 5 Extent of judicial intervention.-
Notwithstanding anything contained in any
other
matters
iglaw for the time being in
governed by this Part, no
force,
judicial
in
authority shall intervene except where so
provided in this part."
18. It is clear that Section 5 applies to the matters governed by Part I. Section 16 is part of this part.
The opening non-obstante clause therein clearly indicates that it overrides provisions in any other statute. As a result, judicial intervention is permissible only where it is specifically provided for in this part (Shri Subhalaxmi Fabrics vs. Chandralal Barodia/Manu/SC0231/2005; (2005) 10 SCC 704. The principal object of Section 5 is to promote and encourage resolution of disputes expeditiously and ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 9 ) less expensively. Especially when there is an arbitration agreement, the Court's intervention should be minimal. (T. Anand Gajapatty Raju vs. PVG Raju AIR 2000 SC 1886).
19. The conclusion in SBP & Co. vs. Patel Engineering Ltd. (supra) with regard to Sections 16, 34 & 37 clinches the issue against the appellants, viz.
"(vi) Tribunal Once or the matter reaches the the sole arbitrator, ARbitral the High Court would not interfere with the orders passed by the Arbitrator or the ARbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act,
(ix) In a case where an Arbitral Tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act".::: Downloaded on - 09/06/2013 13:57:51 :::
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20. Now that the Apex Court has declared as above that there is no option and considering the scheme and purpose of the Arbitration Act, 1996 the order of dismissal of Suit needs no interference.
21. The decision of Apex Court in Atul Singh & ors.
v. Sunil Kumar Singh & ors., (2008) 2 SCC 602, as relied upon by the learned counsel for the Appellant is of no assistance to support his submissions.
judgment revolves around Sections 7 and 8 of That the Arbitration Act, 1996. Before reference, an objection was raised about the validity of the Arbitration Agreement. In a Suit, pursuant to Section 8 no original arbitration agreement or duly certified copy thereof was filed and, therefore, no order for referring the dispute to arbitration was passed in the Suit. The relief having the partnership deed as illegal and void can be granted by the Civil Court and not by Arbitrator. Plaintiffs or Respondents through whom plaintiffs derive title are not parties to the said Deed and, therefore, also the trial Court refused to refer the matter to Arbitration. The Apex Court in this background has maintained the said order. In the ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 11 ) present case, as per agreement and arbitration clause itself, the Arbitrator was appointed. Therefore, this is a case where matter is pending before arbitral tribunal as contemplated under Section 16 of the Arbitration Act, 1996. In view of the scheme and object of Arbitration Act, 1996 and clear dictum of the Apex Court as recorded above, the facts and circumstances of this case (Atul Singh) itself makes the case distinct and distinguishable. Therefore, it is not applicable as admittedly in the present case the and, Appellant is party to the suit contract/agreement therefore, bound by the said arbitration clause based upon which the Arbitrator has been appointed and the parties appeared before the Tribunal. The Appellant, after many correspondences, filed the Suit for declaration that such agreement/writing is null and void and/or obtained by fraud or misrepresentation and, therefore, not binding. All these facets including the existence of arbitration agreement and its effect on the constitution of the Tribunal including the jurisdiction of the Tribunal to proceed with the matter can very well be decided by the Tribunal.
22. It is apt to quote the observation of the Supreme ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 12 ) Court in Maharshi Dayanand Univesity & anr. v. Anand Coop. L/C society Ltd. & anr., (2007) 5 SCC 295:
"13. But we make it clear that the arbitrator, in the first instance, has to decide whether the existence of an arbitration agreement in terms of Section 7 of the Act is established and also to decide whether the claim now made is a claim that comes within the purview of clause 25-A of the tender conditions in case it is found to be an agreement within the meaning of Section 7 of the Act. Only on deciding these two aspects can the arbitrator go into the merits of the claim made by the respondent. But we clarify that it does not mean, that he should treat these two aspects as preliminary issues and decide them first but only that he must decide them without fail while proceeding to finally pronounce his award.
14. In this view of the matter, we see no reason to interfere with the appointment of an arbitrator. We dismiss this appeal giving liberty to the parties to raise all their contentions based on lack of jurisdiction of the Arbitral Tribunal before the arbitrator. The arbitrator will permit the appellant to amend or supplement the objections already filed by it if it is felt necessary by the appellant. We make no order as to costs."
As noted the appellant has challenged the said letter dated 1.4.2003, the contents of which are as under:
Multiple Import & Export Inc. 41, Vaidya Mansion, 2nd floor, Flat No.4, Opp.Cross Road, Haji Ali, Mumbai 400 034, India.
------------------------------------------
01.04.2003 ::: Downloaded on - 09/06/2013 13:57:51 ::: ( 13 ) CONFIRMATION LETTER
1. It is agreed and confirmed on part of the Multiple Import & Export Inc. that they are liable to pay a sum of Rs.42,92,929.99 (Rupees Forty Two Lacs Ninety Two Thousand Nine Hundred Twenty Nine & Paise Ninety Nine only) to M/s.Continental Steel Corporation, comprising of Rs.31,80,000/- principal amount and a sum of Rs.11,12,929.99 the amount of interest computed upto 31.03.2003 @ 24% p.a. as per the statements of accounts attached (four pages).
2. It is hereby confirmed on part of the Multiple Import & Export Inc. that the said principal amount of Rs.31,80,000/- is comprising of the following amounts paid by M/s.Continental Steel Corporation to Multiple Import & Export Inc. and to the concerned various authorities / parties for and on behalf of Multiple Import & Export Inc.
i) Rs.2,10,795.00 paid for custom duty.
ii) Rs.16,00,000.00 paid to M/s.New Plastomer (I) Ltd. (Kandla) - paid at Gandhidham-Kutch,
iii) Rs.13,69,205.00 paid directly to Multiple Import & Export Inc.
3. Multiple Import & Export Inc. agrees to repay the said amount of Rs.42,92,929.99 to M/s.Continental Steel Corporation with interest thereon @ 24% p.a. within the period of one year and after six months from today.
4. It is agreed between the parties hereto that all the disputes and/or differences including non payment of dues under this writing shall be referred to the Sole Arbitration of a person to be appointed by M/s.Continental Steel Corporation having its address at 12/14, Ardeshir Dady Street, Near Alankar Cinema, Mumbai 400 004. The Arbitration shall be conducted subject to Mumbai jurisdiction under the provisions of the Arbitration & Conciliation Act, 1996.
Kindly return the copy thereof duly confirmed.
::: Downloaded on - 09/06/2013 13:57:51 ::: ( 14 ) We confirm, Sd/- Sd/- For Continental Steel For Multiple Import & Corporation. Export Inc. " 23. In view of above and considering the scheme of Arbitration Act, 1996 including Section 5 it is appropriate and desirable that the Civil Court should not interfere with the said proceedings which is pending before the Tribunal. The Suit for such declaration therefore as filed by the of
Appellant/plaintiff is rightly dismissed on the ground maintainability as not triable by the Civil Court in view of clear dictum of the Apex Court.
24. In view of this, the present Appeal is dismissed.
25. In view of this, Civil application also stands disposed of accordingly.
( ANOOP V. MOHTA, J.) ::: Downloaded on - 09/06/2013 13:57:51 :::