Andhra Pradesh High Court - Amravati
Ashika Stock Broking Ltd vs Surender Kumar Shyamsukha, on 31 July, 2019
Author: G. Shyam Prasad
Bench: G. Shyam Prasad
THE HON'BLE SRI JUSTICE M. SEETHARAMA MURTI
AND
THE HON'BLE SRI JUSTICE GUDISEVA SHYAM PRASAD
CMA.NO.1303 of 2018
JUDGMENT
[per Hon'ble Sri Justice M. Seetharama Murti] This civil miscellaneous appeal, under Section 37 of the Arbitration and Conciliation Act, 1996 is filed assailing the order, dated 05.09.2018, passed by the learned XII Additional District Judge, Visakhapatnam in IA.no.79 of 2013 in OS.no.72 of 2011.
2, We have heard the submissions of Sri P. Vikram, learned counsel, appearing for the appellant - petitioner - 1st defendant and of Sri N. Ashwani Kumar, learned counsel appearing for the respondents 1 to 3 - plaintiffs. Respondents 4 to 12- defendants 2 to 10 are stated to be not necessary parties. We have perused the material record. The parties in this appeal shall hereinafter be referred to as arraigned in the suit for convenience and clarity.
3. The facts that lead the 1st defendant to file the present CMA before this Court may be stated, in brief, as follows:
The plaintiffs instituted the suit against the 1st defendant and others for recovery of money with interest and costs. In the said suit, the 1st defendant filed the subject Interlocutory Application under Section 8 of the Arbitration and Conciliation Act, 1996 ['the Act', for short] with verbatim the following prayer: - "...the Honourable Court may be pleased to refer the subject matter of the suit in OS.72/2011 to arbitration in terms of arbitration agreement contained in the client broker agreements of National Stock 2 MSRM, J & GSP,J CMA_1303_2018 Exchange and Bombay Stock Exchange respectively". The plaintiffs filed a counter resisting the application. On merits and by the order impugned in this CMA, the trial Court dismissed the Application. Hence, the 1st defendant is before this Court.
4. The case of the 1st defendant in support of the request to refer the parties to arbitration, as stated by the Manager-Branch Compliances of the 1st defendant, may be stated, in brief, as follows:
The plaintiffs instituted the suit against the defendants for recovery of money with interest and costs. It would appear from the plaint averments that the subject matter of the suit pertains to transactions in shares done by the plaintiffs. The said transactions were done by the plaintiffs under specific client code nos.S-7218, S-7219 and S-8373 respectively of the plaintiffs 1 to 3. The said transactions were done by the plaintiffs, as per terms and conditions contained in booklet 'Know Your Client' [KYC] inter alia comprising the following documents:
a) Account opening form
b) Agreement between stock broker and client [NSE]
c) Agreement between stock broker and client [BSE]
d) Undertaking
e) Combined risk disclosure document; and
f) Check list and other documents of verification The true copies of KYC booklets assigned to plaintiffs 1 to 3 identified by their client codes are filed along with the Interlocutory Application. Plaintiffs undertook transactions both in National Stock Exchange [NSE] and in Bombay Stock Exchange [BSE] and such transactions are governed by the terms and conditions contained in the said booklet and in particular in the agreement between the stock broker and client NSE and the agreement between stock 3 MSRM, J & GSP,J CMA_1303_2018 broker and client BSE forming part of the said booklet. In respect of transactions made by the plaintiffs both in NSE and BSE, the plaintiffs suffered losses and outstanding amounts were due and payable by the plaintiffs to the 1st defendant in respect thereof. The 1st defendant by three letters, all dated 16.12.2008, addressed respectively to plaintiffs 1 to 3, demanded the sums due from the plaintiffs 1 to 3. The said demands were reiterated in subsequent three letters, all dated 27.01.2010. There were also numerous prior demands in writing. As a counter blast to the said demands of the 1st defendant, the plaintiffs instituted the instant suit in or about 21.01.2011 raising frivolous and fictitious claims suppressing the fact that the subject matter of the suit is governed by arbitration agreements. All transactions carried out in the NSE are governed by the terms and conditions of the client broker agreement forming part of KYC booklets of the plaintiffs.
The client broker agreement pertaining to the plaintiffs in respect of NSE and BSE are all dated 21.09.2007, 21.09.2007 and 20.11.2007 respectively. The said agreements, particularly clauses 16 and 17 thereof provide that plaintiffs being the client agreed to refer any claims or disputes to arbitrations as per Rules, byelaws and regulations of the exchange and circulars issued thereunder as may be in force from time and time and also further agreed for ensuring faster settlement of any arbitration proceedings arising out of transactions entered into between plaintiffs and 1st defendant. The regulations and byelaws of NSE inter alia provide for arbitration. For the sake of convenience, a copy of the Circular, dated 31.08.2010, issued by NSE of India Limited, the arbitration department is also filed along with the Interlocutory Application. Similar agreements between plaintiffs and 1st defendant in respect of BSE particularly clauses 16 and 17 thereof provide for reference of any claim or dispute to arbitration as per Rules, byelaws and 4 MSRM, J & GSP,J CMA_1303_2018 regulations of the exchange and circular issued in respect thereof as may be in force from time to time. A copy of circular of BSE, dated 26.08.2010, is also filed along with the Interlocutory Application. Hence, the subject matter of the suit is governed by the arbitration agreements between the parties within the meaning of Section 7 of the Act. From a perusal of the plaint, it appears that the plaintiffs do not have a cause of action against other defendants who have been impleaded deliberately and mischievously to get out of the ambit and scope of Section 8 of the Act. In any event, the plaintiffs averred in the plaint as follows: - "The plaintiffs further submit that as a result of fraud played by Ashika Stock Broking Limited, Kolkata, represented by all the defendants, plaintiffs sustained a loss of about Rs.31 lacs......". There is no independent cause of action against the said other defendants as per the allegations in the plaint. As per allegations in the plaint, the said other defendants allegedly represented the 1st defendant and as such the subject matter of the suit is squarely covered by arbitration agreement between the parties. Instant suit is not triable by a civil Court and the parties to the suit shall be referred to arbitration in terms of Section 8 of the Act.
5. Per contra, the case of the plaintiffs, as stated in the counter filed by the 1st plaintiff, in brief, is this:
The allegations that the transactions referred to in the plaint were done by plaintiffs 1 to 3 under client code nos.S-7218, S-7219 and S-8373 are not admitted. The transactions, dated 21.01.2008 and 22.01.2008, were not done by the plaintiffs 1 to 3. They were done by defendants 9 & 10, in their (plaintiffs') names and with the code numbers by using their passwords, without permission, so as to lessen the financial burden of the 1st defendant; and, apart from this, three signed blank cheques given by the plaintiffs 1 to 3 5 MSRM, J & GSP,J CMA_1303_2018 for Rs.1.00 lakh each were negotiated even though sufficient margin money existed in their names. The KYC booklets 'B' 'C' & 'D' were never supplied to the plaintiffs 1 to 3. The account opening form referred to in KYC booklet at item (a) was never made available to the plaintiffs and copies of items (b) to
(f) of KYC booklets only were furnished in reply to the registered lawyer's notice, dated 08.01.2011, issued on behalf of them. Only code numbers were given. Copies of letters of 1st defendant were already filed along with the plaint. The allegations that plaintiffs undertook transactions in both NSE and BSE; that such transactions were governed by the terms and conditions in the KYC booklet and in particular by the agreements between Stock Broker & client for both NSE and BSE are not at all correct and are denied. The KYC books were not supplied to the plaintiffs till receipt of the reply notice, dated 20.01.2011. Plaintiffs suffered loss in respect of the transactions made by the defendants. The allegation that amounts are due and payable by the plaintiffs to the 1st defendant is not correct. The plaintiffs are not responsible for the losses caused to the 1st defendant/ applicant because, as already stated, defendants 9 & 10 did the transactions on 21.01.2008 and 22.01.2008 by using the password of the plaintiffs 1 to 3 and committed fraud. A criminal case was already filed against them on 03.11.2008. The same is pending on the file of II Additional Chief Metropolitan Magistrate, Visakhapatnam. The allegation that the 1st defendant addressed letters as alleged in the affidavit filed in support of the application of the 1st defendant demanding payments is not correct. Letters, dated 16.12.2008, were in fact sent by LP Tiwari and Company, advocates, on behalf of 1st defendant to the plaintiffs 1 & 2. Reply notice was sent through an advocate of the plaintiffs 1 & 2, on 21.01.2009, mentioning the fraud played by defendants 9 & 10, who are incharge of Visakhapatnam Franchise and calling upon them to furnish
6 MSRM, J & GSP,J CMA_1303_2018 agreement copy of September 2007, contract notes for sale F & O margin money and purchases with details of sale price and quantity of shares etcetera; but, till the date of filing of this suit, the same were not furnished for all the three code numbers of the plaintiffs 1 to 3. Without furnishing the details, reiteration of the claims in the letter, dated 27.01.2010, will serve no purpose. Letters, dated 16.12.2008, are not received by the plaintiffs. 1st defendant is put to strict proof of despatch of said letters. 1st defendant could have referred the cases for arbitration without issuing legal notice, if it was really interested to settle the matter by way of arbitration. 1st defendant failed to do so only reflects the mala fides of the 1st defendant as well as the defendants 9 & 10. The allegations that there were numerous prior demands as alleged in the affidavit filed in support of the application of the 1st defendant are false. The allegation that the suit is filed as a counter blast to the demand of the 1st defendant is false. Prior to the filing of the suit, a criminal case was filed as early as in November, 2008. An FIR was issued by II Town Police Station, Visakhapatnam. According to the NSE - investors' services as downloaded from website, an arbitration application has to be filed within six months from the date of dispute. Due to non supply of agreement by the 1st defendant to the plaintiffs for the best reasons known to them, they cannot now claim that their case is governed by arbitration agreement. The allegations that all transactions carried out in NSE & BSE are governed by the terms & conditions of client broker agreements, dated 21.09.2007, 21.09.2007 and 20.11.2007 in respect of plaintiffs is not admitted. The client broker agreements were not supplied at the relevant point of time and they were furnished only after filing the present suit. The allegation that clauses 16 & 17 of the client broker agreements provide for reference of any claims or disputes to arbitration as per rules, byelaws and 7 MSRM, J & GSP,J CMA_1303_2018 regulations of the exchange is not admitted. When the agreements are not supplied to the plaintiffs at the relevant times, it is not possible for them to know the contents of the same. Clause 16 of the agreement for NSE/BSE is vague in the sense it prescribed preference to arbitration only. The term 'broker' has not been mentioned in paras 1, 1A or 1B of Chapter XI of the Byelaws of NSE. Therefore, the 1st defendant cannot ask for reference to arbitration. According to latest circular, dated 09.02.2011, of Securities and Exchange Board of India, period of limitation for filing an arbitration request shall be governed by the provisions of Limitation Act and this period is applicable to cover the cases where three years have not elapsed and parties have not filed for arbitration with stock exchange. In the instant case, three years period expired by 21.01.2011. Hence, the arbitration mechanism stated in para 16 of NSE agreement is not binding on the plaintiffs and they are at liberty to file the present suit. The allegations that the regulations and byelaws of NSE provide for arbitration as mentioned in copy of Circular, dated 31.08.2010, issued by NSE is not correct. False trading was done by defendants 9 & 10 on behalf of the 1st defendant in the name of plaintiffs, on 21.01.2008 and 22.01.2008. Therefore, Circular, dated 31.08.2010, which is a subsequent circular, has no application to the case. Similarly, copy of Circular issued by BSE, on 26.08.2010, also has no application. The allegations that the subject matter of the suit is governed by arbitration agreement within the meaning of Section 7 of the Act is not admitted. The further allegation that the plaintiffs have no cause of action against the other defendants and they were impleaded deliberately to get out of the scope of Section 8 of the Act are not correct. All the other defendants are Managing Directors, Secretaries and they are incharge of Visakhapatnam franchise of 1st defendant. Therefore, they are necessary and proper parties to the suit by 8 MSRM, J & GSP,J CMA_1303_2018 virtue of their designations. They are vicariously liable for the fraud committed by defendants 9 & 10. The allegations that the plaint does not disclose any independent cause of action against the other defendants and that the suit is not triable by a civil Court are not correct. The defendants have unauthorisedly transacted on behalf of the plaintiffs and the alleged agreements were not supplied to the plaintiffs till the suit is filed. Hence, the 1st defendant cannot rely on the Circulars, dated 31.08.2010 and 26.08.2010 of NSE & BSE respectively, which are not at all relevant to the dates of wrong trading done by defendants 9 & 10 on behalf of plaintiffs 1 to
3. Hence, the petition may be dismissed.
6. Learned counsel for the parties made submissions in line with the pleadings of the parties and the counsel relied upon a number of decisions.
7. We have perused the material record including the order impugned and we have also carefully gone through the decisions cited.
8. Now the short question is as to whether the civil suit is not maintainable and whether it is necessary to refer the parties to arbitration in view of the arbitration agreements being relied upon by the 1st defendant.
9. Since the pleadings are stated in detail, there is no need to reiterate the pleadings and the submissions made in line with the pleadings. It is pertinent to note that except stating that there are arbitration clauses/ agreements, and that the client broker agreement pertaining to NSE/BSE and in particular clauses 16 & 17 thereof provided that the parties agreed to refer any claims or disputes to arbitration and that the byelaws of the NSE/BSE inter alia provide for arbitration and that the circular, dated 31.08.2010 of NSE and Circular, dated 26.08.2010, of BSE are annexed to the application filed by the 1st defendant, none of the relevant clauses providing for 9 MSRM, J & GSP,J CMA_1303_2018 resolution of the dispute by means of arbitration are extracted in the pleadings of the 1st defendant. Be that as it may. We have gone through the documents.
10. The main contest of the plaintiffs is based on the following averments in the plaint: 'The 1st plaintiff is doing business in electrical items at Visakhapatnam under the name and style of 'Pioneer Company' and that the 2nd plaintiff and the 3rd plaintiff are his wife and son. The 1st plaintiff for himself and on behalf of plaintiffs 2 & 3 was doing minor shares trading with Religare securities limited since 2005, without any problems. However, defendants 9 & 10, on behalf of defendants 1 & 8, approached the 1st plaintiff in August, 2007, and stated that they had taken franchise of Ashika Stock Broking Limited viz., 1st defendant, who is a member of NSE, BSE & NCDEX, insurance, mutual funds and forex services etcetera and that they will look after the plaintiffs' shares and money. Believing the said representation of defendants 9 & 10, the plaintiffs became members of Ashika Stock Broking Limited/1st defendant, having its address at a place in Kolkata, for online/direct trading with code numbers S-7218, S-7219 and S-8373. Plaintiffs used to trade on their own. Defendants 9 & 10 were clearly informed that they were entrusted to look after plaintiffs' shares and that they should trade only in case the plaintiffs inform them so to do. At the request of defendants 9 & 10, blank signed margin money books and signed blank cheque book were given by plaintiffs only to meet the emergency shortage of margin money, if any. The plaintiffs also signed blank agreements brought by defendants 9 &
10. The plaintiffs were assured that final approved agreement would be sent by 1st defendant along with the code numbers but final agreement was not received by the plaintiffs. Plaintiffs were given code word letter and password numbers initially by the head office of the 1st defendant at Kolkata 10 MSRM, J & GSP,J CMA_1303_2018 for the purpose of trading. Defendants 9 & 10 represented to the plaintiffs that to facilitate smooth trading, the plaintiffs password should be given to them; and, in good faith and out of trust, the plaintiffs furnished the same. At that time, the plaintiffs informed the defendants 9 & 10 that they should trade on behalf of the plaintiffs only and with the consent of the plaintiffs. Plaintiffs were never supplied with a concluded agreement, containing terms and conditions of member client obligations, either by the 1st defendant or defendants 8, 9 & 10, who are incharge of local branch of Visakhapatnam. Plaintiffs are totally unaware of the terms and conditions of member client agreement. Daily statement of trading was also not supplied to the plaintiffs. While so, when the plaintiffs' financial position was good, defendants 9 & 10, it appears, started trading with the shares of the plaintiffs, on 21.01.2008 and 22.01.2008, by using their password without permission to lessen their financial burden. The said defendants 9 & 10 misused three signed blank cheques given by the plaintiffs for Rs.1.00 lakh each and negotiated them despite the fact that they had sufficient margin money with them. The said transactions were done by the defendants 9 & 10 without the consent of the plaintiffs. In the process, the plaintiffs incurred heavy loss. Plaintiffs requested the defendants to make good the loss caused to them. The defendants evaded to do so. Plaintiffs lodged a criminal complaint, on 03.11.2008, before the II Additional Chief Metropolitan Magistrate, Visakhapatnam; and, on a reference made, S.H.O., II town police station registered a case in Crime No.635 of 2008, on 01.12.2008. As a counter blast to the criminal proceedings, defendants 9 & 10 colluded with the 1st defendant and advised him to issue legal notice to the plaintiffs to clear the outstanding dues. On the 1st defendant getting such a legal notice issued, the plaintiffs sent a suitable reply. Plaintiffs 1 & 2 got issued a reply to the 1st 11 MSRM, J & GSP,J CMA_1303_2018 defendant accordingly showing the details of fraud played by defendants 9 & 10, who are incharge of Visakhapatnam branch. As a result of the fraud played by Ashika Stock Broking Limited, Kolkata, represented by all the defendants, the plaintiffs sustained loss of Rs.31.00 lakhs. Hence, the suit is filed.' The plaintiffs also contend that they were not supplied with KYC booklets or any other documents at the inception and they were only given code numbers and that the documents were supplied later in reply to the registered lawyer's notice, dated 08.01.2011, and that, therefore, they are not aware of any arbitration clauses.
11. Now the contention of the plaintiffs in this matter is that in view of serious allegations of fraud and non supply of the documents, which allegedly contained the arbitration clauses and the plaintiffs being unaware of any such arbitration agreement, the dispute is not arbitrable and hence the petition of the 1st defendant is liable to be dismissed.
12. Per contra the case of the 1st defendant is that the documents are supplied to the plaintiffs and that even if allegations of fraud are raised, the dispute is arbitrable and, therefore, the request to refer the parties to arbitration deserves consideration.
13. In support of the said submissions, learned counsel for the parties relied upon the following decisions:
1. A. Anand Gajapathi Raju and others v. PVG Raju (dead) and others1
2. Hindustan Petroleum Corpn Ltd., v. Pinkcity Midway Petroleums2
3. Sundaram Finance Limited and Ors v. T. Thankam3
4. The Branch Manager Magma Leasing and Financing Limited and Ors v.
Potluri Madhavilata and Ors4 1 (2000) 4 SCC 539 2 (2003) 6 SCC 503 3 (2015) 14 SCC 444 12 MSRM, J & GSP,J CMA_1303_2018
5. Rajeev Maheshwari and Ors v. Indu Kocher and Ors5
6. Niranjan Lal Todi and ORs v. Nandlal Todi and Ors6
7. Octavius Tea & Industries Ltd., v. Lakshmi Chand Garg and Ors7
8. Cheran Properties Ltd v. Kasturi and sons Lts & Ors8
9. Ameet Lalchand Shah & Ors v. Rishabh Enterprises9
10. RV Solutions Pvt. Ltd. V. Ajay Kumar Dixit & Ors10
11. A. Ayyasamy v. A. Paramasivam & Ors11
12. Swiss Timing Ltd. V. Commonwealth Games 2010 Organising Committee12
13. Booz Allen Hamilton Inc. v. SBI Home Finance Ltd & Ors13
14. P.R. Shah, Shares & Stock Broker (P) Ltd., v. B.H.H. Securities (P) Ltd., and Ors14
15. Manoj Javeri Stock Broking Pvt. Ltd., Mumbai v. Gopika S. Mehta15
16. Order, dated 27.07.2018, of a learned Single Judge of the High Court of Andhra Pradesh for the State of Telangana and the State of Andhra Pradesh in CRP.No.3644 of 2018
14. We have gone through all the decisions.
15. Straight away a reference can be made to the precedential guidance in A. Ayyasamy vs. A. Paramasivam and Ors. (11 supra), which is relevant in view of the facts and contentions of the parties. In the said decision it is held as follows:
In view of our aforesaid discussions, we are of the opinion that mere allegation of fraud simplicitor may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the Court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of 4 (2009) 10 SCC 103 5 2011(3) CHN 680 6 2011(1) CHN 762 7 MANU/WB/1000/2018 8 (2018) 16SCC 413 9 (2018) 15 SCC 678 10 2019 SCC Online Del 6531 11 (2016) 10 SCC 12 (2014) 6 SCC 677 13 2011 5 SCC 532 14 AIR 2012 SC 1866 15 2017 5 Mah LJ 186 13 MSRM, J & GSP,J CMA_1303_2018 criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration Clause or the validity of the arbitration Clause itself. Reverse position thereof would be that where there are simple allegations of fraud touching upon the internal affairs of the party inter se and it has no implication in the public domain, the arbitration Clause need not be avoided and the parties can be relegated to arbitration.
While dealing with such an issue in an application Under Section 8 of the Act, the focus of the Court has to be on the question as to whether jurisdiction of the Court has been ousted instead of focusing on the issue as to whether the Court has jurisdiction or not. It has to be kept in mind that insofar as the statutory scheme of the Act is concerned, it does not specifically exclude any category of cases as non-arbitrable. Such categories of non-arbitrable subjects are carved out by the Courts, keeping in mind the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, Courts, i.e. public fora, are better suited than a private forum of arbitration. Therefore, the inquiry of the Court, while dealing with an application Under Section 8 of the Act, should be on the aforesaid aspect, viz. whether the nature of dispute is such that it cannot be referred to arbitration, even if there is an arbitration agreement between the parties. When the case of fraud is set up by one of the parties and on that basis that party wants to wriggle out of that arbitration agreement, a strict and meticulous inquiry into the allegations of fraud is needed and only when the Court is satisfied that the allegations are of serious and complicated nature that it would be more appropriate for the Court to deal with the subject matter rather than relegating the parties to arbitration, then alone such an application Under Section 8 should be rejected. While referring to the above decision, the Supreme Court in Ameet Lalchand Shah and Ors. vs. Rishabh Enterprises and Ors. [9 supra] held as follows:
"34. Under the Act, an arbitration agreement means an agreement which is enforceable in law and the jurisdiction of the arbitrator is on the basis of an arbitration Clause contained in the arbitration agreement. However, in a case where the parties alleged that the arbitration agreement is vitiated on account of fraud, the Court may refuse to refer the parties to arbitration. In Ayyasamy case, this Court held that mere allegation of fraud is not a ground to nullify the effect of arbitration agreement between the parties and arbitration Clause need not be avoided and parties can be relegated to arbitration where merely simple allegations of fraud touched upon internal affairs of parties is levelled. Justice A.K. Sikri observed that it is only in those cases where the Court finds that there are serious allegations of fraud which make a virtual case of criminal offence and where there are complicated allegations of fraud then it becomes necessary that such complex issues can be decided only by the civil court on the appreciation of evidence that needs to be produced. In para (25) of Ayyasamy case, Justice Sikri held as under:
'25......Therefore, the inquiry of the Court, while dealing with an application Under Section 8 of the Act, should be on the aforesaid aspect viz. whether the nature of dispute is such that it cannot be referred to arbitration, even if there is an arbitration agreement 14 MSRM, J & GSP,J CMA_1303_2018 between the parties. When the case of fraud is set up by one of the parties and on that basis that party wants to wriggle out of that arbitration agreement, a strict and meticulous inquiry into the allegations of fraud is needed and only when the Court is satisfied that the allegations are of serious and complicated nature that it would be more appropriate for the Court to deal with the subject-matter rather than relegating the parties to arbitration, then alone such an application Under Section 8 should be rejected.' The above said legal position is not disputed. In the case on hand, the plaintiffs pleaded that they were not even supplied with the material documents including KYC booklet and other documents said to be containing arbitration clauses/agreements and that the documents were supplied to them in reply to their notice issued prior to the suit and that, therefore, they are not even aware of the existence of the arbitration clauses/agreements.
That apart, the plaintiffs also made serious allegations of fraud and deception against the defendants 9 & 10 and made a claim for money against all the defendants on the ground that the 1st defendant is vicariously liable for the acts of the said defendants and a crime is also registered and is under investigation. Therefore, it is possible to hold that fraud is alleged against arbitration agreements themselves. Further, as already noted, plaintiffs filed a criminal complaint, on 03.11.2008, before the II Additional Chief Metropolitan Magistrate, Visakhapatnam; and, on reference made, the Station House Officer, II Town Police Station, registered a case in Crime no.635 of 2008 on 01.12.2008. A plain consideration of the contentions of the plaintiffs make it manifest that the allegations of fraud are of serious nature and the issue of fraud is complex and therefore, its resolution by a common law Court/civil Court is necessary and hence, the dispute is non-arbitrable. Further, an arbitration agreement means an agreement, which is enforceable in law; and the jurisdiction of the arbitrator is on the basis of an arbitration clause contained in the arbitration agreement. However, when the very documents containing the arbitration clauses are not even supplied to the plaintiffs, till the exchange of notices, and when it is the case of the plaintiffs 15 MSRM, J & GSP,J CMA_1303_2018 that they are not aware of the arbitration clauses/agreements due to non supply of the documents to them, they cannot be held to be bound by the said clauses/agreements, which are being stated to have been not supplied till the exchange of notices prior to the suit. In the order impugned, the trial Court noted that it is not the case of the 1st defendant that plaintiffs were supplied with a copy of agreement to say that the plaintiffs are aware of the terms and conditions of the agreement. Therefore, it is possible to find that there is no enforceable arbitration agreement.
16. For the reasons afore-stated, this Court finds that no valid and sufficient grounds are made out calling for interference with the order impugned.
17. In the result, the Civil Miscellaneous Appeal is dismissed. There shall be no order as to costs.
Miscellaneous petitions pending, if any, shall stand closed.
_____________________ M. SEETHARAMA MURTI, J ______________________ GUDISEVA SHYAM PRASAD, J 31.07.2019 Note: Issue CC by 06.08.2019.
B/o Vjl 16 MSRM, J & GSP,J CMA_1303_2018 THE HON'BLE SRI JUSTICE M. SEETHARAMA MURTI AND THE HON'BLE SRI JUSTICE GUDISEVA SHYAM PRASAD CMA.NO.1303 of 2019 [per Hon'ble Sri Justice M. Seetharama Murti] 31.07.2019 Vjl