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Delhi District Court

Ganesh Prasad Singh vs Swo India Ltd on 15 April, 2019

 IN THE COURT OF SH HARGURVARINDER SINGH JAGGI,
   ADDL. DISTRICT JUDGE-02, SOUTH-WEST DISTRICT,
            DWARKA COURTS, NEW DELHI


CS DJ ADJ No.1078/2017
CNR No. DLSW01-015526-2017


IN THE MATTER OF:

Ganesh Prasad Singh
S/o Late S.P.Singh
R/o Q N 92, PO Sindri Shabarpura
District Dhanbad, PIN -828122                 ... Plaintiff

                             Versus

SWO India Ltd.
Through its Directors
409, Block C, Veer Aawas (Kargil Apartment)
Sector -18 A, Dwarka
New Delhi                                   ... Defendant



Date of institution of suit              :    24.11.2017
Date of arguments                        :    20.03.2019
Date of pronouncement of order           :    15.04.2019


                           ORDER

15.04.2019

1. This order shall dispose of an application moved by the defendant under Order VII, Rule 11 of the Code of Civil Procedure, CS DJ ADJ No. 1078/2017 Page No.1/27 1908 (hereinafter "CPC") and under Section 8 read with Section 5 of the Arbitration & Conciliation Act, 1996 (hereinafter "Act").

2. The plaintiff namely, Captain Sourabh Poddar (hereinafter "plaintiff") has instituted a suit for recovery of money i.e. ₹6,38,103/- (Rupees Six lakhs thirty eight thousand one hundred and three only) along with pendente lite and future interest @24% p.a. against the defendant namely, M/s SWO India Ltd. hereinafter "defendant").

3. The facts in a nutshell, as per the averments in the plaint are that the plaintiff is a defence personnel and working in the Indian Air Force. The defendant is a private limited company duly incorporated under the Companies Act, 2013 having its registered office address at 409, Block - C, Veer Aawas (Kargil Apartment), Sector 18A, Dwarka, New Delhi - 110075. The plaintiff had enrolled himself with the Bokaro project of the defendant. It is averred in the plaint that the defendant had introduced, a Scheme No. 36 at Bokaro under the name Veer Aawas Bokaro, providing residential plots at Chas Purulia Road (NH - 32), Mauza Kura NO. 99, PS Pindrajora, Tehsil Chas, District Bokaro, Jharkhand especially for the personnel of armed forces at a subsidized rate i.e. ₹450 per sq.ft. in addition to 5% for preferred location charges, 5% towards commercial space/school/community center facing charge, 5% for corner plot and 5% extra cost for plots having two opposite side road of the basic cost. The defendant charged 2% of total cost, as processing fee and 12.36% as service charge, ₹51,000/- (Rupees Fifty one thousand only) as booking amount including processing fee. It is averred in the plaint that the defendant CS DJ ADJ No. 1078/2017 Page No.2/27 promised to execute the sale deed w.e.f. 15.01.2015 and handover the possession of the plot w.e.f. 15.03.2015.

4. The plaintiff enrolled himself for the Bokaro project of the defendant and booked a plot admeasuring 1200sq.ft. bearing No. B007 and was issued an allocation letter cum agreement dated 09.09.2013 which was modified vide allocation letter cum agreement dated 09.04.2014 being seller buyer agreement. It is averred in the plaint that as per letter dated 09.04.2014, the plaintiff has paid a total sum of ₹5,02,443/- (Rupees Five lakhs two thousand four hundred and forty three only). The plaintiff subsequent to making payments to the defendant, demanded title documents of the plot allotted to the plaintiff and inquired about the project report and asked for execution of sale deed, as per allocation cum agreement dated 09.04.2014. The plaintiff has averred that the defendant through its directors, promoters, employees, agent, representatives made excuses and did not produce the title documents of the allotted plot or took any steps and failed to comply with the assurance of execution of sale deed and till date has not handed over the possession of the plot of land allotted to the plaintiff.

5. The plaintiff has averred in the plaint that the plaintiff has gained knowledge that the plaintiff has been cheated by one Saroj Rana, Khajan Singh, Arun Kumar, Rakesh Rana, Dudi, Dharmender, etc., who are influential persons and are running fictitious companies under the name, Samartian Secure Service Private Ltd., Sainik Welfare Organization India, Koshu Buildcon Pvt. Ltd. and non-government CS DJ ADJ No. 1078/2017 Page No.3/27 organizations (NGOs). The plaintiff has pleaded that the directors, promoters, employees of the defendant have dishonestly and fraudulently induced and deceived the armed forces personnel and misrepresented that the defendant is an NGO and a no-profit organization, which has introduced the Bokaro project. The defendant fraudulently collected huge money from public against Bokaro project and illegally utilized the same for other purpose by diverting it. The plaintiff has lodged a written complaint against the defendant with the Joint Commissioner, (EOW), police station Mandir Marg, Delhi but no First Information Report (FIR) has been lodged against the defendant. Thereafter, the plaintiff through his counsel issued a demand notice dated 06.03.2017 to the defendant seeking return of amount paid by the plaintiff to the defendant i.e. ₹5,02,443/- (Rupees Five lakhs two thousand four hundred and forty three only) alongwith interest @ 9% p.a. i.e. ₹1,35,660/- (Rupees One lakhs thirty five thousand and six hundred sixty only). It is averred in the plaint the defendant did not reply to the said demand notice, regardless of receiving the same. Hence, the present suit for the recovery of i.e. ₹6,38,103/- (Rupees Six lakhs thirty eight thousand one hundred and three only).

6. On 14.12.2017 the court issued summons for settlement of issues to the defendant and the defendant filed appearance on 31.01.2018. The defendant on 08.03.2018, moved an application under Order VII, Rule, 11 CPC and Section 8 read with Section 5 of the Act. It is pertinent to mention that the defendant has not filed any written statement, as defence, before this court.

7. On 28.02.2019 and 20.03.2019, Sh. Girish Kumar, Ld. Counsel for the plaintiff and Sh. Nikhlesh Vashisht, Ld. Counsel for the defendant advanced arguments on the application under Order VII, Rule, 11 CPC and Section 8 read with Section 5 of the Act.

8. Sh. Nikhilesh Vashisht, Ld. Counsel for the defendant submitted that the jurisdiction of this court is ousted, as there is an arbitration agreement between the parties. Thus, this suit is not maintainable before this court and matter be referred for arbitration. Ld. Counsel further submitted that the defendant has filed the arbitration agreement in original, which is a written agreement, signed by the parties and the application moved by the defendant under Section 8 Act be allowed and also the plaint be rejected, as the plaint is hit by Section 8 of the Act. Ld. Counsel further submitted that the plaintiff entered into an agreement with the defendant with free consent without any duress, force, coercion and thus the parties be referred for mediation.

9. Ld. Counsel for the defendant placed reliance on the judgment passed by the Hon'ble High court of India in Sundaram Finance Limited and Ors v. T.Thankam (2015) 14 SCC 444 and submitted that once an application filed under Section 8 Act, duly complies with the provision therein, the court should not see whether the court has jurisdiction but what ought to be seen by the court is whether its jurisdiction has been ousted. Ld. Counsel further submitted that with an arbitration agreement in place, the jurisdiction of this court is ousted and parties be referred for mediation.

10. Per contra, Sh. Girish Kumar, Ld. Counsel for the plaintiff strenuously argued that the plaintiff is an armed forces personnel and he is protected under the Indian Soldiers (Litigation) Act, 1925 which provides special privileges to Indian soldier, under Section 3,4,6 and 7 and on account of such privileges, the matter cannot be referred for arbitration. Ld. Counsel further submitted that arbitration proceedings are beyond the purview of Indian Soldiers (Litigation) Act, 1925 and therefore, the parties cannot be relegated to arbitration.

11. Ld. Counsel for the plaintiff placed reliance on the judgments passed by the Hon'ble High Court of Delhi in M/s R.R. Enterprises v. CMD of M/s Garware Wall Ropes - CS (OS) No. 2086/2010 decided on 13.09.2012, and by the Hon'ble Supreme Court of India in Sukanya Holdings (P) Ltd. v. Jayesh H.Pandaya (2003) 5 SCC 531, N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72 and Himangni Enterprises v. Kamaljeet Singh Ahluwalia (2017) 10 SCC

706.

12. Ld. Counsel for plaintiff placed reliance on R.R. Enterprises (supra) and Sukanya Holdings (P) Ltd. (supra) on the proposition that once a subject matter lies outside the arbitration agreement, there is no question of application of Section 8 of the Act. Ld. Counsel for plaintiff submitted that the defendant company and its directors, employees, agents and representatives fraudulently induced and deceived the armed forces personnel and collected huge money from the public against their Bokaro project and illegally utilized by diverting the same from its original purpose i.e. Bokaro project. Ld. CS DJ ADJ No. 1078/2017 Page No.6/27 Counsel for the plaintiff submitted that the defendant has committed grave and serious fraud.

13. Ld. Counsel for the plaintiff placed heavy reliance on N.Radhakrishnan (supra), wherein the Apex Court held that in disputes, where serious allegations against the opposite party are alleged for having committed malpractices in the account books, finances and the case relates to allegation of fraud, serious malpractices, such a situation can only be settled in court through furtherance of detail evidence adduced by either parties and such a case cannot be referred for arbitration, as arbitrator cannot properly go into the matter.

14. Sh. Nikhilesh, Ld. Counsel for defendant rejoined his arguments and submitted that the averments in the plaint qua allegation of fraud and malpractices are bald and self serving averments without any basis. Ld. Counsel concluded his argument that the present case is a fit case to be referred for arbitration, as there is a valid arbitration agreement between the parties.

15. I have considered the complete record and the submissions advanced by the Ld. Counsel for parties along with the judgments relied upon by the parties.

16. The arbitration agreement is enshrined in Clauses 38, 39 and 45 of the document - Undertaking and Declaration and the same reads as under:

"38. I agree that all or any disputes arising out or touching upon or in relation to the terms of this CS DJ ADJ No. 1078/2017 Page No.7/27 application, allocation/allotment and/or Conveyance Deed / registration including the interpretation and validity of the terms thereof and the respective rights and obligations of the parties shall be settled amicably by mutual discussion failing which the same shall be settled through arbitration.

39. The arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 or any statutory amendments/ modification thereof for the time being in force. The arbitration proceedings shall be held at the Office of the SWO- INDIA LTD.in New Delhi by a sole arbitrator who shall be appointed by the Managing Director of SWO-India LTD. I hereby confirm that I shall have no objection in this appointment. In case of any proceedings, reference etc touching upon the arbitration subject including any award, the territorial jurisdiction of the courts shall be New Delhi only.

45. All suits and legal proceedings of any nature against the company shall be subject to courts of New Delhi / Delhi jurisdiction."

17. Section 8 of the Act, reads as under:

"8. Power to refer parties to arbitration where there is an arbitration agreement.-- (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 to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding CS DJ ADJ No. 1078/2017 Page No.8/27 any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

(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:

Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.

(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."

18. The position in law is well settled that once there is an arbitration agreement in place and the same being a valid arbitration agreement, the courts must give deference to arbitration. Section 5 of the Act, prohibits judicial intervention. Section 8 of the Act contains a mandate that where an action is brought before a judicial authority in the matter which is the subject of an arbitration agreement, the parties CS DJ ADJ No. 1078/2017 Page No.9/27 shall be referred by court to arbitration, if a party to or a person claiming through a party to the arbitration agreement applies not later than the date of submitting the first statement on the substance of the dispute. The only exception is where the court finds prima facie that there is no valid arbitration agreement.

19. The Superior Courts in catena of cases have laid down the scope of judicial intervention, in cases where there is an arbitration clause with clear and unambiguous message that in such an event judicial intervention would be very limited and minimal. It is not out of place to mention that the Act provides for provisions to challenge the award, such as Section 34 and 48 of the Act, however, the Act does not provide the disputes which are non-arbitrable. The courts have held that certain kinds of disputes may not be capable of adjudication through the means of arbitration. The courts have also held that certain disputes such as criminal offences of public nature, disputes arising out of illegal agreements and disputes relating to status such as divorce cannot be referred to arbitration. The following category of disputes are treated as non-arbitrable:

i. patent, trademarks and copyright; ii. anti-trust/competition laws;

iii. insolvency/winding up;

iv. bribery/corruption;

v. fraud;

vi. criminal matters.

Fraud is one such category spelt out by the decisions of the Apex Court, where disputes would be considered as non-arbitrable.

20. Ld. counsel for the plaintiff has made twin fold arguments, the first argument being that on account of Indian Soldiers (Litigation) Act, 1925, certain privileges are granted to Indian soldiers and with the plaintiff being an Indian soldier, such privileges cannot be denuded on account of matter being referred for arbitration, as the arbitration proceedings are beyond the purview of Indian Soldiers (Litigation) Act, 1925.

21. The submissions by the Ld. counsel for the plaintiff that the arbitration proceedings are barred by the Indian Soldiers (Litigation) Act, 1925 is nothing but an innovative machination to avoid the matter being referred for adjudication before arbitrator, as per the arbitration agreement between the parties. I am of the view that the submissions advanced by the Ld. counsel for the plaintiff do not take the case of the plaintiff any far, merely for the reason that according to the preamble of the Indian Soldiers (Litigation) Act, 1925, is an Act to consolidate and amend the law to provide for the special protection in respect of civil and revenue litigation of revenue litigation of Indian soldiers serving under special conditions.

22. Section 3(a) of the Indian Soldiers (Litigation) Act, 1925 defines "special condition" and provides that an Indian soldier shall be deemed to be or, as the case may be, to have been serving, under "special conditions" when "he is or has been serving under war conditions, or overseas or at any place beyond India." Section 3(b) of CS DJ ADJ No. 1078/2017 Page No.11/27 the Indian Soldiers (Litigation) Act, 1925 lays down the conditions which can be described as 'war conditions'. They are "continuance of any hostilities declared by the Central Government by Notification in the Official Gazette to constitute a state of war for purposes of the Indian Soldiers (Litigation) Act, 1925 or at any time during a period of six months thereafter, (i) serving out of India, (ii) under orders to proceed on field service, (iii) serving with any unit which is for the being mobilised or (iv) serving under conditions which in the opinion of the prescribed authority preclude him from obtaining leave of absence to enable him to attend a Court, as a party to any proceeding, or when he is or has been at any other time serving under conditions of service which have been declared by the Central Government by Notification in the Official Gazette to be service under War Conditions. Section 3(c) of the Indian Soldiers (Litigation) Act, 1925 states "overseas" as when he is or has been serving in any place outside India (other than Ceylon) the journey between which and India is ordinarily undertaken wholly or in part by sea. Explanation to Section 3 provides, "for purposes of this Section and with effect from the 3rd day of September, 1939, a soldier who is or has been a prisoner shall be deemed to be or have been serving under war conditions.

23. This court cannot lose sight of the fact that the plaintiff, who is an Indian soldier has instituted the present suit seeking recovery of money against the defendant. It would be unfortunate if the Indian Soldiers (Litigation) Act, 1925 is abused to defeat the process of justice or the course of law or the procedure of courts, when facts do CS DJ ADJ No. 1078/2017 Page No.12/27 not justify the application of this very laudable object of a beneficent Act. I am not impressed by the submissions advanced by the Ld. counsel for the plaintiff that the provisions of the Indian Soldiers (Litigation) Act, 1925 trumps the Arbitration & Conciliation Act, 1996, and therefore, the parties cannot be referred for arbitration.

24. The second argument advanced by the Ld. counsel for the plaintiff that since the defendants have indulged in fraudulent acts and malpractices and have deceived not only the plaintiff but other armed forces personnel and general public, the dispute alleged by the plaintiff tantamount to acts of serious fraud on the part of the defendant and the same cannot be decided by an arbitrator but can only be decided by civil court.

25. Ld. counsel for the plaintiff has placed reliance upon the judgments of Hon'ble High Court of Delhi in M/s R.R. Enterprises v. CMD of M/s Garware Wall Ropes - CS (OS) No. 2086/2010 decided on 13.09.2012, and that of the Hon'ble Supreme Court of India in Sukanya Holdings (P) Ltd. v. Jayesh H.Pandaya (2003) 5 SCC 531, N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72 and Himangni Enterprises v. Kamaljeet Singh Ahluwalia (2017) 10 SCC

706.

26. With all due deference, I observe that out of the four judgments relied upon by the plaintiff, three judgments are clearly distinguishable and with regard to the fourth judgment i.e. N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72, I have dealt with the same at a later stage.

27. The reliance placed by the plaintiff on the judgments of Hon'ble High Court of Delhi in M/s R.R. Enterprises (supra) and that of Hon'ble Supreme Court of India in Sukanya Holdings (P) Ltd. (supra) is misplaced. I, humbly observe, that in both the cases, an application under Section 8 of the Act was moved after the filing of the written statement. In M/s R.R. Enterprises (supra) the application was moved about four weeks after the written statement had been filed and eight days of filing of the replication. Hon'ble High Court held that the pre-requisite condition for referring the parties to arbitration under Section 8 of the Act is not fulfilled.

28. It is observed that in the case at hand the defendant has moved an application under Order VII, Rule 11, CPC and under Section 8 read with Section 5 of the Act. It is further observed that no written statement has been filed by the defendant.

29. Similarly, in Sukanya Holdings (P) Ltd. (supra) a judgment passed by the Hon'ble High Court of Bombay rejecting an application under Section 8 of the Act was challenged before the Apex Court. Hon'ble High Court arrived at the conclusion that in the suit apart from the relief of dissolution and accounts, the plaintiff has prayed for other reliefs and all the defendants to the suit were not parties or partners in the partnership firm and the terms of the partnership deed including the arbitration clause are not binding on them. The Hon'ble High Court held that only part of the subject matter could at the most be referred to arbitration and the Courts were not conferred with power to add parties who are not parties to the agreement in the CS DJ ADJ No. 1078/2017 Page No.14/27 arbitration proceedings. The Apex Court upheld the judgment passed by the Hon'ble High Court of Bombay and held that the Act does not oust the jurisdiction of the civil court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under Section 8(1) and 8(2) of the Act. The Apex Court also held that there is no provision in the Act that when the subject matter of the suit includes subject matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration, there is also no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitrators. I am in disagreement with the Ld. counsel for the plaintiff with regard to the applicability of the holding of Sukanya Holdings (P) Ltd. (supra) to the facts of the case at hand.

30. The judgment passed in Himangni Enterprises v. Kamaljeet Singh Ahluwalia (2017) 10 SCC 706 is also distinguishable from the present case as it was passed in a dispute between a landlord and tenant and an issue with regard to protection under a special legislation i.e. Delhi Rent Control Act, 1958, the present dispute relates to a recovery of money. The aspect of fraud pleaded by the plaintiff and making the dispute a non-arbitrable dispute is dealt by me in the preceding paragraphs.

31. Now moving on to the second limb of arguments by the Ld. counsel for the plaintiff that the matter cannot be referred for arbitration because the plaintiff has alleged serious fraud and which can only be decided by civil court, as the same involves complex CS DJ ADJ No. 1078/2017 Page No.15/27 issues and the parties have to adduce evidence. Ld. counsel for the plaintiff placed heavy reliance upon the judgement passed by the Apex Court in N. Radhakrishnan (supra), wherein the Apex Court held that the matters in which serious fraud is alleged are to be decided by Civil Court, as the same involves complex issues and require evidence.

32. I need not labour much on this point, as the Hon'ble Apex Court in its latest judgement passed in A. Ayyasamy v. A. Paramasivam (2016) 10 386 has not dealt with the issue of fraud and arbitration at length and but also referred to the judgement passed by the Apex Court in N. Radhakrishnan (supra).

33. The Apex Court in paragraph No. 25 of judgment in A. Ayyasamy v. A. Paramasivam (2016) 10 386 held as under:

"25. In view of our aforesaid discussions, we are of the opinion that mere allegations of fraud simpliciter 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 criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil court on the appreciation of the volume this evidence that needs to be produced, the court can sidetrack the agreement by dismissing the 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 CS DJ ADJ No. 1078/2017 Page No.16/27 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 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 in so far 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, "that is public fora, or better suited then a private forum of arbitration. Therefore, the enquiry of the Court, while dealing with an application under section 8 of the Act should be on the aforesaid aspects i.e. 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 the arbitration agreement, a strict and meticulous enquiry into the allegations of CS DJ ADJ No. 1078/2017 Page No.17/27 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."

[Emphasis added by underlining and highlighting of text]

34. Dr. D.Y. Chandrachud, J., His Lordship supplemented the judgment authored by His Lordship, A.K. Sikri, J., in A. Ayyasamy v. A. Paramasivam (2016) 10 386. The opening paragraph of His Lordship' opinion in complete erudition brings out the dilemma faced by the courts in the country. The paragraph No. 31 of A. Ayyasamy v. A. Paramasivam (2016) 10 386 reads as under:

"31. The issue which arises in these proceedings has generated a considerable degree of uncertainty in the law of arbitration in India. This is an area of law where the intervention of this Court is needed to ensure that that that a cloud on the efficacy of arbitral proceedings to resolve issues of fraud is resolved conclusively. The litigative uncertainty which the discourse has produced is best set at rest for nothing is as destructive of legitimate commercial expectations then a state of and settled legal precept."

[Emphasis added by underlining and highlighting of text] CS DJ ADJ No. 1078/2017 Page No.18/27

35. With regard to N. Radhakrishnan (supra), the judgment cited by the plaintiff, I would reiterate the relevant paragraphs of the supplementing opinion of His Lordship, Dr. D.Y. Chandrachud, J., in A. Ayyasamy v. A. Paramasivam (2016) 10 386:

"38. Hence, in addition to various classes of disputes which are generally considered by the courts as appropriate for decision by public fora, there are classes of disputes which fall within the exclusive domain of special fora under legislation which confers exclusive jurisdiction to the exclusion of an ordinary civil court. That such disputes are not arbitrable dovetails with the general principle that a dispute which is capable of adjudication by an ordinary civil court is also capable of being resolved by arbitration. However, if the jurisdiction of an ordinary civil court is excluded by the conferment of exclusive jurisdiction on a specified court or tribunal as a matter of public policy such a dispute would not then be capable of resolution by arbitration.

39. The judgment of a two judge Bench of this Court in N. Radhakrishnan v. Maestro Engineers

- (2010) 1 SCC 72, arose out of a partnership dispute. A suit was instituted before the civil court for declaratory and injunctive reliefs. An application under Section 8 of the Act of 1996 was rejected by the trial court and the order of rejection was affirmed in revision by the High Court. The submission of the appellant that the dispute between the partners ought to have been referred to arbitration was met with the objection that the appellant having raised issues relating to misappropriation of funds and malpractices, these CS DJ ADJ No. 1078/2017 Page No.19/27 were matters which ought to be resolved by a civil court. Affirming the judgment of the High Court, a Bench of two judges of this Court held as follows:

"21. ... ... The High Court in its impugned judgment has rightly held that since the case relates to allegations of fraud and serious malpractices on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation cannot be properly gone into by the Arbitrator." - AIR 1962 SC 406 The judgment accepted the submission of the respondent that the appellant having raised serious matters alleging criminal wrongdoing, such disputes ought to be adjudicated upon by the civil court:

"23. The learned counsel appearing on behalf of the respondents on the other hand contended that the appellant had made serious allegations against the respondents alleging that they had manipulated the accounts and defrauded the appellant by cheating the appellant of his dues, thereby warning the respondents with serious criminal action against them for the alleged commission of criminal offences. In this connection, reliance was placed in a decision of this Court in the case of Abdul Kadir Shamsuddin Bubere vs. Madhav Prabhakar Oak and Another, [AIR 1962 SC 406] in which this Court under para 17 held as under:

"17. There is no doubt that where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open court, that would be a sufficient cause for the court not to order an arbitration agreement to be filed and not to make the reference...."

In our view and relying on the aforesaid observations of this Court in the aforesaid decision and going by the ratio of the above mentioned case, the facts of the present case does not warrant the matter to be tried and decided by the Arbitrator, rather for the furtherance of justice, it should be tried in a court of law which would be more competent and have the means to decide such a complicated matter involving various questions and issues raised in the present dispute."

40. The above extract from the judgment in N. Radhakrishnan relies extensively on the view propounded in Abdul Kadir (supra). The decision in Abdul Kadir arose under the Arbitration Act, 1940 and was in the context of the provisions of Section 20. In Abdul Kadir, this Court emphasized that sub-Section (4) of Section 20 of the Arbitration Act, 1940 left a wide discretion in the court. In contrast, the scheme of the Act of 1996 has made a radical departure from the position under the erstwhile enactment. A marked distinction is made in Section 8 where no option has been left to the judicial authority but to refer parties to arbitration. Abdul Kadir explains the position under the Arbitration Act, 1940. The CS DJ ADJ No. 1078/2017 Page No.21/27 present legislation on the subject embodies a conscious departure which is intended to strengthen the efficacy of arbitration.

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45. The position that emerges both before and after the decision in N. Radhakrishnan is that successive decisions of this Court have given effect to the binding precept incorporated in Section 8. Once there is an arbitration agreement between the parties, a judicial authority before whom an action is brought covering the subject matter of the arbitration agreement is under a positive obligation to refer parties to arbitration by enforcing the terms of the contract. There is no element of discretion left in the court or judicial authority to obviate the legislative mandate of compelling parties to seek recourse to arbitration. The judgment in N. Radhakrishnan has, however, been utilised by parties seeking a convenient ruse to avoid arbitration to raise a defence of fraud:

45.1. First and foremost, it is necessary to emphasise that the judgment in N. Radhakrishnan does not subscribe to the broad proposition that a mere allegation of fraud is ground enough not to compel parties to abide by their agreement to refer disputes to arbitration. More often than not, a bogey of fraud is set forth if only to plead that the dispute cannot be arbitrated upon. To allow such a plea would be a plain misreading of the judgment in N. Radhakrishnan. As I have noted earlier, that was a case where the appellant who had filed an CS DJ ADJ No. 1078/2017 Page No.22/27 application under Section 8 faced with a suit on a dispute in partnership had raised serious issues of criminal wrongdoing, misappropriation of funds and malpractice on the part of the respondent. It was in this background that this Court accepted the submission of the respondent that the arbitrator would not be competent to deal with matters "which involved an elaborate production of evidence to establish the claims relating to fraud and criminal misappropriation". Hence, it is necessary to emphasise that as a matter of first principle, this Court has not held that a mere allegation of fraud will exclude arbitrability. The burden must lie heavily on a party which avoids compliance with the obligation assumed by it to submit disputes to arbitration to establish the dispute is not arbitrable under the law for the time being in force. In each such case where an objection on the ground of fraud and criminal wrongdoing is raised, it is for the judicial authority to carefully sift through the materials for the purpose of determining whether the defence is merely a pretext to avoid arbitration. It is only where there is a serious issue of fraud involving criminal wrongdoing that the exception to arbitrability carved out in N. Radhakrishnan may come into existence.

45.2. Allegations of fraud are not alien to ordinary civil courts. Generations of judges have dealt with such allegations in the context of civil and commercial disputes. If an allegation of fraud can be adjudicated upon in the course of a trial before an ordinary civil court, there is no reason or justification to exclude such disputes from the ambit and purview of a claim in arbitration.

Parties who enter into commercial dealings and CS DJ ADJ No. 1078/2017 Page No.23/27 agree to a resolution of disputes by an arbitral forum exercise an option and express a choice of a preferred mode for the resolution of their disputes. Parties in choosing arbitration place priority upon the speed, flexibility and expertise inherent in arbitral adjudication. Once parties have agreed to refer disputes to arbitration, the court must plainly discourage and discountenance litigative strategies designed to avoid recourse to arbitration. Any other approach would seriously place in uncertainty the institutional efficacy of arbitration. Such a consequence must be eschewed."

[Emphasis added by underlining and highlighting of text]

36. The mandate of Section 8 of the Act has been reiterated by the Apex Court in Sundaram Finance Limited and Ors (supra) that once an application in due compliance with Section 8 of the Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction. It should be to see whether its jurisdiction has been ousted.

37. I deem appropriate to reiterate the averments in the plaint, wherein the plaintiff has averred the allegations fraud, be it serious fraud, malpractices on the part of the defendant. The only paragraph, where there is mention about 'fraud' is the paragraph No. 7 of the plaint and the same is reproduced in verbatim, as under:

"7. That in the meanwhile plaintiff came to know that the plaintiff has been cheated by an CS DJ ADJ No. 1078/2017 Page No.24/27 organized syndicate laid by Saroj Rana, Khajan Singh, Arun Kumar, Rakesh Rana, Dudi, Dharmender etc. Since they are very influencing persons and running several factious (sic) companies namely Samartian Secure Service Private Ltd., Sainik Welfare Organization India, Koshu Buildcon Pvt. Ltd. and NGOs. The directors, promoters, employees of the defendant have dishonestly and fraudulently induced and deceived the armed forces personnel including Army, Navy and Air Force misrepresenting that the defendant is a non-governmental and non- profitable organization and introduced the Bokaro project. They fraudulently collected huge money from public against Bokaro Project and illegally utilized the same for other purpose by diverting it. Not only this, the defendant through director/promoters/employees also taken Plaintiff service certificate issued by Plaintiff service unit, self-attested copy of PAN Card, Pass book etc."

[Emphasis added by underlining and highlighting of text]

38. On applying the ratio of A. Ayyasamy v. A. Paramasivam (2016) 10 386 to the facts of the case at hand, I observe that the only allegation of fraud is that the defendant has fraudulently induced and deceived the armed forces personnel and misrepresented that the defendant is an NGO and introduced the Bokaro project. The defendants have fraudulently collected huge money from public against Bokaro project and illegally utilised the same for some other purpose. I am of the opinion, that the suit at hand is a money recovery suit and the same does not involve any complex issue. As per the CS DJ ADJ No. 1078/2017 Page No.25/27 averments in the plaint, the money was paid by the plaintiff to the defendant through banking channels. The allegations of purported fraud are not so serious which cannot be taken care of by the arbitrator. Thus, the plaintiff' reliance upon N. Radhakrishnan (supra) cannot be a convenient ruse to avoid arbitration to raise a defence of fraud.

39. I am also of the view that the averments qua fraud in the plaint are on account of clever drafting and with the purpose to oust the jurisdiction of the arbitrator and give a colour of serious fraud and malpractices so that the jurisdiction of Civil Courts is not impeached. It is not out of place to mention that Rule 4 of Order VI, CPC states that in all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence, and in all other cases in which particulars may be necessary beyond such, as are exemplified in the forms aforesaid, particulars with dates and items if necessary shall be stated in the pleading. It is observed that the plaint instituted by the plaintiff in its present form (vide paragraph No. 7 of the plaint) fails to comply with Order VI, Rule 4, CPC.

40. In view of the above observations and discussions, I am of the opinion that the allegations of purported fraud are not so serious which cannot be taken care of by the arbitrator. Consequentially, the application moved by the defendant is allowed and the parties are referred to arbitration in accordance with Section 8(1) of the Act.

41. I would like to add a word of caution, that the observations in the preceding paragraphs are prima facie view for disposal of the defendant's application and the same shall not tantamount to be the view on the merits of the case.

42. Parties to bear their own costs. File be consigned to record room. Digitally signed by HARGURVARINDER HARGURVARINDER SINGH JAGGI SINGH JAGGI Date: 2019.04.15 15:15:32 +0530 Pronounced in the open Court (Hargurvarinder Singh Jaggi) on 15.04.2019 Addl. District Judge-02 South West District Dwarka Courts Complex New Delhi CS DJ ADJ No. 1078/2017 Page No.27/27