Orissa High Court
National Aluminum Company Limited vs The Doaba Industrial And Trading ... on 3 August, 2007
Equivalent citations: AIR2008ORI12, 2008(1)ARBLR330(ORISSA), 104(2007)CLT454, AIR 2008 ORISSA 12, 2008 (2) ALJ (NOC) 346 (ORI.) = AIR 2008 ORISSA 12, 2008 AIHC (NOC) 57 (ORI.) = AIR 2008 ORISSA 12, 2008 CLC 350 (ORI), 2008 (1) ARBI LR 330, (2007) 2 CLR 640 (ORI), (2008) 1 ARBILR 330, (2007) 104 CUT LT 454, 2008 A I H C (NOC) 57 (ORI)
Author: S. Panda
Bench: S. Panda
JUDGMENT S. Panda, J.
1. This Civil Revision is directed against an Order dated 19.12.2005 passed by the Learned 2nd Addl. Civil Judge (Senior Division), Bhubaneswar in M.S. No. 792/319 of 2004/1995 rejecting an application of the Petitioner under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") to stay the further proceedings of the suit as the dispute is already under the arbitration proceeding between the parties.
2. The brief facts of the case are as follows; The Petitioner-company is the Defendant and the Opposite Party is the Plaintiff before the Court below. Opposite Party had filed a Money Suit No. 319/792 of 1995/2004 before the Court below for realization of an amount of Rs. 28,585/- from the Defendant along with pendente lite interest and future interest at the rate of 18% per annum. The suit was filed on 24.7.1995. The case of the Plaintiff is that he was awarded a security contract No. MKTG/Exp/Paradeep- C & F/Security and the said contract was commenced with effect from 1.6.1993 and the same was expired on 31.12.1993 in respect to the security of the materials lying at Paradeep. For the execution of the said contract, the Plaintiff raised seven number of bills out of which the Defendant had already paid in respect of five bills but did not clear the dues of the remaining two bills. Hence the Plaintiff filed the suit.
3. The present Petitioner-Defendant after receiving notice of the suit appeared and before taking any steps in the proceeding filed an application under Section 8 of the Act on 21.6.2002 with a prayer to stay the Money Suit as arbitration proceeding is pending between the parties and the same dispute is the subject matter of the Money Suit. It had specifically stated therein that the security contract is a part of the C & F contract. Hence, the same is coming within the arbitration clause embodied in the C & F contract.
4. The Opposite Party filed an objection stating therein that the security contract is a separate and distinct contract than that of a C & F contract. As there was no arbitration clause in the security contract, the application under Section 8 of the Act is not maintainable and Defendant may be directed to file its written statement and the suit may be proceed in accordance with law.
5. The Learned Court below on 19.12.2005 rejected the application on the ground that the subject matter of both the contracts were different in nature and there was no connection with each other. Since the terms and conditions of the contract dated 20.6.1991 were not applicable to the present security contract, the Court below directed the Petitioner to file the written statement. The said order is impugned in this civil revision.
6. The Learned Counsel appearing for the Petitioner submitted that the Court below without appreciating the true scope of the matter and without considering the documents filed by the Petitioner has rejected the petition. Thus, he has exercise his jurisdiction with material irregularity for which interference of this Court is warranted. It is further submitted that though the application was filed to stay the suit, the Learned Court below has erroneously observed that Petitioner has filed a petition to refer the dispute to the Arbitrator as per the terms of agreement, which amounts to non-application of mind. The Learned Counsel for the Petitioner relied on the decisions Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khetan A.K. Jaju v. Avni Kumar and 2004 (1) Arb. LR 241 (Madras) Ramco Super Leathers Ltd. and Anr. v. Associates India Financial Services (P) Ltd.
7. Learned Counsel for the Opposite Party-Plaintiff submitted that on a bare perusal of the security contract and the facts stated in the Money Suit it is clear that the security contract is not connected with C & F contract and security contract did not provide any arbitration clause and as such on consideration of the documents Learned Court below has rightly rejected the application under Section 8 of the Act.
8. On perusal of the records it appears that Opposite Party was awarded with a contract for clearing and forwarding material of the Petitioner-company at Paradeep vis-a-vis the exports made by the Petitioner. As per the said contract, Opposite Party was appointed as the clearing and forwarding agent. There are, he was responsible for looking after the safe custody of the materials to be loaded in the ship and do ail things necessary for clearance of the same from the Port. The aforesaid contract was to expire on 19.6.1993. As it was found that the material was in possession of the Opposite Party, in that connection for the security of the said material the Petitioner company had appointed Opposite Party to guard the same after 19.6.1993 for which a letter was issued on 8.6.1993. The contract for security of the materials was executed on 15.11.1993. The said contract clearly refers to letter dated 8.6.1993 and security was connected with the material entrusted to Opposite Party as per the main contract dated 20.6.1991. The contract dated 15.11.1993 was only an extension of the earlier contract. The arbitration proceeding in respect of the earlier contract is already going on since 10.01.1995 (arbitrator appointed) between the parties as per the arbitration clause of the contract dated 20.6.1991 and the present dispute was also raised before the arbitrator. The Petitioner has filed a copy of the agreement dated 20.6.1991 as Annexure A, copy of the letter dated 8.6.1993 as Annexure-B, copy of the contract dated 15.11.1993 as Annexure-C, copy of the statement of claim of both the parties as Annexure-D series and letter regarding appointment of arbitrator as Annexure-E along with the application under Section 8 of the Act.
9. The extract of the arbitration clause of C & F contract dated 20.6.1991 (Annexure-A) is as follows;
Settlement of Disputes by Arbitrators: - In the event of any dispute or difference arising out of this contract or connected thereto whether before or after the termination/completion of the contract, the same shall, after written notice by either party to the contract to the other of them and to the Appointing Authority, be referred for adjudication to a sole arbitrator to be appointed by CMD, NALCO. The CMD, NALCO shall be the Appointing Authority. The arbitrator shall be deemed to have entered on the reference on the date he issues notices to the parties fixing the date of first hearing. The Arbitrator, may, from time to time, with the consent of the parties enlarge the time for making and publishing the award. The arbitrator shall give a separate award in respect of each dispute or difference and shall give a reasoned and speaking award/awards. The venue of the arbitration shall be at Bhubaneswar. The award of the arbitrator shall be final and binding on both the parties. Subject to the aforesaid provisions of the Indian Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder shall apply to the arbitration proceedings.
10. The arbitration clause in the C & F Contract refers to "any dispute or difference arising out of this contract or connected thereto, whether before or after the termination/completion of the contract". Therefore, any dispute connected with or arising out of C & F contract before or after the termination/completion of the contract can also be referred to arbitration under the arbitration clause. Security contract dt. 15.11.1993 refers to protect the materials of NALCO lying at Paradeep by the Plaintiff. The aforesaid contract was for the period from 1st June, 1993 to end of November, 1993 and any shortage etc. at the end of the contract period will be recovered from the Plaintiff company as per the usual rates of NALCO. The coverage of the two agreements makes it clear that the execution of security contract is 'connected with' the execution of C & F contract for clearing and forwarding NALCO materials lying at Paradeep.
11. From the LCR it reveals that the Petitioner has filed copies of all the documents along with the petition under Section 8 of the Act. From the letter dated 8.6.1993 it appears that the Petitioner company had stated that the C & F contract was going to expire on 19.06.1993 to protect the materials from theft and pilferage. During the absence of C & F contract, the Opposite Party may make proper arrangement for security of the same lying in three different areas i.e. covered godown, transit shed and appron area. It is further revealed that the approximate charge of Rs. 20,000/- per month for security is extremely on the higher side. It was specifically averred that any theft or loss during the period of engagement the Opposite Party will be liable for the same and the amount will be recovered from him. Contract dated 25.11.1993 shows that arrangement of security in respect of NALCO material at Paradeep had been accepted by the Opposite Party and they had admitted that the security services entrusted to them will expire on 30.11.1993. A letter dated 18.12.1993 has also been issued by the Manager regarding C & F contract work and security services at Paradeep Port wherein it has been stated that they have received the amount towards security services upto the period 31.10.1993 and they have confirmed further that they are continuing the security services for the Petitioner's cargo lying in the Paradeep Port till 31.12.1993 and from 01.01.1994 they are not interested to continue the said services and requested the Petitioner company to make alternative arrangements to avoid last minute confusion.
12. From the above documents, it is prima facie appeared that the security contract for the materials is only an extension of main contract dated 20.6.1991 and the same cannot be read as de hors the main contract. It has been alleged that the Plaintiff did not return the materials entrusted to them in respect of contract dated 20.6.1991 and huge quantities of materials having been lost from the custody of the Plaintiff, the Petitioner have already put forth claims against the Plaintiff which is the subject-matter of dispute in the arbitration proceeding. Hence, the subject-matter of the present suit cannot, therefore, be read as separate from the aforesaid subject matter of arbitration proceedings. The dispute regarding the transactions alleged under the suit have already been raised under the arbitration proceedings by the Defendant as well as the Plaintiff.
13. After going through the petition filed under Section 8 of the Act and the copy of the agreement along with other documents, it is crystal clear that the present security contract is an extension of the earlier contract dated 20.6.1991 and the security contract does not stand in isolation. The agreement for security forms an integral part of the earlier agreement and taking advantage of non-mention of the arbitral clause, the Opposite Party cannot contend that the agreement for security is not a part of the earlier agreement dated 20.6.1991.
14. Section 7 of the Arbitration and Conciliation Act, 1996 reads as follows;
7. Arbitration-agreement.- (1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in-
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
15. It is, therefore, on the above back drop of events and the discussions made above, held that the security contract is an extension of C & F contract and the arbitration clause in one contract can be imported into a subsequent contract as it is not inconsistent with the terms of the subsequent contract between the parties. Arbitration clause found in the C & F contract necessarily to be imported into the security contract. Arbitration clause found in C & F contract between the Defendant and Plaintiff is to be imported into the security contract. Such incorporation of arbitration clause to a subsequent contract is statutorily recognized in the new Act under Section 7(5) of the Act.
The Learned Court below has not considered the documents filed by the Petitioner from its proper prospective and exercised its jurisdiction with material irregularity.
16. Thus in view of the above findings, the application filed under Section 8 of the Arbitration and Conciliation Act is allowed and since the dispute under the suit have already been raised by the parties before the Arbitrator, the present suit need to be stayed till finalization of the arbitration proceedings.
Accordingly, the impugned Order dated 19.12.2005 passed by the Learned 2nd Addl. Civil Judge (Senior Division) Bhubaneswar in M.S. No. 792/319 of 2004/1995 is set aside. Consequently, the Civil Revision is allowed.
There shall be no order as to costs.