Calcutta High Court (Appellete Side)
Mr. Rakesh Sethi vs Mr. Rajeev Sethi on 3 July, 2019
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
In the High Court at Calcutta
Civil Revisional Jurisdiction
Appellate Side
The Hon'ble Justice Sabyasachi Bhattacharyya
C.O. No. 1928 of 2019
Mr. Rakesh Sethi
vs.
Mr. Rajeev Sethi
For the petitioner : Mr. Dhiraj Trivedi,
Ms. Abha Tiwari,
Ms. Rajni Chowbey,
Mr. Aditya Singh
For the opposite party : Mr. Rahul Karmakar,
Mr. S.K. Poddar,
Mr. M.K. Poddar
Hearing concluded on : 21.06.2019
Judgment on : 03.07.2019
Sabyasachi Bhattacharyya, J.:‐
1.The plaintiff in a suit for declaration and consequential reliefs has preferred the instant revisional application. The reliefs claimed in the said suit are as follows:
"(a) for a decreed of declaration that the plaintiff is one of the lessee along with the defendant in respect of the scheduled property without any interruption of the defendant.
(b) for declaration that the plaintiff has every right in the scheduled property and business without any obstruction or interference from, the defendant.
(c) a decree for dissolution of a partnership firm namely carrying on its business from the scheduled property.
(d) for a mandatory injunction directing the defendant to furnish true and faithful accounts of all the profit and share of capital, interest, salary to the plaintiff from 01.08.2016 to 31.03.2018 and to pay the share of the plaintiff as may be ascertained by the Learned Court.
(e) for permanent injunction restraining the defendant from obstructing or interfering to the free access of the plaintiff or his agents in the scheduled property and his share of profits in the business.
(f) Receiver
(g) Commissioner
(h) Any other order and/or orders as Your Honour may deem fit and proper."
2. By the impugned order, the trial court allowed an application filed by the defendant/opposite party for reference of the suit to arbitration under Sections 5 and 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act").
3. The petitioner submits that the subject‐matter of the suit is not confined to the subject‐matter of the arbitration clause in the partnership deed between the parties but also relates to disputes regarding the rights of the parties as joint lessees in respect of the suit property.
4. Clause 13 of the partnership deed dated July 9, 2004, which comprises the arbitration clause, runs as follows:
"(13) In case of difference or other disputes, the same shall be referred to three Arbitrators each to be nominated by the parties hereto and in case of difference of opinion among them (Arbitrators) the same shall be referred to the Umpire. The decision of the Arbitrator or Arbitrators or Umpire as the case may be shall be final and binding. The arbitration proceedings shall be governed by the Indian Arbitration Act 1940 or any other statutory amendment there under in force shall be applicable."
5. Initially the father of the parties and both the present parties entered into a partnership by dint of the said deed. Subsequently, the father of the parties expired, upon which his share in the partnership business devolved upon the present parties, since the mother of the petitioner and opposite party had predeceased their father. Clause 10 of the partnership agreement is germane in this regard. The said clause reads as follows:
"(10) The partnership business shall not be dissolved by death of any of the partners. In the event of death of any of the partners of the FIRST or SECOND Part, his share in the partnership business shall be taken up by his respective nominee/heirs. In the event of death of the party of the Third part, his share in the partnership business shall be taken up by his spouse in the first instance or then in equal proportion by his male heirs."
6. Learned counsel for the petitioner argues that paragraphs 32 to 35 of the plaint and relief (a) thereof relate almost exclusively to the rights of the plaintiff as a lessee in respect of the suit property, which is comprised of both the corporeal property and business carried on under the name and style of "HOTEL METRO PALACE" on the first floor of 181/A, Lenin Sarani, P.S.‐Bowbazar, Kolkata - 700
013.
7. In this context, learned counsel cites a judgment of a co‐ordinate bench of this court reported at 2005(1) CHN 158 [Idcol Cement Ltd. vs. P. Roy Chowdhury & Company & Ors.] for the proposition that if the subject‐matter of the suit includes the subject‐matter of an arbitration agreement as well as other disputes, the parties cannot be referred to arbitration.
8. Learned counsel next relies on another co‐ordinate bench judgment of this court, reported at AIR 2006 Cal 227 [Maheswari Brothers Ltd. vs. Airports Authority of India Ltd. & Anr.], wherein it was held that if the cause of action disclosed in the plaint comprise both of arbitrable and non‐arbitrable matters and those cannot be split up, being interlinked with each other, two separate proceedings were not permissible. In the said case, the suit was retained before the civil court and not relegated to arbitration.
9. Learned counsel for the petitioner next argues that specific allegations of fraud and police complaints have been levelled against the defendant/opposite party in the plaint as well, which require detailed investigation and as such cannot be referred to arbitration. In this context, learned counsel places particular reliance on paragraph nos. 12, 13 to 18, 23 and 25 of the plaint.
10. Learned counsel cites a judgment reported at (2010) 1 SCC 72 [N. Radhakrishnan vs. Maestro Engineers and others], wherein it was held that despite existence of an arbitration agreement and the dispute‐in‐question falling within the purview thereof, if dispute requires detailed investigations and production of elaborate evidence, the same must be tried by a court and not an arbitrator. For furtherance of justice, it was held, such a dispute should be tried in a court of law, which would be more competent and have the means to decide such a complicated matter.
11. However, in all fairness, learned counsel for the petitioner also refers to a judgment reported at (2016) 10 SCC 386 [A. Ayyasamy vs. A. Paramasivam and others], wherein it was held that mere allegation of fraud is not sufficient to detract parties from the obligation to submit their disputes to arbitration - only where the court finds serious issues of fraud involving criminal wrongdoing, an exception to arbitrability may come into existence. It was held that heavy burden lies on the party to establish that the dispute is not arbitrable under law and the court or judicial authority is obliged to carefully sift through the materials for the purpose of determining whether the said defence is merely a pretext to avoid arbitration.
12. However, it is argued by learned counsel for the petitioner that the present case falls within the exceptional category where the allegations of fraud were not merely a pretext but were genuine in nature.
13. It is further argued on behalf of the petitioner that the arbitration clause envisaged three arbitrators each to be nominated by the parties thereto. On the death of the father of the present parties, such appointment has become an impossibility, thereby rendering the said arbitration clause infructuous.
14. Learned counsel for the opposite party submits at the outset that the reliefs in the suit primarily concern the partnership business of the parties and, as such, is covered by the arbitration clause. Although certain averments and reliefs relating to the leasehold rights of the parties have been introduced in the plaint, those are intended merely to take the matter outside the purview of arbitration. However, it is submitted, the cardinal reliefs sought in the lis relate to the partnership business, which is covered by the arbitration clause.
15. As far as the argument regarding fraud is concerned, learned counsel for the opposite party submits that no particulars of fraud have been narrated in the plaint. Mere mention of police complaints and cursory reference to the alleged fraud are not sufficient to avoid arbitration, as intended in Clause 13 of the partnership deed.
16. Learned counsel for the opposite party next submits that the provision, as to each of the three initial partners appointing three arbitrators of their choice to constitute the arbitral tribunal, was not a sine qua non for referring the matter to arbitration. Clause 13, which provides so, has to be read with Clause 10 of the partnership deed. Clause 10 stipulates that on the death of Narinder Nath Sethi, the parties' father and the third partner, his share in the partnership business shall be taken up by his spouse in the first instance or then in equal proportion by his male heirs. The mother of the present parties predeceased their father. Thus, read together, the said two clauses indicate that, since the share of Narinder devolved equally upon the petitioner and the opposite party, the right of Narinder to appoint an arbitrator would also devolve equally upon them. Hence, the provision of appointment of three arbitrators was not an impediment to proceed with arbitration, since such stipulation was an ancillary one, not going to root of the arbitration clause.
17. Upon consideration of the submissions of parties and on a plain and meaningful reading of the plaint in perspective, there cannot be any doubt that the lis primarily revolves around disputes pertaining to the partnership business of the parties. The cause of action of the suit, as pleaded in paragraph no. 40 of the plaint, allegedly arose at the suit property on and from August 1, 2016 "since when the defendant failed and neglected to pay the share of profits of the business or any part thereof to the plaintiff as also denying access to the plaintiff into the suit property..."
18. Paragraph nos. 32 to 35 of the plaint refer to the rights of the plaintiff/petitioner as a lessee in respect of the suit property, but such averments are more by way of assertion of such rights and speak less about infringement of such rights. In fact, the plaintiff/petitioner asserts his leasehold rights as an additional basis of getting access to the hotel business.
19. Reliefs (a) and (b), though seek declarations as to the plaintiff's alleged rights as a lessee, those are not the primary reliefs sought. In fact, relief (b) also seeks a declaration about the plaintiff's right to run the business without obstruction or interference. The plaint does not reveal any clear cause of action leading to any infringement of the plaintiff's leasehold rights, apart from stray statements here and there about obstructions to access to the suit property.
20. The fraud alleged in paragraph nos. 12 to 14 of the plaint pertains to a non‐suit property at 29B, Royd Street, relating to which already another suit, bearing Title Suit No. 1306 of 2016, is pending. Such averment, as such, does not concern the subject matter of the present suit at all. Similar allegations in paragraph no. 15 also relate to a different hotel on a different property than the suit property.
21. Alleged forgery and fabrications, as mentioned in paragraph nos. 16 to 18, relate to the partnership business, which is the subject‐matter of arbitration, as do the irregularities and police complaints alleged at paragraph nos. 19, 21 and 23 to 31.
22. It is further noted that no specific particulars of fraud have been pleaded, which require detailed inquiry or meticulous examination by a court. The principle laid down in (2010) 1 SCC 72 [N. Radhakrishnan v. Maestro Engineers and Others] was qualified in (2016) 10 SCC 386 [A. Ayyasamy v. A. Paramasivam and Others]. The facts of the present case match the latter decision more than the former. In the instant case, the allegations of fraud are not of such a serious nature that those necessarily constitute criminal offences, nor are so complex in nature that a decision on the corresponding issues demands extensive evidence, for which the civil court would appear to be a more appropriate forum than the arbitral tribunal. The 'fraud' alleged in the instant case is not of a complicated nature at all.
23. It is rather evident that the allegations of 'fraud' and 'forgery' in the present lis form a convenient mode of avoiding the process of arbitration by simply using the device of making allegations of fraud and pleading that the issue of fraud needs to be decided by the civil court.
24. Hence, following the ratio of A. Ayyasamy (supra), the matter was rightly relegated to arbitration instead of retaining the dispute before the civil court.
25. Though the reference to the rights of the plaintiff as a lessee might form one of the components of the bundle of rights of the plaintiff leading to the cause of action, such rights are not alleged to have been seriously infringed, apart from a stray allegation of obstruction to ingress and egress to the suit premises. The suit primarily hinges around disputes as to the partnership business, which squarely fall within the purview of the arbitration clause.
26. Even if the flimsy infringement of leasehold right, pleaded in the plaint, furnishes a miniscule cause of action to the plaintiff, the same has no direct nexus with the disputes raised in respect of the partnership business. As such, the alleged disputes as to leasehold rights (flowing from lease) and those relating to the partnership business (emanating from the partnership deed containing the arbitration clause) are completely distinct and separate from each other and can easily be segregated. Unlike Maheshwari Brothers Ltd. (supra), in the present case the causes of action relating to the partnership business and those pertaining to the lease (if any) are distinct and can be split up into two different proceedings. Hence the ratio laid down in Maheshwari Brothers Ltd. (supra) is not applicable to the instant case.
27. Since the plaint averments as to rights of the plaintiff as a lessee are superfluous and redundant in the context of the moot controversy involved in the suit, which revolves around the partnership business, there arises a reasonable presumption that the averments pertaining to leasehold rights have been introduced deliberately in the plaint to wriggle out of the arbitration clause. The clubbing of leasehold rights with the partnership dispute, although the two are distinct in genesis and character, appears to be deliberate. The subject‐matter of the suit is primarily the dispute as to the partnership business which is, in turn, the subject‐ matter of arbitration. The other disputes raised are at best collateral disputes.
28. As such, the ratio laid down in Idcol Cement Ltd. (supra) is also not attracted to the present case.
29. In such view of the matter, although the impugned order was on the cryptic side as far as attribution of reasons was concerned, the conclusion therein was correct, since the matter was rightly referred to arbitration under Section 5, read with Section 8, of the 1996 Act.
30. Accordingly, C.O. No. 1928 of 2019 is dismissed on contest, thereby affirming the order impugned therein.
31. There will be no order as to costs.
32. Urgent certified website copies of this order, if applied for, be made available to the parties upon compliance with the requisite formalities.
( Sabyasachi Bhattacharyya, J. )