Calcutta High Court
Pawan Bagaria vs Gontermann-Peilpers (India) Ltd. on 10 March, 2004
Equivalent citations: 2004(3)ARBLR158(CAL), (2004)2CALLT466(HC)
Author: J.K. Biswas
Bench: Jayanta Kumar Biswas
JUDGMENT J.K. Biswas, J.
1. The defendant in Civil Suit No. 390 of 2003 has filed this application (G.A. No. 101 of 2003) dated January 3rd, 2003. It prays for rejection of the plaint, and in the alternative, for referring the disputes involved in the suit to arbitration in view of Section 8 of the Arbitration and Conciliation Act, 1996. The plaintiff has filed opposition dated March 21st, 2003. The defendant has filed a reply dated March 26th, 2003.
2. Mr. Chatterjee, learned counsel for the defendant, has raised three contentions--(1) the plaint does not disclose a cause of action against the defendant; (2) the suit is barred by law; (3) the contract on which the suit is based contains an arbitration agreement, and hence the parties should be referred to arbitration. Mr. Tiwari, learned counsel for the plaintiff, has refuted these contentions.
3. Mr. Chatterjee first submits that admittedly, the defendant purchased M.S. melting scraps from M/s. Shree Balaji Steels having it place of business at 23A, Netaji Subhas Road, 1st Floor, Room No. 27, Calcutta-700 001. It was an unregistered partnership firm. Purchase orders placed by the defendant during the period from 1997 to 2000 will show that it entered into contracts with this partnership firm. From time to time payments were made by the defendant to this partnership firm. The present suit has been filed by the plaintiff for realisation of price for goods sold by this partnership firm during the period from 1997 to 2000. In the plaintiff has stated that the goods were sold by him to the defendant against the purchase orders placed by it in favour of the partnership firm. The plaintiff has not stated anything in the plaint how he is entitled to recover the alleged dues from the defendant on the basis of the sales contracts to which the plaintiff was not a party. Admittedly, at no point of time there was any privity of contract between the plaintiff and the defendant. The case made out in the plaint does not disclose a cause of action against the defendant. Hence in view of provisions in Order 7 Rule 11(a) of the Code of Civil Procedure, 1908 (hereinafter referred to as "the CPC") the plaint is liable to be rejected.
4. According to Mr. Tiwari there is a distinction between the two situations--(1) the plaint does not disclose a cause of action, and (2 the plaint does not disclose a cause of action against the defendant. Purport of such distinction will appear from the decision in State of Orissa v. Klockner and Company and Ors., . In the present case the plaint not only discloses a cause of action, but it definitely discloses a cause of action against the defendant.
5. I find that the plaintiff has described himself as the proprietor of M/s. Balaji Steels. His case is that against the purchase orders placed by the defendant in favour of M/s. Balaji Steels, which was previously an unregistered partnership firm, the goods were supplied to the defendant by him. It is his case that since the defendant failed and neglected to pay the price for the goods, admittedly received by it, a winding up proceeding was initiated by him, and the Company Court relegated him to suit only for a portion of the claim, and for such portion of the claim the present suit has been instituted.
6. Whether the plaintiff is entitled to recover the amount, is a question, answer is essentially dependent on evidence. Answer to the questions whether the goods were actually supplied by the plaintiff or whether for the goods supplied in the name of the firm, the plaintiff would be entitled to recover the price from the defendant, are also essentially dependent on evidence. At this stage, the question whether the plaint discloses a cause of action has to be decided only on the basis of the statements in the plaint.
7. Simply because the defendant had issued the purchase orders in the name of the firm, it cannot be concluded at this stage that regarding the transactions there was no privity of contract between the plaintiff and the defendant. After going through the plaint, I am of the view that the plaint not only discloses a cause of action, but it discloses a cause of action against the defendant in the present case. Hence I find no reason to reject the plaint in terms of Order 7 Rule 11(a) of the Code of Civil Procedure.
8. Mr. Chatterjee submits that Section 26(2) of the Code of Civil Procedure provides that in every plaint facts shall be proved by affidavit. Order 6 Rule 15(4) of the Code of Civil Procedure provides that the person verifying the pleading shall also furnish an affidavit in support of his pleading. In the present case the facts in the plaint have not been proved by affidavit, because the person verifying the pleading has not furnished an affidavit in support of his pleading. This defect in the plaint is not curable. In any event, if the plaintiff is permitted to remove the defect now, the defendant will loose an already accrued right; for as on date (that is, February 26th, 2004) the claim has become barred by limitation. It is therefore apparent that the suit is barred by law. Hence in view of provisions in Order 7 Rule 11(d) of the Code of Civil Procedure the plaint is liable to be rejected.
9. Mr. Tiwari admits that in the plaint the facts were not proved by an affidavit, and the person verifying the pleading did not file an affidavit in support of his pleading. By Relying on the decision in Salem Advocate Bar Association T.M. v. Union of India, he submits that for laches on the part of the advocate the plaintiff should not suffer. According to him the defect is curable and an opportunity should be given to the plaintiff to cure the defects.
10. The reasons for which a plaint is liable to be rejected have been specifically mentioned in Order 7 Rule 11 of the Code of Civil Procedure. Non-compliance with provisions contained in Section 26(2) or Order 6 Rule 15(4) of the Code of Civil Procedure is not one of the grounds for which a plaint is liable to be rejected under Order 7 Rule 11 of the Code of Civil Procedure. In my considered opinion the contention that for non-compliance with provisions in Section 26(2) and Order 6 Rule 15(4) of the Code of Civil Procedure the suit is barred by law, and hence the plaint is liable to be rejected in terms of Order 7 Rule 11(d) of the Code of Civil Procedure, is misconceived.
11. In terms of Order 7 Rule 11(d) of the Code of Civil Procedure a plaint is liable to be rejected only when from the statement in the plaint it is apparent that the suit is barred by law. This means that under the law, even if the suit is free from all defects, it cannot be maintained, because law bars its very institution. Statements in the plaint are essentially statement of facts. By an affidavit accompanying the plaint such facts are only proved. Absence of an affidavit is a defect in the plaint. Such defect has no connection with the ground mentioned in Clause (d) or Rule 11 of Order 7 of the Code of Civil Procedure. Hence in my view, for not filing affidavit as required by Section 26(2) and Order 6 Rule 15(4) of the Code of Civil Procedure, a plaint is not liable to be rejected under Order 7 Rule 11(d) of the Code of Civil Procedure. The defect is a curable one; it does not make the suit non est
12. Mr. Chatterjee's last submission is that from the purchase orders it will appear that the contracts between the partnership firm and the defendant were governed by the general conditions of supply prescribed by the defendant. The general conditions contained an arbitration clause. The parties agreed that disputes and differences arising out of the purchase orders (the sales contracts) would be settled by arbitration. In, view of Section 8 of the Arbitration and Conciliation Act, 1996 the parties should be referred to arbitration. For referring the parties to arbitration the defendant is not required to file a separate application under Section 8 of this Act, The defendant is only required to bring to the notice of the Court the fact of the existing arbitration agreement between the parties. The original purchase orders accompanied by the original general conditions of supply containing the arbitration clause were lying in the custody and possession of the partnership firm. So there was no scope for the defendant to produce the original agreement containing the arbitration clause. In any event, as held in Vivek Arya v. Economic Transport Organisation and Ors.. (2003)3 Cal LT 148 (HC) in such a case production of the original arbitration is not mandatory.
13. Regarding the arbitration clause M. Tiwari submits that the alleged general conditions of supply were never supplied to the plaintiffs firm. The parties never agreed to settle the disputes by arbitration. For the first time in this application the defendant has come out with the case of arbitration agreement. In the previous winding up petition for recovery of same dues the defendant never disclosed the existence of any arbitration agreement. The defendant has not filed any application under Section 8 of the Arbitration and Conciliation Act, 1996. It was required to file such an application before filing the present application for rejection of plaint. At this stage, even assuming there was an arbitration agreement, the parties, cannot be referred to arbitration. The defendant applied for extension of time to file written statement. Such application was allowed. As held in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya and Anr., (2002)5 SCC 531, mere existence of an arbitration agreement does not oust the jurisdiction of the Civil Court.
14. As to the contention regarding requirement of referring the parties to arbitration, after examining the facts and circumstances of the case I am of the view that there is no merit in it. The existence of an arbitration agreement has been disputed by the plaintiff. Admittedly, the defendant has not filed an application as contemplated in Section 8 of the Arbitration and Conciliation Act, 1996. On the contrary it has filed the present application dealing with the substance of the disputes involved in the suit, in support of its prayer for rejecting of the plaint under Order 7 Rule 11 of the Code of Civil Procedure. It is only an alternative prayer that has been made in this application for referring the parties to arbitration, in the event this Court finds no merit in its contention that the plaint is liable to be rejected under Order 7 Rule 11 of the Code of Civil Procedure. The alternative prayer is the prayer of second preference of the defendant.
15. Section 8 of the Arbitration and Conciliation Act, 1996 provides that the party wanting reference to arbitration must apply to the judicial authority before submitting his first statement on the substance of the dispute. A party seeking reference to arbitration under this section is not entitled to invite the judicial authority to decide first the question of maintainability of the proceeding after considering the correctness of the disputes involved in the proceeding, and then to consider the question of referring the parties to arbitration if the proceeding is found to be maintainable. The party in such a situation does not have two options--that is, (1) to contest the maintainability of the proceeding before the Judicial authority, and (2) on failing to get the proceeding dismissed, to seek reference to arbitration. It has to make up its mind whether it will seek reference to arbitration or contest the proceeding before the judicial authority from the stage of maintainability. If it chooses for the latter course, it looses the former. Once it submits to the jurisdiction of the judicial authority, thereafter it is precluded from seeking reference to arbitration, as there is no dispute that the mere existence of an arbitration agreement does not oust the jurisdiction of the Civil Court.
16. In the instant case the defendant fought litigation with the firm for the same transactions and claim in the Company Court. It never disclosed the existence of any arbitration agreement. There is nothing before this Court from which it can be said that any arbitration agreement ever existed between the plaintiff and the defendant. In this suit it filed the application for extension of time to file written statement. It has filed this application for rejection of the plaint. It has alleged that there was no privity of contract between the parties. It has extensively dealt with the substance of dispute in the suit. It has not filed any proper application for referring the parties to arbitration. The decision in Vivek Arya's case has no manner of application to this case. It was given in an application filed under Section 8 of the Arbitration and Conciliation Act, 1996. Hence, I find no reason to hold that in view of Section 8 of the Arbitration and Conciliation Act, 1996 the parties in this suit should be referred to arbitration.
17. It must be noted here that the defendant filed this application for rejection of the plaint on the ground that the suit is barred by provisions of the Indian Partnership Act, 1932. But in course of argument learned counsel for the defendant has not made any submission regarding this ground. The grounds on which learned counsel sought rejection of the plaint have already been noted. Hence there is no reason for me to express any opinion whether the suit is barred by the provisions of the Indian Partnership Act, 1932.
For the above reasons I find no merit in this application; and hence it is hereby dismissed. The costs of this application shall be the costs in the cause.
Urgent xerox certified copy of this judgment and order, if applied for, may be supplied to the parties.