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M/s. Sree Balaji Engineering Works & Another v/s R. Stephon Johnson & Others

    Civil Revision Petition (PD)(MD) No. 414 of 2014 & M.P.(MD) No. 1 of 2014

    Decided On, 04 April 2014

    At, Before the Madurai Bench of Madras High Court

    By, THE HONOURABLE MR. JUSTICE T. MATHIVANAN

    For the Petitioners: G.R. Swaminathan, Advocate. For the Respondents: R1, P. Arun Jayatram, R2 to R5, No Appearance.



Judgment Text

(Prayer: Revision is preferred under 227 of the Constitution of India, against the fair and decretal order dated 31.1.2014 passed in I.A.No.569 of 2013 in O.S.No.106 of 2013 on the file of the II Additional District Judge, Thiruchirappalli.)

1. This Memorandum of Civil Revision has been directed against the fair and decretal order dated 31.1.2014 and made in the Interlocutory Application in I.A.No.569 of 2013 in O.S.No.106 of 2013 on the file of the learned II Additional District Judge, Thiruchirappalli.

2. The revision petitioners herein are the defendants 1 and 2 in the suit in O.S.No.106 of 2013, whereas the first respondent is the plaintiff and the respondents 2 to 5 are the defendants 3 to 6 in the suit. The whole case is revolving around the Settlement Deed dated 23.5.2012 and based on this Settlement Deed, the first respondent/plaintiff has filed the above suit as against the revision petitioners 1 and 2 as well as against the respondents 2 to 5 for recovery of a sum of Rs.26 lakhs together with future interest at 18% per annum from the date of plaint till the date of realization.

3. The first respondent/plaintiff was also a partner along with the second revision petitioner and the respondents 2 to 4 and thereafter, based on the Settlement Deed dated 23.5.2012, the first respondent/plaintiff had retired from the partnership firm i.e., from the first revision petitioner viz., M/s.Sree Balaji Engineering Works and to that effect, a Settlement Deed dated 23.5.2012 was entered into between the first respondent/plaintiff and the second revision petitioner Mr.K.Maruthavanan, who is the Managing Partner of the first defendant’s partnership firm. On a cursory perusal of the Settlement Deed dated 23.5.2012, Clause (3) discloses that 'in case of any dispute arising out of this Agreement, it shall be settled under the provisions of the Arbitration and Conciliation Act, 1996'. Therefore, prior to the filing of the written statement, the second revision petitioner being the Managing Partner of the first revision petitioner partnership firm, has taken out an application in I.A.No.569 of 2013 under Section 8 of the Arbitration and Conciliation Act, 1996, requesting the Trial Court to refer the parties viz., the first respondent and the revision petitioner 1 and 2 to arbitration, so as to enable them to settle the matter amicably.

4. This petition was resisted strenuously by the first respondent/plaintiff by filing his counter statement and on hearing both sides and on perusal of the averments of the affidavit filed in support of the abovesaid petition as well as the averments of the counter statement, the learned Trial Judge had proceeded to dismiss that application on 31.1.2014 on the following three grounds, viz.,:-

(i) The second revision petitioner had filed a suit in O.S.No.667 of 2013 on the file of the I Additional District Munsif, Thiruchirappalli as against the first respondent/plaintiff, seeking the relief of permanent injunction. Having been filed the above suit, the second revision petitioner/second defendant had gone beyond the scope of the Settlement Deed dated 23.5.2012, waiving the arbitration clause covenanted in the Settlement Deed;

(ii) Since the first respondent/plaintiff is not willing for arbitration, the Court cannot compel him to go for an arbitration against his wish;

(iii) Without proving the Settlement Deed dated 23.5.2012, there is no scope in this petition and the Settlement Deed, by itself, has to be proved by the petitioners firstly during the trial and then only, they could invoke the provisions of Section 8 of the Arbitration and Conciliation Act, 1996.

5. Having been aggrieved by the impugned order, the defendants 1 and 2, who are the petitioners in the I.A.No.569 of 2013, stand before this Court with this Memorandum of Revision.

6. Heard Mr.G.R.Swaminathan, learned counsel appearing for the revision petitioners and Mr.P.Arun Jayatram, learned counsel appearing for the first respondent. Despite the service of summons on the respondents 2 to 5, they have not chosen to appear when the matter was taken up for hearing and therefore, they are called absent.

7. Before we go into the merits of this case, this Court is of the view that it would be better to have reference to the provisions of Section 8 of the Arbitration and Conciliation Act, 1996. Section 8 of the Arbitration and Conciliation Act, 1996 reads as under:-

'Section 8: Power to refer parties to arbitration when 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 so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration;

(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;

(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.'

8. On an analytical approach of sub-sections (1) and (3), this Court understands 'If a party applies not later than when submitting his first statement on the substance of the dispute which is brought before a Judicial Authority in a matter which is the subject of an Arbitration Agreement, it is mandatory on the part of the Judicial Authority to refer the parties to arbitration. Secondly, there may not be any impediment or obstacle to commence the arbitral proceedings and to pass an award notwithstanding an issue is pending before the Judicial Authority.

9. On coming to the instant case on hand, the first respondent/plaintiff, being an ex-partner in the first revision petitioner-partnership firm, has filed the present suit against the revision petitioners and others for a judgment and decree and for recovery of a sum of Rs.26 lakhs together with future interest at 18% per annum from the date of plaint till the date of realization, based on the Settlement Deed dated 23.5.2012 which is in question in this revision petition. Admittedly, this Settlement Deed dated 23.5.2012 contains an arbitration clause under clause No.3. Having been signed in the Arbitration Agreement, it is presumed that the first respondent/plaintiff had accepted that there is a valid Arbitration Agreement under clause (3) of the Settlement Deed dated 23.5.2012. In this connection, Mr.G.R.Swaminathan has adverted to that the suit filed by the second revision petitioner in O.S.No.667 of 2013 on the file of the I Additional District Munsif, Thiruchirappali against the first respondent/plaintiff, would not preclude him from referring the parties to Arbitration. The relief sought for by the second revision petitioner in the above suit as against the first respondent/plaintiff i.e., the relief of permanent injunction can be granted only by common law and not by any other law. Therefore, it cannot be, for a moment, construed that the revision petitioners have waived their arbitration clause under Clause (3) of the Arbitration Agreement as the second revision petitioner had filed the above suit. He has also argued that there is an Arbitration Agreement under Clause (3) of the Settlement Deed dated 23.5.2012 which crystallises that in case of any dispute arising out of the said agreement, it shall be settled under the provisions of the Arbitration and Concliation Act, 1996. Therefore, the Arbitration Agreement Clause (3) of the Settlement Deed dated 23.5.2012 ought to have been given due weight as sought for by the revision petitioners and the parties to the Settlement Deed dated 23.5.2012 ought to have referred to arbitration, so as to enable them to settle their dispute, instead of continuing the suit on the file of the learned Trial Judge.

10. On the other hand, Mr.P.Arun Jayatram, learned counsel appearing for the first respondent/plaintiff has submitted that the suit filed by the second revision petitioner in O.S.No.667 of 2013, (the plaint of which has been marked as C-1) before the Trial Court, ought to have been taken into consideration, at the time of hearing of the abovesaid application and that the abovesaid suit was filed by the second revision petitioner as against the first respondent/plaintiff for an injunction only based on the Settlement Deed dated 23.5.2012. Had the second revision petitioner/second defendant given due weight and importance to the Arbitration Agreement under Clause (3) of the abovesaid Settlement Deed dated 23.5.2012, he would not have filed the above suit. He has also submitted that the petition filed by the second revision petitioner/second defendant under Section 8 of the Arbitration and Conciliation Act, 1996, was rightly dismissed by the learned Trial Judge and therefore, this Court’s interference did not require. The argument advanced by Mr.P.Arun Jayatram is not able to be countenanced and in so far as his argument is concerned, this Court is of view that it deserves to be rejected.

11. Admittedly, prior to the filing of the present petition in I.A.No.569 of 2013, the revision petitioners have never submitted to the jurisdiction of the Trial Court. In fact, prior to the filing of their written statement, they have come forward with this petition under Section 8 of the Arbitration and Conciliation Act, 1996, to enforce the Arbitration Agreement under Clause (3) of the abovesaid Settlement Deed dated 23.5.2012. Therefore, the petition itself is very well maintainable as per sub-section (1) of Section 8 of the Act.

12. As aforestated, Section 8 of the Act, provides that where there is an Arbitration Agreement, the Judicial Authority is bound to direct the parties to resort to arbitration, on an application by the parties before or at the time of filing of a written statement on merits.

13. In the present case also, the revision petitioners have filed the abovesaid application prior to their filing of written statement. Sub-section (1) uses the word ‘shall’ and thus makes it obligatory on the part of the Judicial Authority to refer the parties to arbitration if action brought before it as a matter which is covered by the Arbitration Agreement provided such request is made not later than submitting to the Court, the first statement on the substance of the dispute.

14. This Court has gone through the decisions cited on behalf of Mr.P.Arun Jayatram viz., (i) Sukanya Holdings (P) Ltd vs. Jayesh H. Pandya and Another {2003 (5) SCC 531} and (ii) R.K. Productions Pvt. Ltd., Represented by its Director,Ms.Vimala Geetha, Chennai vs. N.K. Theatres Pvt. Ltd., Represented by its Director Natti Kumar, Jayaprakash Nagar, Yellareddygudda, Hyderapad and Others {2013 (2) MLJ 385}.

15. After having gone through the afore cited decisions, this Court is of the view that they are not made applicable to the instant case on hand as

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the facts and circumstances of which are entirely different from that of the present case on hand. 16. On coming to the instant case, this Court finds that the grounds for dismissal of the abovesaid petition set-forth by the Trial Court are absolutely wrong and are liable to be rejected in toto. As adumbrated supra, the Arbitration Agreement contains in Clause (3) of the abovesaid Settlement Deed dated 23.5.2012. Since the first respondent/plaintiff has agreed for the Arbitration Agreement, it is obligatory on the part of the Trial Court, being the Judicial Authority, to refer the parties to arbitration, so as to enable them to settle their dispute amicably as contemplated under Section 89 of the Code of Civil Procedure as the settlement of the dispute in an Alternative Forum is very much essential on this day. 17. Accordingly, this Memorandum of Civil Revision Petition is allowed and the impugned fair and decretal order dated 31.1.2014 are set aside and the petition in I.A.No.569 of 2013 is allowed and the parties to the Arbitration Agreement viz., the revision petitioners and the first respondent/plaintiff are referred to arbitration. No costs. Consequently, connected miscellaneous petition is closed.
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