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Sushma Swaraj v/s M/s. Blue Valley Properties Pvt. Ltd., Rep. by its Managing Director, K. Suryanarayana Raju, Bengaluru & Another

    Writ Petition No. 28968 of 2018 (GM-CPC)
    Decided On, 17 March 2021
    At, High Court of Karnataka
    For the Petitioner: M.J. Alva, Advocate. For the Respondents: R1, Shreepadaraja, R2, Bhargava Bhat, P.B. Ajith, Advocates.

Judgment Text
(Prayer: This Writ Petition is filed Under Article 227 of the Constitution of India, praying to set aside the impugned order dated 26.2.2018 passed by the learned Sr.Civil Judge and JMFC, Anekal in O.S.458/2014 allowing the I.A.No.2 filed by the R-2 under Section 8 of Arbitration and Conciliation Act vide Annex-A;)

1. Petitioner is the plaintiff in O.S.No.458/2014; the 1st respondent is the 1st defendant and the 2nd respondent is the 2nd defendant; suit is for a decree of specific performance; it is founded on the Agreement to Sell dated 14.09.2012; 1st defendant has filed the Written Statement resisting the suit on merits; however the 2nd defendant has filed application in I.A.No.2 u/s.8 of the Arbitration & Conciliation Act, 1996, seeking relegation of the plaintiff to arbitration; this application having been favoured, the petitioner is grieving before the Writ Court.

2. After service of notice, the contesting respondent having entered appearance through his counsel vehemently opposes the writ petition contending that sec.8 of the Act is invokable by a person who claims under a party to the Arbitration Agreement and therefore the impugned order is unassailable; he points out that the change brought about to this section by way of amendment in 2016 relates to Forum of adjudication and thus it is a procedural matter and consequently has retrospective operation; so contending he seeks dismissal of the writ petition.

3. Having heard the learned counsel for the parties and having perused the petition papers, this Court is inclined to grant indulgence in the matter for the following reasons:

(a) Sub-section (1) of section 8 of 1996 Act prior to amendment had read 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 so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration".

This provision of the section was broadly analogous to section 34 of the erstwhile Arbitration Act, 1940 and Article 8 of UNCITRAL Model Law; section 34 of the 1940 Act gave discretion to the court to stay the legal proceedings where the subject matter was covered by an arbitration agreement; section 8 of the 1996 Act mandates the judicial authority before whom the proceedings are brought, to refer the matter for arbitration, if it is covered by the arbitration agreement and reference is applied for at the first instance of submitting the statement on the substance of the dispute; thus there is no discretion to disobey the dicta of the Parliament.

(b) The text of the original sub-section (1) of section 8 permitted only a party to the arbitration agreement to relegate the suit or such other proceedings to arbitration; however the Parliament vide Act 3 of 2016 has amended the said provision which now 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 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".

Therefore as the law now stands, the reference to arbitration can be sought for either by a party to the arbitration agreement or any person claiming under such party, is true; the question for consideration is whether this amendment is retrospective in operation as to apply to the suit which is instituted prior to the said amendment.

(c) An amendment of law bringing about a change as to the forum of adjudication ordinarily does not affect pending actions, unless the legislative intent suggests to the contrary; to decide whether pending proceedings are affected or not, language of the statute has to be examined and the legislative intent to bring within reach of the statute even the pending proceedings has to be ascertained; of course, there need not be an express provision; at times, Benthamite criticism that law shows its face in mask, proves true; apparently this 2016 amendment is with retrospective effect from 23.10.2015; therefore the retrospectivity is limited to this cut-off date and cannot travel back in time longer than what is limited by the law maker himself; metaphorically speaking, laws like rivers do not ordinarily flow reverse; normally, amendment of substantive law is prospective in operation and amendment of procedural law is retrospective in effect, unless a contra intention is implicit in the language of the amendment itself; though the amendment in question can be said to be of procedural nature, because it relates to forum ie., the Court/Arbitrator, its retrospectivity which otherwise would have gone back to the date of enactment of the principal statute, is made limited to a specific period of past ie., 23.10.2015; therefore the suits instituted prior to this cut-off date do not fall within the ambit of the amended provision, as rightly contended by learned counsel for the petitioner.

(d) There is also force in the contention of petitioner's counsel that the 1st defendant being a party to the arbitration agreement has filed his Written Statement resisting the suit on merits without seeking reference to arbitration, and therefore the 2nd respondent being the person claiming under him cannot invoke reference under amended sec. 8; the right of a person claiming under a party is co-terminus with the right of such party under whom he so claims; in other words, where a party to the arbitration agreement waives his right availing u/s.8 of the Act, it is not permissible to the person claiming under such party to take a stand in variance and thereby seek reference of the dispute to the arbitration; if the Parliament intended the law to be otherwise, the text of this provision would have been a bit different; of course, arguably there may be some exceptions to this rule like the culpable act between parties

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to arbitration agreement inter se designed to defraud a third person claiming under such a party, or the like; however, that is not the argued case of 2nd respondent herein. In the above circumstances, this writ petition succeeds; a Writ of Certiorari issues quashing the impugned order; the subject application of the 2nd respondent is dismissed and consequently learned Judge of the court below is requested to try & dispose off the suit, preferably within an outer limit of one year, costs having been made easy. This Court places on record its deep appreciation of the passion and elegance with which both the learned advocates advanced the arguments after thorough preparation of the case.