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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR.
CIVIL REVISION APPLICATION NO.27 OF 2012
APPLICANTS: 1. M/S Kogta Financial India Ltd., through
(Deft. No.3 on its Director Shri Radhe Krishna Kogta,
RA)
Aged Major, Occu: Business, Office at
206, Ganpati Plaza, M. I. Road, Jaipur-
302001 through its Power of Attorney
holder Dinesh Vasantrao Raulkar
Chaityana Nagar Colony Amravati.
(Deft. No.4 on 2. M/s Kogta Financial India Ltd., Office at
RA)
Kogta House, Azad Mohalla, Bajajnagar-
305624 & also at 12/2, Subhshya Flats,
Park Avenue, 1st Street, Baby Nagar,
Velacherry, Chennai-600 042 through its
Power of Attorney holder.
-VERSUS-
NON- 1. Jayesh S/o Kishorlal Dawda, Aged about
APPLICANTS:
41 years, Occu: Business, through
(Plaintiff No.1
General Power of Attorney holder Smt.
on RA)
Daksha Mukesh Chandan, Aged about
51 years, Occu: Legal Practitioner,
(Plaintiff No.2 2. Ms. Minakshi D/o Kishorlal Dawda,
on RA)
Aged about 42 years, Occu: Nil,
Both R/o Flat No.301, Maa Vaishnavi
Apartment, Ghass Bazar, Lakkadganj,
Nagpur-440008.
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(Deft. No.1 on 3. General Motors India, General Motors
RA)
India Pvt. Ltd., Chandrapura Industrial
Estate. Halol-389351, Distt.
Panchmahals, Gujarat.
(Deft. No.2 on 4. M/s Star Motors, through its Partners,
RA)
44/4, Wanjara Layout, Kamptee Road,
N.H. No.7, Nagpur-440026.
(Deft. No.5 on 5. The Sole Arbitrator Mr. Rajrajan
RA)
(Deleted)
Shri M. R. Joharapurkar, Advocate for the applicant.
Non-applicant served.
CORAM: A.S. CHANDURKAR, J.
DATED: JANUARY 05, 2018.
ORAL JUDGMENT :
1. By this Civil Revision Application filed under Section 115 of the Code of Civil Procedure, 1908 (for short, the Code), the applicants who are defendant Nos.3 and 4 in the suit filed by the non-applicant Nos.1 and 2 herein have challenged the order passed by the trial Court below Exhibit- 30 dismissing the application filed by the applicants herein under provisions of Order VII Rule 11 of the Code.
2. The facts in brief are that according to the non- ::: Uploaded on - 08/01/2018 ::: Downloaded on - 09/01/2018 01:41:54 :::
cra27.12.odt 3/8 applicant Nos.1 and 2 they had purchased a four wheeler from the defendant no.1 through its Agency which was defendant no.2. For said purpose financial assistance was obtained by the non-applicant nos.1 and 2 and certain post dated cheques came to be issued by them. According to the plaintiffs, they were cheated in the aforesaid transaction and hence had filed criminal proceedings in that regard. Thereafter the plaintiffs received a notice from the Court at Madras which was an application under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the said Act). The plaintiffs also received certain other documents which included the loan agreement and documents containing arbitration clause. The plaintiffs, therefore, filed suit for declaration that the alleged loan agreement contained various terms and conditions that were not actually agreed upon and hence, those terms were not binding upon the plaintiffs. A further declaration was sought that appointment of the sole arbitrator pursuant to the alleged agreement was without their consent. Certain other reliefs were also sought.
3. The applicants herein who are defendant nos.3 and 4 filed application below Exhibit-30 under provisions of ::: Uploaded on - 08/01/2018 ::: Downloaded on - 09/01/2018 01:41:54 ::: cra27.12.odt 4/8 Order VII Rule 11 (d) of the Code seeking dismissal of the suit as it was barred under provisions of the said Act. Reply was filed to the aforesaid application and the trial Court by the impugned order dated 17-12-2011 rejected that application. Hence, said order has been challenged in this Civil Revision Application.
4 Shri M. R. Joharapurkar, learned Counsel for the applicant submitted that in view of provisions of Section 8 and 16 of the said Act coupled with the fact that clause 22 of the loan agreement contained an arbitration clause, the Civil Court has no jurisdiction to entertain the suit. According to the pleadings in the plaint it was the case of the plaintiffs that their signatures were obtained without making them aware of the actual contents of the loan agreement. Even if it is assumed that this stand of the original plaintiffs was correct, the agreement would be voidable and even in that case, the civil court had no jurisdiction to entertain the suit. Such plea could be raised before the arbitrator and same could be decided as it was permissible to do so under Section 16 of the said Act. In that regard learned Counsel placed reliance on the decisions Hindustan Petroleum Corpn. Ltd. vs. Pinkcity ::: Uploaded on - 08/01/2018 ::: Downloaded on - 09/01/2018 01:41:54 ::: cra27.12.odt 5/8 Midway Petroleums (2003) 6 SCC 503, Swiss Timing Limited vs. Commonwealth Games 2010 Organizing Committee (2014) 6 SCC 677 and World Sport Group (Mauritius) Limited Vs. MSM Satellite (Singapore) Pte. Limited (2014) 11 SCC 639. It was therefore submitted that the trial Court committed a jurisdictional error in proceeding to entertain the suit.
5. The non-applicants though served were not present on 6-12-2017 as well as on 4-1-2018 when the learned Counsel for the applicants was heard. Today also there is no appearance on their behalf. With the assistance of learned Counsel for the applicants I have perused the documents placed on record and I have considered his submissions.
6. Perusal of the plaint indicates that it is the case of the plaintiffs that their signatures were obtained on the loan agreement without disclosing and explaining its contents to them. There was no consent obtained from the plaintiffs and therefore, the arbitration clause in the loan agreement could not be given any legal effect. On that basis a declaration was sought that the terms and conditions mentioned in the loan agreement were never agreed upon by the plaintiffs. ::: Uploaded on - 08/01/2018 ::: Downloaded on - 09/01/2018 01:41:54 :::
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7. It is not in dispute that the loan agreement contains clause of arbitration being clause No.22. The effect of presence of the arbitration clause is that the civil Court loses its jurisdiction to entertain the dispute in question. In Hindustan Petroleum Corpn. Ltd (supra), it was held by the Hon'ble Supreme Court that by virtue of provisions of Section 16 of the said Act, the Arbitral Tribunal has the jurisdiction to rule on any objection with respect to the existence or validity of the arbitration agreement. The view as taken by the Constitution Bench in Kokan Railway Corporation Limited Vs. Rani Construction Pvt. Limited (2002) 2 SCC 388 was followed. In Swiss Timing Ltd. (supra), it was held that on a conjoint reading of Sections 5 and 16 of the said Act it was clear that all matters including the issue as to whether the main contract was void/voidable could be referred to arbitration. The Court ought to decline arbitration only where the Court can reach the conclusion that the contract is void on a meaningful reading of the contract document itself without the requirement of any further proof.
8. As noted above, it is the case of the plaintiffs that their consent to the loan agreement was obtained without ::: Uploaded on - 08/01/2018 ::: Downloaded on - 09/01/2018 01:41:54 ::: cra27.12.odt 7/8 making them aware about its actual contents. In other words, according to the plaintiffs, the agreement would be voidable at their instance. It can be seen that the application under Section 9 of the said Act was entertained by the Court of Madras in which the said plaintiffs had filed an application for re-possession of the vehicle in question. The Arbitrator came to be appointed thereafter. In these facts, prima-facie the contention of the plaintiffs that the insertion of the arbitration clause was void cannot be accepted. In such situation, the Arbitrator would be competent to rule on his jurisdiction as per Section 16 of the said Act. The trial Court without considering the aforesaid legal position and by taking into consideration the dispute raised by the plaintiffs with regard to the manner in which the agreement was entered into rejected the application. I find that the trial Court committed a jurisdictional error when it continued to exercise jurisdiction by entertaining the suit despite existence of clause No.22 stipulating reference of disputes to an Arbitrator. The impugned order is therefore liable to be set aside.
9. In view of aforesaid discussion, the following ::: Uploaded on - 08/01/2018 ::: Downloaded on - 09/01/2018 01:41:54 ::: cra27.12.odt 8/8 order is passed:
(1) The order passed below Exhibit-30 dated 17-12- 2011 in Regular Civil Suit No.759/2011 is quashed and set aside.
(2) The application below Exhibit-30 is allowed in terms of prayer clause (1) thereof.
(3) It is clarified that the plaintiffs would be at liberty to raise all questions with regard to validity of the loan agreement before the Arbitrator. Observations made in this order are only for deciding the application under provisions of Order VII Rule 11 of the Code.
(4) The Civil Revision Application is allowed in aforesaid terms. No costs.
JUDGE /MULEY/ ::: Uploaded on - 08/01/2018 ::: Downloaded on - 09/01/2018 01:41:54 :::