Bombay High Court
Girish Manubhai Parekh vs M/S.Continental Steel ... on 10 October, 2008
Bench: Anoop V.Mohta
dgm
gm IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO.2686 OF 2007
IN
S.C. SUIT NO.4142 OF 2006
OF BOMBAY CITY CIVIL COURT AT BOMBAY
WITH
C.A. NO.3180 OF 2007
Girish Manubhai Parekh ...Appellant
Vs.
M/s.Continental Steel Corporation & ors...Respondents.
Mr.Jayesh Bhatt for the Appellant.
Mr.G.S.Godbole with Mr.Suresh Gole for the
Respondents.
ig CORAM : ANOOP V.MOHTA, J.
DATED : 10th October, 2008.
JUDGMENT:
By consent, heard finally.
2. This is the First Appeal filed by the original
plaintiff against the order dated 22.03.2007 passed in
Regular Civil Suit No.4142/2006 by the learned Judge of
Bombay City Civil Court at Bombay, whereby in Notice of
Motion, by consent of the parties, a preliminary issue
of maintainability of the Suit was raised and decided
against him by holding that Suit is not maintainable in
view of the scheme and object of The Arbitration and
Conciliation Act, 1996 (for short, "The Arbitration
Act, 1996").
( 2 )
3. On 26.02.2007 the Court has framed the following
issues:
Whether defendants prove that in view of
Arbitration Act this Hon'ble Court has no
jurisdiction to entertain and try the present
Suit?
4. The relevant events and facts are as under:
.
In November, 2001, Respondents 1 to 5 requested the
Appellant to import waste paper on their behalf and
made on account payment of Rs.10,00,000/-. Appellant
imported goods worth about Rs.21,66,230/- on behalf of
Respondents 1 to 5.
5. On 28.04.2004 the Appellant become entitled to
receive Rs.13,82,835/- as his share of profit in the
said import business in view of various amounts already
paid by him to Respondents 1 to 5.
6. On 29.04.2005, the Advocate for Respondents 1 to 5
addressed letter to the Appellant contending that the
Appellant allegedly executed alleged writing dated
( 3 )
01.04.2003 interalia admitting his alleged liability to
pay Rs.31,80,000/- to the Respondents 1 to 5 with
interest at 24% and also allegedly agreeing to refer
the matter to Arbitrator to be appointed by Respondents
1 to 5 in the event of non payment. By the said letter
the said Advocate threatened to refer the matter to
alleged Arbitrator Mr.Bharat B. Jain if payment was
not made as per alleged Arbitration Agreement. On
11.05.2005 Appellant through his Advocate denied having
executed alleged writing dated 01.04.2003 and asked for
inspection of the same.
amount. On
ig21.07.2005
The appellant has not paid the
Mr.Bharat B. Jain Advocate
claiming to be sole Arbitrator allegedly appointed by
Respondents 1 to 5 as per said alleged writing dated
01.04.2003, fixed meeting for Arbitration. Number of
letters were thereafter exchanged between the parties
where Appellant pointed out that the alleged
Arbitration was without any authority and the said
alleged writing dated 01.04.2003 is a forged one.
7. On 07.12.2005 Mr.Bharat B. Jain Advocate addressed
letter recording that he was withdrawing from
Arbitration as his conscience did not allow to continue
as Arbitrator in view of serious allegations of forgery
and pendency of criminal case in respect thereof.
( 4 )
8. On 16.12.2005 Mr.Piyush M. Shah, Advocate
addressed letter claiming to be appointed by
Respondents 1 to 5 as Arbitrator under alleged writing
dated 01.04.2003. The Appellant pointed out the
relevant facts to Mr.Piyush M. Shah but he persisted
in going on with the alleged Arbitration.
9. On 20.02.2006 Mr.Piyush M. Shah addressed letter
directing Appellant to deposit Rs.20,000/- with him on
account of alleged Arbitration fee.
10. On 21.08.2006 Respondent no.6 passed an ex-parte
Order in the alleged Arbitration proceeding for
forwarding the alleged confirmation letter dated
01.04.2003 to handwriting expert.
11. On 12.09.2006 the Appellant filed the Suit.
12. On 29.09.2006 the Judge of the City Civil Court
passed order recording that next date for Arbitration
is not fixed and directing Respondent no.6 to give
notice if he wanted to fix any meeting for hearing.
Liberty was granted to the Appellant to move Court for
ad-interim relief if such notice is received. Such
( 5 )
notice has thereafter not been issued till date.
13. The relevant Section 16 of Arbitration Act, 1996
is reproduced as under:
16. Competence of arbitral tribunal to rule
on its jurisdiction. - (1) The arbitral
tribunal may rule on its own jurisdiction,
including ruling on any objections with
respect to the existence or validity of the
arbitration agreement, and for that
purpose.-
(a) an arbitration clause which
forms part of a contract shall be
treated as an agreement independent
of the other terms of the contract;
and
(b) a decision by the arbitral
tribunal that the contract is null
and void shall not entail ipso jure
the invalidity of the arbitration
clause.
(2) A plea that the arbitral tribunal does
not have jurisdiction shall be raised not
later than the submission of the statement
of defence; however, a party shall not be
precluded from raising such a plea merely
because that he has appointed, or
participated in the appointment of, an
arbitrator.
(3) A plea that the arbitral tribunal is
exceeding the scope of its authority shall
be raised as soon as the matter alleged to
be beyond the scope of its authority is
raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of
the cases referred to in sub-section (2) or
sub-section (3), admit a later plea if it
considers the delay justified.
(5) The arbitral tribunal shall decide on a
plea referred to in sub-section (2) or
( 6 )
sub-section (3) and, where the arbitral
tribunal takes a decision rejecting the
plea, continue with the arbitral proceedings
and make an arbitral award.
(6) A party aggrieved by such an arbitral
award may make an application for setting
aside such an arbitral award in accordance
with section 34.
14. A Constitutional Bench of the Apex Court in SBP &
Co. v. Patel Engineering Limited & another, while
dealing with Section 11(6) & (7) and Section 16 of the
Arbitration Act has observed as under:
"19.
recognition
Section 16 is
of
Kompetenz-Komopetenz.
the
said to be
principle
The fact that the
the
of
arbitral tribunal has the competence to rule
on its own jurisdiction and to define the
contours of its jurisdiction, only means
that when such issues arise before it, the
Tribunal can and possibly, ought to decide
them,. This can happen when the parties
have gone to the arbitral tribunal without
recourse to Section 8 or 11 of the Act. But
where the jurisdictional issues are decided
under these Sections, before a reference is
made, Section 16 cannot be held to empower
the arbitral tribunal to ignore the decision
given by the judicial authority or the Chief
Justice before the reference to it was made.
The competence to decide does not enable the
arbitral tribunal to get over the finality
conferred on an order passed prior to its
entering upon the reference by the very
statute that creates it ....."
15. Subsequently, the Supreme Court in McDermott
International Inc. v. Burn Standard Co. Ltd. and
others, reported in (2006) 11 SCC 181 while dealing
( 7 )
with Sections 16, 34 & 37 has observed in para 51 as
under:-
"51. After the 1996 Act came into force,
under Section 16 of the Act the party
questioning the jurisdiction of the
arbitrator has an obligation to raise the
said question before the arbitrator. Such a
question of jurisdiction could be raised if
it is beyond the scope of his authority. It
was required to be raised during arbitration
proceedings or soon after initiation
thereof. The jurisdictional question is
required to be determined as a preliminary
ground. A decision taken thereupon by; the
arbitrator would be the subject matter of
challenge under Section 34 of the Act. In
the event the arbitrator opined that he had
no jurisdiction in relation thereto an
appeal thereagainst was provided for under
section 37 of the Act."
The said principle has further been reiterated by Apex
Court in National Thermal Power Corporation Limited
vs. Siemens Atkeingesellschaft reported in (2007) 4
SCC 451.
16. Therefore, taking overall view of the scheme of
Section 16, one thing is very clear that Arbitrator
has power to decide the applications with regard to
the existence of arbitration agreement and objection
in respect of jurisdiction. The Arbitrator having
once taken decision and rejected the objection with
regard to the jurisdiction and observed further that
there is existence of arbitration agreement between
( 8 )
the parties and proceed accordingly, such order cannot
be challenged except the remedy as available under
Section 34 and or Section 37 of the Arbitration Act as
referred above.
17. Another important facet is Section 5 of the
Arbitration Act which is reproduced as under:
"S.
S. 5 Extent of judicial intervention.-
Notwithstanding anything contained in any
other
matters
iglaw for the time being in
governed by this Part, no
force,
judicial
in
authority shall intervene except where so
provided in this part."
18. It is clear that Section 5 applies to the matters
governed by Part I. Section 16 is part of this part.
The opening non-obstante clause therein clearly
indicates that it overrides provisions in any other
statute. As a result, judicial intervention is
permissible only where it is specifically provided for
in this part (Shri Subhalaxmi Fabrics vs. Chandralal
Barodia/Manu/SC0231/2005; (2005) 10 SCC 704. The
principal object of Section 5 is to promote and
encourage resolution of disputes expeditiously and
( 9 )
less expensively. Especially when there is an
arbitration agreement, the Court's intervention should
be minimal. (T. Anand Gajapatty Raju vs. PVG Raju
AIR 2000 SC 1886).
19. The conclusion in SBP & Co. vs. Patel
Engineering Ltd. (supra) with regard to Sections 16,
34 & 37 clinches the issue against the appellants,
viz.
"(vi)
Tribunal
Once
or
the matter reaches the
the sole arbitrator,
ARbitral
the High
Court would not interfere with the orders
passed by the Arbitrator or the ARbitral
Tribunal during the course of the arbitration
proceedings and the parties could approach
the Court only in terms of Section 37 of the
Act or in terms of Section 34 of the Act,
(ix) In a case where an Arbitral Tribunal has
been constituted by the parties without
having recourse to Section 11(6) of the Act,
the Arbitral Tribunal will have the
jurisdiction to decide all matters as
contemplated by Section 16 of the Act".
( 10 )
20. Now that the Apex Court has declared as above
that there is no option and considering the scheme and
purpose of the Arbitration Act, 1996 the order of
dismissal of Suit needs no interference.
21. The decision of Apex Court in Atul Singh & ors.
v. Sunil Kumar Singh & ors., (2008) 2 SCC 602, as
relied upon by the learned counsel for the Appellant
is
of no assistance to support his submissions.
judgment revolves around Sections 7 and 8 of
That
the
Arbitration Act, 1996. Before reference, an objection
was raised about the validity of the Arbitration
Agreement. In a Suit, pursuant to Section 8 no
original arbitration agreement or duly certified copy
thereof was filed and, therefore, no order for
referring the dispute to arbitration was passed in the
Suit. The relief having the partnership deed as
illegal and void can be granted by the Civil Court and
not by Arbitrator. Plaintiffs or Respondents through
whom plaintiffs derive title are not parties to the
said Deed and, therefore, also the trial Court refused
to refer the matter to Arbitration. The Apex Court in
this background has maintained the said order. In the
( 11 )
present case, as per agreement and arbitration clause
itself, the Arbitrator was appointed. Therefore, this
is a case where matter is pending before arbitral
tribunal as contemplated under Section 16 of the
Arbitration Act, 1996. In view of the scheme and
object of Arbitration Act, 1996 and clear dictum of
the Apex Court as recorded above, the facts and
circumstances of this case (Atul Singh) itself makes
the case distinct and distinguishable. Therefore, it
is not applicable as admittedly in the present case
the
and,
Appellant is party to the suit contract/agreement
therefore, bound by the said arbitration clause
based upon which the Arbitrator has been appointed and
the parties appeared before the Tribunal. The
Appellant, after many correspondences, filed the Suit
for declaration that such agreement/writing is null
and void and/or obtained by fraud or misrepresentation
and, therefore, not binding. All these facets
including the existence of arbitration agreement and
its effect on the constitution of the Tribunal
including the jurisdiction of the Tribunal to proceed
with the matter can very well be decided by the
Tribunal.
22. It is apt to quote the observation of the Supreme
( 12 )
Court in Maharshi Dayanand Univesity & anr. v. Anand
Coop. L/C society Ltd. & anr., (2007) 5 SCC 295:
"13. But we make it clear that the
arbitrator, in the first instance, has to
decide whether the existence of an
arbitration agreement in terms of Section 7
of the Act is established and also to decide
whether the claim now made is a claim that
comes within the purview of clause 25-A of
the tender conditions in case it is found to
be an agreement within the meaning of
Section 7 of the Act. Only on deciding
these two aspects can the arbitrator go into
the merits of the claim made by the
respondent. But we clarify that it does not
mean, that he should treat these two aspects
as preliminary issues and decide them first
but only that he must decide them without
fail while proceeding to finally pronounce
his award.
14. In this view of the matter, we see no
reason to interfere with the appointment of
an arbitrator. We dismiss this appeal
giving liberty to the parties to raise all
their contentions based on lack of
jurisdiction of the Arbitral Tribunal before
the arbitrator. The arbitrator will permit
the appellant to amend or supplement the
objections already filed by it if it is felt
necessary by the appellant. We make no
order as to costs."
As noted the appellant has challenged the said letter
dated 1.4.2003, the contents of which are as under:
Multiple Import & Export Inc.
41, Vaidya Mansion, 2nd floor, Flat No.4,
Opp.Cross Road, Haji Ali, Mumbai 400 034,
India.
------------------------------------------
01.04.2003
( 13 )
CONFIRMATION LETTER
1. It is agreed and confirmed on part of the
Multiple Import & Export Inc. that they are
liable to pay a sum of Rs.42,92,929.99 (Rupees
Forty Two Lacs Ninety Two Thousand Nine
Hundred Twenty Nine & Paise Ninety Nine only)
to M/s.Continental Steel Corporation,
comprising of Rs.31,80,000/- principal amount
and a sum of Rs.11,12,929.99 the amount of
interest computed upto 31.03.2003 @ 24% p.a.
as per the statements of accounts attached
(four pages).
2. It is hereby confirmed on part of the
Multiple Import & Export Inc. that the said
principal amount of Rs.31,80,000/- is
comprising of the following amounts paid by
M/s.Continental Steel Corporation to Multiple
Import & Export Inc. and to the concerned
various authorities / parties for and on
behalf of Multiple Import & Export Inc.
i) Rs.2,10,795.00 paid for custom duty.
ii) Rs.16,00,000.00 paid to M/s.New Plastomer
(I) Ltd. (Kandla) - paid at Gandhidham-Kutch,
iii) Rs.13,69,205.00 paid directly to Multiple
Import & Export Inc.
3. Multiple Import & Export Inc. agrees to
repay the said amount of Rs.42,92,929.99 to
M/s.Continental Steel Corporation with
interest thereon @ 24% p.a. within the period
of one year and after six months from today.
4. It is agreed between the parties hereto
that all the disputes and/or differences
including non payment of dues under this
writing shall be referred to the Sole
Arbitration of a person to be appointed by
M/s.Continental Steel Corporation having its
address at 12/14, Ardeshir Dady Street, Near
Alankar Cinema, Mumbai 400 004. The
Arbitration shall be conducted subject to
Mumbai jurisdiction under the provisions of
the Arbitration & Conciliation Act, 1996.
Kindly return the copy thereof duly confirmed.
( 14 )
We confirm,
Sd/- Sd/-
For Continental Steel For Multiple Import &
Corporation. Export Inc. "
23. In view of above and considering the scheme of
Arbitration Act, 1996 including Section 5 it is
appropriate and desirable that the Civil Court should
not interfere with the said proceedings which is
pending before the Tribunal. The Suit for such
declaration therefore as filed by the
of
Appellant/plaintiff is rightly dismissed on the ground
maintainability as not triable by the Civil Court
in view of clear dictum of the Apex Court.
24. In view of this, the present Appeal is dismissed.
25. In view of this, Civil application also stands
disposed of accordingly.
( ANOOP V. MOHTA, J.)
