Bombay High Court
Sai Wardha Power Ltd. Through Its ... vs M/S Goyal Dhatu Udyog Pvt. Ltd., ... on 26 August, 2015
Bench: Z.A. Haq
Judgment 1 wp592.15.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO. 592 OF 2015
1. Sai Wardha Power Ltd.,
Previously known as Wardha Power
Company Ltd., through its Whole
Time Director Shri Sastry Ayyapa Kolluri,
Registered Office at 8-2-293/82/A/431/A,
Road No.122, Jubilee Hills, Hyderabad -
500 033.
2. Shri Sastry Ayyapa Kolluri,
Whole Time Director,
Wardha Power Company Ltd.,
Presently known as Sai Wardha
Power Ltd.
Registered Office at 8-2-293/82/A/431/A,
Road No.122, Jubilee Hills, Hyderabad -
500 033.
3. Shri Kishor Sethuraman,
Director, Wardha Power Company Ltd.,
Presently known as Sai Wardha
Power Ltd., R/o. B-3, Subhagya
Apartment, Gangamahal Colony,
Domalguda, Hyderabad - 500 029.
4. Shri Subramaniam Ramchandra Iyer,
Wardha Power Company Ltd.,
Presently known as Sai Wardha
Power Ltd., R/o. Flat No.R03, Rao Mansion,
Maleshwaram, 17th CR, 8th Main Road,
Bangalore - 560055.
5. Shri Baburaj Poyilikavil, Nominee
Director, Wardha Power Company Ltd.,
Presently known as Sai Wardha
Power Ltd., R/o. Flat No.12-B, 1st Floor,
DDA, MIG Flats, Sheikh Sarai, Phase-I,
New Delhi - 110 017.
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Judgment 2 wp592.15.odt
6. Shri Vyankatesh Subramanian,
Director, Wardha Power Company Ltd.,
Presently known as Sai Wardha
Power Ltd., R/o. Flat No.602, 7-1-39,
Shriniketan Apartment, Shyamkaran
Road, Ameerpeth, Hyderabad - 500 016.
7. Shri M.S.R. Saran Prasad,
Secretary, Wardha Power Company Ltd.,
Presently known as Sai Wardha
Power Ltd., R/o. D No.2-22/195/3,
Plot No. 155, Aruna Society, Near
Jaya Nagar, Opp. KPHB Colony,
Kukkutpally, Hyderabad, 500 072.
(Original Defendants)
.... PETITIONERS.
// VERSUS //
M/s. Goyal Dhatu Udyog Pvt.Ltd.
Through its director Shri Sourabh S/o.
Ashok Agrawal, having its office at
SG-1, Gulmohor, Opp. Hislop College,
Civil Lines, Nagpur - 44 0001.
(Original Plaintiff)
.... RESPONDENT
.
___________________________________________________________________
Shri Avinash Gharote, Advocate for Petitioners.
Shri R.M.Bhangde, Advocate for Respondent.
___________________________________________________________________
CORAM : Z.A.HAQ, J.
DATE OF RESERVING THE JUDGMENT : 14.08.2015.
DATE OF PRONOUNCING THE JUDGMENT : 26.08.2015.
ORAL JUDGMENT :
01. Heard learned advocates for the respective parties.
Judgment 3 wp592.15.odt
02. RULE. Rule made returnable forthwith.
03. The petitioners/original defendants have filed this petition
challenging the order passed by the trial Court rejecting the application
(Exh.16) filed by the petitioners praying that the parties be referred to
arbitration.
04.
The respondent has filed civil suit against the petitioners
praying for the decree for Rs.36,24,598/- along with interest. According to
the respondent/ plaintiff, the petitioners / defendants are liable to pay the
amount of Rs.28,53,743/- towards the balance payment for the supply of
goods made in February, 2014. The respondent/ plaintiff contends that as
per the terms and conditions incorporated in the bills, the plaintiff is entitled
to charge interest @ 24% per annum if the payment is not received within 30
days and therefore, the amount which is sought to be recovered from the
petitioners, includes interest of Rs.2,60,825/-. In addition, the respondent/
plaintiff has claimed damages of Rs.5,00,000/-, notice charges of Rs.5,000/-
and miscellaneous expenses of Rs.5,000/-. Thus, the total amount of
Rs.36,24,598/- is claimed.
05. The petitioners/ defendants filed application (Exh.16) under
section 8 of the Arbitration and Conciliation Act, 1996 praying that the
parties be referred to arbitration. According to the petitioners, the terms and
Judgment 4 wp592.15.odt
conditions of the contract between the parties are incorporated on the
purchase order and as per clause 11(a), any dispute arising between the
parties out of or relating to the purchase order is required to be settled by the
sole arbitrator to be appointed by the parties. The petitioners contend that
the claim of the respondent/ plaintiff is in respect of the amount for the
goods alleged to have been sold and delivered to the petitioner No.1 and the
petitioners are disputing the claim of the respondent. It is further submitted
that the petitioners are disputing the claim made by the respondent for
interest, damages, notice charges and miscellaneous expenses.
06. The learned trial Judge, by the impugned order, concluded that
the respondent/ plaintiff has not agreed in respect of the arbitration clause
and therefore, there is no arbitration agreement between the parties. The
learned trial Judge has accordingly rejected the application filed by the
petitioners. The petitioners, being aggrieved by the order passed by the trial
Court, has filed this petition.
07. Shri Gharote, learned advocate for the petitioners has assailed
the legality of the impugned order urging that the learned trial Judge has
committed an error in concluding that there is no arbitration agreement
between the parties, overlooking the specific condition on the purchase order
that in case of dispute, controversy or claim arising out of or relating to the
purchase order, the dispute shall be referred to sole arbitrator to be
Judgment 5 wp592.15.odt
appointed on mutual discussions. It is submitted that there need not be
written and signed agreement or contract between the parties containing the
clause of arbitration and the arbitration agreement can be inferred from the
letters, telex, telegrams or other means of telecommunication between the
parties. To fortify this submission reliance is placed on the following
judgments :
i) Judgment given in the case of Govind Rubber Ltd. Vs. Louids
Dreyfus Commodities Asia P. Ltd., reported in 2014(4) Scale
ii) Judgment given in the case of Trimex International FZE Ltd.
Dubai Vs. Vedanta Aluminium Ltd., India, reported in (2010) 3
SCC 1.
iii) Judgment given in the case of UNISSI (India) Pvt. Ltd. Vs. Post
Graduate Institute of Medical Education & Research, reported in
(2009) 1 SCC 107.
08. It is submitted that the claim of the respondent/ plaintiff is
based on the purchase order and even for the claim of interest, the
respondent/ plaintiff relies on the condition incorporated in the purchase
order and therefore, the conclusion of the learned trial Judge that there is no
arbitration agreement between the parties is unfounded.
09. Shri Gharote, learned advocate has submitted that when it is
established that there is arbitration agreement between the parties and an
application under Section 8 of the Arbitration and Conciliation Act, 1996 is
filed praying for referring the parties to arbitration and once it is established
Judgment 6 wp592.15.odt
that the dispute between the parties is covered by the arbitration clause, then
the trial Court is under obligation to refer the dispute for arbitration. In
support of this submission, the learned advocate has relied on the following
judgments :
i) Judgment given in the case of Agri Gold Exims Ltd. Vs. Sri
Lakshmi Knits & Wovens, reported in (2007) 3 SCC 686.
ii) Judgment given in the case of Branch Manager M/s. Magma
Leasing and Finance Ltd. .Vs. Potluri Madhavilata, reported in AIR
2010 SC 488.
It is submitted that in the present case all the requirements,
necessary for referring the parties to arbitration, have been established on
the record and therefore, the trial Court was under an obligation to stay the
civil suit and refer the parties to arbitration.
10. Shri Bhangde, learned advocate for the respondent has
submitted that there is no agreement between the parties and the
respondent/ plaintiff has not accepted the terms of the arbitration clause. It
is argued that the petitioners cannot impose the terms of arbitration clause
unilaterally and unless it is shown that the respondent agreed for the terms
of the arbitration clause, the trial Court cannot exercise jurisdiction under
Section 8 of the Arbitration and Conciliation Act, 1996. It is submitted that
the purchase order is not signed by the respondent and therefore, it cannot
be said that the respondent has agreed for the terms of arbitration clause.
Judgment 7 wp592.15.odt
11. It is submitted that the petitioners have accepted the liability to
pay the amount of Rs.28,53,443/- by issuing calculation sheet and therefore,
there is no dispute between the parties regarding the claim of the respondent
and consequently there is no need for referring the parties to arbitration.
In support of this contention the learned advocate has relied on
the following judgments :
i) Judgment given in the case of M/s. Rai & Sons Vs. M/s. Poysha
Industries Co.Ltd., reported in AIR 1972 AP 302.
ii) Judgment given in the case of Maruti Udyog Ltd. Vs. Mahalaxmi
Motors Ltd., reported in 2002(61) DRJ 398 = 95(2002) DLT
iii) Judgment given in the case of M/s. Sankar sealing Systems
Pvt.Ltd. Vs. M/s. Jain Motor Trading Co., reported in AIR 2004
Madras 127.
iv) Judgment given in the case of HDFC Bank Ltd. Mumbai Vs.
Ashish Sheshmani Pandey, reported in 2008(3) Mh.L.J. 865.
It is submitted that the petitioner Nos. 2 to 7 are Directors of
the company and they are not party to the purchase order and therefore,
even if the contentions of the petitioners relying on the terms of the purchase
order are to be accepted, there cannot be arbitration in respect of the claim
made by the respondent against the petitioner Nos. 2 to 7.
12. Relying on the judgment given in the case of SBP & Co. Vs. Patel
Engineering Ltd., reported in 2005(8) SCC 618, the learned advocate for the
respondent has submitted that the trial Court, while considering the
Judgment 8 wp592.15.odt
application under Section 8 of the Arbitration and Conciliation Act exercises
judicial powers and therefore, it has to examine whether the requirements
necessary for referring the parties for arbitration are existing or not. It is
submitted that the learned trial Judge has rightly concluded that there is no
arbitration agreement between the parties and therefore, the parties are not
required to be referred to arbitration. It is submitted that the petitioners are
unnecessarily delaying the disposal of the civil suit. It is urged that the
impugned order be maintained and the petition be dismissed with costs.
13. In reply, the learned advocate for the petitioners has submitted
that the claim made against the petitioner Nos. 2 to 7 is in their capacity as
Directors of the company and the claim is not against them in their personal
capacity. It is submitted that the calculation-sheet, on which the respondent
is relying, refers to the amount of Rs.28,53,443/- and there is nothing on the
record to show that the petitioners have accepted the liability to pay this
amount and the other amounts claimed by the respondent. It is submitted
that the claim made by the respondent for the amount of damages, interest
and other items is ancillary to the substantive claim made on the basis of the
purchase order and the petitioners are disputing the entitlement of the
respondent for these claims and therefore, the dispute will be covered by the
terms of the arbitration clause. It is prayed that the impugned order be set
aside and the application filed by the petitioners under Section 8 of the
Arbitration and Conciliation Act, 1996 be allowed.
Judgment 9 wp592.15.odt
14. After examining the documents placed by the parties on the
record of this writ petition, I find that there is no dispute between the parties
that the respondent is claiming the amount for the alleged supply of goods
on the basis of the purchase order dated 15th January, 2014, the supply is
alleged to have been made in February, 2014. The respondent claims interest
on the principal amount @ 24% per annum relying on the clause of the
purchase order. In this background, whether the clause of arbitration
incorporated in the purchase order can be considered as arbitration
agreement between the parties.
15. In the judgment given in the case of Govind Rubber Ltd. (supra)
the Hon'ble Supreme Court has dealt with this aspect and has recorded as
follows :
"15. Perusal of the aforesaid provisions would show that in
order to constitute an arbitration agreement, it need not be
signed by all the parties. Section 7(3) of the Act provides that
the arbitration agreement shall be in writing, which is a
mandatory requirement. Section 7(4) states that the
arbitration agreement shall be in writing, if it is a document
signed by all the parties. But a perusal of Clauses (b) & (c) of
Section 7(4) would show that a written document which may
not be signed by the parties even then it can be arbitration
agreement. Section 7(4)(b) provides that an arbitration
agreement can be culled out from an exchange of letters,
telex, telegrams or other means of telecommunication which
provide a record of the agreement.
16. Reading the provisions it can safely be concluded that an
arbitration agreement even though in writing need not be
signed by the parties if the record of agreement is provided by
exchange of letters, telex, telegrams or other means of
telecommunication. Section 7(4)(c) provides there can be an
Judgment 10 wp592.15.odt
arbitration agreement in the exchange of statements of
claims and defence in which the existence of the agreement is
alleged by one party and not denied by the other. If it can be
prima facie shown that the parties are at ad idem, then mere
fact of one party not signing the agreement cannot absolve
himself from the liability under the agreement. In the present
day of E-commerce, in cases of internet purchases, tele
purchases, ticket booking on internet and in standard forms
of contract, terms and conditions are agreed upon. In such
agreements, if the identity of the parties is established, and
there is a record of agreement it becomes an arbitration
agreement if there is an arbitration clause showing ad idem
between the parties. Therefore, signature is not a formal
requirement Under Section 7(4)(b) or 7(4)(c) or under 7(5)
of the Act.
17. We are also of the opinion that a commercial document
having arbitration clause has to be interpreted in such a
manner as to give effect to the agreement rather than
invalidate it. On the principle of construction of a
commercial agreement, Scrutton on Charter Parties (17 th
Edition, Sweet & Maxwell, London, 1964) explained that
commercial agreement has to be construed, according to the
sense and meaning as collected in the first place from the
terms used and understood in the plain, ordinary and
popular sense (See Article 6 at page 16). The learned Author
also said that the agreement has to be interpreted 'in order to
effectuate the immediate intention of the parties'. Similarly,
Russel on Arbitration (21st Edition) opined, relying on Astro
Vendeor Compania Naviera SA v. Mabanaft GmbH
(1970) 2 (Llyod's Rep. 267, that the Court should, if the
circumstances allow, lean in favour of giving effect to the
arbitration clause to which the parties have agreed. The
learned Author has also referred to another judgment in Paul
Smith Ltd. v. H and S International Holdings Inc. (1991)
2 Llyods Rep. 127 in order to emphasize that in construing
an arbitration agreement the Court should seek to 'give effect
to the intentions of the parties'. (See page 28 of the book).
18. The Apex Court also in the case of Union of India v.
D.N. Revri and Co. MANU/SC/0003/1976 : AIR 1976 SC
2257, held that a commercial document between the parties
must be interpreted in such a manner as to give efficacy to
the contract rather than to invalidate it. The learned Judges
clarified it by saying:
Judgment 11 wp592.15.odt
"7. It must be remembered that a contract is a
commercial document between the parties and it
must be interpreted in such a manner as to give
efficacy to the contract rather than to invalidate
it. It would not be right while interpreting a
contract, entered into between two lay parties, to
apply strict rules of construction which are
ordinarily applicable to a conveyance and other
formal documents. The meaning of such a contract
must be gathered by adopting a common sense
approach and it must not be allowed to be
thwarted by a narrow, pedantic and legalistic
interpretation."
19. ...
20. ...
21. ...
22. It is clear that for construing an arbitration agreement,
the intention of the parties must be looked into. The
materials on record which have been discussed hereinabove
make it very clear that the Appellant was prima facie acting
pursuant to the sale contract issued by the Respondent. So, it
is not very material whether it was signed by the second
Respondent or not."
In the judgment given in the case of UNISSI (India) Pvt.Ltd.
(supra) the Hon'ble Supreme Court has dealt with this issue and has
recorded as follows :
"15. Keeping the aforesaid principles, as quoted hereinabove, in
the aforesaid decisions of this Court in mind, in fact what
constitutes an arbitration agreement between the parties, we
have to examine whether there exists an arbitration agreement
between the parties or not in the facts and circumstances of the
case. Let us, therefore, consider the gist of the facts involved in
this case. A tender enquiry No.2PGI/OGL/2K/6281 dated
21.12.2000 for purchase of Pulse Oxymeters was floated by
PGI. It is an admitted position that the appellant submitted
their tender vide their offer No.UIPL/331177/00-01 dated
15.1.2001. The tender of the appellant was accepted by PGI
Judgment 12 wp592.15.odt
vide their letter No.PGI/P-61/02/477/11936-51 dated
29.9.2002 for supplying forty-one Pulse Oxymeters to their
different departments. The tender documents itself contain an
arbitration clause and by reason of acceptance of the tender of
the appellant by PGI, it must be held that there was a valid
arbitration agreement between the parties. The appellant
supplied forty-one Pulse Oxymeters and the receipt thereof was
duly acknowledged on behalf of PGI on the delivery challans.
The service/installation reports of the aforesaid machines were
duly signed on behalf of PGI. In the letters issued by PGI, there
was an apparent acknowledgement of supply of the aforesaid
meters by the appellant and also reference to the
aforementioned tender enquiry number.
16. It is an admitted position that the appellant had sent the
agreement containing the arbitration clause, as per the format
provided by PGI, after duly signing the same on requisite value
of stamp paper for signing of the same by PGI. PGI though
admittedly received the same, did not send back the agreement
to the appellant after signing it as per the agreement between
the parties. PGI admittedly had used the machines for about an
year and thereafter returned the same to the appellant.
Subsequently, the bank guarantee furnished by the appellant
for Rs.2,13,160/- and the earnest money deposit of Rs.45,000/-
was encashed and forfeited by PGI.
17. In view of the aforesaid facts and the correspondences
between the parties, particularly the tender offer made by the
appellant dated 15.1.2001 and supply order of PGI dated
29.9.2002, and, in our view, to constitute an arbitration
agreement between the parties and the action taken on behalf
of the appellant and in view of Section 7 of the Act and
considering the principles laid down by the aforesaid two
decisions of this Court, as noted herein earlier, we are of the
view that the arbitration agreement did exist and therefore the
matter should be referred to an Arbitrator for decision. That
apart, as we have already noted herein earlier that in this case,
the documents on record, in our view, apparently show supply
of materials by the appellant and acceptance thereof by PGI in
pursuance of the tender enquiry by PGI, wherein tender of the
appellant containing an arbitration clause was admittedly
accepted by the respondent. In that view of the matter, it cannot
be said that PGI should now be allowed to wriggle out from the
arbitration agreement between them.
Judgment 13 wp592.15.odt
18. We may reiterate that in this case admittedly the documents
which are on record apparently show supply of the material by
the appellant to PGI and acceptance thereof by PGI in
pursuance of the tender enquiry by them wherein tender of the
appellant containing the arbitration clause was admittedly
accepted by PGI. Accordingly, we hold that arbitration
agreement did exist and, therefore, dispute between the parties
would be referred to an Arbitrator for decision.
19. Therefore, considering the above aspects of the matter in
this case, we must come to this conclusion that although no
formal agreement was executed, the tender documents
indicating certain conditions of contract contained an
arbitration clause. It is also an admitted position that the
appellant gave his tender offer which was accepted and the
appellant acted upon it. Accordingly, we are of the view that the
learned Additional District Judge, Chandigarh erred in holding
that their did not exist any arbitration agreement between the
parties and, therefore, the order passed by him is liable to be set
aside."
In the judgment given in the case of Trimex International FZE
Ltd., Dubai (supra) the Hon'ble Supreme Court has dealt with this issue and
has recorded in paragraphs 16 and 17 as follows :
"16) In Shakti Bhog Foods Limited v. Kola Shipping
Limited, (2009) 2 SCC 134, this Court held that from the
provisions made under Section 7 of the Arbitration and
Conciliation Act, 1996 that the existence of an arbitration
agreement can be inferred from a document signed by the
parties, or an exchange of letters, telex, telegrams or other
means of telecommunication, which provide a record of
the agreement.
17) It is clear that in the absence of signed agreement
between the parties, it would be possible to infer from
various documents duly approved and signed by the
parties in the form of exchange of e-mails, letter, telex,
telegrams and other means of tele-communication."
Judgment 14 wp592.15.odt
16. It is clear from the proposition laid down in the above
judgments that the intention of the parties has to be looked into while
construing the arbitration agreement and it is not necessary that the
arbitration agreement should be signed by the parties. The arbitration
agreement can be inferred from the various documents in the form of
e-mails, letters, telex, telegrams and other means of telecommunication. In
the present case, the respondent has made the claim relying on the purchase
order and the claim of interest is also made relying on the terms incorporated
on the purchase order. The facts on the record show that the parties have
acted upon the purchase order. Under these circumstances, the submission
made on behalf of the respondent that there is no arbitration agreement
between the parties cannot be accepted, overlooking the terms of the
arbitration clause incorporated in the purchase order. The learned trial Judge
has committed an error by concluding that there is no signed agreement
between the parties requiring the reference of dispute for arbitration. The
impugned order is unsustainable in law and has to be set aside.
17. The learned trial Judge has rejected the application filed by the
petitioners under Section 8 of the Arbitration and Conciliation Act, 1996 on
the ground that there is no arbitration agreement between the parties. The
learned trial Judge has not adverted to the issue as to whether the dispute
between the parties is required to be referred for arbitration. In normal
course, after setting aside the impugned order the matter should have been
Judgment 15 wp592.15.odt
remitted to the trial Court for considering the issue as to whether the dispute
between the parties is covered by the arbitration clause and as to whether the
dispute is required to be referred for arbitration. However, the learned
advocates for the respective parties have made elaborate submissions on this
issue also as this issue is interlinked with the point raised by the parties
regarding existence of the arbitration agreement. Therefore, in my view, it
would be appropriate to deal with this issue also. The adjudication on the
issue as to whether the parties should be referred to arbitration will also be
in the interest of the respondent, considering its grievance that the matter is
being unnecessarily prolonged.
18. In the judgment given in the case of Branch Manager, M/s.
Magna Leasing (supra) the Hon'ble Supreme Court has laid down as follows :
"22. An analysis of Section 8 would show that for its
applicability, the following conditions must be satisfied:
(a) that there exists an arbitration agreement; (b) that
action has been brought to the court by one party to the
arbitration agreement against the other party; (c) that the
subject matter of the suit is same as the subject matter of
the arbitration agreement; (d) that the other party before
he submits his first statement of the substance of the
dispute, moves the court for referring the parties to
arbitration; and (e) that along with the application the
other party tenders the original arbitration agreement or
duly certified copy thereof."
In the judgment given in the case of Agri Gold Exims (supra) the
Hon'ble Supreme Court has laid down as follows :
Judgment 16 wp592.15.odt
"15. Difference between Section 34 of the Arbitration Act,
1940 and Section 8 of the 1996 Act is distinct and
apparent. Section 8 of the 1996 Act makes a radical
departure from Section 34 of the 1940 Act. The 1996 Act
was enacted in the light of UNCITRAL Model Rules.
16. We need not dilate on this issue as this aspect of the
matter has been considered by this Court in Rashtriya
Ispat Nigam Ltd. v. Verma Transport co. wherein this
Court noticed (SCC pp 285-86, paras 24-25):
"24. Section 34 of the repealed 1940 Act
employs the expression 'steps in the
proceedings'. Only in terms of Section 21 of the
1940 Act, the dispute could be referred to
arbitration provided parties thereto agreed.
Under the 1940 Act, the suit was not barred.
The Court would not automatically refer the
dispute to an arbitral tribunal. In the event, it
having arrived at satisfaction that there is no
sufficient reason that the dispute should not be
referred and no step in relation thereto was
taken by the applicant, it could stay the suit.
25. Section 8 of the 1996 Act contemplates
some departure from Section 34 of the 1940
Act. Whereas Section 34 of the 1940 Act
contemplated stay of the suit; Section 8 of the
1996 Act mandates a reference. Exercise of
discretion by the judicial authority, which was
the hallmark of Section 34 of the 1940 Act,
has been taken away under the 1996 Act. The
direction to make reference is not only
mandatory, but the arbitration proceedings to
be commenced or continued and conclusion
thereof by an arbitral award remain
unhampered by such pendency. [See O.P.
Malhotra's 'The Law and Practice of
Arbitration and Conciliation', 2nd Edition, pp.
346-347]"
I have recorded that the arbitration agreement exists between
the parties. The respondent and the petitioner No.1 are party to the
Judgment 17 wp592.15.odt
arbitration agreement. Prima-facie, the claim against the petitioner Nos. 2 to
7 has been made in their capacity as Directors of the petitioner No.1
company. The purchase order on which the arbitration clause is
incorporated is not disputed by the parties and in fact, the respondent/
plaintiff has made the claim relying on the purchase order. In these facts,
applying the ratio laid down by the Hon'ble Supreme Court in the judgment
given in the case of Branch Manager, M/s. Magma and in the judgment given
in the case of Agri Gold Exims Ltd. it has to be held that the conditions
prerequisite for referring the parties to arbitration exist and there is no
option for the Court but to refer the parties to arbitration.
19. The judgment given in the case of SBP & Co. (supra) lays down
that Sections 8 and 11 of the Arbitration and Conciliation Act, 1996 are
complementary in nature and when one of the parties ignoring the
arbitration agreement, files a claim before a judicial authority and the other
party raises the objection that the parties have to resort to arbitration, the
judicial authority has to consider the objection and if the objection is found
sustainable, it has to refer the parties to arbitration. It is laid down that the
judicial authority is bound to decide the jurisdictional issue raised before it
before declining to make the reference. It is laid down that when the
defendant before the judicial authority raises a plea that there is an
arbitration agreement and the subject matter of the claim is covered by the
agreement, the judicial authority has to decide whether, in fact, there is in
Judgment 18 wp592.15.odt
existence a valid arbitration agreement and whether the dispute raised
before it is covered by the arbitration clause. The judgment given in the case
of SBP & Co. (supra) does not assist the respondent for urging that the
parties are not required to be referred for arbitration.
20. In the judgment given in the case of Rai and Sons Pvt.Ltd.
(Supra), the defendant admitted the liability throughout and sought
accommodation for payment, asking for postponement of the encashment of
the cheques given by him to the plaintiff in that case. Similarly, in the case of
Maruti Udyog Ltd. (supra) the Managing Director of the defendant company
in that case accepted the liability to pay the amount claimed by the plaintiff
and undertook to discharge the liability by making payment in instalments.
In case of M/s.Sankar Sealing Systems Ltd. (supra) also the defendant
admitted most part of the liability. In case of HDFC Bank Ltd., Mumbai
(supra) the defendant in that case admitted that the plaintiff had paid all the
amount and the dispute was not regarding the amount payable by the
plaintiff in that case to the defendant. Moreover, the defendant in that case
had not made any application praying for reference of the matter to the
arbitration. In these facts, it is held in the above referred cases that the
dispute did not exist between the parties and therefore, there was no
requirement to refer the parties to arbitration.
Judgment 19 wp592.15.odt
In the present case, the petitioners are disputing the claim of
the respondent and the petitioners have filed an application praying for
referring the parties to arbitration. I have recorded that the arbitration
agreement exists between the parties and the dispute between the parties is
covered by it. Therefore, the dispute has to be referred for arbitration.
21. In view of above, the following order is passed :
i) The impugned order is set aside.
ii) The application (Exh.16) filed by the petitioners is allowed.
iii) The parties are referred to arbitration as per clause 11(K) (b) of
the purchase order dated 15th January, 2014.
Rule is made absolute in the above terms. In the circumstances,
the parties to bear their own costs.
JUDGE
RRaut..
