Bombay High Court
Narayana Farm Produce Pvt. Ltd. ... vs M/S Jalaram Feeds Thr. Partner, ... on 15 September, 2017
Bench: S.B. Shukre
(Judgment) 1509 CRA 58-2017 1/11
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH AT NAGPUR.
CIVIL RIVISION APPLICATION NO. 58/2017
1] Narayana Farm Produce Pvt. Ltd.,
Through its Director - Shri Sunil Menon,
Having its Registered Office at
R/o. Plot No.74, Pioneer Residency Park,
Somalwada, Wardha Road, Nagpur.
2] Shri Sunil Menon,
Director, Narayana Farm Produce Pvt. Ltd.,
Aged about major, Occu: Business,
R/o. Plot No.74, Pioneer Residency Park,
Somalwada, Wardha Road, Nagpur. APPLICANTS
.....VERSUS.....
M/s. Jalaram Feeds,
Through its Partner,
Shri Yogesh Kantilal Kataria,
Having its Registered Office at
K-31/3-A, M.I.D.C., Hingna Road, Nagpur. RESPONDENT
Shri U.L. Chhangani, counsel for applicants.
Shri S.S. Dewani, counsel for respondent.
CORAM: S.B. SHUKRE, J.
DATE : SEPTEMBER 15, 2017.
ORAL JUDGMENT :
Heard.
2] Rule. Rule made returnable forthwith.
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3] Heard finally by consent.
4] The dispute between the applicants, who
are the original defendants and the respondent, who
is the original plaintiff, revolves around the
maintainability or otherwise, of a summary suit before
the Civil Court, filed under Order 37 Rule 2 of the
Code of Civil Procedure (in short, "C.P.C.").
5] The learned counsel for the applicants
submits that the suit as filed by the respondent in the
instant case, is not maintainable because there is an
agreement containing arbitration clause prescribing
that in case of any dispute regarding any payment or
interest payable on the amount due, the matter shall
be referred to the sole Arbitrator appointed by the
original plaintiff i.e. respondent. He submits that
when an application was filed by the applicants
seeking leave to defend the summary suit, a specific
objection regarding maintainability of the suit, by
virtue of the availability of arbitration mechanism for
resolution of the dispute, was taken but the trial Court
(Judgment) 1509 CRA 58-2017 3/11
only granted leave to defend the suit and did not
decide the objection about the maintainability of the
suit. Therefore, he submits that it could not be taken
in the instant case that the objection regarding
maintainability of the suit was not raised at the time
of submission of first statement on the substance of
the defence. He also submits that the plaint filed by
the respondent does not show that there is any cause
of action as it has been stated by the applicants that
the statement of account disclosing some payments to
be made by the applicants to the respondent, was a
promissory note, which in fact, is not correct in view
of the definition of a promissory note under Section 4
of the Negotiable Instruments Act. He also submits
that an application filed under Order 7 Rule 11 of the
C.P.C. for rejection of plaint, can be filed at any point
of time as held by the Hon'ble Supreme Court in the
case of Saleem Bhai and otheres -Vs- State of
Maharashtra and others, (2003) 1 Supreme
Court Cases 557.
6] Shri Dewani, learned counsel for the
(Judgment) 1509 CRA 58-2017 4/11
respondent submits that the main issue required to be
decided when such an objection taken is as to
whether or not the defendant has waived his right of
arbitration and submitted himself to the jurisdiction of
the Civil Court. He submits that in the instant case
even though while granting a leave to defend the suit,
the Civil Court did not decide the objection regarding
maintainability of the suit because of availability of
arbitration clause, later on, the applicants filed their
written statement and thus submitted themselves to
the jurisdiction of the Civil Court, which could also be
construed as waiver of their right to seek arbitration
in the matter. He further submits that while deciding
such an application, only the plaint pleadings are
required to be considered and if they are so
considered, one would find that they disclose cause of
action.
7] On going through the plaint pleadings, the
application filed by the applicants for seeking leave to
defend the suit and other documents forming part of
the paper book, I find that there is a great substance
(Judgment) 1509 CRA 58-2017 5/11
in the argument of the learned counsel for the
respondent and no merit in the submissions made
across the bar by the learned counsel for the
applicants.
8] It is well settled law that an application
under Order 7 Rule 11 of C.P.C. can be filed by the
defendant at any stage of the suit, and this is reflected
in the case of Saleem Bhai -Vs- State of
Maharashtra (supra). But, this would be so only in
those cases, where the objection is not taken on the
maintainability of a suit on the ground of availability
of alternate mechanism in the nature of arbitration.
Whenever rejection of a plaint is sought on the
ground that alternate mechanism of arbitration is
available and referral of the dispute to arbitration is
also sought under Section 8(1) of the Arbitration and
Conciliation Act, 1996 (for short, "Arbitration Act"),
the condition prescribed in this very provision of law
would come into play. This condition is that the
referral of the dispute to arbitration must be sought
by the defendant not later than the date of submitting
(Judgment) 1509 CRA 58-2017 6/11
his first statement on the substance of the dispute. In
the case of Booz Allen and Hamilton Inc. -Vs- SBI
Home Finance Limited and others, AIR 2011 SC
2507, the Hon'ble Supreme Court has elaborated the
procedure to be adopted by the parties, for seeking
such referral of the dispute to the arbitration. The
Hon'ble Supreme Court has held that, in such a case,
the Court will have to decide: (i) whether there is an
arbitration agreement among the parties; (ii) whether
all the parties to the suit are parties to the arbitration
agreement; (iii) whether the dispute which is the
subject matter of the suit falls within the scope of
arbitration agreement; (iv) whether the defendant
had applied under Section 8 of the Act before
submitting his first statement on the substance of the
dispute; and (v) whether the reliefs sought in the suit
are those that can be adjudicated upon and granted in
an arbitration.
9] In the same case, in para no.25, the
Hon'ble Supreme Court observed that, not only filing
of the written statement in a suit, but filing of any
(Judgment) 1509 CRA 58-2017 7/11
statement, application, affidavit, by a defendant prior
to the filing of the written statement will be construed
as "submission of a statement on the substance of the
dispute", if by filing such a statement/application/
affidavit, the defendant shows his intention to submit
himself to the jurisdiction of the Court and waives his
right to seek reference to arbitration.
10] Same is the view taken by the Hon'ble
Supreme Court in the case of Rashtriya Ispat Nigam
Limited and another -Vs- M/s. Verma Transport
Company, AIR 2006 SC 2800. It also clarified in this
case that waiver of a right on the part of the
defendant to the lis must be gathered from the fact
situation obtaining in each case. Same principle of law
was also propounded by the Division Bench of
Bombay High Court in a 1954 case of Jadavji
Narsidas Shah and Company -Vs- Hirachand
Chatrabhuj, AIR 1954 Bom. 174. So now it would be
necessary to examine the conduct of the defendants,
who are applicants here to ascertain as to whether or
not they have waived their right to seek arbitration
(Judgment) 1509 CRA 58-2017 8/11
and have submitted themselves to the jurisdiction of
the Civil Court in the present case.
11] While it is true that the objection regarding
maintainability of the suit because of the presence of
the arbitration clause and the need for referring the
dispute to arbitration under Section 8(1) of the
Arbitration Act were expressed in clear words in an
application filed by applicants to seek leave to defend
and it is also true that while granting leave, the trial
court did not decide on applicants objection as to
maintainability of suit and need for referring the
dispute to arbitration. But, it is seen from the record
of the case that later on, these applicants never
insisted upon the trial court to decide their objection
on the maintainability of the suit as well as need for
referring the dispute to arbitration. On the contrary,
the applicants submitted their written statement in
the suit. The filing of the written statement by the
applicants, I must say, marked submission of their
first statement on the substance of the dispute thereby
showing their intention that the Civil Court must hear
(Judgment) 1509 CRA 58-2017 9/11
the parties and decide the dispute between the parties
on it's own merits. This clearly amounted to waiver of
the applicants' right to seek arbitration in the present
case. Therefore, I do not think that later rejection of
the application seeking rejection of plaint on the
ground of maintainability of suit because of existence
of arbitration clause by the trial court could be faulted
with in any manner.
12] As regards the second ground on which
rejection of the plaint has been sought by the
applicants, I would say this ground being based upon
merits of the matter, cannot be considered while
exercising power under Order 7 Rule 11 of C.P.C. and
therefore, I would further say, the trial court was right
in rejecting this objection as well.
13] It must be made clear here that the
rejection of the plaint on a ground relating to the
cause of action is possible only when the ground is
based upon non-disclosure of cause of action and is
found to be with substance. But, if the objection is
that there is no cause of action to file a suit, the
(Judgment) 1509 CRA 58-2017 10/11
objection is beyond the permissible limits of court's
power to reject a plaint under Order 7 Rule 11(a)
C.P.C., for such an objection touches upon the merits
of the case and cannot be decided just by looking into
the pleadings in the plaint and documents, if any,
which are part of the pleadings in the plaint. One
must be aware of fine distinction between a
contention that the plaint does not disclose a cause of
action and the submission that there is no cause of
action to file a suit. The former can be decided by
merely considering the plaint pleadings as they stand,
and if they disclose, in the reckoning of the plaintiff,
cause of action, the court is obliged to accept it as it is
and court cannot say it is wrong to contend that cause
of action exists; for, that would be a consideration on
merits beyond the scope of power under Order 7 Rule
11 C.P.C. The latter kind of objection can only be
decided by considering the defence of defendants and
evidence, if any, and so it is out of pale of power
under Order 7 Rule 11 C.P.C.
14] In this case the objection relating to cause
of action is that since statement of account contended
(Judgment) 1509 CRA 58-2017 11/11
by respondent-plaintiff to be a promissory note is in
reality not a promissory note as defined under Section
4 of the N.I. Act, 1881, there is no cause of action to
file a summary suit. Such an objection surely cannot
be decided by just looking into the plaint and would
call for examination of the defence of the applicants
and documentary evidence as well for it's
adjudication. That is like going into the merits of the
issue and so, was not rightly considered by the trial
court.
15] In this view of the matter, I find no merit
in the application. Application deserves to be rejected.
16] Application stands rejected.
17] Parties to bear their own costs.
18] Rule is discharged.
JUDGE
Yenurkar
