Bombay High Court
M/S Kogta Financial India Ltd., ... vs Jayesn S/O Kishorlal Dawda, ... on 5 January, 2018
Bench: A.S. Chandurkar
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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-
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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
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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
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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.
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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
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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
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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/
