Bombay High Court
Overseas Infrastructure Alliance ... vs Railsys Engineers Private Ltd on 13 December, 2023
Author: Abhay Ahuja
Bench: Abhay Ahuja
2023:BHC-OS:15384
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INTERIM APPLICATION (L) NO. 33664 OF 2022
IN
SUMMONS FOR JUDGMENT NO. 68 OF 2021
Overseas Infrastructure Alliance Pvt. Ltd. & Anr.
501-502, OIA House, 470, Cardinal Graciuos Road,
Andheri East, Mumbai-99 ...Applicants
In the matter between
M/s Railsys Engineers Private Ltd.
A Private Limited Company, duly registered
under the Indian Companies Act, 1956,
having their registered address at
B-503, Trishla, Sant Gadge Lane,
Datta Saheb Phalke Road,
Dadar East, Mumbai-400014 and
its corporate office at 322, 3rd Floor,
Skylark Building, Plot No. 63, Sector 11,
CBD Belapur, Navi Mumbai-400 614.
Through its Director Jyoti Sanjay Singh
Occupation Service, Mobile No. 9820201661
E mail id :[email protected], [email protected]
Aged 49 years ...Plaintiff
V/s.
Overseas Infrastructure Alliance Pvt. Ltd.
A Private Limited Company registered under
the provisions of Indian Companies Act, 1956
having their registered address at
501-502, OIA House, 470, Cardinal Graciuos Road,
Andheri East, Mumbai-99
through its Director Defendant No.2.
Nikita Gadgil 1/18
::: Uploaded on - 27/12/2023 ::: Downloaded on - 29/02/2024 23:44:30 :::
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
2. Purshottam Maheshwari
age not known through its Director of
Overseas Infrastructure Alliance (India)
Private Limited having its address at
501-502, OIA House, 470, Cardinal Graciuos Road,
Andheri East, Mumbai-99 ...Defendants
WITH
SUMMONS FOR JUDGMENT NO. 68 OF 2021
IN
COMMERCIAL SUMMARY SUIT NO. 86 OF 2021
Ms. Shyamli Hajela i/b H and M Legal Associates, Advocate for
Plaintiff.
Mr. P. G. Sabnis, Advocate for Defendants.
CORAM : ABHAY AHUJA, J.
DATE : 13th DECEMBER, 2023
ORAL JUDGMENT :-
1. This is an application filed by the Defendants in the summons for
judgment in the commercial summary suit seeking rejection/dismissal
of the suit as not maintainable in view of Section 8 of the Arbitration
and Conciliation Act, 1996.
2. Mr. Sabnis, learned Counsel for the Defendants would submit
that in view of the specific Clause in the contract between the Plaintiff
and Defendants, this suit is not maintainable and the dispute between
the parties be referred to arbitration, pursuant to Section 8 of the
Arbitration and Conciliation Act, 1996.
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
3. Learned Counsel draws the attention of this Court to paragraph 4
of the plaint and submits that it is an admitted position that the
Plaintiff and Defendant No.1 had entered into a contract agreement
dated 21st October, 2011 (the "said contract"), whereby the Plaintiff
was to provide consultancy services with respect to rail related
infrastructure developments to the Defendants. Learned Counsel would
submit that the Plaintiff has purported to make a claim on the
outstanding invoices raised under the said contract dated 21 st October,
2011.
4. Mr. Sabnis, learned Counsel for the Defendants submits that this
summary suit is not maintainable in view of Clauses 19.2 and 19.3 of
the said contract, which are quoted as under:-
"19.2 If the dispute is not resolved through friendly
consultations within thirty (30) days after a party of one
part first informs the party of the other part in writing of
the existence of the dispute, then the party raising the
dispute may refer the dispute for resolution by arbitration.
Such arbitration shall be governed by the provisions of the
UNICTRAL rules. The arbitration shall be held at
Singapore. All proceedings in any such arbitration shall be
conducted in English. There shall be three arbitrators who
shall be the arbitration board-Consultant and the third will
be appointed by the client one will be appointed by
consultant and the third will be appointed mutually who
shall chair the arbitration board, each of the arbitrators
shall be fluent in English. The arbitration award made by
the sole arbitrator shall be final and binding on the parties
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
and the parties agree to be bound thereby and to act
accordingly. The award shall be enforceable in any
competent court of law. The award shall be in writing. All
costs in context to the arbitration shall be borne by the
parties jointly.
19.3 Both parties agree that they will not institute any
legal proceedings against the other arising out of or in
connection with this AGREEMENT, except only as provided
in this clause and to enforce in any court having
jurisdiction any award rendered by the arbitrator. In the
event any legal proceedings are instituted in any court to
enforce any arbitration award, the party against whom
enforcement of that arbitration award is sought shall pay
all costs, including without limitation the costs of legal
counsel and translation fees, of the party seeking to
enforce the arbitration award."
5. Learned Counsel would submit that disputes between the parties
have to be referred to arbitration. Referring to Clause 19.3, as quoted
above, learned Counsel submits that both the parties have agreed that
they will not institute any legal proceedings against the other arising
out of or in connection with the said contract, except only to enforce
the award and therefore, this Court dismiss the suit and refer the
dispute to arbitration pursuant to Section 8 of the Arbitration and
Conciliation Act, 1996.
6. Learned Counsel has relied upon the following decisions in
support of his contention:-
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
1) Omega Finvest LLP Vs. Direct News Private Limited1
2) Super Blastech Solutions Vs. Rajasthan Explosives and
Chemicals Ltd.2
Learned Counsel has also relied upon the decision of this Court in the
case of USP Studios Pvt. Ltd. Vs. Ganpati Enterprises & Ors. 3 in
support of his contentions.
7. Ms. Hajela, learned Counsel for the Respondent in the
application and for the Plaintiff in the suit has opposed the submissions
made on behalf of the Defendants, submitting that in view of the
communication dated 17th November, 2017, there was a new
agreement between the parties and the said communication did not
have any arbitration clause. Learned Counsel submits that the said
communication is an acknowledgment letter and also pursuant to the
said acknowledgment letter, Defendants have already made part
payment. Learned Counsel submits that at this juncture allowing the
application of the Defendants would tantamount to denying the
Plaintiff's legitimate and valid claim. Learned Counsel seeks to rely
upon the Full Bench decision of this Court in the case of Jyotsna K.
Valia Vs. T. S. Parekh and Co. 4 and submits that since the debt is due
1 2022 SCC Online Del 3418
3 SJ 21/20 in COMSS 1420/19 dated 25th August, 2022
4 2007(4) Mh. L. J.
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
from the Defendants to the Plaintiff on the basis of communication
dated 17th November, 2017, the summary suit is maintainable on the
basis of the said communication, which is an acknowledgment of debt
on behalf of the Defendants.
8. I have heard the learned Counsel for the parties and considered
the rival contentions.
9. The suit, as noted above has been filed by the Plaintiff for
recovery of the amount in respect of the services rendered by the
Plaintiff to the Defendants under the said contract agreement dated 21 st
October, 2011. Pursuant to negotiations, the Defendants sent a
communication dated 17th November, 2017 to the Plaintiff, whereby
the outstanding amount of Rs. 2,93,99,077/- was agreed by the
Defendants to be paid to the Plaintiff in the installments mentioned
therein. It is an admitted position that pursuant to the said
understanding the Defendants made payments to the Plaintiff of a total
sum of Rs. 1,35,00,000/- leaving an outstanding of Rs. 1,58,99,077/-.
It is in respect of this amount that the Plaintiffs have filed the captioned
suit as a summary suit on the basis of the settlement dated 17 th
November, 2017.
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
10. A perusal of the dispute resolution clause in the contract dated
21st October, 2011 indicates that if the dispute if not resolved through
friendly consultations, then the dispute is to be referred to arbitration.
Clause 19.3 of the said contract clearly records the agreement that both
the parties will not institute any legal proceedings against the other
arising out of or in connection with the agreement except for the
purposes of enforcing any award in any Court.
11. It has been argued on behalf of the Plaintiff that the settlement
arrived at between the Plaintiff and Defendants on 17 th November,
2017 is a new contract and that the said new contract does not contain
any arbitration clause and therefore, the suit is maintainable on the
basis of the acknowledgment of debt under the said settlement.
12. I am afraid, I am unable to agree with the submissions made on
behalf of the Plaintiff. As noted above, Clause 19 of the said contract
clearly provides how disputes between the two parties are to be
resolved and that is by referring the dispute to arbitration. A perusal of
clause 19 and clause 19.3 of the said contract agreement dated 21 st
October, 2011 in particular, clearly suggests that the parties have
categorically agreed to refer any dispute to arbitration and also agreed
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
not to institute legal proceedings in respect of any matter arising out of
or in connection with the said contract.
13. A look at page 45 of the Plaint, which contains the settlement
dated 17th November, 2017, which again clearly indicates that if due to
any reason the Defendant fails to fulfill its commitment, then the
Plaintiffs shall have all the rights to take appropriate legal action and
that the demand notice dated 13th October, 2017 will not be acted
upon. The demand notice dated 13 th October, 2017 refers to the action
that was threatened by the Plaintiffs against the Defendants under the
Insolvency and Bankruptcy Code. Reference to appropriate legal action,
to my mind, would refer to the action as contained in the contract to
resolve disputes between the parties. The settlement dated 17 th
November, 2017 arises out of the said contract dated 21 st October, 2011
and in respect of any dispute arising out of the said contract, the parties
have agreed not to institute legal proceedings but to refer the dispute
to the arbitration. The settlement dated 17 th November, 2017 by no
stretch of imagination can be said to be an independent settlement or a
new contract between the parties extinguishing the said contract.
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
14. It is also pertinent to refer to some of the Clauses in the plaint,
pursuant to which the Plaintiff has filed the captioned suit. Paragraph
12 of the Plaint clearly records that as on 18 th December, 2020 an
amount of Rs. 1,58,99,077/- was due and payable by the Defendants to
the Plaintiff under the said contract, arrangement dated 17 th November,
2017 and also under the cheques. Even paragraph 17 which pertains to
the jurisdiction of this Court to entertain, try and dispose of the suit
refers to the fact that the contract was entered into at Mumbai. In my
view, the suit is based on the contract as well as on the settlement
arrived at between the parties on 17 th November, 2017 pursuant to the
said contract dated 21st October, 2011 and cheques issued thereafter,
which allegedly have been dishonoured.
15. Mr. Sabnis, learned Counsel for the Defendants-Applicants has
relied upon the decision of the Delhi High Court in the case of Omega
Finvest LLP Vs. Direct News Private Limited (supra), where there were
similar arguments that the arbitration clause in the "second rent
agreement" that expired on 30 th June, 2019 by efflux of time would not
apply to the "addendum to settlement" dated 26th February, 2020 as the
said addendum did not contain the arbitration clause. After analyzing
the law on the point, the Delhi High Court held that the argument that
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
in view of the addendum to the settlement there does not exist an
arbitration agreement and thus, the petition under Section 11 of the
Arbitration and Conciliation Act, 1996 was not maintainable, could not
be accepted.
16. In other words, the arbitration agreement in the second rent
agreement though had expired by efflux of time on 30 th June, 2019,
was considered to be existing between the parties in the addendum to
the settlement, which was executed on 26th February, 2020, although
the same did not contain an arbitration clause. In my view, the facts of
the case at hand are even much better than the facts before the Delhi
High Court in the case of Omega Finvest LLP Vs. Direct News Private
Limited (supra) as in the present case the communication dated 17 th
November, 2017 arises out of the said contract dated 21 st October,
2011.
17. Even the decision of the Delhi High Court in the case of Super
Blastech Solutions Vs. Rajasthan Explosives and Chemicals Ltd.(supra) ,
relied upon by Mr. Sabnis, clearly holds that even if the contract comes
to an end by way of termination or subsequent agreement between the
parties, the arbitration clause will not be rendered inoperative, except
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
in cases where the contract containing the arbitration clause is
completely extinguished and substituted by a new contract that
exclusively and entirely governs the relations between the parties. In
the facts of this case also there is neither an extinguishment nor a new
agreement substituting the said contract dated 21 st October, 2011 but
the communication dated 17th November, 2017, as observed, has arisen
pursuant to the said contract dated 21 st October, 2011. The said
contract dated 21st October, 2011, in my view, in the facts of this case
has not been terminated or replaced by a new contract or by
communication dated 17th November, 2017. This is borne out, as noted
above, by the fact that the plaint in paragraph 12 as well as paragraph
17 with respect to jurisdiction of this Court clearly refer to the said
contract. Therefore, in my view, the arbitration clause in the said
contract would apply to the disputes arising between the parties
including with respect to disputes pursuant to the communication
dated 17th November, 2017.
18. Sub-section (1) of Section 8 of the Arbitration and Conciliation
Act, 1996, clearly provides that a judicial authority, before which an
action is brought in a matter which is the subject of an arbitration
agreement shall, if a party to the arbitration agreement or any person
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
claiming through or under him, so applies not later than the date of
submitting his first statement on the substance of the dispute, then
notwithstanding any judgment, decree or order of the Supreme Court
or any Court, refer the parties to arbitration unless it finds that prima
facie no valid arbitration agreement exists.
19. The Hon'ble Supreme Court in the case of P. Anand Gajapathi
Raju vs. P.V.G.Raju5 has held that the language of Section 8 of the
Arbitration and Conciliation Act, 1996, (the "Arbitration Act") is
peremptory in nature. That, therefore, in cases where there is an
arbitration clause in the agreement, it is obligatory for the Court to
refer the parties to arbitration in terms of their arbitration agreement.
Also, the Hon'ble Supreme Court in Sundaram Finance Limited and
Another vs. T. Thankam6 has relying upon its own decisions including
in the case of P. Anand Gajapathi Raju vs. P.V.G.Raju (supra), held that
once there is an agreement between the parties to refer disputes or
differences arising out of an agreement to arbitration and in case either
party ignoring the terms of the agreement approaches the Civil Court
and the other party, in terms of Section 8 of the moves the Court for
referring the parties to arbitration in view of the peremptory language
5 (2000) 4 SCC 539
6 (2015) 14 Supreme Court Cases 444
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
of Section 8 of the Arbitration Act, it is obligatory for the Court to refer
the parties to arbitration in terms of the agreement. Paragraphs 8, 9,
10 and 13 of the said decision are usefully quoted as under :
"8. Once there is an agreement between the parties to
refer the disputes or differences arising out of the agreement
to arbitration, and in case either party, ignoring the terms of
the agreement, approaches the civil court and the other party,
in terms of the Section 8 of the Arbitration Act, moves the
court for referring the parties to arbitration before the first
statement on the substance of the dispute is filed, in view of
the peremptory language of Section 8 of the Arbitration Act,
it is obligatory for the court to refer the parties to arbitration
in terms of the agreement, as held by this Court in P. Anand
Gajapathi Raju v. P.V.G. Raju (2000) 4 SCC 539.
9. The position was further explained in Hindustan
Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums. To
quote :(SCC pp. 510-11, para 14)
"14. This Court in P. Anand Gajapathi Raju v. P.V.G.
Raju has held that the language of Section 8 is
peremptory in nature. Therefore, in cases where there
is an arbitration clause in the agreement, it is
obligatory for the court to refer the parties to
arbitration in terms of their arbitration agreement and
nothing remains to be decided in the original action
after such an application is made except to refer the
dispute to an arbitrator. Therefore, it is clear that if, as
contended by a party in an agreement between the
parties before the civil court, there is a clause for
arbitration, it is mandatory for the civil court to refer
the dispute to an arbitrator. In the instant case the
existence of an arbitral clause in the agreement is
accepted by both the parties as also by the courts below
but the applicability thereof is disputed by the
respondent and the said dispute is accepted by the
courts below. Be that as it may, at the cost of repetition,
we may again state that the existence of the arbitration
clause is admitted. If that be so, in view of the
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
mandatory language of Section 8 of the Act, the courts
below ought to have referred the dispute to
arbitration."
10. In Magma Leasing and Finance Ltd. v. Potiuri
Madhavilata [(2009) 10 SCC 103], the position has been
restated holding that no option is left to the court, once the
pre-requisite conditions of Section 8 are fully satisfied.
13. Once an application in due compliance with Section 8 of
the Arbitration Act is filed, the approach of the civil court
should be not to see whether the court has jurisdiction. It
should be to see whether its jurisdiction has been ousted.
There is a lot of difference between the two approaches. Once
it is brought to the notice of the court that its jurisdiction has
been taken away in terms of the procedure prescribed under a
special statue, the civil court should first see whether there is
ouster of jurisdiction in terms or compliance with the
procedure under the special statute. The general law should
yield to the special law - generalia specialibus non derogant.
In such a situation, the approach shall not be to see whether
there is still jurisdiction in the civil court under the general
law. Such approaches would only delay the resolution of
disputes and complicate the redressal of grievance and of
course unnecessarily increase the pendency in the court."
20. Ms. Hajela, learned Counsel for the Plaintiff has referred to the
Full Bench decision of this Court in the case of Jyotsna K. Valia Vs. T. S.
Parekh and Co.(supra) to elaborate on the meaning of the word 'debt'
and to submit that a summary suit is maintainable on an
acknowledgment of debt. In my view, the said reference does not assist
the case of the Plaintiff as there is no discussion in the said decision
with respect to the arbitration clause in an agreement. The said
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
decision only refers to the invocability of jurisdiction under Order 37
Rule 2 and not with reference to the dispute between the parties on a
contract, where there is a arbitration clause. Nowhere does the said
decision hold that even if there is an arbitration clause to a contract
between the parties, a suit under Order 37 is maintainable. Therefore,
the said decision would not render any assistance to the case of the
Respondent/Plaintiff.
21. It has also sought to be argued on behalf of the Plaintiff that
since there is an acknowledgment of debt, there would be no dispute in
the matter. In this connection the decision of this Court in the case of
USP Studios Pvt. Ltd. Vs. Ganpati Enterprises & Ors.(supra) also
assumes significance. This Court after considering various decisions has
elucidated on the term dispute in paragraph 25 as under:-
"25. I am persuaded to agree with the aforesaid
submissions of Mr. Patil. If there is a semblance of dispute,
which is covered by an arbitration agreement, the judicial
authority is statutorily enjoined to refer the parties to
arbitration. A profitable reference, in this context, can be
made to the judgment of the Supreme Court in the case of
Agri gold Exims Ltd. vs. Sri Lakshmi Knits & Wovens and
Others 5 , wherein the Supreme Court held that the term
'dispute' must receive its general connotation. The Supreme
Court, inter alia, observed as under:
"18. The term "dispute" must be given its general meaning
under the 1996 Act.
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
19. In P. Ramanatha Aiyar's Advanced Law Lexicon, 3rd
edition, page 1431, it is stated:
"In the context of an arbitration the words "disputes" and
"differences" should be given their ordinary meanings.
Because one man could be said to be indisputably right and
the other indisputably wrong, that did not necessarily
mean that there had never been any dispute between
them......"
20. Admittedly, the appellant's claim is not confined to the
question regarding non-payment of the amount under the
two dishonoured cheques. Thus, there existed a dispute
between the parties. Had the dispute between the parties
been confined thereto only, the same had come to an end.
21. Appellant evidently has taken before us an inconsistent
stand. If he was satisfied with the payment of the said
demand drafts, he need not pursue the suit. It could have
said so explicitly before the High Court. It cannot,
therefore, be permitted to approbate and reprobate.
22. Section 8 of the 1996 Act is peremptory in nature. In a
case where there exists an arbitration agreement, the court
is under obligation to refer the parties to arbitration in
terms of the arbitration agreement. [See Hindustan
Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums,
(2003) 6 SCC 503 and Rashtriya Ispat Nigam Limited
(supra)] No issue, therefore, would remain to be decided
in a suit. Existence of arbitration agreement is not
disputed. The High Court, therefore, in our opinion, was
right in referring the dispute between the parties to
arbitration."
(emphasis supplied)"
In my view, therefore, the submissions on behalf of the Plaintiff, would
not hold water in view of the above elucidation. If a payment is not
made, by a party under a contract, whether it is with reference to a
subsequent arrangement between the parties, in my view, would also
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
be a dispute which is arbitrable and to be referred to arbitration, in the
event there is an arbitration clause in the agreement. In the facts of this
case, there is, as mentioned above, clearly an arbitration clause to
resolve the dispute by mode of arbitration and not to institute any legal
proceedings in respect of the disputes.
22. Ergo since the said contract 21st October, 2011, clearly indicates
that a valid arbitration agreement exists between the parties, the
dispute between the parties be referred to arbitration. The reference to
arbitration would not in my view deny the Plaintiff's legitimate and
valid claim as the Plaintiff can always file statement of claim before the
arbitration and also prove it. Only the forum for adjudication has been
substituted as per mandate of law. Accordingly, following order is
passed:-
ORDER
i) The parties are referred to arbitration, in accordance with
arbitration agreement contained under the Clause 19 of the
contract dated 21st October, 2011.
ii) Arbitrator to be appointed by the parties, in accordance
with the provisions of the Arbitration and Conciliation Act,
1996.
8. SJ 68-21 in COMSS 86-21 @ IAL 33664-22.doc
iii) In view of the reference of the parties to arbitration, the
commercial summary suit no. 86 of 2021 stands disposed.
iv) In view of the disposal of the suit, the summons for
judgment no. 68 of 2021 also to stand disposed of.
v) Refund of Court Fees as per Rules.
vi) The Registry is directed to return the original documents
to the Plaintiff.
23. The interim application accordingly stands allowed and disposed
as above.
(ABHAY AHUJA, J.)
