M/S Khaitan & Co. vs M/S Virtue Securities & Anr.
2010 Latest Caselaw 1841 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                                Date of Reserve: March 16, 2010
                                                                   Date of Order: April 08, 2010
+ CM(M) 378/2009
%                                                                                     08.04.2010
     M/s Khaitan & Co.                                                        ...Petitioner
     Through: Mr. Ajay Choudhary, Advocate

        Versus

        M/s Virtue Securities & Anr.                        ...Respondents
        Through: Mr. C. Rajaram and Mr. B. Anand, Advocates


        JUSTICE SHIV NARAYAN DHINGRA

1.      Whether reporters of local papers may be allowed to see the judgment?

2.      To be referred to the reporter or not?

3.      Whether judgment should be reported in Digest?



        JUDGMENT

1. The petitioner has assailed an order dated 28 th January 2008 whereby the

learned Additional District Judge (ADJ) allowed an application of the respondent

herein for restoration of the suit.

2. Brief facts relevant for the purpose of deciding the present petition are that

the respondent (plaintiff before the trial court) filed a suit for Rs.11.22 lac from the

defendant (petitioner herein). After completion of pleadings when the suit was at the

stage of admission/ denial of documents and framing issues, an application under

Section 8 of the Arbitration & Conciliation Act was made by the petitioner for

referring the disputes to the arbitration in terms of byelaws and Article of

Association of Delhi Stock Exchange Association Limited (DESA) on the ground that

the transaction pertained to contract regarding securities/ shares between the

broker and the plaintiff. The matter was referred to the arbitrator, however,

arbitrator observed that the amount of Rs.3 lac paid to respondent was not in

respect of transaction of shares and this claim was not adjudicatable by arbitrator as

CM(M) 378/2009 M/s Khaitan & Co. v. M/s Virtue Securities & Anr. Page 1 Of 3 per Rules, Regulations and byelaws of DSEA. Regarding rest of the claim, nil award

was passed on the ground that the claim pertained to obtaining third party cheques

without covering letter, in settlement of obligation of another party, was contrary to

the accounting principles, conventions and thus the claim was not tenable.

Regarding Rs.3 lac, arbitrator observed that it was not related to the transaction

and was out of the scope of arbitration so he permitted the respondent to initiate

civil suit for recovery of Rs.3 lac from respondent. This award was not challenged by

either of the parties. Thus, the award became final. Respondent after that filed an

application before the trial court for revival of the suit and the trial court after

finding that the arbitrator did not have jurisdiction to entertain the entire claim and

the arbitrator himself observed that the civil suit could be filed for recovery of Rs.3

lac, revived the suit.

3. During arguments, counsel for the respondent stated that he has no objection

if the claim in the suit is restricted to Rs.3 lac although he had paid court fee on

more than Rs.11 lac. The respondent submitted that part of the claim before the

arbitrator did not pertain to securities/ shares and was not covered by arbitration

clause and has not been adjudicated. The suit was a composite suit and thus the

matter could not have been referred to the arbitrator, but even if it has been

referred, his suit would survive for rest of the claim. The counsel for the petitioner

submits that since the dispute in the suit was referred to the arbitrator, the suit

stood dismissed and, therefore, it could not be revived.

4. It is settled law that under Section 8 of the Arbitration & Conciliation Act,

1996, the Court has to refer the subject matter of the suit to arbitration if the entire

claim made in suit is subject matter of arbitration agreement. It is not the case of

the petitioner that Rs.3 lac received by the petitioner from the respondent was

subject matter of arbitration agreement. Since the matter was a composite matter,

the learned ADJ should have refused to refer this matter under Section 8 of the

Arbitration & Conciliation Act. The entire subject matter of the suit was not subject

CM(M) 378/2009 M/s Khaitan & Co. v. M/s Virtue Securities & Anr. Page 2 Of 3 matter of arbitration agreement. However, without considering this aspect, the

matter was referred to the arbitration and the arbitrator gave its award and stated

that claim of Rs.3 lac was not part of the arbitration agreement. Since the award has

not been challenged, both the parties were bound by the award and the

respondent's right to recover this amount through civil suit cannot be denied. The

respondent had already filed the civil suit and paid the court fee. The respondent

has right to get this civil suit revived on account of refusal on the part of the

arbitrator to adjudicate upon the claim of the respondent for Rs.3 lac. The trial court

has therefore rightly revived the suit. However, revival of the suit shall remain

restricted to claim of respondent to the extent it was not adjudicated upon by the

arbitrator.

5. With above observations, the petition stands disposed of. The trial court shall

continue with the suit filed by the respondent herein to the limited extent to which

the liberty has been given by the arbitrator.

April 08, 2010                                                       SHIV NARAYAN DHINGRA J.
rd




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