M/S R.S. Builders & Engineers Ltd vs Bumi Hiway (M) Sdn Bhd
2012 Latest Caselaw 1086 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                   Date of Judgment : 16.02.2012

+     CRP 128/2004 and CM No. 85/2012

      M/S R.S. BUILDERS & ENGINEERS LTD.         ..... Petitioner
                     Through   Mr. Prabhjit Jauhar, Adv.

                     versus

      BUMI HIWAY (M) SDN BHD.                                  ..... Respondents

Through None.

CORAM:

HON'BLE MS. JUSTICE INDERMEET KAUR

INDERMEET KAUR, J: (Oral)

1. The order impugned is the order dated 19.2.2004 vide which the

application filed by the defendant under Section 8 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as „the Act‟) seeking

reference of the disputes to arbitration, had been dismissed.

2. Record shows that the present suit is the suit for declaration that

the consequential relief of permanent and mandatory injunction.

3. There are eight defendants who have been arrayed in the plaint.

Prayers are contained in para 28 which read herein as under:-

"a) to pass a decree of declaration to the effect that the alleged Joint Venture agreement dated 24.3.2001 and 28.3.2001 and

alleged GPA dated 16.4.2001 and other related documents are illegal, null and void having been forged and fabricated to procure work contract illegally by defendant company from the defendant/employer no.7.

b) A further decree of Declaration to the effect that the partnership agreement dated 1.4.2001 is legally not binding having neither been acted upon nor ever having started carrying on the desired business and even otherwise having become redundant and having been already dissolved as such by the plaintiff with a consequent relief of;

c) a decree of permanent injunction restraining the defendant company (defendant nos. 1 to 6) from using name and goodwill of the plaintiff Company, the alleged partnership firm and the alleged Joint Venture firm for procuring or executing any project/work so procured illegally in the name of plaintiff company and the alleged Joint Venture firm and with a further consequent relief of a decree.

d) of mandatory injunction against defendant no.7 and 8 to cancel/terminate all agreements relating to any work/project awarded to the defendant company in the name of alleged joint venture firm and take such appropriate legal action against defendants No. 1 to 6 for playing fraud, misrepresenting the facts and submitting fake, false and fabricated documents to defendant no.7 for procuring work contracts illegally in the name of joint venture firm and also grant such further relief/relief against the defendants as may be found necessary and just for the final decision of this case.

e) The litigation and exemplary costs under Section 35 - A of CPC may also kindly be awarded."

4. The contention of the plaintiff as is evident from the averments

made in the plaint is that defendant No.1 R.S. Builders had made

misrepresentations to the plaintiff and pursuant thereto forged and

fabricated documents were got executed by the plaintiff which include

the joint venture agreements dated 24.3.2001, 28.3.2001, GPA dated

16.4.2001 and partnership agreement dated 1.4.2001; the contention

being that these documents are fake, forged and fabricated; all these acts

were committed by the defendants with a view to obtain a wrongful gain

for themselves and to cause a wrongful loss to the plaintiff; a fraud has

been played upon the plaintiff. The aforenoted prayers were accordingly

made. Prayer „c‟ is a specific prayer directed against the defendant No. 1

to 6 of whom defendant No. 1 is company and defendant Nos. 2 to 6 its

directors. Prayer "d" is made qua defendant nos. 7 and 8 who are public

servants.

5. In the course of the proceedings before the trial court, the present

application under Sec. 8 of the said Act had been filed. Contention

before the trial court being that there is an arbitration clause contained in

the joint venture agreements dated 24.3.2001 and 28.3.2001 as also in

the partnership agreement dated 1.4.2001. There is no dispute to this

proposition and attention has been drawn to the said arbitration clause

contained in the aforenoted joint venture agreements and the partnership

agreement dated 1.4.2001. The vehement contention of the petitioner

being that since these agreements contained an arbitration clause and the

dispute have arisen out of the aforenoted agreements, the matter must

be referred for arbitration; in fact there is a mandate upon the Court in

these circumstances to make a reference to arbitration. For this

proposition, reliance has been upon the judgment of the Apex Court

reported in (2003) 3 SCC 686 in Agri Gold Exims Ltd v. Sri lakshmi

Knits & Wovens & Ors.. Reliance has also been placed on 133 (2006)

DLT 297 in Shukaran Devi v. Om Prakash Jain & Anr to support the

submission that even if a fraud has been alleged by one party qua the

said arbitration agreement, there is nothing to stop the Arbitration

forum for adjudicating upon the said fraud/forgery and the trial Court in

these circumstances declining to refer the disputes to arbitrations has

committed an illegality.

6. None has appeared for the respondent, although he has been

served.

7. There is no dispute to the proposition if all the requirements of

Section 8 of the Arbitration Act are fulfilled, there is a mandate upon the

court to refer the dispute to arbitration.

8. The Apex Court while dealing with a power of the Arbitrator in

the context of fraud in N. Radhakrishnan vs. Maestro Engineers and

Ors. reported in (2010) 1 SCC 72 noted hereinasunder:-

"The learned Counsel for the respondents on the other hand argued that when a case involves substantial questions relating to facts where detailed material evidence (both documentary and oral) needed to be produced by either parties, and serious allegations pertaining to fraud and malpractices were raised, then the matter must be tried in court and the Arbitrator could not be competent to deal with such matters which involved an elaborate production of evidence to establish the claims relating to fraud and criminal misappropriation.

In our opinion, the contention of the respondents relating to the jurisdiction of the Arbitrator to decide a dispute pertaining to a matter of this proportion should be upheld, in view of the facts and circumstances of the case. The High Court in its impugned judgment has rightly held that since the case relates to allegations of fraud and serious malpractices on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation cannot be properly gone into by the Arbitrator".

9. The Apex Court in (2007) 5 SCC 510 India Household and

Healthcare Ltd. Vs. LG. Household and Healthcare Ltd. has held as

under:-

"It is also no doubt true that where existence of an arbitration agreement can be found, apart from the existence of the original agreement, the Courts would construe the agreement in such a manner so as to uphold the arbitration agreement. However, when a question of fraud is raised, the same has to be considered differently. Fraud, as is well known, vitiates all solemn acts. A contract would mean a valid contract; an arbitration agreement would mean an agreement which is enforceable in law."

10. The averments made in the present case clearly shows that the

entire case of the plaintiff is bordered on a case of fraud and perjury

which the defendant had committed upon him pursuant to which the

aforenoted documents were got executed through him; these allegations

of fraud require a detail examination and trial; this exercise can also be

gone into by the Civil Court; it may not be in the domain of the

Arbitrator as a detail and elaborate production of evidence would be

required to establish the claim of fraud and perjury as set up by the

plaintiff.

11. Even otherwise the prayers made by the plaintiff in the present

case especially the prayer „c‟ and „d‟ which are directed against the

persons other than the parties to the Arbitration Agreement i.e.

defendant Nos. 2 to 6 being the directors of defendant 1 who are

admittedly not parties to the Arbitration Agreement. There is also no

dispute to the proposition that a company is a distinct legal entity and

has an entity distinct from its directors. Defendant Nos. 7 to 8 are also

government officers. The prayers made against the aforenoted

defendants cannot also be gone into or examined by the Arbitrator.

12. These matters thus would be clearly outside the ambit of the

Arbitration Agreement and in view of the ratio of the judgment of the

Apex Court in Sukanya Holdings Pvt. Ltd. vs. Jayesh H. Pandya

reported in AIR 2003 SC 2252, reliefs which are claimed in the suit

which are admittedly outside the Arbitration Agreement and also

between other persons who are not parties to the Arbitration Agreement

the question of the applicability of Section 8 would not arise. In this

factual scenario the Trial Court dismissing the application under Section

8 of the Arbitration Act and refusing to refer the disputes to arbitration

suffers from no infirmity.

13. Petition is without any merit; dismissed.

FEBRUARY 16, 2012/ 'raj'                     INDERMEET KAUR, J