Anil Mahindra & Anr vs Surender Kumar Makkar & Anr
2017 Latest Caselaw 6254 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                            Pronounced on: 08.11.2017
+      CM(M) 243/2016
       ANIL MAHINDRA & ANR                             ..... Petitioners
                   Through             Mr.Ankur Mahindro & Ms.Shrestha
                                       Chaudhary, Advocates
                          versus

       SURENDER KUMAR MAKKAR & ANR          ..... Respondents
                   Through Mr.R.S.Kela, Advocate

       CORAM:
       HON'BLE MR. JUSTICE JAYANT NATH

JAYANT NATH, J.

1. This petition is filed under Article 227 of the Constitution of India seeking to impugn the order dated 13.01.2016 by which order the application filed by the petitioners/defendants under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter rererred to as 'the Act') was dismissed.

2. The respondents/plaintiffs have filed a suit for recovery of possession and a decree for payments of unpaid rents. It is the case of the respondents that the property being B-7, Model Town, Delhi was licensed to the petitioners. The premises consists of a hall with facility of latrine and bath room situated on the second floor. Over the years, the license fee/rent has increased from time to time. It is also the case of the respondents that w.e.f. 01.04.2014, the license fee/rent was increased to Rs.3520/- per month. A notice was issued to the petitioners which was served and delivered. However, neither any reply was received, nor arrears of rents were remitted

which was demanded in the receipt. Hence, the present suit has been filed seeking a decree of Rs.3,69,440/- and a decree of possession. The premises is said to be duly furnished.

3. The petitioners have filed an application under Section 8 of the Act stating that under clause 9 of the License Deed dated 02.12.1985, there exists an arbitration clause. Accordingly, it was prayed that the disputes be referred to the arbitration.

4. The trial court by the impugned order concluded that license deed is not a registered lease agreement and hence the same is against the public policy and is of no use and void ab-initio. The impugned order also noted the judgment of the Supreme Court in the case of Booz Allen & Hamiltaon Inc. v. SBI Home Finance Ltd. & Ors. (2011) 5 SCC 532 where the Supreme Court held that where a civil suit is pending, the court will refuse to accept an application under Section 8 of the Act, if the subject matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or tribunal. In eviction or tenancy matters, only the specified courts are conferred with jurisdiction to decide the dispute, the court also noted and the named arbitrator in the agreement had died. The trial court also noted that the counsel for the defendants/peititoners appeared on 10.09.2014 and filed vakalatnama and sought an adjournment to file written statement. Despite lapse of statutory period of 90 days, the counsel for the defendants/petitioners did not file written statement and intentionally filed the present application to delay the proceedings. Accordingly, the application of the petitioners was dismissed.

5. I have heard learned counsel for the parties.

6. The learned counsel for the respondents has pointed out that the petitioners have taken three adjournments to file written statement. It is urged that on the first date itself, the petitioners were obliged to file the application under Section 8 of the Act and failed to do the needful and hence, the present application would not lie. It is urged that no petition would lie against an order passed in the application under Section 8 of the Act and hence, the present petition may be dismissed.

7. There are two aspects, which arise in the present case. Firstly, the license agreement which is bone of contention between the parties is admittedly unregistered and unstamped. The Supreme Court in the case of SMS Tea Estates Pvt. Ltd. v. Chandmari Tea Company Pvt. Ltd., (2011) 14 SCC 66, held as follows:

"22. We may therefore sum up the procedure to be adopted where the arbitration clause is contained in a document which is not registered (but compulsorily registrable) and which is not duly stamped:

22.1 The court should, before admitting any document into evidence or acting upon such document, examine whether the instrument/document is duly stamped and whether it is an instrument which is compulsorily registrable. 22.2 If the document is found to be not duly stamped, Section 35 of Stamp Act bars the said document being acted upon. Consequently, even the arbitration clause therein cannot be acted upon. The court should then proceed to impound the document under Section 33 of the Stamp Act and follow the procedure under Section 35 and 38 of the Stamp Act. 22.3 If the document is found to be duly stamped, or if the deficit stamp duty and penalty is paid, either before the Court or before the Collector (as contemplated in Section 35 or 40 of the Stamp Act), and the defect with reference to deficit stamp is cured, the court may treat the document as duly stamped.

22.4 Once the document is found to be duly stamped, the court shall proceed to consider whether the document is compulsorily registrable. If the document is found to be not compulsorily registrable, the court can act upon the arbitration agreement, without any impediment.

22.5 If the document is not registered, but is compulsorily registrable, having regard to Section 16(1)(a) of the Act, the court can de-link the arbitration agreement from the main document, as an agreement independent of the other terms of the document, even if the document itself cannot in any way affect the property or cannot be received as evidence of any transaction affecting such property. The only exception is where the Respondent in the application demonstrates that the arbitration agreement is also void and unenforceable, as pointed out in para 8 above. If the Respondent raises any objection that the arbitration agreement was invalid, the court will consider the said objection before proceeding to appoint an arbitrator. 22.6 Where the document is compulsorily registrable, but is not registered, but the arbitration agreement is valid and separable, what is required to be borne in mind is that the Arbitrator appointed in such a matter cannot rely upon the unregistered instrument except for two purposes, that is (a) as evidence of contract in a claim for specific performance and (b) as evidence of any collateral transaction which does not require registration."

8. Hence, where the document is not properly stamped, the arbitration clause cannot be acted upon unless the steps as per law are taken to remove the deficit stamp duty. In the present case, the trial court has not gone into this issue. The petitioners also have not taken steps to remove the said defect.

9. In any case, in my opinion, I need not dwell further on this aspect. Admittedly, the fact in the present case is that the matter was fixed after service on the peititoners/defendants on 10.09.2014. The petitioners sought

an adjournment on that date to file written statement. No written statement was filed despite the fact that the matter came up for hearing on 18.10.2014 and 07.11.2014. The time prescribed by CPC for filing of the written statement expired and thereafter, the petitioners have filed the present application under Section 8 of the Act.

10. Section 8 of the unamended Act reads as follows:

"8. Power to refer parties to arbitration where there is an arbitration agreement.--

(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

11. The Supreme Court in the case of Booz Allen & Hamiltaon Inc. v. SBI Home Finance Ltd. & Ors.(supra), held as follows:

"29. Though Section 8 does not prescribe any time limit for filing an application under that section, and only states that the application under Section 8 of the Act should be filed before submission of the first statement on the substance of the dispute, the scheme of the Act and the provisions of the section clearly indicate that the application there under should be made at the earliest. Obviously, a party who willingly participates in the proceedings in the suit and subjects himself to the jurisdiction of the court cannot subsequently turn round and say

that the parties should be referred to arbitration in view of the existence of an arbitration agreement. Whether a party has waived his right to seek arbitration and subjected himself to the jurisdiction of the court, depends upon the conduct of such party in the suit.

30. When Plaintiffs file applications for interim relief like appointment of a receiver or grant of a temporary injunction, the Defendants have to contest the application. Such contest may even lead to appeals and revisions where there may be even stay of further proceedings in the suit. If supplemental proceedings like applications for temporary injunction on appointment of Receiver, have been pending for a considerable time and a Defendant has been contesting such supplemental proceedings, it cannot be said that the Defendant has lost the right to seek reference to arbitration. At the relevant time, the unamended Rule 1 of Order VIII of the Code was governing the filing of written statements and the said rule did not prescribe any time limit for filing written statement. In such a situation, mere passage of time between the date of entering appearance and date of filing the application under Section 8 of the Act, cannot lead to an inference that a Defendant subjected himself to the jurisdiction of the court for adjudication of the main dispute.

31..........."

32..........."

33. But where the issue of "arbitrability" arises in the context of an application under Section 8 of the Act in a pending suit, all aspects of arbitrability will have to be decided by the court seized of the suit, and cannot be left to the decision of the arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application under Section 8 of the Act, to refer the parties to arbitration, if the subject-matter of the suit is capable of

adjudication only by a public forum or the relief claimed can only be granted by a special court or Tribunal."

Hence, a party who willingly participates in the proceedings in the suit and subjects himself to the jurisdiction of the court cannot subsequently turn round and say that the parties should be referred to arbitration in view of the existence of an arbitration agreement.

12. Reference may also be had to the judgment of the Supreme Court in the case of Rachappa Gurudappa, Bijapur v. Gurudiddappa Narandappa & Ors., AIR 1989 SC 635. This judgment pertains to a proceeding under Arbitration Act, 1940 where while interpreting Section 34 of the Act, the Supreme Court held as follows:

"12. From the Order-sheet in this case and as noted by the learned Trial Judge, it appears that the counsel appearing for the petitioner has sought adjournment "specifically for filing written statement" and obtained time for more than one occasions for such purpose. It was not only the time taken to consider whether written statement should be filed as a defence to the plaint to enter into an arena of controversy, but it was time taken to have the matter decided by the suit.

13. The party evinced an intention to have the matter adjudicated by the Court. If that is the position, then in our opinion, in view of the principle enunciated hereinbefore, the party has disentitled itself to ask for stay of the said suit. The High Court was, therefore, right in affirming the order of the learned Trial Judge. Apart from the same, from the conduct of the petitioner and the narration of the events mentioned hereinbefore, it does not appear that the petitioner was ever keen to have the matter adjudicated by arbitration. If that is the position then the petitioner cannot have any grievance."

13. The trial court by the impugned order has noted that the counsel for the peititoners/defendants appeared on 10.09.2014 and filed vakalatnama and sought adjournment to file written statement. They allowed the extended stutatutory period prescribed for filing written statement under Order 8 Rule 1 CPC, i.e. 90 days, to expire. Thereafter, the petitioners have filed the present application under Section 8 of the Act. The trial court hence concluded that the act of the petitioners was only an attempt to delay the proceedings.

14. The respondents have clarified that the petitioners were served with summons sometimes much before 13.08.2014. Thereafter, the petitioners have appeared before the court on 10.09.2014 and sought an adjournment to file written statement. The period of 30 days as prescribed under Order 8 Rule 1 CPC had expired. However, the time was given to the petitioners to file written statement within the period prescribed under law. Thereafter, the matter came up for hearing on 18.10.2014 and again 07.11.2014. After the time for filing of the written statement expired, the present application under Section 8 of the Act has been filed.

15. A perusal of the judgment of the Supreme Court in the case of Booz Allen & Hamiltaon Inc. v. SBI Home Finance Ltd. & Ors.(supra), would show that the court had sepcficially noted that where a party participated in the proceedings, the said party cannot subsequently turn around and say that the matter be referred to arbitration. Whether the party has waived his rights to seek arbitration and subjected itself to jurisdiction of the court would depend on the conduct of the party. In that case, the court specifically noted that unamended Order 8 Rule 1 CPC was dealing with filing of the written statement and the said rule as it then existed did not prescribe any time-limit

for filing of the written statement. Factually, in the present case the amended Order 8 Rule 1 CPC is applicable. The petitioners have appeared and sought time to file written statement. Thereafter the petitioners have deliberately let the period of 90 days expire as stated under Order 8 Rule 1 CPC. They have then woken up and filed the present application under Section 8 of the Act.

16. Keeping in view the above legal position, it is manifest that the petitioners by their conduct have clearly indicated the intention to participate in the suit proceedings. Hence, in my opinion, though for different reasons, the trial court has passed the correct direction.

17. In view of the above, there are no reasons to interfere with impugned order. The petition is accordingly dismissed. All the pending applications, if any, are also dismissed.

(JAYANT NATH) JUDGE NOVEMBER 08, 2017/v