Gujarat High Court

M/S Associated Business Corporation vs State Of Gujarat on 18 January, 2024

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     C/SCA/9732/2021                              ORDER DATED: 18/01/2024

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           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 9732 of 2021

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                M/S ASSOCIATED BUSINESS CORPORATION
                                Versus
                          STATE OF GUJARAT
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Appearance:
HARSH V GAJJAR(7828) for the Petitioner(s) No. 1
MR ADITYA D DAVDA, ADVANCE COPY SERVED TO ASSISTANT
GOVERNMENT PLEADER/PP for the Respondent(s) No. 1
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 CORAM:HONOURABLE MR. JUSTICE DEVAN M. DESAI

                            Date : 18/01/2024

                             ORAL ORDER

1. Heard learned advocate Mr. Harsh V. Gajjar for the petitioner

and learned Assistant Government Pleader Mr. Aditya D. Davda for

the respondent-State.

2. Upon joint request and consent of learned advocates for the

respective parties, this matter is taken up for final hearing.

3. By way of this petition under Articles 226 and 227 of the

Constitution of India, the present petitioner has prayed for the

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following reliefs :-

"A. By issuing a writ of certiorari or any other appropriate writ, order and / or direction, Your Lordships may be pleased to quash and set aside the impugned order dated 08.02.2021 passed below Exhibit 1 and 7 in Regular Civil Suit No. 2350/2015 (Old Special Civil Suit No. 143/1992) by the Learned Principal Senior Civil Judge, Vadodara (At Annexure-A) and further direct the Learned Trial Court to decide the Regular Civil Suit No. 2350/2015 on its own merits within time bound manner.

B. Pending admission, hearing and final disposal of the present petition, Your Lordships may be pleased to stay the execution, implementation and operation of the impugned order dated 08.02.2021 passed below Exhibit 1 and 7 in Regular Civil Suit No. 2350/2015 (Old Special Civil Suit No. 143/1992) by the Learned Principal Senior Civil Judge, Vadodara.

C. An ex-parte ad interim relief may be granted in terms of paragraph B as above.

D. xxx..."

4. The learned advocate for the petitioner has submitted that the

present petitioner had filed Regular Civil Suit No.2350 of 2015 (Old

Special Civil Suit No.143 of 1992) before the learned Principal

Senior Civil Judge, Vadodara for recovery of amount. It is submitted

that the defendant-State appeared and filed an application below

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Exhibit-7 under Section 34 of the Arbitration Act, 1940 and prayed

for the stay of the proceedings. Thereafter, the suit was proceeded

and issues were framed. Evidences of both the parties were recorded

and arguments of both the sides were placed before the learned trial

Court and the suit was kept for pronouncement of judgment. At this

stage, instead of pronouncing the judgment, the learned Principal

Senior Judge took a suo motu call and passed an order dated

8.02.2021 relegating the parties to the arbitration proceedings.

Against which, the present petitioner is before this Court.

5. It is submitted by the learned advocate for the petitioner that

upon service of summons of the suit, defendant-State appeared and

moved an application below Exhibit-7 under Section 34 of the

Arbitration Act, 1940 and prayed for the stay of the suit. However,

the said application was not pursued by the defendant and instead of

that, defendant participated in the suit proceedings and filed Written

Statement.

6. On the basis of pleadings, issues came to be framed vide

Exhibit-27 on 27.07.2018 and the oral evidence of parties was led

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and concluded in the year 2019. Written submissions were submitted

on 05.12.2019 vide Exhibit-73 and thereafter, the matter was kept

for pronouncement of judgment. It is further submitted that the

petitioner is a senior citizen and aged about 87 years of age. After

waiting for almost more than 25 years, the learned trial Court

relegated the parties to the arbitration proceedings. It is submitted

that the order itself is illegal as the learned trial Court ignored the

provisions of Section 34 and law laid down in the catena of

decisions whereby, the law is settled that once the defendant had

participated in the proceedings, Court shall decide the controversy

rather than relegating the parties to the arbitration. It is further

submitted that the learned Civil Court has no jurisdiction to suo

motu exercise the powers under Section 8 of the Arbitration and

Conciliation Act, 1996. It is further submitted that for the similar

works contract, the original-plaintiff had filed Regular Civil Suit

No.2345 of 2015 (Old Special Civil Suit No.575 of 1991), wherein

the suit of the present plaintiff was decreed on 21.04.2018 and the

decree has been satisfied by the respondent herein.








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     C/SCA/9732/2021                                  ORDER DATED: 18/01/2024

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7. In support of his submission, the learned advocate for the

petitioner has placed reliance upon Section 34 of the Arbitration Act,

1940, which is as under:-

"Power to stay legal proceedings where there is an arbitration agreement. - Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him, in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings ; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings."

8. In support of his submission, learned advocate for the

petitioner has further relied upon the following decisions;

1. Babulal Prabhudas Modi versus Narayanbhai Prabhudas Modi reported in 1996(1) GLR 794.

2. Vishal Retail Ltd. & anr. Versus Achhar Singh Bhumer & ors. reported in 2011 AIR (Orissa) 159.

3. Kishandas Parsram Ahuja and another Versus Bhagchand

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Dwardadas Nagdev and others reported in 1991 SCC Online Mp 113 : AIR 1991 MP 309.

4. Rachappa Gurudappa Bijapur Versus Gurudiddappa Nurandappa and Others reported in (1989) 3 SCC 245.

9. Per contra, learned AGP has vehemently submitted that the

impugned order does not require any interference and has mainly

placed reliance upon affidavit-in-reply filed by the respondent. It is

further submitted that Section 8(1) of the Arbitration and

Conciliation Act, 1996 is a mandatory provision and wherever in the

agreement, arbitration clause exist the jurisdiction of the Civil Court

is ousted. It is further submitted that the submission of participation

in the Civil Suit has no application since there was a valid clause of

arbitration in the works contract. There is no dispute raised by the

plaintiff that there is no arbitral dispute between the parties. It is

further submitted that over and above, the aforesaid provision of

Section 8(1) of the Act, the suit is itself barred under the provisions

of Gujarat Public Works Contracts Disputes Arbitration Tribunal

Act, 1992. It is further submitted that since the jurisdiction of the

Civil Court is ousted under the said Act, the impugned order is in

consonance with provisions of law and only the arbitral tribunal will

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have the jurisdiction to try and decide the dispute. Learned advocate

for the respondent has relied upon Section 8(1) of the Arbitration

and Conciliation Act, 1996, which is as under:-

"Power to refer parties to arbitration where there is an agreement.¹[(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 to the arbitration agreement or any person 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."

10. Thus, the core submission of the learned AGP is that Section

8(1) is applicable and the learned trial Court had jurisdiction to

relegate the parties to the arbitration. Learned AGP has placed

reliance upon the decisions of Hindustan Petroleum Corpn. LTD.

Versus Pinkcity Midway Petroleum reported in (2003) 6 SCC 503

and decision of P. Anand Gajapathi Raju and Others Versus P.

V. G. Raju (DEAD) and Others reported in (2000) 4 SCC 539.

Learned AGP has also placed reliance upon the decisions of R. M.

Dasa Vs. The Gujarat Water Supply and Sewerage Board and

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Ors. reported in AIR 2009 Guj 130, 2009(3) ARBLR646

(Gujarat) and State of Gujarat & ANR. Versus Ajay S. Patel,

Engineers, Contractors and Consultant passed in First Appeal

No.413 of 2000.

11. The limited issue before this Court is whether in the

background of facts of the present case, whether the respondent-

original defendant has participated in the proceedings and whether

can it be said that the respondent has waived their right to refer the

matter to the arbitration? The suit agreement is governed, Section 34

of the Arbitration Act, 1940 has the application. The application by

respondent was also under Section 34 of the Arbitration Act, 1940.

Thus, the parties were governed under the Old Act of 1940. For the

reasons best known to the respondent, application was not pursued

and instead of pursuing the application, defendant filed Written

Statement and thereafter cross-examined the plaintiff on merits.

Defendant also led evidence. These facts would be culled out from

the record of the case. Thus, the respondent has not only participated

in the proceedings but also duly and effectively participated in the

proceedings.





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12. This Court is of the view that in a Regular Civil Suit 2345 of

2015 (Old Special Civil Suit No.575 of 1991), the dispute was

arising out of the similar type of works contract, wherein the

arbitration clause was in existence. However, despite the question of

jurisdiction of the Civil Court, defendant-State participated in the

suit and the said suit was partly allowed and said decree came to be

satisfied by the defendant-State. In the present case, the stage of the

suit is at the pronouncement of the judgment and considering the

stage of the suit, it would not be proper to relegate the parties to the

arbitration, more particularly, the plaintiff has waited for almost 25

years and after such a long time, if the parties are relegated to the

arbitral tribunal again, the entire exercise of the proceedings of