2016 Supreme(AP) 508

IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
SANJAY KUMAR, ANIS, JJ.
Syed Irfan Sulaiman – Appellant
Versus
M/s. New Amma Hospitals, Represented by its authorized signatory and Managing Partner, Mohd. Faiaz Khan – Respondent
Civil Miscellaneous Appeal No. 111 of 2016 & Civil Revision Petition No. 953 of 2016
Decided On : 15-11-2016

Headnote:

Civil Law - Arbitration and Conciliation Act, 1996 - Sections 8, 37, 9 - Relief Act, 1963 - Sections 8(2),58,2(1)(b) - Defendant in the suit, filed I.A.No.796 of 2015 therein under Section 8 of the Arbitration and Conciliation 1996 seeking reference of the dispute to arbitration in terms of the arbitration clause contained in the partnership deed. He also filed in the suit under Order 7 Rule 11 CPC seeking rejection of the plaint. By separate orders dated the trial Court dismissed both I.As. Aggrieved thereby, he is before this Court. C.M.A.No.111 an appeal under Section of the Act arises out of the order passed in I.A in of while under Article of the Constitution pertains to the order passed - Plaintiff is a registered partnership firm bearing Registration on the file of the Registrar of Firms Reddy East - Original registered partnership deed is dated 26.02.2015 - Plaintiff firm established a hospital with the sole intention of serving needy patients at reasonable charges as financial difficulties were faced in the running of the hospital the partners of the plaintiff firm agreed to induct a new partner who would pay a sum help them overcome problems in the operation of the hospital - Defendant was acquainted with the partners of the plaintiff firm and came forward with the proposal that he would invest monies so as to resolve the problems faced by the hospital. After discussions and negotiations the partners of the plaintiff firm and the defendant arrived at a proposal in principle whereby the defendant was to be inducted as a partner with a 30% share - Upon this understanding, retirement-cum-reconstitution of partnership deed dated was reduced into writing, wherein the partners of the plaintiff firm and the defendant affixed their signatures - Defendant did not fulfill his obligation as per his promise - Plaintiff firm further alleged that the original of this partnership deed, which was not registered was in the custody of the defendant and with a malafide intention and without the consent of the partners of the plaintiff firm he submitted it before the Registrar of Firms without their knowledge. The partners of the plaintiff firm lodged a complaint before the Registrar on requesting him not to register or entertain the said partnership deed. The plaintiff firm further asserted that in the light of the objections raised by the partners the Registrar of Firms did not register the partnership deed dated 13.04.2015 and issued notice to all concerned. The defendant however failed to appear but started visiting the hospital along with anti-social elements and was creating a nuisance. In this regard, the plaintiff firm asserted that on 04.08.2015 the defendant came to the hospital and started to interfere with the management of the hospital by threatening the hospital staff, patients and the partners of the firm - Held, Petition filed by the defendant under Section of the Act of merited consideration and as the said provision mandates in no uncertain terms that the judicial authority concerned shall refer the parties to arbitration as has been emphasized by the Supreme Court trial Court erred in rejecting the petition filed by the defendant under Order 7 Rule 11 CPC - Once the suit was barred in terms of Section 8 of the Act of 1996 Order 7 Rule 11(d) CPC clearly applied and the trial Court was statutorily barred from proceeding with the said suit. The understanding of the trial Court that this exercise should be undertaken only on the strength of the plaint averments is shortsighted - No doubt for the purpose of Order 7 Rule 11(a) CPC the trial Court would look only into the plaint averments to determine as to whether a cause of action has been established - Same approach may not be applicable when Order 7 Rule 11(d) CPC is pressed into service as it would be for the defendant to demonstrate before the Court as to how the suit is barred under any law - Any material placed before the trial Court by the defendant, including a petition under Section 8 of the Act of 1996 necessarily warranted examination by the trial Court - Court erred in rejecting the petition filed by the defendant under Order 7 Rule 11 CPC - Once the right of the defendant to take recourse to Section 8 of the Act of 1996 is upheld law mandates that the judicial authority, before which a proceeding has been brought by one of the parties to the arbitration agreement, must necessarily non-suit such party and refer the case to arbitration - Order passed by the trial Court in I.A.No.797 of 2015 in O.S.No.1142 of 2015 is also set aside. The trial Court shall take steps accordingly - C.M.A.No.111 of 2016 and C.R.P.No.953 of 2016 are allowed - Ordered Accordingly.