IMPORTANT POINT
The main legal point established in the judgment is that serious allegations of fraud and the pending criminal case against a party may make it improper to refer disputes to arbitration, leading to the dismissal of the application to refer the disputes to arbitration.

JUDGMENT :

Krishna Rao, J.

1. The instant application is filed by the defendant under Sections 5 and 8 of the Arbitration and Conciliation Act, 1996, seeking to refer the dispute between the parties to Arbitration in terms of Agreement dated 2nd January, 2007.

2. The plaintiff is a manufacturer of diesel generator sets (in short “DG sets”) and also carries on allied businesses like assembling diesel generator sets, distribution of DG sets and sale of DG sets. The plaintiff’s generator sets are sold under the trade mark and trade name “United Genset”, which enjoys substantial goodwill and reputation in Eastern India.

3. The defendant is a manufacturer of diesel engines including diesel generator engines (hereinafter also referred to as “DG engines”).

4. The plaintiff had filed a suit before this being C.S. No. 2 of 2015 (United Machinery & Appliances -vs.-Greaves Cotton Ltd.), and has sought for the reliefs mentioned herein below:

(a) Decree for Rs. 4,92,76,854/-as pleaded in paragraph 24 above;

(b) Mandatory injunction directing the defendant to forthwith take back all the dead stock, more fully stated in Annexure “J”; hereto; alternatively a decree for Rs.31,04,792/-;

(c) Interim interest and interest on judgment at the rate of 18% per annum;

(d) Mandatory injunction directing the defendant to have all the Bank Guarantees caused to be furnished by the plaintiff more fully stated in Annexure “M” hereto be discharged/released;

(e) Mandatory injunction directing the defendant to keep the plaintiff indemnified against any loss that the plaintiff may suffer as a consequence of encashment of any of the Bank Guarantees more fully stated in Annexure “M” hereto and decree for such sum as is equivalent to the amount of the Bank Guarantees found to be encashed;

(f) The defendant be directed to render true and faithful accounts of all dealings and transactions with the plaintiff and thereafter an enquiry be made and appropriate decree be made on the result of such enquiry;

(g) Receiver;

(h) Injunction;

(i) Costs

(j) Further or other reliefs.”

5. Mr. Jishnu Saha, Learned Senior Advocate representing the defendant submitted that due to shifting of the registered office of the defendant, records were misplaced due to which there was delay in taking steps with respect of the suit filed by the plaintiff and accordingly, the defendant had filed an application being G.A. No. 2232 of 2015 in C.S. No. 2 of 2015 praying for following reliefs:

“a The delay in filing the application be condoned;

b. Time to file written statement by the defendant by extended for a period of eight (8) weeks from the date of the order to be passed therein;

c. Costs of and incidental to this application to be costs in the same;

d. Such further or order or orders be passed and/or direction or directions be given as to this Hon'ble Court may deem fit and proper.”

6. Mr. Saha submitted that subsequently, the defendant had discovered 2nd that there is an agreement dated January, 2007 wherein an Arbitration Clause which binds the parties for the purpose of adjudication of disputes which has arisen between the parties. He submits that immediately the defendant has withdrawn the application being G.A. No. 2232 of 2015 and had filed the present application.

7. Mr. Saha submitted that the agreement dated 2nd January, 2007 was subsequently continued in terms of the minutes of the meeting dated 22nd October, 2009 by which the parties have expressly continued their business till June 2014. He submits that the defendant by a letter dated 3rd July, 2015 has terminated the agreement. On receipt of the letter dated 3rd July, 2015, the plaintiff had sent a reply dated 13th July, 2015 calling upon the defendant to provide the copy of the Agreement dated 2nd July, 2007 and also intimated that the plaintiff has initiated a case against the defendant before this Court for recovery of amount and allied prayers. Mr. Saha submitted that on 8th July, 2015, the defendant had sent a notice to the plaintiff to refer