2008 Supreme(Mad) 3748

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S. RAJESWARAN
Thirumuruga Kirupananda Variyar
Versus
M/s. Sahu Trust Rep. By its Managing Trustee & Others
C.R.P.PD.No.2433 of 2007 and 2767 of 2007 and M.P.Nos.1 & 2 of 2007 & M.P.Nos.1 to 3 of 2007
Decided On : 18-10-2008

1. The court is not empowered under Section 8 of the 1996 Act, to restrain the arbitral proceedings from commencing or continuing. 2. The exclusion of jurisdiction of civil court is not to be readily and unconditionally assumed and civil court can refuse to refer the matter to arbitration if complicated question of fact or law is involved or where allegation of fraud is made.

Headnote:

ARBITRATION - AGREEMENT - REFERENCE - ENFORCEABILITY OF MOU - CIVIL DISPUTE - ARBITRATION CLAUSE - APPLICABILITY - SCOPE OF ENQUIRY UNDER SECTION 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - JURISDICTION OF CIVIL COURT - EXCLUSION - CONDITIONS.

Fact of the Case:

The revision petitioner/plaintiff is running a Dental College in Bhubaneswar in the Orissa State by name "Vinayaka Visions Lord Jagannath Institute of Dental Science and Research". The plaintiff decided to transfer the control and management of the Dental College and the first defendant/first respondent Trust was willing to undertake the same and run the Institute. Both the revision petitioner and the respondent herein entered into a Memorandum of Agreement on 27.2000. But, disputes arose between the parties and therefore, by mutual discussions, the revision petitioner/plaintiff decided to hand over the College to the defendants/respondents to run the same by issuing a Letter of Authorisation dated 11.2000. Again, further differences crept in between the parties and therefore, the letter of authorisation was revoked by the revision petitioner/plaintiff by issuing a public notice dated 111.2000. This resulted in the defendants/ respondents herein filed an arbitration case under sEc.9 of the Act before "Khurdha Court" and they also obtained an order of injunction. The defendants/respondents herein also filed ICC Case No.829/2005 against the revision petitioner/plaintiff before the Sub Divisional Judicial Magistrate, Bhubaneswar. Thereafter, the parties decided to settle the differences and accordingly, the earlier Memorandum of Understanding dated 27.2000 was cancelled and a new agreement was entered into between the parties on 19.2006 and 19.2006. As per the agreement dated 19.2006, it was agreed to between the parties as follows: .(i) The total amount agreed to be paid to the defendants by the plaintiff was Rs.3.75 Crores. .(ii) The defendants must pay out of the 3.75 Crores, a sum of Rs.1.00 Crore towards the liabilities to the government of Orissa in respect of 40 acres of land allotted on lease to the plaintiff. (iii) The plaintiff must transfer 7 acres of land out of 40 acres as 33 acres were already remitted to the government. .(iv) It is the sole responsibility of the defendants to get a clearance from the government in respect of 7 acres of leasehold properties. .(v) Out of the 3.75 crores to be paid Rs.1.00 crore is to be paid by way of DD and 5 DDs were purchased in the name of the first defendant Trust Rs.1.00 crore was reserved for the payment to be levied by the government. Rs.1.75 crores have to be paid by way of 10 post dated cheques each of which is for Rs.17.5 lakhs and the same is morefully described in teh schedule hereunder to this suit as the same is the subject matter of the suit. .(vi) Simultaneously, the defendants must withdraw the criminal case ICC 829/2005, before the Senior Divisional Judicial Magistrate. The defendants must also withdraw the Arbitration case 239/2003 pending before the District Judge, Kurdha. On withdrawal of the above cases, the 10 post dated cheques, each of which is for Rs.17.5 lakhs, shall be handed over to the defendants. (vii)Within 15 days, from 19.2006 the defendant must make arrangements with the government and obtain necessary notice of demand for the cess.

Finding of the Court:

1. The application filed by the respondents in I.A.No.490 of 2006 in O.S.No.267 of 2006 should not be rejected on the ground that the original agreement or a certified copy of the same was not filed by the respondents herein along with the application filed under sec.8 of the Act. 2. The respondents have not indicated specifically to the arbitral dispute which is to be referred to arbitration in the application filed under Sec.8(1) of the Act, in I.A.No.490 of 2006. 3. The trial court has committed an illegality in dismissing the second suit filed in O.S.No.754 of 2007 merely on the basis of a memo filed by the respondents herein. 4. The arbitration clauses contained in the agreement did not get attracted in the present case and the suits are very much maintainable for the reliefs sought for.

Issues: 1. Whether the application filed by the respondents in I.A.No.490 of 2006 in O.S.No.267 of 2006 should be rejected on the ground that the original agreement or a certified copy of the same was not filed by the respondents herein along with the application filed under sec.8 of the Act? 2. Whether the respondents have indicated specifically to the arbitral dispute which is to be referred to arbitration in the application filed under Sec.8(1) of the Act, in I.A.No.490 of 2006? 3. Whether the trial court has committed an illegality in dismissing the second suit filed in O.S.No.754 of 2007 merely on the basis of a memo filed by the respondents herein? 4. Whether the arbitration clauses contained in the agreement did not get attracted in the present case and the suits are very much maintainable for the reliefs sought for?

Ratio Decidendi: 1. When arbitration agreement exists, the court is obliged to refer the parties to arbitration. 2. The scope of the enquiry under Sec.8, is only peripheral in nature in the sense that it is confined to the examination of a few aspects namely (a) the existence of an Arbitration Agreement, (b) whether the action brought before the Court is by one of the parties to the said Agreement against the other party, (c)whether the subject matter of the action before the Court is the same as the subject matter of the Arbitration Agreement, and (d) whether the other party moves the Court seeking a reference to Arbitration, before submitting its first statement on the substance of the dispute. 3. The situation contemplated by Sec.8, can arise only at the first instance of an opponent and defendant in a judicial proceeding, or, at the highest, suo motu at the instance of the judicial authority, when the judicial authority comes to know of the existence of an arbitration agreement.

Final Decision: C.R.P. No.2433 of 2007 is dismissed. No cost. M.P.Nos.1 and 2 of 2007 are also dismissed. C.R.P.No.2767 of 2007 is dismissed. No cost. M.P.Nos.1 and 2 of 2007 are also dismissed. M.P.No.3 of 2007 filed by the respondents to vacate the status quo order is allowed.