Somasundaram vs M/s. Anguparameswari Textiles P Ltd. , Rep. by its Managing Director

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2008 Supreme(Mad) 1453

Madurai Bench of Madras High Court
THE HONOURABLE MRS. JUSTICE R. BANUMATHI
Somasundaram & Another
Versus
M/s. Anguparameswari Textiles P Ltd., Rep. by its Managing Director
C.R.P.PD (MD) No.94 of 2008, 263 of 2008 and 264 of 2008 and M.P.No. 1 of 2008 in C.R.P. No.94 of 2008 and M.P.No.2 of 2008 in C.R.P. No.264 of 2008
Decided On :Decided On : 30-04-2008

Advocates Appeared:
For the Petitioner:A.R.L. Sundaresan, Sr. Counsel for A.L. Ganthimathi, Advocate. For the Respondent:S. Harihara Ramachandran, Advocate.

Headnote:
Cheque - Sale Agreement Dispute - Negotiable Instruments Act, Arbitration Act - Sec. 8, Sec. 9, Sec. 41(d) of Specific Relief Act - The court discussed the application of Arbitration Act, the jurisdiction of the Civil Court, and the maintainability of the suit under Sec. 41(d) of Specific Relief Act. The court emphasized the mandatory referral to arbitration when there is an arbitration clause in the agreement and the limitations of the Civil Court's jurisdiction in granting interim measures under Sec. 9 of Arbitration Act.
Fact of the Case:

The Plaintiff sought permanent injunction restraining the Defendants from presenting the Cheque under Negotiable Instruments Act pending reference to Arbitration. The Defendants resisted, claiming the suit was not maintainable and no injunction could be granted.
Finding of the Court:

The court found that the suit was not maintainable before the Principal Subordinate Court and the temporary injunction granted was without jurisdiction. The court also held that the suit could not be treated as an application under Sec. 9 of Arbitration Act.
Issues: The issues included the maintainability of the suit, the jurisdiction of the Civil Court, and the applicability of Sec. 41(d) of Specific Relief Act.
Ratio Decidendi: The court emphasized the mandatory referral to arbitration when there is an arbitration clause in the agreement and the limitations of the Civil Court's jurisdiction in granting interim measures under Sec. 9 of Arbitration Act. The court also clarified the definition of 'Court' under Sec. 2(e) of Arbitration Act and the implications for jurisdiction.
Final Decision: C.R.P. No.94/2008: The order granting interim injunction was set aside and the Revision was allowed. Interim injunction granted by the Principal Subordinate Judge, Dindigul was vacated. C.R.P. Nos.263/2008 and 264/2008 were disposed of with a direction to present the applications before the concerned Court, if necessary.

Judgment :-

(2) C.R.P. No.263 of 2008 is filed under Constitution of India against the order dated 02.01.2008 made in I.A. SR. No.25 of 2008 in I.A. No.382 of 2007 in O.S. No.261 of 2007 on the file of Principal Subordinate Judge, Dindigul.

(3) C.R.P. No.264 of 2008 is filed under Constitution of India against the order dated 02.01.2008 made in I.A. SR. No.24 of 2008 in I.A. No.382 of 2007 in O.S. No.261 of 2007 on the file of Principal Subordinate Judge, Dindigul.)

C.R.P. No.94 of 2008 is directed against the order granting temporary injunction restraining the Revision Petitioners/Defendants from presenting the Cheque under Negotiable Instruments Act or committing breach in any manner pending reference to Arbitration. For convenience, the parties are referred in their array in the suit.

2. The Plaintiff is the absolute owner of the Spinning Mill M/s. Anguparameswari Textiles Private Limited. On 14.06.2006 an agreement of sale was entered into between the Plaintiff and the Defendants for slump sale for consideration of Rs.4,00,00,002/-. The Defendants also entered into conversion agreement and were running the Mill. There is a clause in the agreement that in the event of dispute about the interpretation or implementation of the agreement, it shall be referred to a single Arbitrator appointed by both parties and the verdict of the Arbitrator shall be binding. The sale agreement was renewed on 29.12.2006 with some modifications and additions.

3. The case of the Plaintiff is that they were always ready and willing to perform their part of the agreement. But the Defendants insisted for reduction of conversion rates and they were delaying the completion of the sale. As per the arrangement, Cheque for Rs.40,00,000/- was given to the Defendants and is encashable if the same does not fructify. According to the Plaintiff, the Defendants are attempting to wriggle the sale agreement and demanding sum of Rs.40,00,000/-from the Plaintiff. It is the further case of the Plaintiff that the question as to who is in fault has to be decided only by the Arbitration and the Defendants should not be allowed to present the cheque and encash it when they are at fault and the issue to be decided by the Arbitration. The Plaintiff filed O.S. No.261 of 2007 seeking for Permanent Injunction restraining the Defendants from committing breach of the agreement dated 14.06.2006 renewed and modified on 29.12.2006 and from in any manner presenting the Cheque under Negotiable Instruments Act pending reference to Arbitration and committing breach of the agreement. The Plaintiff also filed I.A. No.382 of 2007 for interim injunction under Or.39, R.1 CPC praying for temporary injunction to the same effect pending disposal of the suit.

4. The Defendants resisted the application for injunction on the ground that the suit as well as the application was not maintainable. The Defendants averred that even according to the Plaintiff, the dispute is referable to Arbitration and who is at fault can only be determined by Arbitration proceedings and suit itself is not maintainable. The defendants also contended that no injunction can be granted at any rate. There is no prima facie case. Balance of convenience is in favour of the Defendants.

5. When the matter was posted for Orders on 02.01.2008 before the Principal Sub Court, Dindigul, the Defendants filed application for re-opening and receiving the additional documents and those applications presented in the open court were directed to be presented in the Registry and later those papers were returned by the Registry stating that Orders were already pronounced.

6. Upon consideration of the rival contentions, the learned Principal Subordinate Judge allowed I.A. No.382 of 2007 and granted temporary injunction. The learned Principal Subordinate Judge, held that the issue as to whether the Plaintiff or the Defendants are at breach can be decided only in Arbitration proceedings and pending reference of the dispute to the Arbitration t

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