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2023 Supreme(Online)(KAR) 1807
HIGH COURT OF KARNATAKA
R. Nataraj, J
HARIYANA STEEL AND POWER (DIVISION OF HARIYANA SHIP BREAKERS LTD.) – Appellant
Versus
INDURE PRIVATE LIMITED – Respondent
Writ Petition No.55928 of 2015 (GM-CPC) | Writ Petition No.48364 of 2016(GM-CPC)
For the Appellants/Petitioners: Sri. Bimbadhar M. Gowda
For the Respondents: Sri. S.R. Kamalacharan, Sri. G.S. Venkat Subbarao
The court ruled that disputes arising from a valid arbitration clause in a purchase order must be referred to arbitration, reinforcing the parties' contractual obligations.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 8 - The Trial Court referred the parties to arbitration based on the clause in the purchase order - The plaintiff sought to appeal the decision on grounds of arbitration unviability due to the defendants’ refusal to participate. (Paras 6, 9, 22, 28)
(B) Legal principles - The court emphasized the necessity of respecting arbitration clauses as per the contract terms and the non-justiciability of disputes non-arising out of the original agreements. (Paras 21-24)
Facts of the case:
The plaintiff placed an order for constructing a power plant, paid an advance, but disputes arose over delays in execution leading to litigation on recovery of the advance.
Findings of Court:
The court ruled that disputes relating to the purchase order indicated a clear agreement for arbitration and upheld the Trial Court’s referral of the matter.
Issues: Whether the court erred in referring parties to arbitration despite refusal by the defendant to engage.
Ratio Decidendi: The arbitration clause was held binding and applicable to the disputes invoked, limiting judicial interference at this stage.
Result: Both writ petitions dismissed.
| Table of Content |
|---|
| 1. allegations of delay and contract fulfilment. (Para 2 , 10 , 20) |
| 2. dispute over advance payment and arbitration. (Para 3 , 4 , 14) |
| 3. court’s approach to arbitration agreement validity. (Para 6 , 13 , 23) |
| 4. importance of arbitration clause enforcement. (Para 8 , 9 , 21 , 22 , 26) |
| 5. judgment dismissal and arbitration reference upheld. (Para 27 , 28) |
ORDER
W.P. No.55928/2015
The plaintiff in O.S. No.115/2014 on the file of the Principal Senior Civil Judge, Hassan (for short, the 'Trial Court') has filed this writ petition assailing the correctness of the Order dated 19.08.2015, by which, the Trial Court allowed I.A. No.III filed by the respondent No.1 herein under Section 8 of the Arbitration and Conciliation Act, 1996 (for short, 'the Act of 1996') and referred the parties to arbitration.
2. The parties in this petition will henceforth be referred to as they were arrayed before the Trial Court. The petitioner herein was the plaintiff while the respondent Nos.1, 2, 3, 4, 5 and 6 herein were defendant Nos.1, 2, 3, 4, 5 and 6 respectively before the Trial Court.
Facts in W.P.No.55928/2015:
3. The plaintiff had placed an order dated 08.04.2005 with the defendant No.1 for construction of 10 MW Captive Power Plant at its steel plant at Hassan for Rs.24,50,00,000/-. The purchase order contained a clause for settlement of disputes through arbitration. The plaintiff had paid an advance of Rs.3,67,50,000/- to defendant No.1 and due to alleged change in specifications, the supply and commissioning of the equipment was delayed and culminated in the termination of the purchase order. The plaintiff issued a notice dated 20.08.2011 calling upon the defendant No.1 to repay the interest free advance consideration amounting to a sum of Rs.3,67,50,000/- within 15 days from the date of receipt of the notice. The defendant No.1 replied on 16.11.2011 denying its liability to refund the advance and refused to participate in the arbitration. Consequently, the plaintiff filed O.S. No.115/2014 against the defendants for the following reliefs:
"(i) To direct the defendants to pay the Plaintiff a sum of Rs.3,67,50,000/- (Rupees Three Crores Sixty Seven Lakhs Fifty Thousand Only) along with interest that may be quantified by this Hon'ble Court;
(ii) To grant costs, and
(iii) To grant such other relief/s as this Hon'ble Court may deem fit to grant under the circumstances of the case, in the interest of justice and equity."
4. The defendant No.1 filed an application (I.A.No.III) under Section 8 of the Act of 1996 before filing their first statement of defence.
5. The plaintiff opposed this application.
6. The Trial Court after considering the material on record, held that the parties were indeed bound by the clause No.1.8 of the General Terms and Conditions of the Contract stated in Schedule-F to the Purchase Order dated 08.04.2005 providing for settlement of disputes through arbitration and hence, allowed the application (I.A. No.III) filed under Section 8 of the Act of 1996 and referred the parties to arbitration.
7. Being aggrieved by the same, this writ petition is filed.
8. Learned counsel for the plaintiff / petitioner submitted that the defendant No.1 / respondent No.1 in terms of the reply dated 16.11.2011, refused to participate in arbitration and therefore, the Trial Court committed an error in allowing the application (I.A. No.III) under Section 8 of the Act of 1996 and referring the parties to arbitration. The learned counsel contended that when the defendant No.1/respondent No.1 itself refused to participate in the arbitration, no purpose would be served again in directing the parties to arbitration. He further contended that the suit was not only against the defendant No.1 but also against defendant No.2 – Managing Director, defendant No.4-Vice President and defendant Nos.3, 5 and 6 – Directors who were responsible for compelling the plaintiff to take further steps for implementation and commissioning of the Project. The learned couns
