@JUDGMENTTAG-ORDER
Aravind Kumar, J.@mdashThough matter is listed today for admission by consent of learned Advocates the matter is taken up for final hearing.
2. The defendants 1 and 2 are in revision questioning the correctness and legality for the order passed on I.A. No. 8 in O.S. No. 4463/2002 by the third Additional City Civil Judge, Bangalore on 22-1-2010 requesting this Court to exercise revisional jurisdiction and to set aside the said order whereunder the application filed by defendants 1 and 2 u/s 8 of the Arbitration and Conciliation Act, 1996 (hereinafter refer to as New Act) came to be dismissed. The parties in this petition are referred as per their ranks in the Court below.
3. The facts and dates which are not in dispute are as follows:
The plaintiffs and defendant 1 and 2 entered into an agreement on 27-12-1901 for manufacture of tin containers/cans and other allied products. Certain dispute is said to have cropped-up between the parties with regard to said agreement on account of which, the plaintiff instituted a suit on 27-6-1996. The plaint came to be presented along with an application under Order 33 Rule 1 CPC to sue as indigent person which petition came to be numbered as P. Misc. No. 400/1996. On 23-9-1996 defendants 1 and 2 entered appearance through learned advocate and on 19-7-1996 objections came to P. Misc. 400/1996 along with a memo. On 28-6-1999 after contest the above said petition P. Misc. 400/1996 came to be dismissed and a direction was given to plaintiff to remit the Court fee by 31-8-1999.
4. The plaintiffs being aggrieved by the order of rejection of P. Misc. 400/1996 filed a Civil Revision Petition No. 2673/1999 before this Court challenging the said order of dismissal/rejection. By order dated 19-11-2001, the Civil Revision Petition came to be allowed. Though defendants were served in the said revision petition, none appeared on their behalf. While allowing the revision petition this Hon''ble Court had directed that suit is to be registered and the petitioners therein (plaintiffs) were permitted to continue the suit in forma pauperis. Aggrieved by this order the defendants filed a review petition in R.P. No. 722/2004 which came to be dismissed by this Court of 19-11-2004.
5. As per order dated 19-11-2001 passed in CRP No. 2673/1999 suit came to be numbered as O.S. No. 4463/2002. On 18-7-2002 summons came to be issued to the defendants. On 22-1-2003 an advocate by name Sri. V.G.B. undertook to file vakalath for defendants 1 and 2. However, no such vakalath was filed. Hence, the Court below placed the defendants 1 and 2 ex parte on 18-9-2003. It is seen from the order sheet of O.S. No. 4463/2002 dated 18-9-2003 on that date defendant No. 3 was present and did not choose to cross-examine P.W. 1 who had already been examined and hence the Court below posted the case for delivering the judgment.
6. The matter came to be subsequently adjourned to 18-3-2004. There afterwards the suit in O.S. No. 4463/2002 referred to supra came to be adjourned to hear further arguments on 5-4-2004, 28-5-2004, 8-6-2004 and 28-6-2004. There afterward the suit came to be adjourned to 8-7-2004. On the said date when the matter was set down for further arguments, the defendants engaged another counsel and vakalathnama was filed along with an application under Order 9 Rule 7 CPC to set aside the exparte order dated 22-1-2003 placing the defendants exparte. There afterwards on 6-9-2004 defendants filed two interlocutory applications u/s 151 CPC for stay of suit and under Order 7 Rule 11(d) of CPC for rejection of the plaint as being barred by limitation respectively which came to be numbered as I.A. Nos. 6 and 7. The application filed under Order 9 Rule 7 CPC came to be allowed on 1-12-2004 and the matter was posted for hearing on I.A. No. 7 and it was adjourned to 18-1-2005. There afterwards from time to time the matter came to be adjourned to 4-2-2005, 26-3-2005 and 27-5-2005. On 27-5-2005 it was set down for hearing I.A. No. 7 filed by defendants 1 and 2 under Order 7 Rule 11(d) and on the said date an application u/s 8 of the Arbitration and Conciliation Act, 1996 came to be filed contending that there is an arbitration clause in the agreement dated 27-12-1991 and as such the same is required to be adjudicated by arbitrator and accordingly the matter was sought to be referred to arbitration . This application was opposed by the plaintiffs by filing detailed objections on 16-9-2005 along with an application seeking permission to file objections to file I.A. No. 7 and 8 which was allowed and the objections was taken on record. On the said objections, the Court below considering the plea advanced in the application and also the objections raised by the plaintiffs by its order dated 22-1-2010 dismissed the application I.A. No. 8 which is now assailed in the present revision petition.
7. Sri. K.P. Kumar learned Senior counsel appearing for the petitioner would contend that Section 8 of the Arbitration and Conciliation Act, 1996 is a self contained Code. He would contend that raising of any plea in the supplemental proceedings would not whittle down the right of the petitioner to invoke the jurisdiction u/s 8 of New Act and seek for reference for arbitration. He would contend that when admittedly there is an arbitration agreement between the parties and contracting parties have to be directed to have recourse to Arbitration and Conciliation Act, 1996. He would also contend that unlike the words used ''written statement'' in Section 34 of the Old Act (1940) in the present 1996, Act, the words used are "first statement" and he contends that before he filed his first statement an application u/s 8 of the Act was filed invoking the Arbitration clause and seeking intervention of the Court to refer the parties to arbitration. He would also elaborate his submission by contending filing the applications either u/s 151 CPC or under Order 7 Rule 11 and or filing objections to the P. Misc. would not amount to petitioner waiving their right inasmuch as it is a mandatory obligation cast on the Court to exercise its power u/s 8 of the Act and refer the parties to arbitration. He would also contend even if there is any delay in filing the application, it cannot defeat the mandatory provision of the Act. He would draw the attention of this Court to the order challenged in the revision petition to drive home the point that Court below was inclined to dismiss the application filed u/s 8 of the Act only on the ground of delay and it is contrary to the provisions of Section 8 of the Act. He would submit that immediately on the suit being registered, the application u/s 8 came to be filed and any statement made in the supplemental proceedings cannot be taken note of while deciding or adjudicating the application u/s 8 of the Act. In support of his submission he would draw the attention of this Court to the judgment in the case of
8. He would emphasize ingredients required to be satisfied for allowing an application u/s 8 are as follows:
(1) Existence of Arbitration Agreement.
(2) That action has been brought to the Court by one party to the arbitration agreement against the other party.
(3) The subject matter of the suit is the same as that of the arbitration agreement.
(4) That the party before submitting the first statement on the substance of the dispute moves the Court for referring the parties to arbitration.
(5) Along with the application original agreement are duly certified copy is annexed. and these ingredients are fully satisfied in the instant case.
In support of this proposition he has relied upon the decision in
9. Per contra Smt. Vidyulatha appearing on behalf of the respondent 2 would contend that the suit was instituted on 27-6-1996 along with an application to sue in forma pauperis by invoking Order 33 Rule 1 Civil Procedure Code. To the said application objections were filed on 19-7-1996 by the revision petitioners and there was no whisper about the Arbitration clause invoked by the revision petitioners and she draws attention of the Court to paragraph 11 of the objection statement to contend that said statement of the revision petitioners is to be construed as the first statement made which is referable to Section 8 and she contends that defendants have accepted and submitted themselves to the jurisdiction of the Civil Court.
10. She would also contend that after the dismissal of the P. Misc the second respondent had filed revision petition in CRP 2673/1999 which was also not contested by the present revision petitioner. When the said revision petition came to be allowed by this Court by order dated 19-11-2001 a review petition was filed in RP 722/2004 to recall the earlier order dated 19-11-2001 whereunder the plaintiffs were permitted to continue the suit in the capacity of in forma pauperis. Even in the said review petition she contends that revision petitioners herein had dwelt upon the merits of the case and thus the revision petitioners are to be construed as fence sitters. Elaborating her statement she would submit that when an application under Order 9 Rule 7 came to be filed there was no whisper with regard to the arbitration clause or even when they filed an application u/s 151 CPC on 6-9-2004 seeking stay of further proceedings. She would also contend that application filed under order 7 Rule 11(d) by the revision petitioners cannot be construed as a supplemental proceedings so as to escape from the clutches of Section 8 since a positive decision thereon would have resulted in plaint being rejected and thus it is not a supplemental proceedings and accordingly she contends that the application has been rightly dismissed by the Court below. She would draw the attention of the Court to the affidavits filed in support of these applications to demonstrate that there has been no mention about the arbitration clause in any of these pleadings and when the plaintiffs have invoked the exclusive jurisdiction of Civil Court u/s 9 CPC and revision petitioners having submitted their first statement by filing objections to P. Misc and traversing on merits of the case, they have given up their right to seek for arbitration. She would submit that in the objection filed to P. Misc particularly paragraph 5, 6 and 7 the revision petitioners have delved upon the merits of the case and there is no mention about the arbitration clause.
11. She would also submit that if registration of the original suit is to be construed as the starting point for Limitation then filing of application under Order 7 Rule 11(d) has to be construed as first statement u/s 8 of the Arbitration Act. She draws attention of this Court to Section 3(2)(ii) of the Limitation Act to contend that moment the plaintiffs instituted the suit by presenting the petition in forma paupcris the suit is said to have been filed. She would submit that once the revision petitioners submitted to the judicial authority namely the Civil Court by filing several applications, the revision petitioners are deemed to have waived the right to invoke the arbitration clause.
12. In reply to petitioner''s counsel Argument she would submit by drawing attention to paragraph 36 of Rashtriya Ispat Nigam''s case, to contend that words "first statement on the substance of the dispute" envisaged in 1996, Act is to be understood in contra distinction with the expression "written statement" envisaged under 1940, Act since first statement under the New Act, unlike the written statement under Old Act is to be understood where revision petitioners have delved upon the merits of the case. She would also submit that in Rashtriya Ispat Nigam''s case defendants therein had reserved their right to invoke the arbitration clause in the application filed for vacating the exparte injunction and this fact is conspicuously absent in the present case. She would also submit that order 7 Rule 11 (d) application filed by the revision petitioners seeking for rejection of the plaint cannot be construed as a supplemental proceedings inasmuch as the allowing of the said application would have resulted in termination or culminating of the suit itself. Hence, it cannot be construed as supplemental proceedings.
13. She submits that from 1996 till 2005 the revision petitioners have filed application after applications and protracting the proceedings which has been rightly taken note of by the Court below to reject the application filed u/s 8 of the Arbitration Act on the ground of delay and supports the orders passed by the Court below. The judgment of Rastriya Ispat Nigam Limited relied upon by the learned Counsel for the petitioners is also relied upon by Smt. Vidyulatha particularly with reference to paragraph 34 and 42 to contend that in the said case they had not submitted to the jurisdiction of Civil Court and had specifically reserved their rights.
14. Sri. Mohd. Saddiq, learned Counsel appearing for respondent No. 3 would contend that after the disposal of CRP 2673/1999 on 19-11-2001, the revision petitioners had filed the review petition No. 722/2004 which came to be rejected on 19-11-2004 to contend that in the review petition the revision petitioners had taken up a specific contention that they had a case on merits to be adjudicated and as such the revision petitioners had submitted to the jurisdiction of the Civil Court. Reiterating what was stated by Smt. Vidyulatha he would state objections filed to P. Misc is to be construed as the first statement referable to Section 8 of the Act. He would further contend that Article 137 of the Limitation Act is applicable to the facts of the present case inasmuch as the right to sue having accrued to the revision petitioners ought to have been exercised within three years when their right to apply seeking appointment of arbitration commenced namely in the year 1996. Having not done so they could not have invoked Section 8 and thus Article 137 is clearly applicable to the facts of the present case. He would also contend that third plaintiff and third defendant are not parties to the Arbitration agreement and as such the said clause cannot be invoked particularly when the third plaintiff being a proprietary concern.
15. In reply Sri. K.P. Kumar, learned Senior Counsel would draw the attention of the Court to Annexure-''C'' namely the plaint in O.S. No. 4463/2002 particularly paragraph-3 to contend that plaintiffs themselves have admitted third defendant is only a proforma and a necessary party to the suit though substantial relief is claimed against only defendants 1 and 2. He would also draw the attention of the court to para 11 of the plaint to demonstrate that plaintiffs themselves have admitted that first plaintiff and third plaintiff are sister concerns. He would also submit that at the first instance Article 137 of the Limitation Act does not apply since Section 8 of the Arbitration Act, 1996 is a self contained Code and the starting point for filing an application u/s 8 of the Act commences only after the plaintiff instituted a suit and before the first statement is filed and not earlier to that.
16. He would also submit that Section 3(2)(ii) of the Limitation Act is to be construed only for the purpose of reckoning the date of filing of the suit and only for the limited purpose of application of the Limitation Act and not for being considered as to whether it is a suit or otherwise and as such the initiation of the suit by filing P. Misc petition would not and cannot be construed as having instituted the suit. With reference to the contention raised by the learned Counsel for the respondent No. 1, on the ground of delay he would rely upon the judgment in the case of
17. Having heard the learned Counsel for the parties, the following points arise for my consideration:
(i) Whether in the facts and circumstances of the case can it be held that defendants have submitted their first statement on the substance of the dispute?
OR
Whether the revision petitioner satisfy the ingredients of Section 8 of the Arbitration and Conciliation Act, 1996, which in turn would entitle them to seek for reference to Arbitration?
(ii) Whether filing of application under order VII Rule (d) would be supplemental proceedings u/s 94 CPC or otherwise?
(iii) Whether Article 137 of the Limitation Act is applicable to the facts of the present case?
(iv) Whether the suit instituted under Order 33 Rule 1 in forma pauperis is to be construed as the starting point for limitation for invoking Section 8 of the Arbitration and Conciliation Act, 1996?
(v) Whether the order passed by the Court below in rejecting the application filed u/s 8 of the Arbitration and Conciliation Act, 1986 suffers from any legal infirmity?
(vi) What order?
18. In order to appreciate the rival contentions raised by the parties it would be of necessary to extract relevant provisions of Arbitration Act, 1940 (hereinafter referred to as the Old Act) as well as provision of Arbitration & Conciliation Act, 1996 (hereinafter referred to as the New Act).
18.1. Section 34 of the Old Act and Section 8 of New Act reads as under:
---------------------------------------------------------------- Section 34 Section 8 of 1996 Act ---------------------------------------------------------------- 34. Power to stay legal 8. Power to refer parties to proceedings where there is an arbitration where there is an arbitration agreement : arbitration agreement: Where any party to an (1) A Judicial authority arbitration agreement or any before which an action is person claiming under him brought in a matter which is commences any legal the subject of an arbitration proceedings against any other agreement shall, if a party party to the agreement or any so applies not later than person claiming under him in when submitting his first respect of any matter agreed statement on the substance of to be referred, any party to the dispute, refer the such legal proceedings may at parties to arbitration. any time before filing a written statement or taking (2) The application referred any other steps in the to in sub-Section (1) shall proceedings, apply to the not be entertained unless it judicial authority before is accompanied by the which the proceedings are original arbitration pending to stay the agreement or a duly certified proceedings; and if satisfied copy thereof. that there is no sufficient reason why the matter should (3) Notwithstanding that an not be referred in accordance application has been made with the arbitration under subsection (1) and that agreement and that the the issue is pending before applicant was, at the time the judicial authority, an when the proceedings were arbitration may be commenced commenced, and still remains, or continued and an arbitral ready and willing to do all award made. things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings. ----------------------------------------------------------------
18.2. The present suit was instituted on 27-6-1996 by presenting the plaint with an application under Order 33 Rule 1 of CPC which reads as under:
1. Suits may be instituted by indigent person: Subject to the following provisions, any suit may be instituted by an indigent person.
[Explanation I-A person is an indigent person:
(a) if he is not possessed of sufficient means (other than property exempt from attachment in execution of a decree and the subject-matter of the suit) to enable him to pay the fee prescribed by law for the plaint in such suit, or
(b) where no such fee is prescribed, if he is not entitled to property worth one thousand rupees other than the property exempt from attachment in execution of a decree, and the subject-matter of the suit.
[Explanation II - Any property which is acquired by a person after the presentation of his application for permission to sue as an indigent person, and before the decision of the application, shall be taken into account in considering the question whether or not the applicant is an indigent person.
Explanation III - Where the plaintiff sues in a representative capacity, the question whether he is an indigent person shall be determined with reference to the means possessed by him in such capacity.]
18.3. Part II of Limitation Act, deals with Bar of Limitation in respect of suits appeals and applications which reads as under.
Part II
Limitation of suits, Appeals and applications;
3. Bar of Limitation:
(1) Subject to the provisions contained in Sections 4 - 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence.
(2) For the purposes of the Act:
(a) a suit is instituted:
(i) in an ordinary case, when the plaint is presented to the proper officer;
(ii) in the case of a pauper, when his application for leave to sue as a pauper is made; and
(iii) in the case of claim against a company which is being wound up by the court, when the claimant first sends in his claim to the official liquidator;
(b) any claim by way of a set-off or a counterclaim, shall be treated as a separate suit and shall be deemed to have been instituted
(i) in the case of a set-off, on the same date as the suit in which the set-off is pleaded;
(ii) in the case of a counter-claim, on the , date on which the counter claim is made in court;
(c) an application by notice of motion in a High Court is made when the application is presented to the proper officer of that court.
18.4. On account of vast changes made to the old Act, the new Act namely the Arbitration and Conciliation Act, 1996 came into force. As seen from comparison of Section 8 of the New Act with Section 34 of the Old Act it is seen same is analogous. In this regard the commentary of Justice R.S. Bachawat''s on Law of Arbitration and Conciliation Act, would be of benefit and as such it is extracted:
As regards the effect of a party''s failure to invoke the arbitration agreement by way of such a timely request, it seems clear that article 8(1) prevents that party from invoking the agreement during the subsequent phases of the court proceedings. It may be noted that the Working Group, despite the wide support for the view that the failure of the party should preclude reliance on the agreement also in other proceedings or contexts decided not to incorporate a provision on such general effect because it would be impossible to devise a simple rule which would satisfactorily deal with all the aspects of this complex issue.
18.5. The scope of Section 8 of the New Act has been enumerated by Justice R.S. Bachawat which read as follows:
This section is based on the principle that the right to seek arbitration is a contractual right and a contract cannot be unilaterally abrogated so as to overthrow the arbitration clause. Under this section, the judicial authority does not restrain the plaintiff (a party to the agreement) from bringing an action in breach of his agreement with the defendant (the other party to the agreement). On the other hand, it is only on the defendant exercising his right to go in for arbitration that the judicial authority makes the parties to abide by their contract and contract and refers them to arbitration.
(Emphasis supplied by me)
Failure of the defendant to exercise his right would lead to an inference of an agreed conduct of the parties to supersede or abandon the terms of the agreement, thus vesting the judicial authority with jurisdiction to decide the dispute including matters which required arbitration. The judicial authority would then adjudicate upon the disputes. It does not enjoy suo motu power of reference to arbitration.
(Emphasis supplied by me)
18.6. The issue in question is with regard to the interpretation of Sub-section (1) of Section 8. The author in his book above referred has analysed Sub-section (1) of Section 8 and in the words of the author it reads as under:
Sub-section (1) empowers a judicial authority to refer the parties to arbitration agreement. The power comes into play when a legal proceeding is instituted before a judicial authority on a matter which is the subject-matter of an arbitration agreement. The party against whom proceedings are instituted can make an application to the court praying that the matter be referred to arbitration in terms of the agreement. Such application must be made by the party before, but not later than, submitting the first statement on the substance of the dispute. The natural consequence of the provision is that if an application is not so made and the party submits a statement on the substance of the dispute, that would amount to an acquiescence in the legal proceedings. The judicial authority would itself decide the dispute. The agreement as to arbitration becomes defeated.
(Emphasis supplied by me)
19. The words that requires to be analyzed and examined in comparison to the two Acts would be "not later than, submitting his first statement on the substance of the dispute" (as found in the new Act) and "may at any time before filing a written statement or taking any other steps in the proceedings" as found in the old Act. These two words have been analyzed by Hon''ble Supreme Court in the case of
The expression "first statement on the substance of the dispute" contained in Section 8(1) of the 1996 Act must be contra distinguished with the expression "written statement". It implies submission of the party to the jurisdiction of the judicial authority. What is, therefore, needed is a finding on the part of the judicial authority that the party has waived its right to invoke the arbitration clause. If an application is filed before actually filing the first statement on the substance of the dispute, the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the court. What is, therefore, material is as to whether the petitioner has filed his first statement on the substance of the dispute or not, if not, his application u/s 8 of the 1996 Act, may not be held wholly unmaintainable.
(emphasis supplied by me)
In view of the changes brought about by the 1996 Act, what is necessary is disclosure of the entire substance in the main proceeding itself and not taking part in the supplemental proceeding.
(emphasis supplied by me)
By opposing the prayer for interim injunction, the restriction contained in Sub-section (1) of Section 8 was not attracted. Disclosure of a defence for the purpose of opposing a prayer for injunction would not necessarily mean that substance of the dispute has already been disclosed in the main proceeding. Supplemental and incidental proceedings are not part of the main proceeding. They are dealt with separately in the CPC itself. Section 94 CPC deals with supplemental proceedings. A distinction has been made between supplemental proceedings and incidental proceedings in
20. In the case of
18. Section 8 in the form of legislative command to the court and once the prerequisite conditions as aforestated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfilment of the conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration. There is nothing on record that the prerequisite conditions of Section 8 are not fully satisfied in the present case. The trial court, in the circumstance, ought to have referred the parties to arbitration as per arbitration Clause 22.
21. In the background of Law laid down by the Hon''ble Supreme let me consider the points formulated herein above as follows:
FINDINGS
22. Re: Point No. 1 & 2: Under the old Act, it was considered that seeking for time to file written statement itself was a step in the proceedings and if such a prayer were to be made by a party applying for stay of the proceedings u/s 34 would be precluded from seeking stay on the ground that he had taken a step in the proceedings. However, in the new Act the words "taking any other steps in the proceedings" has been conspicuously omitted as gathered from the intention namely the objects under which a sweeping changes are made to the Arbitration Act with effect from 1996 so as to ensure that parties to the contract are bounded to the covenants entered into by them. Sri. K.P. Kumar, learned senior counsel appearing for the revision petitioners has vehemently contended that right of the petitioner would get waived only in the event the statement on the substance of the dispute is made and merits delved upon and not otherwise. Though it is contended that filing of interlocutory applications being supplementary in nature as provided u/s 94 of Civil Procedure Code, the revision petitioners were not precluded from filing the application u/s 8 of the New Act. Having relied upon the Rashtriya Ispat Nigarm''s case extensively, he would draw the attention of this Court to paragraphs 34, 35 and 36 to contend that in the said case wherein it was considered by their Lordships'' as to whether an application filed for vacating the order of temporary injunction and incidentally dwelling upon the averments of the main case would not be considered as dwelling upon the merits of the case and has rightly allowed the application filed u/s 8(1) and as such he contends that mere filing of application either u/s 151 CPC or u/s 7 Rule 11(d) would not and cannot be construed as dwelling upon the merits of the case and seeks to allow the application filed under the new Act. The Chronological list of dates and events would be of relevance to consider the contention raised in this revision petition and same is as under:
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Sl.No. DATES EVENTS
1 27.06.1996 Plaintiffs presented Plaint along with an
Application U/Order 33 Rule 1 Civil Procedure
Code, to sue as Forma Pauperis, which was numbered
as P. Mis. No. 400/96
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2 23.10.1996 Vakalath filed by Defendants D1 & D2.
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3 19.07.1996 Objections filed by the Defendants to P. Mis.
No. 400/1996 along with memo.
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4 28.06.1999 P. Mis. No. 400/1996 dismissed and directed the
Plaintiff to remit court fee by 31.08.1999.
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5 30.08.1999 Plaintiff preferred CRP No. 2673/99 challenging
the order dated 28.06.1999. Defendants served and
unrepresented.
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6 19.11.2001 CRP 2673/99 was allowed and Order in P. Mis. No.
400/96dated 28.06.99 was set aside and Plaintiffs
were permitted to continue the Suit in forma
pauperis.
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7 15.07.2002 Plaint presented earlier on 23.06.96 by the
Advocate for Plaintiff was numbered as O.S.
No.4463/02.
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8 18.07.2002 Summons issued.
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9 22.01.2003 VGB Advocate undertook to file Vakalat for D1 and
D2, but since he never turned up, D1, D2 placed
Ex-party.
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10 18.09.2003 PW1 discharged after examination in chief, Since
D1 & D2 absent, D3 present, did not opt for cross
examination.
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11 28.02.2004 08.03.2004 18.03.2004 Posted for Judgement.
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12 05.04.2004 28.05.2004 08.06.2004 28.06.2004 Posted Further
Arguments.
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13 08.07.2004 One Advocate, K.S. files Vakalat for D1 & D2 along
with an Application under Order IX Rule 7 of CPC
for setting aside ex-party order.
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14 02.09.2004 Review Petition 722/2004 filed by defendants
(Revision Petitioner herein) seeking review of the
Order dated 19.11.2001 passed in CRP 2673/99.
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15 06.09.2004 D1 & D2 filed 2 Applications u/s 151 CPC,
for rejection of Plaint as being bared by
Limitation. (I.A. Nos. 6 and 7).
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16 19.11.2004 R.P. 722/2004 came to dismissed.
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17 01.12.2004 Trial Court pleased to set aside the ex-party
order on payment of cost. No Written Statement
filed by D1 and D2 till date.
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18 01.10.2004 Objections filed by Plaintiff to the above
Applications.
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19 27.05.2005 D1 & D2 filed another Applications u/s 8
of Arbitration and Conciliation Act 1996 r/w
Section 151 of CPC to refer the matter to
arbitration. (I.A. No. 8)
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20 30.07.2005 Objection filed to the said Application by
Plaintiffs.
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21 22.01.2010 Orders on I. A. Nos. 6-8. All the 3 applications
are dismissed by the Trial Court.
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22 15.02.2010 (Present CRP: 35/2010 filed challenging Order
passed by Trial Court on IA No. 8
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23. In order to appreciate the contention raised by the learned senior counsel it would be necessary to extract the relevant pleadings in which the defendants have delved upon before Court below. In its objection filed to P. Misc. 400/96 on 19.07.1996 defendants (Revision Petitioner herein) has stated to the following effect.
5. I submit that there is absolutely no case for the petitioner to claim a sum of Rs. 2,34,43,200/- from this defendant by way of damages and compensations. In fact, very huge amount viz. Rs. is due from the Petitioner to this Defendant Company towards the amount due as per the agreement for the goods supplied and delivered to the Petitioner.
6. The arrangement and agreement entered into between this defendant and the Petitioner was for the supply of tinplates and the Petitioner has to make the printed canes or the cine canes as per the requirements. The Petitioner miserably failed to carry out the orders in time and further more even though a bank guarantee was executed upon and given by the petitioner for the supply of tin plates, the petitioner failed to fulfill his obligations and failed to make the payments in time.
7. I submit that as a result of the default committed by the Petitioner, during February 1996 this defendant stopped supply of the tinplates and by letter dated 09.02.1996 demanded that all the Cine canes lying in M/s. Banu Steel Industries and the Tomco Canes should be dispatched to the customers accordingly. In order to get over this and also to avoid the payment of Rs. 50,000/- demanded by the defendant company, the Petitioner by his notice dated 26.02.1996, issued through his counsel, made so may untenable demands and called upon this defendant to pay some alleged losses sustained by the Petitioner without mentioning any figures. This defendant through his counsel issued a reply dated 16-03-1996, reiterating that the agreement entered into earlier between this petitioner and defendant, has been acted upon by this defendant and it is only the petitioner who had violated the terms of the agreement and failed to make payment due for the goods supplied.
24. The application for rejection of the plaint came to be filed under Order 7 Rule 11(d) Civil Procedure Code. The said application was supported by an affidavit of the company Secretary whereunder it was contended as follows:
I submit in para 24 of the plaint, the plaintiff/opponent has stated as hereunder "the cause of action for the suit arose on 13-3-1991 being the date of meeting of the plaintiffs and the officials of the defendants 1 and 2 at Bangalore City, on 18-10-1991 being the date of plaintiffs purchasing of the sick Unit from the third defendant, on 4-11-1991 being the date of intimation as to the purchase of the sick unit by the plaintiffs to defendants 1 and 2, on 27-12-1991 being the date of entering into contract agreements at Bangalore City, and subsequently on different dates of orders placed by the defendants 1 and 2 and manufacturing of such goods, on 9-2-1996 being date of letter by the defendants 1 and 2 and on 26-2-1996 being the date of issue of the legal notice and on 31-5-1996 being the legal notice issued by the defendants 1 and 2 and on 7-6-1995 being the date of reply to the same by the plaintiffs subsequently, within the jurisdiction this Hon''ble Court". It is therefore, evident from the pleadings that the cause of action for the above suit starts running w.e.f. 27-12-1991, the date on which contract was signed between the parties. The contention of plaintiff that the suit is within time is without any basis. The applicant submits that event the documents relied upon by plaintiffs/opponents in their evidence does not disclose of any transaction between the parties between 1991 to 1996. Therefore, the plaintiff ought to have filed the above suit within a period of three years from the said date of signing the contract dated 27-12-1991. The plaintiffs/opponents having filed the suit on 27-06-1996 is hopelessly barred by limitation and therefore, the same is liable to be rejected in limine without going into the merits of the case.
25. Subsequently when the Court below rejected the plaint under Order 7 Rule 11 for nonpayment of Court fee, the matter had been taken up in revision by respondents 1 to 3 herein in CRP 2673/1999 which was allowed on 19-11-2001, against which a review petition was filed in RP No. 722/2004, whereunder the revision petitioners herein had sought for recall of the order passed in CRP. No. 2673/1999.
25.1. These pleadings when read together it emanates that at the first instance the revision petitioners did not raise a plea about the arbitration clause. In the pleadings above referred to it is not merely the pleadings which can be construed as supplemental inasmuch as the revision petitioners have delved upon the merits of the claim itself. The case of the revision petitioners is that they have taken upon themselves of the risk of dwelling into the merits particularly with reference to the objections to the P. Misc. namely paragraphs 5, 6 and 7 as referred to. In these paragraphs revision petitioners not only delved upon the merits also but have reiterated the claim against the defendants on the basis of the agreements. It is to be noticed that when respondents herein before instituting the proceedings had got issued a legal notice through their counsel on (26-3-1996) and it made several demands thereunder. Even in the said reply to the said notice namely reply notice dated (16-3-1996) there is no whisper made by the revision petitioners about the Arbitration clause. These facts clearly go to show that the revision petitioners being fully aware of the relevant arbitration clause namely clause 26 of the agreement referred to supra had not pressed into service and they have given a complete go by to the same.
26. Be that as it may, when the proceedings came to be instituted by the respondents herein, by filing suit for recovery of money by instituting suit namely suit along with an application under Order 33 Rule 1 to sue as an indigent person came to be resisted by the revision petitioners and took advantage of the order of dismissal and there afterwards without raising any ground whatsoever waited for long number of years to have the revision petition to be culminated and even the said order when it went against them and in favour of the respondent herein and this Court permitted the petitioners therein to prosecute their suit in forma pauperis filed a review petition in R P No. 722/2004 and suffered an order of dismissal of the review petition. The dates as mentioned herein above clearly goes to show that the revision petitioners have consciously waived their right to seek for reference to arbitration.
27. The words used in Section 8 are "when submitted his first statement on the substance of dispute" is to be read with conjunction with the object with which the Section has come into effect which can be classified as two fold namely:
(i) to ensure the parties to the lis settle their dispute at a faster pace;
(ii) to urge their right by invoking a covenant in the agreement and request the Court to bind the party to the covenant with which they have agreed upon.
These two covenants are required to be satisfied by the party who seeks to invoke the arbitration clause and not otherwise. It is in this background the Hon''ble Supreme Court in Rashtriya Ispat Nigam''s case while considering whether a party would be precluded from filing an application u/s 8 in the event of lis dwelling upon the merits of the case in an incidental proceedings considered and came to a conclusion in the negative. The said judgment when examined with reference to the facts of the case has to be held against the petitioners, inasmuch as the petitioners had an obligation to the Court to which an application was filed seeking reference to arbitration and demand for binding the other contracting party to adhere to the covenant as agreed upon. This is conspicuously absent in the present case as seen from the chain of events as narrated hereinabove. On 27-6-1996 the plaintiffs (respondent herein) filed a suit along with an application under order 33 Rule 1 CPC to sue in forma pauperis. There afterwards it culminated in the order passed by this Court on 19-11-2001 whereunder this Court permitted the respondents herein to continue the suit in forma pauperis and the suit came to be registered on 18-7-2002. There afterwards after waiting in the wings for a period of two years the revision petitioners flies an application under Order 7 Rule 11(d) for rejection of the plaint. Here again the revision petitioners do not whisper about the arbitration clause. Though the petitioners have contended that filing an application under Order 7 Rule 1l(d) is a supplemental proceedings, the same cannot be accepted for the simple reason that on the order passed under Order 7 Rule 11(d) reaches a finality and would get crystalised itself as decree under Sub-section (2) of Section 2 of Code of Civil Procedure. Thus, decree of dismissal becomes appellable. This is fortified by the following judgments:
(i)
Shamsher Singh, v. Rajinder Prashad and Ors.
3. Before us a preliminary objection was raised based on the observations of this Court in
Albert D''Souza v. M.S.R.T. Corporation Hassan
2. These revision petitions are filed against rejection of plaints in different suits filed by the petitioners in the Court of the Munsiff, Hassan.
5. The learned Munsiff...was barred by law. He, therefore, rejected the plaints by applying the provisions of Order 7, Rule 11 (d) of the CPC (to be herein-after referred to as the Code) These are the orders challenged in those revision petitions.
9. Whatever may be the view in regard to jurisdiction of the Court of the Munsiff in such matters, it is now to be seen whether this Court can exercise its powers u/s 115 of the Code. It has already been made clear that these revision petitions are directed against rejection of plaints in various suits by applying the provisions of Order 7, Rule 11(d) of the Code.
11. But, by now this controversy has been settled by the Supreme Court in
If an appeal lies against the adjudication directly to the High Court, or to another Court from the decision of which an appeal lies to the High Court, it has no power to exercise its revisional jurisdiction, but where the decision itself is not appealable to the High Court directly or indirectly, exercise of the revisional jurisdiction by the High Court would not be deemed excluded.
It is, hence, clear that if from the decision in question an appeal lies to a sub-ordinate Court and the decision of such subordinate Court is appealable to the High Court, the High Court has no power to exercise its revisional jurisdiction. I have already pointed out that the petitioners had right of appeal to the Court of the Civil Judge u/s 96 of the Code and Section 20 of the Act. It is, therefore, certain that second appeals u/s 100 of the Code would lie to this Court as against the decisions rendered by the Civil Judge. Because of these facts and circumstances and the law being as laid down by the Supreme Court in the decision reported in
12. In view of the foregoing reasons, I hold that these revision petitions are not maintainable in this Court, and reject them.
In view of the same the contention of the learned Counsel for the petitioners which is to the effect that an application filed u/s 7 Rule 11(d) is to be construed as a supplemental proceedings cannot be accepted and same is rejected. Accordingly question No. IV is answered holding that filing of application u/s 7 Rule 11 would not be a supplemental proceedings.
28. Coming back to the core issue that "first statement on the substance of the dispute", I am of the considered opinion in the facts of these cases that revision petitioners having taken upon themselves by dwelling upon the merits at every stage of the case have acquiesced themselves by relinquishing their right to file an application u/s 8 of the Act.
29. As rightly pointed out by Smt. Vidyulatha, learned Counsel for respondent No. 2 in Rashtriya Ispat Nigam''s case at paragraph 36 it has been held as under:
The expression "first statement on the substance of the dispute" contained in Section 8(1) of the 1996 Act must be contra distinguished with expression "written statement". It employs submission of the party to the jurisdiction of the judicial authority. What is, therefore, needed is a finding on the part of the judicial authority that the party has waived its right to invoke the arbitration clause. If an application is filed before actually filing the first statement on the substance of the dispute, in our opinion the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the court. What is, therefore, material is as to whether the petitioner has filed his first statement on the substance of the dispute or not, if not, his application u/s 8 of the 1996 Act, may not be held wholly unmaintainable".
(Emphasis supplied by me)
It has been held by the Hon''ble Supreme Court in the above case that it has to be ascertained in the facts of each case as to whether petitioner has filed the first statement on the substance of the dispute or not. Which in effect means, if merits is touched upon in said application filed u/s 8 of 1996, Act, it may held as not maintainable. In the instant case, on facts it is seen that revision petitioners have delved upon the merits of the case in respect of the averments made in the suit and hence the judgment of Rashtriya Ispat Nigam''s case is to be held is in favour of the respondent herein inasmuch as the only issue which came up for consideration in the said case before the Hon''ble Supreme Court was with reference to an application filed by a contesting defendant seeking vacating the interim Order and incidentally delving upon the merits of the case would amount to waiving their right u/s 8 or not and was held in the facts of the said case in the negative.
30. However, on examination of facts in the instant case it is seen that revision petitioners have in fact delved upon the merits of the case in paragraphs 5, 6 and 7 of their objections as referred to supra and hence they have waived their right if any to seek for arbitration. In view of the above discussion, I am of the considered opinion that Point No. 1 formulated herein above is required to be answered against the revision petitioner and in favour of the respondents by holding that defendants namely the revision petitioners in the present suit have submitted their statement on the substance of the dispute and thus would not be entitled to invoke the arbitration clause in exercise of their right u/s 8 of the new Act.
31. In view of the discussion made hereinabove and the conclusion arrived at, it is also to be held that the revision petitioners have failed to demonstrate that they have satisfied the ingredients of Section 8 of the Arbitration Act, 1996 and they would be entitled to claim the relief thereunder.
32. One another aspect which requires to be noticed in the instant case is that revision petitioners have been consistently appearing in all the proceedings that are taking place right from the year 1996 till 27-5-2005 i.e., till the date of filing the application u/s 8 of the New Act but for the reasons best known to them have consciously omitted to make a whisper about the Arbitration clause. This conduct of the petitioners expressly exhibit their intention to waive the arbitration clause and their willingness to submit themselves to the jurisdiction of the Civil Court for dispute being adjudicated. In view of above points 1 and 2 formulated herein above is answered againsts the revision petitioners. Hence, question of considering the arguments addressed on question Nos. 3, 4 and 5 would not arise and accordingly the said questions are not addressed to and answered by this Court.
33. It is needless to observe that in the event an application is filed by the revision petitioners before the Court below to contest the matter on merits by seeking permission to file written statement the same will be considered in accordance with law on its merits.
34. In view of the above following order is passed.
ORDER
(i) The revision petition is dismissed as devoid of merits.
(ii) Order passed on LA. No. 8 dated 22.01.2010 by III Additional City Civil Judge, Bangalore is hereby confirmed.
(iii) No Order as to costs.
