Bhagya Jain vs Advanced Micronic Devices Ltd.

A.V. Chandrashekara, J.—Heard learned Counsel for the appellant and learned Counsel for the respondent.

Matter is taken up for final disposal with the consent of the learned Counsel on both sides.

Appellant and respondent are the lone plaintiff and defendant respectively in OS No. 1159/2014 pending on the file of the V Additional City Civil Judge, (CCH-13), Bengaluru.

Parties are referred to as per their rankings before the trial Court for the sake of clarity and convenience.

Plaintiff has chosen to file a suit for recovery of money on the ground that the defendant has committed default after termination of tenancy. During the pendency of the suit, an application was filed by the plaintiff under order 39 Rule 1 and 2 of Civil Procedure Code (hereinafter referred to as CPC for short) seeking an ad-interim mandatory injunction of re-entry as per the terms of the lease deed and also with a direction to the defendant to continue to pay the damages at the rate prevailing in the market, till disposal of the suit. The said application was not objected by filing written objection. On the other hand, the defendant chose to file a memo stating that the defendant had already handed over the possession of the suit schedule property to the plaintiff on 31.10.2013 and that the entire amount due had been paid.

After hearing the learned Counsel appearing for the parties and perusing the records, more particularly, the very lease deed entered into between the parties furnished by the plaintiff, the trial Court has come to the conclusion that the suit itself is not maintainable, while passing an order under Order 39 Rule 1 and 2 of CPC, in the light of there being a specific Arbitration Clause in the agreement. The observation so made by the learned Judge is as follows:

"Apart from this, there is a special clause in the lease agreement. The lease agreement provides for settlement of dispute or differences arising between the parties. The parties have agreed to settle their dispute or differences arising out of termination of tenancy through Arbitration. This arbitration clause contained in the lease agreement between the plaintiff and the defendant ousts the jurisdiction of this Court to entertain the suit for mandatory injunction and arrears of rent for November by way of damages. The decisions referred to by learned Counsel for the plaintiff are applicable where the suit is duly and properly instituted in a forum which has got jurisdiction to entertain the suit. Therefore with due respect, I am of the opinion that the decisions cited by learned Counsel for the plaintiff are not applicable to the facts of the case. In view of the foregoing reasons, I am of the opinion that the plaintiff has not made out a prima-facie case for grant of injunction as prayed in the application. Therefore, I answer point No. 1 to 3 in the negative." 7. While dismissing IA filed under Order 39 Rule 1 and 2 of CPC for ad-interim mandatory injunction, the learned Judge has dismissed the suit itself as not maintainable under law vide order dated 17.07.2014. It is this order which is called in question in this appeal. Several grounds have been urged in this appeal challenging the findings.

The plaintiff has filed a copy of the lease agreement entered into between the plaintiff and the defendant. As could be seen from the records, the said lease agreement relied upon by the plaintiff contains Arbitration Clause in Column No. 13(f). The same reads as follows:

"13(f):-In the event of any dispute or difference arising between the Lessor and lessee hereto concerning or relating to the interpretation of these presents or the interpretation or effect of any provisions there of relating to the liability of the obligation on the part of any of the parties hereto, including any dispute or differences arising out of its termination, the same shall be referred to arbitration of three arbitrators, one to be appointed by each of the parties and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. The award passed by them shall be binding on both the parties. The arbitration shall be in Bangalore and in accordance with and subject to the provisions of the Arbitration and Conciliation Act, 1996, or any such statutory modifications or re-enactments thereof for the time being in force." 9. The learned Judge has virtually dismissed the original suit purportedly in terms of Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''the Act'').

Section 8 of the Act reads thus:

"8. Power to refer parties to arbitration where there is an arbitration agreement--

1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

For an application under Section 8 of the Act, it is absolutely essential that there should be an arbitration agreement between the parties, as held by the Hon''ble Apex Court in the case of Atul Singh and Others Vs. Sunil Kumar Singh and Others, . Similarly in another decision of the Hon''ble Apex Court in the case of Ravi Prakash Goel Vs. Chandra Prakash Goel and Another, , it is held that, the parties cannot be compelled to take a recourse to in the civil Courts where a dispute is referable to Arbitration. Even the expression ''first statement on the substance of the dispute'' contained in Sub-section (1) of Section 8 must be contra-distinguished with the expression ''written statement'' as per the decision of the Hon''ble Apex Court in the case of Rashtriya Ispat Nigam Limited and Another Vs. Verma Transport Company, .

Expression 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 his 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 his right or acquiesced himself to the jurisdiction of the Court.

Admittedly, the plaintiff has filed a copy of the lease agreement and it contains a specific Arbitration clause. As per mandate of Sub Section (1) of Section 8 of the Act, a formal application has to be filed under Section 8(1) of the Act by the defendant seeking to refer to the Arbitration in terms of relevant clause found in the lease agreement and mere production of the copy of the lease deed by the plaintiff would not be sufficient to refer to the Arbitration under Section 8 of the Act.

Admittedly, in the present case, defendant has not filed any first statement on the substance of the case, except filing a memo stating that the property in question is already been handed over to the plaintiff and nothing is due to be paid to the plaintiff. In the light of the same, nothing comes in the way of the defendant to file a formal application under Section 8 of the Act and request the Court to proceed in terms of Clause 13(f) of the lease deed. It is indeed reiterated that an opportunity has to be given to the plaintiff to oppose the said application and the Court can pass a comprehensive order after considering the submission made by the parties in terms of Section 8 of the Act.

In this view of the matter, the very approach adopted by the trial Court is not in accordance with law. Even if the Court were to ultimately come to the conclusion that the suit is not maintainable, in terms of specific clause found in the lease deed, the only avenue left to the Court is to refer the matter to the Arbitration Court and not just pass order of dismissal of the suit as not maintainable, but to refer the parties to arbitration.

Hence, I proceed to pass the following:

ORDER

i) The appeal is allowed.

ii) The matter is remitted to the trial Court to enable the defendant to file a formal application under Section 8 of the Act and thereafter the trial Court to grant sufficient opportunity to the plaintiff to file the objections. After filing of objections and after hearing learned Counsel for the parties, the learned Judge to pass appropriate orders in terms of Section 8 of the Act.

iii) After considering IA that would be filed under Section 8 of the Act, the trial Court is at liberty to consider the application filed under Order 39 Rules 1 and 2 of CPC.

iv) The parties to appear before the trial Court on 26.03.2015, on which date, the defendant is at liberty to file an application under Section 8 of the Act. If he does not file an application under Section 8 of the Act, the Court is at liberty to proceed in accordance with law.

v) The report submitted by the Commissioner before this Court be sent to the trial Court, by the registry, so that it can be considered if the parties are not referred to arbitration in terms of Section 8 of the Act.

vi) There is no order as to costs.