Citi Financial Consumer Finance India Ltd. vs Swapan Bihari Pati

Pradip Mohanty, J.—This civil revision arises out of the order dated 26.10.2005 passed by the Civil Judge (Junior Division), 1st Court, Cuttack in C.S.(I) No. 126 of 2005 rejecting an application u/s 8 read with Section 5 of the Arbitration and Conciliation Act, 1996 which was filed with a prayer to refer the parties to the suit to arbitration as per the arbitration agreement.

The opposite party as the Plaintiff filed C.S.(I) No. 126 of 2005 in the Court of the Civil Judge (Junior Division), 1st Court, Cuttack praying therein to declare that the Petitioner-Defendant has no right to run the business of lending money and to collect interest at a higher rate on the loan advanced to him. A further prayer was also made to injunct the Petitioner from collecting the instalment of interest charged at such higher rate from the opposite party till final disposal of the suit. On 16.9.2005, the Petitioner appeared and before filing written statement filed an application u/s 8 read with Section 5 of the Arbitration and Conciliation Act, 1996 to refer the parties the suit to the arbitration as per the arbitration agreement between them. The trial Court rejected the said application.

Mr. Pattnaik, learned Counsel for the Petitioner submitted that at the first opportunity, i.e., before filing of the written statement, the Petitioner filed an application u/s 8 of the Arbitration and Conciliation Act. Therefore, the Court has jurisdiction to entertain the application. But the Court below has rejected the same without applying its mind. He further submitted that the Court below has acted with material irregularity by taking into account only the agreement in isolation, without the contents of the certificate in the loan application, in determining the propriety of an arbitration agreement within the ambit of Section 7 of the Arbitration and Conciliation Act, 1996. The trial Court has unnecessarily restored to extraneous consideration like the column of witnesses and address having not been duly filed in the agreement to ascertain the propriety of the agreement within the ambit of Section 7 of the Arbitration and Conciliation Act, 1996. The Trial Court ought to have taken into account that there is an arbitration clause, i.e. Clause 30, in the agreement.

Mr. Routray, learned Counsel for opposite party submitted that the trial Court has rightly rejected the application since it prima facie found that the signature appearing on the loan application does not tally with the signature on the agreement. Therefore, no fault should be found with the trial Court in passing the impugned order.

Counsel for the parties in support of their respective contentions cited upon the decisions in P. Anand Gajapathi Raju and Ors. v. P.V.G. Raju (died) and Ors. AIR 2000 SC 1886, Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway Petroleums, , State of Orissa and Another Vs. Surendranath Kanungo, , Sashi Bhushan Pati and Anr. v. State Bank of India and Anr. 60 (1985) CLT 591, Nanda Kishore Mohapatra and Others Vs. Binayak Mishra and Another, and Shiv Shakti Coop. Housing Society v. Swaraj Developers and Ors. 2003 (I) OLR 673.

Perused the materials available on record as well as the decisions cited by the parties. This Court is of the view that the civil revision is maintainable because had the application filed by the Petitioner been allowed in his favour, the (sic) would have been terminated, because in such event the matter had to be referred to the arbitrator u/s 8 of the Act. Admittedly, Clause 30 of the agreement provides for arbitration in case of any controversy or dispute between the parties. There is no dispute that u/s 8 of the Act the Civil Court has jurisdiction to refer the matter to an arbitrator. But the crux of the case is whether the agreement in question relying on which the Petitioner seeks for referring the matter to arbitration is a valid one and an agreement between the parties. For this purpose, it is necessary to refer Section 7 of the act which deals with arbitration agreement.

Arbitration agreement - (1) In this part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3)An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in -

(a) a document aligned by the parties.

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not defined by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

It is crystal clear from the above provision that "arbitration agreement" means an agreement by the parties. But in the instant case, the name and address of the Plaintiff-opposite party has not been duly described either in the contents of the agreement or in the contents of the appended promissory note thereto. The signature of the Plaintiff-opposite party seems to be not in the own handwriting of the Plaintiff-opposite party as it does not tally with the signature put in the loan application. The agreement in question seems to be a document containing no name and address of the Plaintiff-opposite party. Simply the signature of the Plaintiff-opposite party has been obtained therein. Therefore, the trial Court prima facie found that the agreement in question and promissory note has not been duly executed. Furthermore, from a close reading of Clause 30 it is clear that the Courts of Delhi will have jurisdiction and that the dispute will be referred to the arbitrator. The Civil Court will refer the matter only when it is proved that the Defendant-Petitioner and the Plaintiff-opposite party have executed the agreement. The question of enforcing Clause 30 does not arise if the parties have not signed the agreement. In the instant case, there is no agreement between the parties. Therefore, the Trial Court has rightly rejected the application u/s 8 of the Act.

for the foregoing discussions, there is no illegality committed by the Trial Court. The revision is accordingly dismissed.