Indian Oil Corporation Limited and Another vs Smt. Vijay Mehta

Bansi Lal Bhat, J.—Through medium of instant revision petition, the Indian Oil Corporation Limited (hereinafter to be referred to as

petitioner-Corporation) through its Senior Divisional Retail Sales Manager and Senior Depot Manager seek setting aside of order dated

10.04.2006 passed by learned Sub Judge (Chief Judicial Magistrate), Jammu in File No. 131/Civil titled Smt. Vijay Mehta Vs. Indian Oil

Corporation Limited and ors. by virtue whereof the Suit has been permitted to be proceeded with despite invoking of Arbitration Clause by the

petitioner. The facts are not in controversy. Respondent was granted dealership of retail outlet by the petitioner-Corporation in her capacity as a

member of Scheduled Caste Category. This was done under a special incentive programme devised by Government of India. Expenditure was

incurred by the petitioner Corporation for obtaining the land and setting up the unit. It was alleged that the respondent entered into illegal

transaction with one Rakesh Wazir transferring management to him. There was a litigation inter se the parties. Respondent was called upon to

show cause why her dealership be not terminated. Allegedly she failed to give any explanation and the dealership came to be terminated.

Respondent filed a Suit for declaration before the learned Trial Court. Petitioner-Corporation appeared before the Trial Court and raised the plea

that since there was an Arbitration Clause in the dealership agreement, the Suit could not proceed. Learned Trial Court framed two preliminary

issues which were decided against the petitioner-Corporation. The Suit was held to be maintainable in terms of the impugned order dated

10.04.2006, legality whereof is the subject of challenge in the instant revision petition.

Heard learned counsel for the rival sides.

Section 8 of Arbitration and Conciliation Act, 1997 (hereinafter to be referred to as the Act) dealing with power of Court to refer parties to

arbitration is reproduced hereunder; 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.

A plain reading of this provision lays bare that the authority before whom an action is brought in a matter which is the subject of an arbitration

agreement has the power to refer the parties to arbitration on the application of a party, who applies not later than when submitting his first

statement on the substance of the dispute. The Civil Court seized of the suit, whether competent or not, can refer the parties to arbitration.

In the case in hand, it is the case of petitioner that an arbitration clause covering all kinds of disputes relating to dealership exists in the dealership

agreement and it cannot be disputed that the subject matter of the dispute between the parties is covered by the agreement. However, there is no

application on the record of Trial Court for seeking reference of parties to arbitration. No doubt, petitioner has taken a preliminary objection in his

written statement in regard to maintainability of the suit but the same does not tantamount to filing of an application for seeking reference to

arbitration. The mandate of law, embodied in Section 8 of the Act is that the judicial authority seized of the matter can refer the parties to

arbitration only upon application by a party to the lis. Such application is to be accompanied by the original arbitration agreement or a duly certified

copy thereon. The provision does not admit of making of reference suo moto. The Hon'ble Apex Court held in a case reported in Sukanya

Holdings Pvt. Ltd. Vs. Jayesh H. Pandya and Another, that for interpretation of Section 8, Section 5 would have no bearing because it only

contemplates that in matters governed by part-1 of the Act, the judicial authority shall not intervene except where so provided in the Act. Except

Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Thus, where no

application was made u/s 8 of the Act at the appropriate stage or the application was not accompanied by the original arbitration agreement,

Section 5 would not come into play and bar jurisdiction of Civil Court to entertain the suit. Viewed in this context, learned Trial Court is right in

holding that in absence of compliance with the procedure laid down in Section 8, the Trial Court could not refer the parties to arbitration merely

because an objection had been raised to the maintainability of the suit in the written statement. No exception can be taken to the view adopted by

the Trial Court while holding that unless there is a formal application by a party to suit for reference of parties to arbitration not filed later than filing

of the first statement of facts, parties cannot be referred to arbitration. Likewise, it is difficult to disagree with the Trial Court in holding that failure

on part of the party to file a formal application for reference of parties to arbitration would justify raising the presumption that the right to get the

case referred to arbitration has been waived. Despite raising objection to maintainability of suit, the petitioner did not file an application in terms of

Section 8 of the Act. The application filed after filing of written statement merely prayed for decision on issue of arbitrability in the first instance.

Same could not be treated as an application u/s 8 of the Act. The Trial Court had framed the preliminary issues relating to jurisdiction of Court and

plea of res-judicata raised by the petitioner in his written statement. The findings on the issues, in the light of aforesaid, do not call for interference.

Viewed in this context, the contention that jurisdiction of Civil Court was completely ousted has to be repelled. Power to refer the parties to

arbitration, where there is an arbitration agreement, springs from Section 8 finding place in Chapter II of the Act leaving the operation of Section 5

included in Part-I of the Act outside its scope.

No fault can either be found with the finding returned on Issue No. 2 as the learned Trial Court came to conclusion that the suit was maintainable

and there was no commonality on issues and parties between the lis pending before it and the earlier lis decided between the parties. Viewed thus,

I find no merit in this revision petition. The impugned order dated 10.04.2006 does not suffer from any legal infirmity or jurisdictional error. The

Revision Petition is accordingly dismissed. Record be sent down.