Mr. G. Laxminarayan vs Sesa Goa Limited and Mr. B.D. Hanuman Singh

A.P. Lavande, J.—Heard Mr. Furtado, learned Counsel appearing for the Petitioner and Mr. R.G. Ramani, learned Counsel for Respondent No. 1. None appears on behalf of Respondent No. 2, though served.

Rule. By consent, heard forthwith.

By this petition, under Article 227 of the Constitution of India, the Petitioner challenges order dated 1/12/2009 passed by the Civil Judge, Senior Division "B" Court dismissing the application filed by the Petitioner u/s 8 of the Arbitration and Conciliation Act, 1996 ("The Act" for short).

Briefly, the facts leading to filing of the present petition are as under:

The Respondent No. 1 filed Special Civil Suit No. 38/2009/B before the Civil Judge, Senior Division at Panaji seeking recovery of amount of Rs. 5 million with interest thereon from 13/12/2004 against the Petitioner and Respondent No. 2. According to Respondent No. 1 the agreement dated 21/12/2004 was entered into between the Plaintiff and the Defendants by which the Defendants were supposed to procure a mine and transfer it to the Plaintiff for a consideration of Rs. 110 million. According to the Plaintiff, thereafter the said agreement was terminated and the Defendants agreed to refund the amount of 15 million which was received by the Defendants. Out of the said amount, the Defendants paid the first installment of Rs. 10 million and the balance amount of Rs. 5. Million was not paid. Therefore the suit was filed by the Plaintiff seeking recovery of the said amount, jointly and severally, from the Defendants.

The Petitioner/Defendant No. 2 in the suit filed an application dated 17/9/2009 seeking reference of the dispute to arbitration u/s 8 of the said Act in view of Clause 6 of the agreement dated 21/12/2004 which contained the arbitration clause. The said clause reads as under:

If any dispute or question arises between the parties touching the meaning, construction or effect of this agreement or of any clause or thing herein contained or regarding the respective liabilities and rights under this agreement then every such dispute or question except where specifically provided otherwise shall be referred to Arbitration, as per the provision of the Arbitration and Conciliation Act 1996.

The application was opposed by Respondent No. 1. By impugned order dated 1/12/2009, the trial court dismissed the application on the ground that the material on record clearly suggested that the agreement dated 21/12/2004 was terminated, as such, the dispute was not referable to arbitration in terms of Section 8 of the Act. The trial court further held that the arbitration Clause 6 of the agreement could not be invoked by the Petitioner/Defendant No. 2 since the arbitration agreement was not in existence and therefore the application filed u/s 8 was not maintainable.

Mr. Furtado, learned Counsel appearing for the Petitioner submitted that the findings recorded by the learned trial court are contrary to the settled law laid down by the Apex Court. Learned Counsel further submitted that even if the agreement dated 21/12/2004 stood terminated, the same by itself was not sufficient ground to dismiss the application u/s 8 of the Arbitration Act. In support of his submission Mr. Furtado placed reliance upon the judgment of the Apex Court in the case of The Branch Manager, Magma Leasing and Finance Limited and Another Vs. Potluri Madhavilata and Another, . He, therefore, submitted that the impugned order is patently unsustainable in law and deserves to be quashed and set aside.

Mr. Ramani, learned Counsel appearing for Respondent No. 1 fairly conceded that the reasons given by the trial Court for dismissing the application are unsustainable in law but contended that on merits, the conclusion drawn by the learned trial court that the application u/s 8 of the Act deserves to be dismissed cannot be faulted. Mr. Ramani supported the impugned order firstly on the ground that the application filed u/s 8 by the Petitioner was not accompanied by a certified copy of the arbitration agreement and secondly on the ground that the suit was filed on the basis of the subsequent agreement dated 8/8/2006, as pleaded in the plaint and not on the basis of agreement dated 21/12/2004.

As stated above, Respondent No. 2 though served has chosen not to put in appearance.

I have considered the rival submissions and perused the record.

Perusal of the impugned order dated 1/12/2009 discloses that the trial court has dismissed the application mainly on the ground that the agreement dated 21/12/2004 stood terminated and consequently, there was no arbitration agreement between the parties. In my opinion, the ratio laid down in the case of Branch Manger, Magma Leasing and Finance Ltd. (supra) is squarely applicable in the present case. In the said case, the Apex Court has held that even if the contract has come to an end by its termination due to breach, the arbitration clause does not perish nor is rendered inoperative; rather it survives for resolution of disputes "in respect of" or "with regard to" or "under" the contract. The necessary sequitur, therefore, is that the findings given by the trial court that since the agreement stood terminated, there was no arbitration clause is patently unsustainable in law and therefore deserves to be quashed and set aside. Since the impugned order is passed on the basis of the said finding the impugned order dismissing the application u/s 8 deserves to be quashed and set aside. I do not deem it appropriate to deal with the objections mentioned by Mr. Ramani since they have not been dealt with by the trial Court.

In the result, therefore, the impugned order dated 1/12/2009 passed by the Civil Judge, Senior Divn., Panaji in Special Civil Suit No. 38/2009/B dismissing the application dated 17/9/2009 is quashed and set aside and the trial court is directed to decide the application afresh in the light of the observations made above in accordance with law in the case of Branch Manger, Magma Leasing and Finance Ltd. (supra).

It is made clear that all the rival contentions of the parties are kept open.

Interim order dated 8/2/2010 passed by this Court staying further proceedings in the suit is vacated.

The parties either personally or through their advocates shall appear before the trial court on 11/2/2011 at 10.00 a.m. The trial court shall proceed to dispose of the application in the light of the observations made above.