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Judgment
89 paragraphs · 1,878 wordsM. Jaichandren, J.—This Original Side Appeal has been filed against the order of the learned single judge, dated 23.7.2012, made in
Application No. 1642 of 2012, in C.S. No. 609 of 2010. The 1st and 2nd defendants in the suit, in C.S. 609 of 2010, are the appellants in the
present Original Side Appeal. The Civil Suit, in C.S. No. 609 of 2010, had been filed by the 1st respondent in the present Original Side Appeal,
for recovery of an amount of Rs. 5.01 Crores, together with interest thereon, at 24% per annum.
It had been stated that the defendants in the suit had owed a sum of Rs. 5.01 Crores, together with the interest accrued thereon, in respect of
sale and purchase of certain lands situated at Chennai. The appellant, in the present Original Side Appeal, had filed an application, in A. No. 1642
of 2012, in C.S. No. 609 of 2010, u/s 8 of the Arbitration and Conciliation Act, 1996, praying that this Court may be pleased to refer the dispute
that had arisen amongst the appellant, as well as the respondents, to Arbitration, in terms of the provisions contained in the Memorandum of
Understanding, dated 30.11.2006. The said application, filed by the appellants, had been contested by the 1st respondent herein, stating that, as
per the provisions contained in the Deed of Settlement, dated 5.7.2007, concluded amongst the parties concerned, the Memorandum of
Understanding, dated 30.11.2006, stood terminated. According to the Deed of Settlement, dated 5.7.2007, the parties had agreed that they
would not opt to enforce their rights and obligations, as per the Memorandum of Understanding, dated 30.11.2006.
It has also been stated that the application filed by the appellants, in A. No. 1642 of 2012, contending that the dispute is to be referred to
Arbitration, as per the terms contained in the Memorandum of Understanding, dated 30.11.2006, is frivolous and without any merits.
It had also been stated that the said application had been filed by the appellants only with an ulterior motive of dragging on the proceedings and
to defeat the rightful claims made by the respondents, for the recovery of the sum of Rs. 5.01 Crores due to them. The appellants herein, who had
filed the application, in A. No. 1642 of 2012, had contended that various disputes had arisen amongst the parties, prior to the Deed of Settlement,
dated 5.7.2007, and it had culminated in entering into the said Deed of Settlement, dated 5.7.2007.
Per contra, the respondents had contended that the arbitration clause contained in the Memorandum of Understanding, dated 30.11.2006, had
been abrogated and the parties concerned had entered into a fresh Deed of Settlement, dated 5.7.2007. Therefore, the arbitration clause
contained in the Memorandum of Understanding, dated 30.11.2006, cannot be invoked by the appellants herein, for referring the disputes that had
arisen subsequent to the entering into the Deed of Settlement, dated 5.7.2007, for Arbitration.
In such circumstances, the learned single Judge, by his order, dated 23.7.2012, made in the Application, in A. No. 1642 of 2012, had rejected
the application filed by the appellants, u/s 8 of the Arbitration and Conciliation Act, 1996, stating that the Memorandum of Understanding, dated
30.11.2006, had been cancelled, mutually, by a Deed of Settlement, dated 5.7.2007, and therefore, the question of invoking the arbitration clause
found in the Memorandum of Understanding, dated 30.11.2006, would not arise.
The learned single Judge had also found that the 3rd defendant, who is a party to the suit, is not a party to the Memorandum of Understanding.
He had also found that the intention of the parties to abrogate the Memorandum of Understanding was very clear. The abrogation of the
Memorandum of Understanding was mutual in nature and therefore, it would not be open to the appellants herein to avail the arbitration clause that
was found in the Memorandum of Understanding, dated 30.11.2006.
It was also found that a fresh Deed of Settlement had been entered into amongst the parties concerned, on 5.7.2007, and the amount of Rs.
5.01 Crores, said to be due from the appellants, as claimed in the Civil Suit, in C.S. No. 609 of 2010, is a fresh cause of action, based on the
Deed of Settlement, dated 5.7.2007.
The learned counsel appearing on behalf of the appellants had contended that, even though the Memorandum of Understanding, dated
30.11.2006, stood cancelled, on 5.7.2007, when the Deed of Settlement had been entered into, the arbitration clause contained in the
Memorandum of Understanding, dated 30.11.2006, would survive and therefore, the suit filed by the 1st respondent, in the present appeal, cannot
be sustained, in view of Section 8 of the Arbitration and Conciliation Act, 1996. Therefore, the learned single Judge ought to have referred the
parties to settle the disputes that had arisen amongst them, by way of arbitration, as per the arbitration clause contained in the Memorandum of
Understanding, dated 30.11.2006.
10 The learned counsel appearing on behalf of the appellants had further submitted that the suit filed by the 1st respondent traces the cause of
action in the said suit, only from the Memorandum of Understanding, dated 30.11.2006. Since there is no contract entered into amongst the parties
concerned, by way of the Deed of Settlement, dated 5.7.2007, the 1st respondent ought to have initiated the arbitration proceedings, as per the
arbitration clause contained in the Memorandum of Understanding, dated 30.11.2006.
11 The learned counsel had further submitted that the Deed of Settlement would only refer to the disputes that had arisen amongst the parties
concerned and it could be traceable to the cause of action that had arisen, with reference to the Memorandum of Understanding, dated
30.11.2006, and therefore, it would not be open to the 1st respondent to file a suit for recovery of the money, said to be due from the appellants.
12 The learned counsel appearing on behalf of the appellants had relied on the following decisions, in support of his contentions:-
[i] Rashtriya Ispat Nigam Limited and Another Vs. Verma Transport Company, ,
[ii] The Branch Manager, Magma Leasing and Finance Limited and Another Vs. Potluri Madhavilata and Another, , and
[iii] Appeal [L] No. 206 of 2013 in Arbitration Petition No. 1070 of 2011 in Suit No. 2287 of 2011 [Mulheim Pipe coatings GmbH. v. Welspun
Fintrade Ltd., & Anr.
The Learned counsel for the respondents had contended that a new Settlement Deed had come into being, on 5.7.2007, and that is the only
settlement that is existing. The Memorandum of Understanding, entered into amongst the parties concerned, dated 30.11.2006, had been
terminated. He had also submitted that the cause of action for the filing of the suit, in C.S. No. No. 609 of 2010, had arisen, independently,
without reference to the Memorandum of Understanding, dated 30.11.2006.
The learned counsel had also stated that the cheques given to the 1st defendant in the said suit, who is the 1st appellant, in the present appeal,
had been diverted to the 3rd defendant in the said suit. The 3rd defendant is not a party to the Memorandum of Understanding, dated 30.11.2006.
It had also been stated that all the immovable properties belonging to the 1st defendant stood in the name of the 3rd defendant. On lifting the veil, it
could be seen that the 1st defendant had diverted all the properties and the money, in favour of the 3rd defendant, only with the intention of
defeating the rightful claim of the plaintiff, in C.S. No. 609 of 2010. He had also pointed out that all the defendants in the suit, in C.S. No. 609 of
2010, had filed an application, u/s 8 of the Act, to refer the dispute to arbitration. Even though, the suit, in C.S. No. 609 of 2010, is in respect of a
money claim that had arisen under the terms of the Deed of Settlement, dated, 5.7.2007, the cause of action in the suit, in C.S. No. 609 of 2010,
cannot be split, as per the decision of the Supreme Court, in Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya and Another, . The learned
counsel appearing on behalf of the respondents had also relied on the following decisions, in support of his contention:-
[i National Insurance Co. Ltd. Vs. Boghara Polyfab Pvt. Ltd.,
[ii] O.S.A. Nos. 431 to 433 of 2009 [Chandivali Farm Road v. Sundaram BNP Paribas Home Finance Ltd.]
[iii] The Union of India Vs. Kishorilal Gupta and Bros.,
[iv] Tata Iron and Steel Co. Ltd. Vs. Standard Chrome Ltd.,
[v] Canbank Financial Services Ltd. Vs. Haryana PetroChemicals Ltd. and Another,
[vi] Rites Limited Vs. JMC Projects (India) Ltd.
[vii] Kotak Mahindra Investment Limited Vs. Kitply Industries Limited and . Another,
In view of the submissions made by the learned counsels appearing on behalf of the appellants, as well as the first respondent and on a perusal
of the records available and on considering the decisions cited supra, we are of the considered view that it not open to the appellants to claim that
the suit filed by the 1st defendant, in C.S. No. 609 of 2010, is not maintainable. The suit, in C.S. No. 609 of 2010, had arisen out of an
independent cause of action, based on the Deed of Settlement, dated 5.7.2007. Therefore, it would not be open to the appellants, in the present
Original Side Appeal, to claim that the parties to the disputes should go before the Arbitrator, as per the arbitration clause contained in the
Memorandum of Understanding.
From the records available, it is clear that the Memorandum of Understanding, dated 30.11.2006, had been terminated, mutually, by the
parties concerned and a new Deed of Settlement, dated 5.7.2007, had come into being. The cause of action in the suit, in C.S. No. 609 of 2010,
had arisen, purely, out of the Deed of Settlement, dated 5.7.2007. The claim of the appellants that the cause of action for the filing of the suit, in
C.S. No. 609 of 2010, could relate back to the Memorandum of Understanding, dated 30.11.2006, cannot be countenanced. Having agreed to
terminate the Memorandum of Understanding, dated 30.11.2006, it would not be open to the appellants to claim that the disputes, said to have
arisen amongst the parties concerned, subsequent to the entering into the Deed of Settlement, should be settled by way of arbitration, as per the
arbitration clause contained in the Memorandum of Understanding. It could be noted that the parties concerned had agreed, mutually, to terminate
the Memorandum of Understanding, dated 30.11.2006, by entering into a fresh Deed of Settlement, dated 5.7.2007. It could also be noted that
the cause of action, in C.S. No. 609 of 2010, had arisen only out of the subsequent Deed of Settlement, dated 5.7.2007, entered into amongst the
parties concerned. In such circumstances, the claim made by the appellants herein that the suit filed by the 1st defendant, in C.S. No. 609 of 2010,
cannot be sustained, is not acceptable. In such view of the matter, we are of the considered view that the present Original Side Appeal is devoid of
merits, and therefore, it is liable to be dismissed. Accordingly, the Original Side Appeal is dismissed. No costs.