Rama Gouri R. Dave vs Sudhir Kumar Roy

Maharaj Sinha, J.—As the fate of the above application for leave to enter appearance and to file the Written Statement (G. A. No. 1310 of 2006) would, in my opinion, primarily depend on the decision on the application u/s 8of the Arbitration and Conciliation Act, 1996, I would deal with the merits of the application u/s 8 of the said act, 1996 first and then, if necessary, I would deal with the merits of the other application of the Defendant/Petitioner for elave to enter appearance and to file the Written Statement in this judgment one after the other.

The Defendant/Petitioner has made the above application under the provisions of Section 8 of the Arbitration and Conciliation Act, 1996 being G. A. No. 1310 of 2006 "primarily seeking a declaration" that there exists a valid arbitration agreement between the Petitioner and the Respondent and disputes between the parties "should be referred to arbitration". In aid of the above declaration, the Petitioner has also sought for stay of all further proceedings in the suit, namely, Civil Suit No. 63 of 2005. The Petitioner herein is the Defendant in the said suit and the Respondent is the Plaintiff.

Before considering the merits of the abvoe application, it should, however, be pointed out very briefly that on or about 21 March 2005, the Plaintiff instituted the above suit essentially claiming a decree for Rs. 13,53,008/- and interest on the said sum. There is no dispute that after institution of the said suit, the Writ of Summons was duly served upon the Defendant, namely the Petitioner herein, but in spite of service of Writ of Summons upon the Defendant, the Defendant/Petitioner did not enter appearance to contest the above suit.

Eventually, the suit appeared as an undefended suit in the list on 15 March 2006 "for hearing", when the Plaintiff was allowed to adduce and/or given evidence in support of her claim or claims in the suit. The suit was allowed to proceed on the basis of the certificate granted by the department concerned in favour of the Plaintiff recording that the Defendant in spite of service of Writ of Summons upon him did not enter appearance to contest the suit; The witness of the Plaintiff, in fact, gave full evidence and sought to prove all the documents relied upon by the" Plaintiff in support of her claim or claims In the plaint and the evidence of the Plaintiff was thereafter concluded as none appeared on behalf of the Petitioner (Defendant) to cross examine the Plaintiff''s witness.

On 22 march 2006, when the Court was about to deliver judgment as the Plaintiff/Respondent completed her evidence and the Learned Counsel on behalf of the Plaintiff also completed his submissions in support of the suit, the learned Advocate on behalf of the Petitioner (Defendant) appeared in Court for the first time and made submissions to the effect that though the Writ of Summons was duly served upon the Defendant yet as the Defendant was ill and hospitalised, the Defendant was not in a position to enter appearance for the purpose of contesting the suit.

On the basis of the above submissions of the learned Advocate for the Petitioner, the Petitioner was allowed to make necessary application for obtaining leave of the Court to file Written Statement to contest the suit.

In fact, the Court allowed the learned Advocate of the Petitioner to enter appearance so that the necessary application could be made by the Petitioner (Defendant) for obtaining leave to file the Written Statement to contest the said suit. The Petitioner, however, along with the above application for obtaining leave to file the Written Statement, made this application, seeking, as aforesaid, the stay of hearing of the said suit on the plea that "since there exists a valid arbitration agreement" between the parties, namely the Plaintiff/Respondent and the Defendant/Petitioner, the disputes (which are the subject matters of the suit should be referred to arbitration). It should, however, be mentioned at this stage that the Defendant/Petitioner also made an application or rather took out a Master''s Summons on 22 March 2006 seeking leave to enter appearance in the suit and to file the Written Statement for the purpose of contesting the said suit on merits, Needless to mention that the Petitioner also made and affirmed the necessary Affidavit in support of the orders as prayed for by the Petitioner in the Master''s Summons.

The Petitioner has sought to make out a case in the present petition that both the Petitioner and the Respondent (Defendant & Plaintiff) are the members of the Eastern India Motion Pictures Association which association has, in fact, the status of a Company, as the same is incorporated under the Companies Act, 1956. The membership of such association is practically compulsory as both the Petitioner and the Respondent "are engaged in business of distribution, production and exhibition of motion pictures". The association has its own "bye-laws" relating to disposal of disputes between member or rather members of the association (inter-se) and between its members and non-members.

According to the Petitioner, since both the Petitioner and the Respondent are the members of the said association and since the said association has its "bye laws" for disposal of disputes between the Petitioner and the Respondent (Plaintiff and Defendant) which are the subject matters of the above suit should be resolved in the manner as provided in the bye-laws of the association and both the Petitioner and the Respondent being members of the said association "are duty bound to follow and/or to abide by and/or to act in terms of the said bye-laws; of the said association" and as the "provisions of the said bye-laws are mandatory provisions", the Petitioner and the Respondent as the members of the said association "cannot violate the mandatory provisions".

On the basis of the said bye-laws or rather the relevant bye-laws the Respondent (Plaintiff) according to the Petitioner without referring the disputes to the "arbitral tribunal" of the said association instituted the above suit "in total breach of the norms of the said association".

In support of his application, the Petitioner, it seems, has tried to spell out the following grounds:

(i) the alleged cause of action as disclosed by the Defendant in the plaint is the subject matter of an arbitration, as such, the alleged disputes should be referred to the arbitral tribunal of the said association;

(ii) under the provisions of Section 8 of the Arbitration and Conciliation Act, 1996, this Court should refer the disputes between the Petitioner and the Respondent which are the subject matters of the above suit to arbitration and since the association has its bye-laws, on the basis of the said bye-laws "reference should be made to the Complaint Committee of the said association for resolving disputes as alleged by the Respondent (Plaintiff) in her plaint;

(iii) in view of the existence of an arbitration agreement between the parties, the suit cannot, in any event, be entertained;

(iv) even asuming that there is an agreement between the Petitioner and the Respondent in relation to screening of the feature film "Yaadein" as "mentioned in the plaint" any violation or breach of the terms and conditions of such agreement or any dispute "touching the said agreement" must be referred to the arbitral tribunal constituted, by the said association on the basis of the said bye-laws:

Indeed, the cause of action of the Petitioner/Respondent appears to be based on an alleged agreement or rather on the alleged breach of such agreement. The substance of the alleged agreement is that the Defendant/ Petitioner in the year 2001, as the distributor of a feature film called "Yaadein" approached and offered the Plaintiff/ Respondent to screen the aid film upon payment of an amount mentioned in the plaint by way of an advance or "booking amount" and the Plaintiff/Respondent accepted the said offer of the Petitioner.

The terms and conditions of the agreement breach of which is the foundation of the cause of action of the Respondent in her suit are, inter alia, mentioned in paragraphs 3, 4, 5 and 6 of the plaint.

The most important and interesting point is that the alleged agreement between the Petitioner and the Respondent herein as pleaded in the plaint of the Respondent is not admittedly a written agreement in the first place. In other words, the agreement upon which the cause of action of the Respondent is founded in her suit, is not in writing and it is also an admitted position that there is no arbitration agreement between the Petitioner and the Respondent regarding and/or in respect of disputed or any dispute arising out of or in connection with or in relation to the said alleged agreement between the Petitioner and the Respondent.

It is by now more than well established that when two or more persons (person means a juristic person as well) agree to have their disputes, either arising in respet of a contract to which such persons are parties or by virtue of or because of their legal relationship with each other or one another, settled by a forum of their choice, then such agreement for settlement of the disputes of such persons by their chosen forum is normally regarded as an arbitration agreement.

Therefore, there has got to be a valid agreement between two or more persons (persons can be termed as parties as well) to have their disputes settled by a forum of their own choice, as such, unless there is an agreement, namely, an arbitration agreement, between two or more persons the disputes of such persons, if any, cannot be referred to the arbitration by the person or persons concerned and naturally, therefore, there can be no arbitration proceeding in the first place.

Section 7 of the Arbitration and Conciliation Act, 1996 makes the abvoe posititon abundantly clear, it says: "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."

It is of fundamental importance that an arbitration agreement has got to be in writing. The said agreement may be provided or incorporated as an arbitration clause in a contract between two or more persons or the same can take the form of a separate arbitration agreement between such persons.

Sub-section (3) of Section 7 of the 1996 Act provides that "an arbitration agreement shall be in writing

Sub-section (4) of Section 7 of the said 1996 Act says : An arbitration agreement is in writing if it is contained in -

(a) a document signed 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 denied by the other;

Sub-section (5) of Section 7 of the above Act provides as follows:

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.

Mr. A.K. Mitra, Learned Counsel appearing in support of the above application had repeatedly drawn my attention to the provisions of the said "bye-laws" relating to disposal of disputes between the members of the said Eastern India Motion Pictures Association (EIMPA in short) in particular paragraph 2 and paragraph 18 thereof including the format of a standard film renting contract (at page 61 of the application and page 26 of the said bye laws) and submitted that since both the Petitioner and the Respondent were the members of the said association and since the disputes being the subject matter of the above suit instituted by the Respondent herein-against the Petitioner were very much covered by the relevant provisions of the said bye-laws, namely, the paragraph 2 and paragraph 18 thereof, the present case "is a fit case where the disputes between the Petitioner and the Respondent should be referred to the arbitration in terms of the said bye-laws of the said association (EIMPA)."

For the purpose of my own satisfaction, I have considered the bye-laws, the plaint as a whole and the relevant provisions of the arbitration and Conciliation Act, 1996 in particular the provisions contained in Section 7 and Section 2 (h) in somewhat detail and having considered the bye-laws, the plaint and the provisions of the 1996 Act, I am at a loss to appreciate as to how this application under the provisions of Section 8 of the said Act could at all be made by the Petitioner in the first place.

Firstly, the Petitioner has failed and failed miserably to show that there was or in any valid arbitration agreement in writing between the parties herein, namely, the Petitioner and the Respondent as contemplated u/s 7 of the said Act in the first place.

Mere referene to certain bye-laws cannot possibly constitute a valid arbitration agreement between the parties herein, the provisions in paragraph 18 of the said bye-laws make this position absolutely clear. The format of the standard film renting contract which contract had or has never been made and/or signed by the parties herein also makes the position even clearer.

Although it was sought to be argued on behalf of the Petitioner that by writing a letter to the Petitioner dated 23 March 2004, which happens to be a "letter of demand" from the Respondent''s end, the Respondent himself intended to refer the disputes to arbitration, yet on a plain reading of the said letter (appearing as Annexure-C to the petition at page75 thereof), it cannot be said that the said letter itself constituted or constitutes a valid arbitration agreement between the parties herein. The said letter, in my opinion, is nothing but a letter of demand and nothing more than that. In order to constitute a valid arbitration agreement, the provisions contained in Section 7 or the 1996 Act have got to be satisfied or rather the conditions mentioned in the said provisions have to be fulfilled which in their turn will sufficiently entitle a party to an arbitration agreement to seek a reference if the other party or parties to such agreement seeks to resile therefrom.

Since, I have aleady taken the view that in the facts and circumstance of the case and having regard to the subject matter of the suit instituted by the Respondent, it cannot be said that there exists any arbitration agreement far from being a valid arbitration agreement in the first place, the question of referring any alleged dispute or disputes to any arbitration under the provisions of and/or on the basis of the bye-laws of the aid "EIMPA" or otherwise cannot really arise. The present application, in my opinion, has been made with the sole object of delaying the hearing of the suit as the Defendant/Petitioner, in spite of service of Writ of Summons upon him did not even enter appearance to contest the suit instituted by the Respondent.

The Petitioner having taken the fullest advantage of some provisions of the Arbitration and Conciliation Act, 1996 and certain bye-laws of the said association (EIMPA) made this application, and I am prepared to say that by this process, the Petitioner has merely tried to abuse the process and power of this Court exercised by it under the provisions of the said 1996 Act.

The view that I have already taken that this application should never have been made as there had or has never been any valid arbitration agreement between the parties or rather there had or has never existed any arbitration agreement between the parties, the decisions as relied on behalf of the Petitioner as well as on behalf of the Respondent need not be referred to nor need they be considered in any detail at all. Suffice it to say that the dicsisions relied on on behalf of the Petitioner have no manner of application to the present case or rather to the facts and circumstances of the present case at all.

However, the decisions relied upon by Mr. Sinha Roy, the Learned Counsel on behalf of the Respondent, namely, the decision in K.K. Modi Vs. K.N. Modi and Others, and the decision in Bihar State Mineral Dev. Corpn. and Another Vs. Encon Builders (I) Pvt. Ltd., definitely support the contentions of the Learned Counsel on behalf of the Respondent that the Petitioner has failed to show that there exists any valid arbitration agreement between the parties in the first place.

Since, I have held that this application should never have been made and by making this application the Petitioner has tried to delay the. hearing of the suit as long as he can, the Petitioner must pay the cost of this application which is assessed at Rs. 5,000/- . This cost of Rs. 5,000/- has to be paid to the Respondent within a period of two weeks. The above application of the Petitioner, needless to mention, is dismissed with the above cost.

Simultaneously with the making of the application u/s 8 of the Arbitration and Conciliation Act, which application I have just dismissed with cost, the learned Advocate-on-Record on behalf of the Defendant/ Petitioner also took out a Master''s Summons on 22 March 2006 seeking leave on behalf of the Defendant/Petitioner to enter appearance to file his Written Statement to contest the above suit. The Defendant/Petitioner also made other prayers as mentioned in the said Master''s Summons.

As I have mentioned in my judgment on the above application of the Defendant/Petitioner u/s 8 of the Arbitration and Conciliation Act, 1996 that in spite service of Writ of Summons upon the Petitioner, the Petitioner did not enter appearance and the suit of the Plaintiff/Respondent eventually appeared as an undefended suit. The Respondent produced the necessary certificate of the department concerned to the effect that the Defendant did not enter appearance to contest the suit in spite of service of Writ of Summons upon him and on that basis the Plaintiff/Respondent was allowed to give her evidence in Court on 15 March 2006. In fact, on 15 March 2006 itself, the evidence of the Plaintiff or rather the evidence of the Plaintiff''s witness in fact, proved all the documents in his evidence and after the conclusion of evidence the undefended suit was directed to appear as a "partly heard" undefended suit mainly for delivery of the judgment after a week. On 22 March 2006 when I was about to deliver the judgment after the submissions of the Plaintiff''s counsel, he Learned Counsel, Mr. A.K. Mitra appeared on behalf of the Defendant/Petitioner and after hearing the submissions of the Learned Counsel of the Defendant, I granted leave to the Petitioner to make necessary application for obtaining leave to enter appearance and to file the Written Statement to contest the suit.

On the basis of the leave granted by this Court on 22 March 2006, the Petitioner, in fact, made two applications, the one was made u/s 8 of the Arbitration and Conciliation Act, 1996 which application, as aforesaid, I have just dismissed with cost and this application for obtaining leave to file the Written Staement.

By an earlier order, I, however, granted leave to the Defendant to enter appearance and on the basis of the said leave, the learned Advocate on Record of the Petitioner, in fact, entered appearance.

Learned Counsel appearing on behalf of the Plaintiff, Mr. Sinha Roy submitted at the hearing of this application that the Petitioner was unable to show or disclose any reason or rather valid reason as to why the Petitioner in spite of the due service of the Writ of summons upon him did not enter appearance and in any event, the Petitioner failed meserably to disclose in this application that he had any defence far from any bonaffde defence to contest the suit by filing his Written Statement.

On those grounds alone, contended the Learned Counsel for the Respondent, this application ought to be dismissed.

In support of his submissions for dismissal of the present application, the Learned Counsel on behalf of the Respondent relied on a decision of the Division Bench of this Court in Smt. Kiranmoyee Dassi v. Dr. J. Chatterjee 49 CWN 246 and also a decision of a learned Single Judge of Delhi High Court in Punjab and Sind Bank v. Roller Flour Mills AIR 1988 Del. 308 that in order to succeed in this application, the Petitioner being the Defendant in the suit was/is under an obligation to show that he had/has a substantial defence and triable issues to raise and that the defence of the Defendant/ Petitioner "is not frivolous or vexatious". The leave to defend the suit or rather to file the Written statement for the purpose of defending the suit could not be granted, as a matter of course, whether the Defendant would be permitted to defend the suit and for that purpose would be permited o file the Written Statement, would definitely depend on the facts and circumstances of a particular case, submitted Mr. Sinha Roy with great emphasis.

Mr. Sinha Roy further submitted that since in the instant case the Petitioner had merely said that the Petitioner toad a bona fide defence to the claim or claims of the Plaintiff without disclosing what defence the Petitioner had to contest the suit bona fide or otherwise no leave should be granted in favour of the Defendant/ Petitioner as the Petitioner, in any event, had miserably failed to disclose that the Petitioner had any defence far from any bona fide defence to contest the suit in the first place.

True it is that the Constituted Attorney had affirmed the Affidavit dated 22 March 2006 in support of the prayers made in the said Master''s Summons taken out on behalf of the Petitioner by his learned Advocate-on Record.

Apart from stating the reasons in paragraphs 3, 4, 5 and 6 of the said Affidavit as to why the Petitioner was unable to enter appearance and to file the Written Statement to contest the suit on the ground of his personal illness, the Petitioner merely stated that he "has a very good bona fide defence in the suit". Again in paragraph 8 of the said Affidavit, it was stated: "the Defendant has a bona fide defence to the claim of.the Plaintiff" and that "the Plaintiff does not have any cause of action against the Defendant" and that "the plaint does not disclose the true and correct story" and that "the plaint suffers from suppression of material facts". The Petitioner practically stated nothing as to the nature of the defence of the Petitioner that the Petitioner has to contest the suit of the Respondent by filing his Written Statement.

In the normal course of events, after the service of Writ of Summons, if the Defendant/Petitioner had entered appearance and filed the Written Statement in due course, then before the trial of the suit, the Defendant would not have been obliged to show that he had a bona fide defence to go to the trial to contest the suit. Even assuming, and this I say on the basis of an assumption, that the Defendant, perhaps, has no defence to the claim or claims of the Plaintiff/Respondent herein.

The above two decisions relied on the Mr. Sinha Roy in support of his contentions that since the Petitioner has failed to disclose that the Petitioner has a bona fide defence to the claim or claims of the Respondent, he should not be allowed to file a Written Statement to contest the suit.

The Court the case of Smt. Kiranmoyee Dassjw was concerned with a case whether the Defendant should be granted leave to defend the suit on an application made by the Plaintiff under Chapter XIIIA, Rules 6, 7 and 9 of the Original Side Rules of this High Court and in the second case, the learned Singh Judge of the Delhi High Court was concerned with a case where the Plaintiff instituted a suit for summary judgment under Order 37 of the Code of Civil Procedure.

The Courts in considering the respective situations which arose, in the above two cases, one, as aforesaid, under Chapter XIIIA of the Original Side''Rules of this Court and the other under the provisions of Order 37 of the CPC took into account several factors and the factors and/or the considerations which were taken into account in deciding the the above two cases by the respective Courts, namely, the Division Bench of this Court in Smt. Kiranmoyee Dassi(Supreme) and the Delhi High Court in the Punjab & Sind finaly(Supra) cannot, in my opinion,, be identical to the consideration or considerations which I should take into account in deciding whether the leave should be granted to the Petitioner to file his Written Statement simply because the present suit was not instituted for summary judgment under the provisions of Order 37 of the Code fo CPC nor the Plaintiff/Respondent after the instituttion of the suit initiated any proceeding under the provisions of Chapter XIIIA of the Original Side Rules of this High Court for obtaining, a summary judgment.

In deciding the cases under the above provisions the Court, as a matter of course, has to decide whether leave should be granted to the Defendant in a particular case to defend the suit in accordance with the provisions fo Order 37 of the CPC and in accordance with the provisions as contained in Chapter XIIIA of. the High Court, Original Side Rules. Unless it is shown by the Defendant concerned that he has a good and/or bona fide defence to the claim/s of the Plaintiff, he cannot obtain either conditional or unconditional leave to defend the above categories of suit as a matter of course.

In the isntant case, as I have said above, the suit instituted by the Respondent is a regular suit for obtaining a money decree and decree for interest on the principal sum. The suit in question in neither a suit under the provisions of Order 37 nor any proceeding had or has been initiated after the institution of the said by the Plaintiff for obtaining summary judgment under the provisions of Chapter XIIIA of the Original Side Rules.

Therefore, in my opinion, the Defendant being the Petitioner herein, is not obliged in law to disclose in detail at this stage that he has a bona fide and/or substantial defence to contest the suit and leave, (either conditional or unconditional) therefore, should be granted in his favour to file the Written Satatement.

If I accept that the Petitioner in the present case was prevented from entering appearance because of his illness and consequently was unable to file the Written Statement within the period the Petitioner should have filed his Written Statement, then and in that event, the Defendant/Petitioner, in my opinion, should be allowed to contest the suit by filing his Written Statement even though he has not been able to spell out or perhaps has not spelt out the nature of his defence to the claim or claims of the Plaintiff in detail at this stage.

At this stage, if the case of the Petitioner''s illness as made out by the Petitioner in this application is accepted, then whether the Petitioner should be given leave to file the Written Statement to contest the suit, is the sole question for consideration, the Petitioner in addition to that is not required to show or demonstrate in detail the nature of his tlefence to the claims of the Plaintiff for the purpose of obtaining the leave to file his Written Statement.

The sole consideration is whether the Petitioner has been able to make out a case that he was prevented by sufficient cause from entering appearance in spite of service of the Writ of Summons upon him and consequently failed to file the Written Statement to contest the suit. No decision, however, has been cited which has recognised a situation that in considering whether the Defendant should be permitted to file the Written Statement in an ordinary and regular suit (not a suit under the provisions of Order 37 of the CPC or a proceeding under Chapter XIIIA of the Original Side Rules) when such suit, because of the fault or default on the part of the Defendant, is treated to be an undefended suit and the Defendant applies for leaveto file the Written Statement to contest the suit, the Defendant must satisfy the Court that he has a substantial and/or good and/or bona fide defence apart from satisfying that he was prevented by sufficient cause from entering appearance and/or filing the Written Statement to contest the suit.

On the above basis and after considering the fact that the Petitioner was prevented from entering appearance within the time stipulated, in spite of due service of the Wit of Summons upon him, I am minded to allow the Defendant a chance to file his Written Statement positively within a period of four weeks from date. If, however, the Defendant/Petitioner does hot file his Written Statement, the suit will automatically appear once again as an undefended suit and in that event the Defendant will have no other option but to contest the proceeding by merely corss-examining the Plaintiff or the Plaintiff''s witness without any Written Statement. In other words, if the Defendant fails to file the Written Statement as above, them the defence of the Defendant, if any, to the suit and/or to the claim/s of the Plaintiff will be deemed toihave been struck out.

Since, the Plaintiff/Respondent has suffered for no fault on her part but because of the fault or default on her part but because of the fault or default on the part of the Defendant/Petitioner, at least partly, the Petitioner is directed to pay cost of this application assessed at Rs. 10,000/- to the Respondent and the Petitioner shall pay this cost as a condition precedent to the filing of his Written Statement and the said cost has to be paid positively within a period of three weeks from date. After the Written Statement has been filed and a copy thereof has been served upon the Plaintiff/Respondent, the parties would be at liberty to seek early hearing of the suit.

For the above purpose, there will be a cross order for discovery within a period of three weeks from the date of filing of the Written Statement and the inspection of documents to be made forthwith thereafter.

Needless to mention, on the above basis the Judge''s Brief of Documents should also be prepared immediately upon compliance of the above direction.

Once the above formalitites are completed, the Plaintiff/Respondent would be at liberty to seek early hearing of the suit.

If, however, there is any breach on the part of the Defendant/Petitioner to comply with any of the above directions, the Plaintiff/Respondent, needless to mention, would be at liberty to seek early hearing of the suit as well.

If the respective costs as directed to be paid in dismissing the Petitioner''s application u/s 8 of the Arbitration and Conciliation Act, 1996 or in allowing the Petitioner''s application for leave to file the Written Statement are not paid, then the department is directed not to accept the Written Statement of the Defendant/ Petitioner and in that event, the suit will be treated to be an undefended suit as well and the Plaintiff will be entitled to proceed accordingly.

This application is disposed of as above.

The parties are to act on a signed xerox copy of this dictated order.