Reliance Infratel Ltd. and Another vs Gaje Singh

K. Kannan, J.—Both the revision petitions are connected; one is against an order of rejection of petition filed u/s 8 of the Arbitration and Conciliation Act for a reference to Arbitration and the second revision petition filed in CR No. 7840 of 2011 is against the orders striking off the defence of the defendant for not filing the written statement. The suit has been filed for a declaration that the lease agreement dated 31.01.2008 entered into between the parties was wrong, illegal and null and void. The plea of the petitioners for avoiding the lease was that the amounts were not being released as per the lease agreement and there had been a breach of terms of the lease to justify plaintiffs to be relieved from the obligation under the transaction. On such a suit being filed, the petitioners, who were the defendants, moved an application pointing out the terms of the lease that contained an arbitral agreement between the parties, which is reproduced as under:

It is hereby expressly agreed that if at any time there shall arise any dispute, doubt or difference or question with regard to interpretation of this agreement or in respect of the rights, duties & liabilities of the parties hereto arising out of these present, then every dispute, doubt difference or question shall be referred to arbitration as per the provision of the Arbitration & Conciliation Act, 1996 and the rules framed there under. Two arbitrators are to be appointed one by each of the parties and the third to be appointed by the said two arbitrators. The decision of the Arbitration shall be final binding to the parties to this deed. The place of arbitration will be Chandigarh and the language of the arbitration proceedings shall be English.

The defendant, therefore, without entering a defence by filing a written statement sought for a reference to Arbitration relying on the said agreement. The trial Court has dismissed it holding that since the plaintiff was avoiding the lease agreement itself, the arbitral clause contained therein cannot be invoked. He, consequently, dismissed the petition and also struck off the defence for not filing the written statement.

The Court below has erred, in my view, in assuming that attempt to assail the lease agreement itself will result in abrogation of arbitral agreement. The arbitral agreement is defined u/s 2(b) read with Section 7 of the Arbitration & Conciliation Act (for short, ''the Act''). The arbitral agreement as defined u/s 7 of the Act includes an agreement in writing if it is contained in a document signed by the parties. In other words, an arbitral agreement need not exist as an independent agreement but could be a part of any agreement signed by the parties. It is not the plaintiff''s case that the agreement was not written or there were vitiating circumstances attendant on such agreement. Consequently, it meant that arbitral agreement was itself an admitted fact. If there were breach of the terms of the lease as contended by the plaintiff, it means that there has arisen a dispute between the parties with reference to the transaction of lease between the parties. This is specifically stated to be a circumstance when the arbitration clause itself will become operative as could be seen from the Clause extracted above. It is irrelevant that the plaintiff complains of breach of the terms of the lease in the suit. If there exists a dispute upon any transaction arising out of the lease then, it should be decided only in the manner contemplated under the Arbitration Clause. The power of the Court to refer the parties to Arbitration arises u/s 8 of the Act when the original arbitral agreement or duly certified copy of the agreement is filed before the Court. The Court was bound to have referred the parties to Arbitration and allowed for an adjudication in the manner contemplated therein. The petitioners will be entitled to resort the arbitral clause and obtain redress in the manner contemplated in the arbitral agreement. The arbitral clause contemplates appointment of two arbitrators, one to be appointed by each of the parties and the third to be appointed by the said two arbitrators. The petitioners are at liberty to invoke the said procedure and after a due notice is issued informing the respondent about the appointment of an arbitrator made by the petitioners and also calling upon the respondent to name his own arbitrator, the proceedings will be carried in accordance with law. The civil revision is allowed and the petition filed u/s 8 is also allowed. Striking off the defence of the defendants/petitioners as a consequence to not filing the written statement also stands dismissed in view of the finding that the case has to be referred to Arbitration and cannot be prosecuted further in a civil Court. Both the civil revisions are allowed on the above terms.