Saju Thomas vs Prabhakaran Kizhakkeveetil

This appeal is filed by the defendant in O.S.No.7761/2016 challenging the order dated 21.01.2017 passed on I.A.No.1 filed under Order 39

Rules 1 and 2 CPC.

The respondent No.1 brought a suit against the appeal claiming decree for recovery of Rs.91,12,616/-, dissolution of the partnership firm M/s.

Biolix Technologies LLP, mandatory injunction directing the defendant to provide details of the amounts received by him from the accounts of

partnership firm and for rendition of accounts. The plaintiff alleged mis3 management of the firm and mis-appropriation of funds of the partnership

firm. Along with the plaint, the plaintiff filed an application seeking temporary injunction to restrain the defendant or his agents or anybody claiming

under him from operating the bank account bearing No.100805000381 at ICICI Bank, 1st Block, Koramangala, Bengaluru-34, account bearing

No.33410171501, State Bank of India, Koramangala, Bengaluru-34 and another Bank account bearing No.0693102000002035 at IDBI Bank,

100 ft. Road, Kormangala, Bengaluru-34.

The defendant appeared before the court and filed statement of objections to the application contending mainly that the Limited Liability

Partnership Agreement (LLP) dated 01.06.2016 between him and the plaintiff contains arbitration clause for resolving dispute between the parties

relating to firm or management or business of the firm and therefore the nature of the dispute alleged in the plaint falls within the ambit of the

arbitration clause and thus the civil court has no jurisdiction.

The trial court while deciding the application for temporary injunction has held that even though it is a fact that arbitration clause is present in the

agreement, it does not oust the jurisdiction of the court. The trial court has held that the defendant should have made an application under Section 8

of the Arbitration and Conciliation Act seeking reference of the dispute to the Arbitration. Since such an application has not been made, jurisdiction

of the court has not been taken away. Giving a finding like this with regard to its jurisdiction to entertain the suit in view of the existence of

arbitration clause in the agreement, it further proceeded to hold that the plaintiff was able to make out a case for grant of temporary injunction and

thus the trial court allowed the application. Aggrieved by this order, the defendant has preferred this appeal.

The learned counsel for the appellant argues that the civil court has no jurisdiction. The agreement between the parties was produced before the

court. In the statement of objections filed by the defendant to the application for temporary injunction, it is contended that the civil court has no

jurisdiction in view of the arbitration clause. The dispute between the parties falls within the scope of arbitration. The observation made by the trial

court that a separate application under Section 8 of the Arbitration and Conciliation Act should have been made is illegal. She refers to the

judgment of the Hon''ble Supreme Court in the case of Sundaram Finance Limited and another Vs. T. Thankam - [(2015)14 SCC 444]. She

argues that once a contention is taken by the defendant that the civil court has no jurisdiction, it should not have granted temporary injunction.

The learned counsel for the respondent argues that mere presence of the arbitration clause in the agreement does not oust jurisdiction of the civil

court. The trial court has rightly observed that the defendant should have made an application under Section 8 of the Arbitration and Conciliation

Act. He argued that according to Section 8(i) of the said Act, an application has to be filed. If the application is not made, it amounts to submission

of the defendant to the jurisdiction of the civil court and therefore the trial court cannot be found fault with in granting an order of temporary

injunction. He further argues that clause 27 (ii) of the agreement between the parties provides that the courts of Karnataka have exclusive

jurisdiction to settle any dispute or claim that arises out of or in connection with this agreement and therefore not withstanding the presence of

arbitration clause in the agreement, the civil court has jurisdiction to entertain the suit and grant appropriate interim orders. In support of his

argument he has referred to the judgment of this court in the case of Venkateswara Goods Movers Private Limited Vs. Vikrant Tyres Limited

Mysore in [W.P.No.2573/2009].

It is his further argument that in the plaint allegations of fraud and mis-appropriation have been made against defendant. Arbitrator cannot decide

these issues. Whenever fraud is alleged, the competent court is the civil court and therefore the suit is very much maintainable. In this regard he

refers to judgment of the Supreme Court in the case of N. Radhakrishnan Vs. M/s. Maestro Engineers and others - [Civil Appeal No.7019/2009].

The learned counsel for the appellant replies that the plaint does not contain allegations regarding fraud. She further argues that mere allegations

about fraud do not take away the jurisdiction of the arbitrator; only when serious issues of fraud involving criminal wrong doing are alleged in the

plaint, civil court gets jurisdiction. Since there is no such allegation in the plaint, the matter should be referred to the arbitrator. In this regard she

refers to the judgment of the Supreme Court in the case of A. Ayyasamy Vs. A. Paramasivam and others - [(2016) 10 SCC 386].

Having heard both sides, I am of clear opinion that without filing a separate application under Section 8 of the Arbitration and Conciliation Act,

the defendant cannot say that the civil court has no jurisdiction. It is not enough if such a contention is taken in the written statement or objections

filed by way of application for temporary injunction. This court has already taken a view in Venkateswara Goods Movers Private Limited Vs.

Vikrant Tyres Limited Mysore in [W.P.No.2573/2009] that a separate application has to be filed. Even in the judgment of the Supreme court in

the case of Sundaram Finance Limited and another Vs. T. Thankam - [(2015)14 SCC 444, it can be noticed that the appellant had filed an

application under Section 8 of the Arbitration Act, 1986 bringing to the notice of the trial court that in view of the agreement between the parties

regarding the dispute, the civil court had no jurisdiction to try the case. Therefore it is held that once an application in due compliance with Section

8 of the Arbitration Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction, but it should be to see

whether its jurisdiction has been ousted. Therefore it becomes very clear that even in that case, an application under Section 8 of the Arbitration

Act had been filed and for this reason the Hon''ble Supreme court had to hold that it was the duty of the trial court to see whether its jurisdiction

had been ousted.

Even if Section 8(I) is read what becomes very clear is that before a party files statement on the substance of the dispute, he must apply to the

court that the subject matter is covered under the Arbitration agreement. So the meaning of this Section is so plain that separate application must

be filed before filing statement of objection or written statement. This being the case it is not enough if contention is taken in the written statement or

objections statement that in view of arbitration clause the civil court has no jurisdiction.

With regard to another point that civil court gets jurisdiction in view of fraud alleged against defendant, the learned counsel for the appellant has

referred to the judgment of the Hon''ble Supreme Court in the case of A. Ayyasamy Vs. A. Paramasivam and others - [(2016) 10 SCC 386]

where it is held that mere allegations of fraud is not sufficient to detract the parties from obligation to submit their disputes to arbitration. Therefore

it is clear that mere allegations are not sufficient. The allegation must be serious one to hold that the civil court has jurisdiction. On this point of

argument, I express my opinion that since this appeal does not deserve to be allowed in as much as the appellant has not made a separate

application as observed above, the trial court has to consider this issue of fraud and decide it. With this discussion, I hold that the trial court has not

committed any error in entertaining the application for injunction. Since no argument was canvassed by appellant''s counsel on aspects other than

jurisdiction, it is unnecessary for me to deal with them. Appeal is dismissed. No order as to costs.