Smt. Indrani Sen vs Smt. Subrata Mitra and Others

S.P. Talukdar, J.—This application under Article 227 of the Constitution is directed against Order No.16 dated 10.7.2006 passed by the learned First Court of Civil Judge (Junior Division) at Sealdah in Title Suit No.114 of 2006.

The backdrop of the present case may briefly be stated as follows:

Opposite party No.1, as plaintiff, filed the aforesaid title suit against the present petitioner and the respondent Nos. 2, 3 and 4 praying for dissolution of the Partnership Business, Accounts as well as for appointment of Receiver and other reliefs. In the said suit, she filed an application under Order 40 Rule 1 of the CPC praying for appointment of Receiver over the partnership business ''Rittik''. Being directed by the learned Court copies of such application was served upon the defendants being the present petitioner and respondent Nos. 2, 3 and 4, who were directed to show cause as to why such prayer under Order 40 Rule 1 of the C P Code should not be allowed. All the defendants, by filing individual written objection, contested the said application for appointment of Receiver. The defendants did not file then written statement dealing with the subject matter of dispute. The cause of action and the main relief prayed for in the plaint was for adjudication of the dispute and differences between the partners and for dissolution of the partnership business carried under the name and style of ''Rittik'' impleaded as respondent Nos.4 herein.

The petitioner herein claimed that the Deed of Partnership contains the agreed clause of adjudication of dispute and differences arising between the partners under the provision of Arbitration and Conciliation Act of 1996 and amendment made thereof by the named Arbitrator, the head of the family of the parties to the suit. In view of such arbitration clause in the relevant Deed, the suit filed before the Civil Court is not maintainable, nor the Civil Court has any jurisdiction to proceed with the same. In response to the said application under Order 40 Rule 1 of the C P Code filed by the plaintiff the present petitioner pending filing of written statement prepared and filed his written objection to the said interlocutory application. As application u/s 8(1) of the Arbitration and Conciliation Act, 1996 praying for staying of the suit proceeding and for appropriate relief was also filed opposite party /plaintiff contested the said application u/s 8(1) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ''Act, 1996'') by filing written objection. The learned Court after hearing the parties held that the partnership business of which dissolution has been sought in the suit is being carried on under Deed of Partnership having the agreed clause of adjudication of disputes under the provision of the Act, 1996. Learned Court, however, refused to grant any relief and dismissed the application by erroneously holding that the said application u/s 8(1) being filed later then the first statement on the substance of the dispute cannot be entertained.

Petitioner, in such circumstances, approached this Court for necessary redress.

The present application has been seriously contested by the respondent No.1/plaintiff with other respondent participating in it.

Before proceeding further, it is, perhaps, necessary to refer to the impugned order in order to appreciate how the matter had been dealt with by the learned trial Court. It was contended before the learned trial Court, as reflected from the impugned order that the defendant No.2 prayed for referring the dispute before the Arbitrator in terms of Clause No.17 of the original Partnership Deed dated 5th December, 1986. It was claimed that the Partnership Deed was modified due to death and expulsion of partners but the terms and conditions substantially remained the same and the arbitration clause continued to be in force. On the other hand, it was submitted on behalf of the plaintiff/respondent No.1 that the agreement dated 21st May, 2002 is a fresh agreement and the earlier agreements stood terminated. It was also urged that the application u/s 8(1) of the Act, 1996 ought to have been filed before submitting first statement on the substance of the dispute as required u/s 8(1) of the Act, 1996.

Learned trial Court after referring to the factual details held that the agreement dated 21st May, 2002 is not a new partnership agreement but it is the continuation of the original partnership agreement which contained the arbitration clause. Learned Court, however, dismissed the application u/s 8(1) of the Act, 1996 on the ground that such application should have been filed at the very first instance after entering into appearance in the suit.

After giving due regard to the submission made by learned counsel for the parties and on perusal of relevant materials, it now appears that this Court as to first decide whether there had been any valid arbitration clause in the relevant Partnership Deeds. Next point requiring adjudication is if there is such a clause how far the learned trial Court was justified in dismissing the application seeking such reference on the ground that such application was not filed prior to submitting the first statement on the substance of the dispute. It if furthermore necessary to decide how far this Court in exercise of its power under Article 227 of the Constitution can entertain such grievance as ventilated in the application.

The first Deed of Partnership dated 5th of December, 1986 contains such arbitration clause and the same is reproduced as follows:

"17 Any dispute and difference which may arise between the partners regarding the interpretation of these presents or regarding the rights and liabilities of any partner arising hereunder or any other matter of thing concerning the firm or the affairs thereof shall be referred to the arbitration and the decision of Arabinda Mitra and this clause shall be deemed to be a submission within the meaning of the Arbitration Act, 1940 including its statutory modification and re-enactment."

There was a supplementary deed dated 31st March, 1992. This was followed by the deed dated 1st of July, 1997. Significantly enough, the deed of 1997 refers to a clause which reads as follows:

''The existing business shall continue on the principles of a going concern, every other things will remain as it is except the charges became necessary on demise of the deceased partner, and also the changes, if any, enumerated in the following clauses.''

It, thus, appears that the learned trial Court quite rightly held that the agreement dated 31.3.1992 is in reality an indenture to substitution of clause 5 of the original agreement and insertion of two new clause 5A and 5B. It was further held that the deed dated 1.7.1997 relates to the same firm and it was executed only to strike out the name of deceased partner Mrs. Anima Mitra and the related changes in capital, profit loss sharing, ration etc. Then comes the deed dated 21.5.2002. Such deed of the year 2002 was executed, as one of the partners was expelled though it had been specifically mentioned that the existing business shall continue on the principles of a ''going concern'' and every other thing will remain as it is except the changes enumerated in the deed itself. In such context, learned trial Court held that none of the clauses of the deed of the year 2002 contains anything which nullifies the arbitration clause. This led the learned trial Court to hold that the agreement dated 21.5.2002 is not a new Partnership Agreement and rather it is the continuation of the original Partnership Agreement which contained the arbitration clause.

Mr. S. P. Roy Chowdhury, appearing as learned counsel for one respondent No.1, seriously challenged the finding of the learned trial Court that the deed of the year 2002 was in effect in the nature of continuation of the original Deed of Partnership of the year 1986. Though no application was filed challenging the impugned order by the plaintiff/respondent. Mr. Roy Chowdhury claimed that since Article 227 of the Constitution gives this Court the power of superintendence, it is not necessary that such grievance cannot be ventilated even without filing an application. It was submitted that this Court in exercise of its power under Article 227 of the Constitution can even go for scrutiny of an order which is not before this Court. It was submitted that the revision includes appeal and though not specifically challenged, this Court has every power to consider even an earlier order.

True, High Court is competent to see that proper orders are made when a matter comes up in revision. Even, if a particular order is not under challenge, High Court is competent to see that proper orders are made. The mere fact that no application is filed against an order would not stand in the way of the High Court making an order in accordance with law. (Ref: Jatindra Nath Nandi and Others Vs. Krishnadhan Nandi and Another, ).

The Apex Court in the case of Shankar Ramchandra Abhyankar Vs. Krishnaji Dattatreya Bapat, held that when the aid of the High Court is invoked on the revisional side it is done because it is a superior Court and it can interfere for the purpose of rectifying the error of the Court below.

Following the same, it can be very well said that the revisional jurisdiction of the High Court, particularly the power of superintendence under Article 227 of the Constitution, certainly permits this Court to look into any order and if situation so demands, rectify or correct the same even in absence of an application.

In fact, raising of objection regarding the finding of the learned trial Court even without filing any application on that effect, was not seriously challenged at the time of hearing.

Question that next arises is whether the learned trial Court was justified in holding that the agreement of the year 2002 was in effect in the nature of a continuation of the initial agreement of 1986. The Deed of Partnership dated 5th December, 1986 contains in arbitration clause. Due to change of circumstances, more particularly on death of expulsion of existing partner, the parties executed further Deeds of Partnership Agreement. First such Deed was made in the year 1992 and it was followed by the Deeds of 1997 and then again, 2002.

It seems to be the settled position of law that what is required to be seen is the intention of the parties. While ascertaining the intention of the parties attempt should be made to give meaning to the incorporation clause and to give effect to the same and not to individual or frustrate it giving a literal, pedantic and technical reading of the clause. (Ref: The Owners and Parties Interested in the Vessel M.V. Baltic Confidence and Another Vs. State of Trading Corportion of India Ltd. and Another, .

Attention of the Court was invited to the decision in the case of Dwarkadas and Co. Vs. Daluram Goganmull, , by learned counsel for the respondents while submitting that the subsequent agreements in respect of the same partnership business did not ever attempt to disturb the arbitration clause being clause 17 in the Deed of Partnership of 1986. Analysis made by the learned trial Court in this regard, as reflected from the impugned order, does not, in fact, leave for further controversy in that regard.

In the case of J.K. Jain and others Vs. Delhi Development Authority and others, , the Apex Court while taking into consideration that arbitration clause was not included in the agreement itself after giving regard to the terms and conditions of tender form including term about reference of disputes to arbitration agreed to be made part of main agreement and binding between parties held that it cannot be said that there was no arbitration agreement between the parties.

Mr. Sen as learned counsel for the respondent/defendants, referred to the decision in the case of Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and Others, in this context.

It may be mentioned that while dealing with an application under Article 227 of the Constitution, this Court is certainly called upon to see as to whether there had been any jurisdictional error or not. Even assuming that there had been any error of fact, it is doubtful how far this Court will be justified in entering into that aspect-more particularly where the opposite party No.1/plaintiff did not choose to file any application assailing the same.

Mr. Roy Chowdhury submitted that dispute regarding validity of contract is required to be decided by Court and not by Arbitrators. He submitted that arbitration clause in a contract, which is illegal and void, must perish along with the contract. In the context, he referred to the decision in the case of Waverly Jute Mills Co. Ltd. Vs. Raymon and Co. (India) Private Ltd., . Mr. Sen in response to the same, submitted that the said decision has no relevance in the context of the Act, 1996.

It was next contended on behalf of the opposite party No.1/plaintiff that there is no provision in the Arbitration and Conciliation Act, 1996 for referring a matter to an arbitrator by intervention of the Court. Relying upon the decision in the case of Tamil Nadu Electricity Board v. Sumathi & Ors., as reported in (2000) 6 SCC 543, it was submitted that if during the pendency of the proceedings in the Court parties have entered into an arbitration agreement then they have to proceed in accordance with the provisions of the new Act.

It was quite rightly submitted on behalf of the respondents that a common sense approach may be taken while interpreting an arbitration clause. In the case of The Union of India (UOI) Vs. D.N. Revri and Co. and Others, , the Apex Court held that the meaning of an agreement must not be allowed to be thwarted by a narrow pedantic and legalistic interpretation.

Emphasis is to be laid on the intention of the parties. In the case of M/s. V.H. Patel and Company and Others Vs. Hirubhai Himabhai Patel and Others, , it was held that arbitrator has such power to dissolve a partnership where a clause in a partnership deed or agreement or order referring the matter to arbitration, makes clear that all matters in dispute between the partners have been referred to arbitration.

In a dispute like a present one, the first question that is required to be answered is what was the intention of the parties. While ascertaining the interest attempt should be made to get the meaning to the incorporation clause and to give effect to the same and not to frustrate it giving a literal, pedantic and technical meaning.

In course of hearing, learned counsel for the parties sought to explain the expression first statement on the substance of the dispute and in this context sought to derive support and strength from the various decisions. Mr. Ashok Banerjee as learned counsel for the petitioner, referred to the decision in the case of Union of India v. Lajwant Kaur, as reported in 2003(2) Arb. LR 539 (P&H), while submitting that the trial Court was competent to refer the dispute to arbitration if the defendants petitioners had made a prayer in this regard before filing written statement.

Mr. Banerjee further invited attention of the Court to a decision of the learned single bench of this Court in the case of Fiat India Private Limited v. Rahul Udyog Viniog Limited & Anr., as reported in (2003) 3 Cal. LT 381 (HC). It was held that there are substantial differences between sub-section (1) of section 8 of the Act, 1996 to section 34 of the Arbitration Act, 1940. Section 8 of the Act, 1996 is peremptory in nature and the judicial authority before whom an action is brought has not other option but to refer the parties to arbitration in the event the tests laid down in the said section 8 of the Act of 1996 are satisfied.

Mr. Banerjee derived inspiration from another judgment of the learned single bench of the Court in the case of Vivek Arya v. Economic Transport Organisation & Ors., as reported in (2003) 3 Cal. LT 148(HC). Question that next arises as to how far the learned trial Court was justified in refusing to refer the manner to arbitration. The conditions which are required to be satisfied under sections 8(1) and 8(2) of the Arbitration and Conciliation Act, 1996 before the Court can exercise its powers are:

i) There is an arbitration agreement

ii) A party to the agreement brings an action in the Court against the other party.

iii) The subject matter of the action is the same as the subject matter of the arbitration agreement.

iv) The other party moves the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute.

In the case of Rashtriya Ispat Nigam Limited and Another Vs. Verma Transport Company, , it was held that the expression first statement on the substance of the dispute contained in section 8(1) of the 1996 Act must be contradistinguished with the expression ''written statement''. It implies submission of the party to the jurisdiction of the judicial authority. It is well settled that in view of the changes brought about the 1996 Act, what is necessary is disclosure of the entire substance in the main proceeding itself and not taking part in the supplemental proceeding. By opposing the prayer for an interim relief, the restriction contained in sub-section (1) of section 8 was not attracted.

Much was submitted by the learned counsel for the parties regarding how statutory provisions are to be interpreted. It was held by Judge learned Hand that it is one of the surest indexes of a mature and developed jurisprudence to remember that statutes always have some purpose or object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. There is no dispute that literal or plain meaning cannot be relied upon where it results in absurd, injustice and unconstitutionality.

It is for the Court to discover the true purpose and object of the provision by filling gaps, clearing doubts and mitigating hardships, harshness or unfair consequences where the language is ambiguous or capable of more than one meaning. (Ref: Motor Owners'' Insurance Company Limited Vs. Jadavji Keshavji Modi and Others, )

Mr. Sen, while responding to the challenge thrown by and on behalf of the respondent No.1/plaintiff, categorically submitted that where the spirit behind reference to arbitration indicates that the ideal is to settle all the disputes between the parties, it would be open to any of them to claim dissolution of partnership.

Be that as it may, the factual backdrop of the present case, perhaps, does not demand a more detailed discussion.

It can, however, be gathered from above that the arbitration clause in the initial Deed of Partnership of the year 1986 was never attempted to be disturbed and the parties to the partnership, in fact, chose to proceed on its basis. Learned trial Court did not allow the application whereby the petitioner/defendant prayed for reference to arbitration u/s of the Act, 1996 merely on the ground that a written objection had already been filed as against the application under Order 40 Rule 1 of the CP Code filed by the plaintiff.

By no stretch of imagination, the said written objection can be held to be first statement on the substance of the dispute within the meaning of sub-section(1) of section 8 of the Act, 1996. Such a written objection was filed in compliance with the direction of the trial Court and there must not be any attempt to read something more into it than what meets the eyes.

Mr. Fali S. Nariman in his book ''India''s Legal System Can it be saved?'' mentioned that the underlying philosophy on which the 1996 Act is based is autonomy of the parties and the non-intervention of national Courts in the arbitral process.

The direction of the new law is away from the Courts and towards more arbitral autonomy. I would like to quote a relevant observations made in the said book which is as follows.

''But for this new law to be effective, there has to be a change in attitudes, both on the part of arbitrators, and also on the part of Judges and lawyers, without such attitudinal change, the law will remain constrained and fettered by a Court-controlled mindset, encouraged for decades by the provisions of the (old) Arbitration Act of 1940.''

In fact, section 89 of the CPC also deals with ''settlement of disputes'' outside the Court. Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may formulate the terms of a possible settlement and refer the same for arbitration or conciliation or judicial settlement including settlement by Lok Adalat or mediation.

Considering all such facts and circumstances, this Court finds it difficult to brush aside the grievances as ventilated in the application. In the considered opinion of this Court the learned trial Court was not justified in rejecting the application u/s 8(1) of the Arbitration and Conciliation Act, 1996. Thus, the present application being C. O. No. 2633 of 2006 succeeds and be allowed.

The impugned order dated 10.7.2006, thus, stands set aside to the said extent the learned trial Court is hereby directed to refer the dispute for arbitration as sought for in the application u/s 8(1) of the Arbitration and Conciliation Act, 1996. There is no order as to costs.

Xerox certified copy of the order be supplied to the parties, if applied for, as expeditiously as possible.