AI Structured Summary
Not yet generated for this judgment
Judgment
Jawad Rahim
Trial court''s order directing parties to the suit to refer the dispute between them for arbitration in exercise of power u/s 8(1) of the Arbitration and Reconciliation Act (hereinafter referred to as the Act, for brevity) is questioned in this revision.
Heard Sri Srinivas Kulkarni, advocate for the petitioner and Sri Narayan Sharma for the respondent.
From what the learned counsel have adverted to and manifest from the records, reveals:
i) Petitioners Nagaraj and his wife-B.N.Sharada in joint action filed a suit against the respondent seeking to grant the following reliefs:
a) for a mandatory injunction directing the defendants not to terminate the Memorandum of Agreement and the general power of attorney dated 29.10.2009 until closure of the term of ten years mentioned therein;
b) for a permanent injunction restraining the defendants or their agents, legal heirs, coolies, contractors, henchmen, labourers, or anyone else claiming through the defendants or on their behalf from interfering with the running of education institution by the plaintiffs;
c) for costs and such other reliefs as the Hon''ble Court may deem fit in the circumstances of the case in the ends of justice and equity.
ii) Respondents entered contest and before filing defence, filed an application u/s 8(1) of the Act supported by an affidavit requesting the court to refer the dispute raised in the suit for arbitration on the premise, plaintiffs and defendants had certain disputes between them and to solve it amicably, they entered into a Memorandum of Understanding (MoU) dated 29.10.2009 in which they spelled out terms, conditions and covenants to have smooth running of the institution under their governance. Each term so mentioned in the MoU, is described as having binding effect on all parties.
iii) Respondents therefore referred to clause 23 of the MoU to contend it non-suits the plaintiff and compels the dispute to be decided by the arbitrator.
iv) Clause 23 in its phraseology reads thus:
If any dispute arises between parties, the same shall be decided by an Arbitrator Sri O.Shama Bhat, Advocate, Mysore, or if he is not available, as per the provisions of the Indian Arbitrator & Conciliation Act.
v) According to them, the clause brought into mischief Section 8 of the Act which postulates ''A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a part so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration,'' Thus they contend clause 23 compels the parties in case of dispute amongst them to subject themselves to arbitration. As petitioners-plaintiffs had brought action relating to a dispute, the judicial authority (court) had statutory restriction to proceed further, and had no choice but to refer it to arbitration if the parties to the suit apply.
vi) The request made by the respondents was resisted by the petitioner-plaintiffs on the ground though MoU dated 29.10.2009 evidences the fact that parties incorporated the terms, of settlement therein, clause 23 is not of that nature to be construed as ''arbitration agreement.'' It is only to take care of certain contingencies parties entered into the MoU. There is no proclamation by either party that the decision of the arbitrator shall be final. Consequently the dispute raised by the plaintiff has to be decided in a full-fiedged enquiry in the original suit.
vii) The trial court rejected the contention and allowed the application filed, directing parties to submit themselves to arbitration, as seen from the order impugned.
viii) Reiterating what was urged before the trial court, this revision is filed.
I am impressed by the efforts made by the learned counsel against the impugned order and to seek restoration of the suit in civil court for further action, but on a close scrutiny of the material propositions in the pleadings of the parties, documents binding them and the language of Sections 7 and 8 of the Act, all these contentions must be discounted for the following reasons:
I) Clause 23 of the MoU has to be examined keeping in mind the language of Section 7 of the Act which reads thus:
Arbitration agreement:
(1) In this part "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) 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.
(5) The reference In a contract to a document containing an arbitration clause constitutes agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract''
Therefore, there is no mention in sub-rule (1), (2) or (3) to (5) that the agreement must also show that the decision of the arbitrator will be final. Ail that the provision refers to is agreement by the parties to submit themselves to arbitration and nothing more. Therefore, the first ground urged against the impugned order is untenable.
II) Regarding the second ground that 1st respondent has not signed it, but 2nd respondent-Sharada has signed it, it must also go for the reason, it is actually signed by one SMt. Satyabhama. Even if it is not signed by the parties, clause (b) of sub-section (4) of Section 7 is attracted, which reads: an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement'' is deemed to be arbitration agreement.
III) Since the suit is based on the MoU, it provides necessary proof of agreement between the parties to submit disputes if any for Arbitration and thus answers sub-section (2) of Section 7 of the Act.
IV) In the resultant position, petitioners-plaintiffs have no choice but to submit themselves to arbitration by virtue of clause 23 which is exactly what the learned judge has done in exercise of power u/s 8(1) of the Act. I find no infirmity, legal or otherwise, in the order impugned requiring interference. It is, therefore, confirmed.
However, learned counsel at this stage vented out an apprehension in the mind of the plaintiffs that the arbitrator named in clause 23 is a legal officer of the institution and may be biased. To avoid any further controversy, it is desirable that the trial court may permit both sides to suggest the name of the arbitrator to who shall be the person named in the order of reference. This is opposed strongly by Sri Narayan Sharma, teamed counsel for the respondent.
As could be seen from the conspectus of the Act, when a party to the dispute has no confidence in the arbitrator, principles of natural justice permit the court to name an arbitrator. This power could be exercised by the court. Hence, objections are over-ruled. The trial court to give opportunity to give an alternate name in place of Sri O.Shama Bhat, Advocate, Mysore, if they so desire, which the trial court shall consider and name him in the order of reference.
With the above observation, this revision petition stands disposed of.