Union of India vs Shyama Charan Agarwala

N.M. Jamdar, J.—By this petition, the petitioner-Union of India challenges the order passed by the Civil Judge, Senior Division, Vasco-da-Gama rejecting the application filed under section 8 of the Arbitration and Conciliation Act 1996, in Special Civil Suit no. 41/1996/B. The petitioner/Union had filed an application under section 8 of the Arbitration and Conciliation Act 1996 ("The Act") for referring the dispute raised by the respondent in the suit for arbitration.

The respondent filed a special civil suit no. 41/1996/B in the Court of Civil Judge, Senior Division, Vasco da Gama praying for various reliefs. The respondent is a proprietor and carries on business as a contractor. He is enlisted in the department of MES in a "Special" class category. The petitioner-Union allotted certain contracts for civil works for construction of buildings to the respondent and the respondent had accepted the same through its acceptance letters. Certain disputes arose between the parties as regards working in restricted area, account of extra expenditure in respect of stone excavation, excavation of hard rock etc.. There were certain other proceedings between the parties, details of which are not necessary for the purpose of the present order. In the suit the respondent prayed for setting aside the letters issued by the petitioner-Union for cancelling the contracts and for prohibitory injunction. The respondent prayed for decree for an amount of Rs.8,00,00,000/-along with interest at the rate of 24%.

In this suit, the petitioner/Union filed an application dated 24/10/2010 under section 8 of the Act for referring the dispute for arbitration. According to the petitioner-Union, the subject matter of the suit is the same as the subject matter of the agreement between the parties which contains the arbitration clause. According to the petitioner-Union, condition 6(b) in the contract agreement incorporates the Condition 70 of the General Conditions of the Contract and, therefore, Condition 70 of the General Conditions of contract is applicable to the parties. The petitioner-Union pointed out that no written statement is filed in the suit filed by the respondents. The petitioner-Union prayed that the dispute be referred for arbitration.

The respondent filed a detailed reply, opposing the application made by the petitioner-Union. The respondent contented that serious charges of fraud are made against the petitioner-Union; the subject matter of dispute raised in the suit is not capable of being referred for arbitration; the arbitrator chosen by the petitioner will not pass a legal and proper order; there are certain third parties involved in the suit; there are criminal proceedings pending between the parties; and the petitioner-Union has not produced copy of the original agreement along with the application. On these grounds the respondent resisted the application made by the petitioner-Union.

The learned Civil Judge considered the application. According to the learned Civil Judge the technical objection raised by the respondent as regards maintainability of the application cannot detain the Court from referring the matter for arbitration, if the dispute needs to be resolved by process of arbitration. The learned Civil Judge, however, rejected the application on the ground that the dispute regarding valuation and measurements will not fall under Condition 70 as the final authority for determining this issue is the C.W.E or G.E. under condition 53, which is excluded from Condition 70. The argument of the respondent that the person appointed by the petitioner-Union is likely to favour the petitioner was rejected on the ground that, having chosen to enter into an agreement providing a particular forum, of it''s own volition, it is not open to the respondent to raise the objection. By the impugned order dated 29/10/2003, the application was dismissed.

I have heard Mr. M. Amonkar, learned counsel for the petitioner and Mr. S.G. Bhobe, learned counsel for the respondent.

It appears that earlier attempts were made to resolve the dispute amicably. However, there were no fruitful results. The learned counsel for the parties have addressed the Court on the merits of the dispute.

Shri Amonkar, the learned counsel for the petitioner and Shri S.G. Bhobe, the learned counsel for the respondent have raised certain objections to the impugned order. Though the order passed is in favour of the respondent, Mr. Bhobe submitted that there are various other issues involved including the maintainability of the application under section 8 of the Act have not been satisfactorily dealt with. Mr. Amonkar for the petitioner, has assailed the impugned order on various grounds.

Mr. Amonkar submitted that while passing the impugned order the learned Civil Judge has not considered various decisions of the Apex Court, more particularly the decision in the case of "P. Anand Raju and others Vs. P.V.G Raju and others". He submitted that the respondent themselves had requested for arbitration and it was obligatory on the learned Civil Judge to consider the intention for which the act is enacted to refer the matter for arbitration for speedy disposal of the dispute. He further submitted that as regards the third parties in the suit, no relief is prayed by the respondent against them and that will not detain the Civil Court from referring the matter to arbitration under section 8 of the Act. Mr. Amonkar submitted that the finding that the dispute raised by the respondent falls under exempted category is incorrect. According to Mr. Amonkar since the respondent had consciously chosen to enter into an agreement which contained arbitration clause and disputes raised are of such nature which need to be resolved through arbitration, the learned Civil Judge ought to have referred the matter for arbitration. As regards the contention that the original copy of the agreement was not furnished along with the application, Mr. Amonkar submitted that he had produced the original copy during the proceedings before the learned Civil Judge and this fact has been referred to in the impugned order.

Mr. Bhobe for the respondent on the other hand submitted that in view of the decision of the Apex Court in the case of Atul Singh and Others Vs. Sunil Kumar Singh and Others, , it is mandatory for a party filing an application under section 8 of the Act to annexe copy of the original arbitration agreement or a duly certified copy thereof. He submitted that no such original copy was ever produced before the learned Civil Judge and an application has been made in the present proceeding to ascertain whether original copy was produced. Mr. Bhobe disputed the factual assertion that the petitioner had produced the original copy of the agreement before the learned Civil Judge. He submitted that in view of the position of law settled by the Apex Court the learned Civil Judge was in error in brushing aside the objection raised by the respondent as a mere technicality. Mr. Bhobe further contended that a detailed reply was filed before the learned Civil Judge and only one contention raised by the respondent as regards Condition 70 has been accepted, however, there are various other facets which have not been considered by the learned Civil Judge. Mr. Bhobe invited my attention to the reply filed before the learned Civil Judge.

Having heard the learned counsel for the parties and considering the rival contentions, I am of the opinion that in the impugned order, the learned Civil Judge has not considered the key aspects of the dispute. The argument as regards the maintainability of the application under section 8 of the Act, on the ground that the original copy of the agreement was not annexed has been brushed aside as a mere technicality. There is a serious dispute as to the factual position as to whether the original copy was produced, as contented by Mr. Amonkar. It will also has to be considered as to whether there was production of original agreement during the proceedings, if it was so produced, whether it will be a sufficient compliance of section 8. For that purpose the factual controversy needs to be considered and resolved by the learned Civil Judge and thereafter the law laid down by the Hon''ble Apex Court would have to be applied.

As regards the sole ground of rejection of the application based on Condition 70, the argument of Mr. Amonkar is that parties having chosen to enter into an agreement which mandates a reference to arbitration, the Court is not precluded from referring the parties to arbitration when the court came to the conclusion that such dispute can be conveniently referred for arbitration. This is also one more aspect which the Civil Judge will have to consider and not merely rely on the language of condition 70, keeping in mind the objection for which Act was enacted i.e. for speedy disposal of the disputes.

Though Mr. Amonkar has raised an objection that an respondent has not chosen to take any steps against the impugned order, there is merit in the contention raised by Mr. Bhobe that various grounds raised in the reply have not been considered by the learned Civil Judge.

The respondent has placed on record various orders of the proceedings between the parties of the suit, criminal proceedings and has raised certain objections to the appointment of the arbitrator of the choice of the petitioner. Considering the position which is narrated above, therefore, it will be proper if the impugned order is set side and the application filed by the petitioner is restored to the file to be decided afresh by the learned Civil Judge.

Since the proceedings are remanded for de novo consideration it is made clear that the contentions of the learned counsel reproduced above are only to emphasize the areas of dispute which the learned Civil Judge needs to decide and are not to be considered as reflected on the merits of the rivals contentions.

Accordingly the petition is disposed off in the following terms:

(I) The impugned order dated 29/12/2003 passed by the learned Civil Judge Senior Division Vasco-da-Gama is quashed and set aside and the miscellaneous application no. 204/2000/B is restored to file.

(II) The learned Civil Judge will decide the application within a period of six months from the date of receipt of the record from the registry.

(III) The Registry to send the record to the learned Civil Judge, Senior Division, Vasco Da Gama, forthwith.

Rule is made absolute in above terms. No costs.