(Prayer: This CRP is filed under Section 115 of CPC., against the Order dated 05.08.2011 passed in OS No.37/2010 on the file of the III Additional Senior Civil Judge, Hubli dismissing the I.A.No.III filed under Section 8 of Arbitration and conciliation Act 1996 etc.)
1. Revision under Section 115 of C.P.C. is by the applicant whose application under Section 8 of the Arbitration and Conciliation Act, 1996 (herein after referred to as âthe Arbitration Act) has been rejected by the impugned Order in O.S. No.37/2010.
2. Revision is posted for admission after notice to the respondents. The respondent Nos.2 to 7 have entered caveat.
3. Heard regarding admission. The factual matrix to which the learned counsel have adverted to, and manifest from the records, reveals:
a) The 1st respondent in this revision Gulabchand, a person of unsound mind, represented by the next friend and guardian-Nilesh, filed suit in O.S.No.37/2010 seeking decree:
a) for partition and separation possession of his 1/5th share in the suit schedule properties;
b) for perpetual injunction restraining defendants 18 to 25 from enforcing sale agreement dated 23.03.2001 allegedly executed by defendant Nos.5, 6, 7 and 16 in respect of the entire suit schedule properties.
c) for perpetual injunction restraining defendants 5 to 25 from interfering with suit schedule properties.
b) In the suit, some of the defendants entered appearance, amongst whom the petitioner in this revision, who was arrayed as defendant No.18, is one. Before filing written statement, he filed an application under Section 8 of the Arbitration Act requesting the judicial authority (Court) to refer the parties to the suit to arbitration, on the assertive contention that there is an arbitration agreement in force binding the parties to submit dispute between the for arbitration.
c) The defendants Nos.1(a) to 1(c), 2 to 4 filed separate written statement, likewise defendant Nos.5, 6, 7, 8 and 10 to 16 also filed their written statement.
d) The application filed was supported by the affidavit of H.R. Prahlad in which he averred he and others are partners of defendant No.18 firm. The defendant Nos.5 to 16 had transacted with the Firm by an agreement dated 23.03.2001 to sell the property described in the schedule. The defendants 1(a), 1(b), 1(c), 2, 3, 4 and 27 having transacted, were denying to execute the deed of sale in terms of the agreement creating dispute, which in terms of the arbitrary agreement was referred to sole arbitrator.
e) He alleged there is no dispute that the plaintiff has entered into the shoes of defendant Nos.5 to 16 being one of the lessees, and therefore, the term of reference to the arbitrator contained in the agreement of sale dated 23.03.2001 (clause 9) binds him (plaintiff) as the said clause binds not only parties to the agreement, but also the assignees including the plaintiffs.
f) On this basis, the deponent further deposed the suit filed being in respect of properties covered by the sale agreement, it is subject to arbitration.
g) The plaintiff and other defendants resisted. Defendant Nos.1 to 4 resisted the application denying arbitration agreement between them and the applicant (defendant No.18) also disputed validity of the agreement dated 23.03.2001 to bind them.
h) The learned Trial Judge by the impugned Order, rejected the application, consequent to which he is in revision.
4. Learned counsel for the petitioners was at his best in bringing to the notice of the Court several proceedings in the recent past between persons who are arrayed as parties in this revision. He has furnished chronology of events and appended documents.
5. He has specifically referred to the proceedings in W.P.No.66743/2009, orders passed in the Arbitration Proceedings No.03/2007, orders passed in 61430/2011, the petition in F.D.P. 9/1994,orders passed in CRP No.1501/2004, orders in M.F.A. No.2866/2005 with connected appears. From the plethora of material filed, he tries to bring home following aspects.
i) The plaintiff in O.S.No.37/2010 and the defendant Nos.1 to 4 formed one group. Defendant Nos.5 to 16 are parties to form the second group. Defendant Nos.5 to 16 were the owners of the property described in Schedule to the plaint and were entitled to exercise of right, title and interest. The plaintiff and defendant Nos.1 to 4 were lessees in the land in question. The defendant No.18, a firm, transacted with defendant Nos.5 to 16 to purchase the property in question for valuable consideration and on specific terms, a binding contract was created vide agreement dated 23.03.2001. In terms of it, defendant Nos.5 to 16 are obliged to sell the property in question.
ii) The 18th defendant is represented by its partners (defendant Nos.19 to 25). While things stood thus, the defendant Nos.5 to 16 tried to put up volte face and rescinded the contract.
iii) It is alleged, the plaintiff and defendant Nos.2 to 4 joining with the defendant Nos.5 to 16 created relinquishment deed purporting to release/relinquish all the right, title and interest in favour of the defendant Nos.1 to 4 and 27.
iv) He would further submit that such a transaction was later in point of time i.e., it was in the year 2006, whereas the agreement of sale was in the year 2001. Not satisfied with attempts made to frustrate the contract of sale, the defendant Nos.5 to 16 and defendant Nos.1 to 4 indulged in other acts including setting up of defendant No.1(a) (Tarabai) to question the agreement itself in one such proceedings, defendant No.1(1)-Tarabai filed a suit in O.S.No.359/2006 in which suit she brought into party array the petitioner No.1 and the filed application under Section 8 of the Arbitration Act.
v) That application was allowed referring the dispute to the arbitration and the same was questioned by her in W.P.No.1842/2007 (GM-CPC). This Court by Order dated 29.06.2007 rejected the writ petition confirming the Order and directing her to subject herself to arbitration.
6. The learned counsel contends that the suit in O.S.No.37/2010 filed by the plaintiff is virtually the same, and therefore, the order passed in the writ petition would apply to non-suit the plaintiff herein and for allowing the application under Section 8 of the Arbitration Act.
7. He has referred to other orders passed, which at this juncture may not be necessary to refer to.
8. Learned counsel for the contesting respondent who is plaintiff in the trial Court, has also referred to the fact situation relating to right, title and interest of the parties. I do not wish to go into the claim and counter claim of the parties regarding title in respect of the property in question.
9. The issue under consideration falls in a narrow contest and the question arising is:
1. Whether the issue arising in O.S. No.37/2010 filed by the contesting 1st respondent is covered by the arbitration agreement between the de3fendant No.18 and defendant Nos.5 to 16 and 27?
2. If so, whether the plaintiff is a party to the arbitration agreement to compel him to submit to arbitration?
10. To answer these two questions, undoubtedly reference has to be made to the arbitration agreement relied by the petitioners herein. The arbitration agreement sought to be enforced is found in clause 9 of the agreement of sale, which reads thus-
âAny dispute of difference between the parties arising out of this agreement or their rights and liabilities hereunder shall be adjudicated by the arbitration of Shri. VishwanathRamasa Jartarghar, House No.6, Bailappanavar Nagar, Hubli and the award of the sole arbitrator shall be final and conclusive on the subject as between the parties and this clause shall be deemed to be a submission within the meaning of Arbitration and Conciliation Act, 1996 and its statutory modification or re-enactment thereof in force from time to time.â
11. While the petitioners bring in force this clause as an arbitration agreement, the contesting respondent (plaintiff) denies being party to it. Therefore, I have examined the nature of transaction and the parties to the contract itself in which this arbitration clause is incorporated. It shows the clause described as arbitration agreement is one of the clauses in the agreement of sale between M/s Eureka Builders, a registered Partnership Firm represented by its partners and Smt. Kamalavva w/o. Late Kyatanagouda Patil, Shri. Fakiragouda adopted son of Late, Kyatanagouda Patil, Shri. Fakiragouda S/o. Basanagouda Patil, Shri. Dyamangouda S/o. Marigouda Patil, Shri. Chandrashekargouda S/o. Marigouda Patil, to which the 1st respondent-plaintiff is not a party.
12. Nowhere we find the contesting respondent-plaintiff in the party array. It is also noticed that the defendant Nos.5 to 16 and 27 are parties to the agreement of sale dated 23.03.2001. However, learned counsel submits, the clauses of the agreement not only binds the parties who are bound by the clauses of the agreement, it also binds the assignees. Consequently the plaintiff and lessees who are beneficiaries of the relinquishment are bound by the arbitration agreement. This contention has to be examined with reference to Section 7 of the Arbitration Act, which is the basis for further actions under the Act.
13. Section 7 postulates, i) âIn this part, âarbitration agreementâ means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or notâ. Therefore, sub-section 1 of Section 7 of the Arbitration Act clearly spells out arbitration agreement means agreement by the parties to submit to arbitration all disputes within or arising between them within a defined legal relationship, whether contractual or not. Therefore, the prerequisite is to ascertain whether the dispute is a dispute arising between the parties within a defined legal relationship, whether contractual or not. It is only then they would be bound. In the instant case, the 1st respondent (plaintiff) as also defendant Nos.1 to 4 in the sit are not parties to the agreement of sale dated 23.3.2001 in which it is alleged as âarbitration clause sought to be enforced as arbitration agreement, are conspicuous by their absence, being not party to the agreement.
14. Secondly, sub-section 2 further clarifies, who would be bound by an arbitration agreement. It reads-
An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement, but it insists by sub-section 3 that an arbitration agreement shall be in writing, sub-section 4 reads- 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.
15. Sub-section 5 envisages, the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is as such as to make that arbitration clause part of the contract.
16. There should be no difficulty in understanding that the arbitration agreement referred to is an arbitration agreement either in the form of an agreement itself or by way of an arbitration clause in a contract. But it must be between the parties. Persons, who are not parties to the arbitration agreement or a contract in which arbitration clause is incorporated will not be âpartiesâ as referred to in Section 7 of the Arbitration Act.
17. Keeping this in mind, if we examine the fact situation, the agreement which is the genesis for all arbitration proceeding canvassed by the petitioner is an agreement of sale dated 23.03.2001, interalia, between the defendant No.18 (petitioner No.1 herein) and the defendant Nos.5 to 16 only. I have already observed in para supra that we are not going to refer to the right, title and interest, they claim in the property in question. We are only concerned as to whether the suit filed by plaintiff/contesting respondent was not maintainable in a civil court, in view of the clause 9 in the agreement in question. Keeping in mind the mandate of Section 7, it has to beheld that as he is not a party to the agreement dated 23.03.2001, he cannot be treated as a party to clause 9 in the agreement and it will not bind him. Presuming that as an assignee under the relinquishment deed, he steps into the shoes of the vendors under the agreement, the question is, whether the dispute raised in the Civil Suit O.S. No.37/2010 is a dispute, capable of being adjudicated by the arbitrator.
18. Clause 9, therefore needs to be examined. Clause 9 (arbitration agreement) is between petitioner No.1 herein and defendant Nos.5 to 16 extracted above. It shows that the parties have agreed specifically that any dispute or differences between the parties arising out of this agreement or their rights and liabilities, thereunder shall be adjudicated by arbitration. Therefore, it is necessary to first ascertain the nature of dispute and as to between whom it has arisen. Clause 9 leaves no scope for doubt that disputes referred to in clause 9 are disputes arising between the parties to agreement of sale and on the issues covered under the agreement and no other issue. Keeping this clause 9 in mind, when we examine the plaint, the prayer in O.S.No.37/2010 is as under:
a. For partition and separate possession by metes and bounds of the plaintiffs 1/5th share in the suit schedule propertiesâ¦
b. For perpetual injunction restraining the defendants No.18 to 25 from enforcing the sale agreement dated 23.3.2001 alleged to have been executed by the defendant Nos.5, 6, 7 and 16 in respect of entire suit schedule propertyâ¦
c. For perpetual injunction restraining the defendant Nos.5 to 25 from interfering with the suit schedule properties, in the ends of justice and equity.
19. It is clear that in the suit the principal prayer is for partition of the property in question between the plaintiff and defendant Nos.2 to 4, in which no dispute between defendant Nos.5 to 16 comes in for adjudication, nor defendant Nos.17 to 26, Reason being, plaintiff, is seeking his 1/5th share against defendant No.2 to 4. The two more prayers sought for by him are virtually in the nature of consequential relief to declare that the agreement dated 23.03.2001 to which he is not a party, is unenforceable.
20. The second question is, whether the relinquishment deeds referred to by the petitioners is a transaction between the plaintiff along with others or not. The learned counsel for contesting respondent makes it clear that plaintiff is not a beneficiary under the relinquishment deed, but is fighting for his independent right unfettered by the transactions covered by agreement dated 23.03.2001 or the deeds of relinquishment. This fact is not disputed by the petitioners and has a bearing on the contention of learned counsel for petitioners that the order passed by this Court in an action initiated by Tarabai virtually binds the 1st defendant.
21. The order passed in writ petition against Tarabai appears to be on the basis that under relinquishment deed she had acquired interest, and therefore, she was transferee of title or interest from the persons, who are party to the sale agreement, and therefore, she was also subjected to arbitration. Whereas, the plaintiff being not a party to the relinquishment deed, cannot be placed at par with defendant No.1(a)-Tarabai who had failed in the writ action solely on the basis of relinquishment deed, and therefore, cannot be construed as having steeped into the shoes of the transferors under the agreement dated 23.03.2001 under which the petitioners seek to claim right to acquire the property in question. The main relief sought by the plaintiff is for petition which cannot be adjudicated by the arbitrator. Thus the answer obviously has to be in the negative, in view of clarity of expression in clause 9 (arbitration agreement) sought to be enforced.
22. At this juncture, we need to remind ourselves that Arbitration Act is not in derogation of the power of Civil Court conferred by Section 9 of C.P.C. It is in supplementation to the process of adjudication of civil rights and not a substitute. All actions in personam could be covered by and brought in for arbitration, but if action in contemplation is action in rem, the remedy is only in civil court and it ousts the jurisdiction of the arbitrator. Besides, it is now well settled even if there is a clause for arbitration, it will not oust the jurisdiction of the Court if the issue arising for consideration requires a detail enquiry and the trial for decision on the right, title and interest of the parties.
23. The Apex Court has in more than one of its pronouncements, assertively held that merely because of existence of an arbitration agreement, all disputes cannot be referred for arbitration, not the plaintiffs be non-suited from civil action. What needs examination is the nature of dispute brought before a judicial authority. If the dispute is of such a nature which cannot be decided in a summary arbitration proceedings, then despite the arbitration agreement being in force, such disputes will be retained by the Civil Courts for adjudication. It is also well settled principle of law that unless a person is shown to be a party to the arbitration agreement, he or she cannot be compelled to face arbitration, as the very mandate of Section 7 is âparties to an arbitration agreement.
24. In the case of N. Radhakrishnan vs. Maestro Engineers and Ors. reported in (2010) 1 SCC 72, the Apex Court considering the conspectus of provisions relating to arbitration particularly Section 8(2) of the Arbitration Act, observed, where serious allegations of fraud, mal-practices committed in accounts books and manipulation of finance of the Partnership Firm etc., are made and where dispute in question falls within the purview thereof requires a detailed investigation and production of elaborate evidence is not referable for arbitration under Section 8. To form such an opinion, Apex Court took note of the fact that arbitration proceedings are summary in nature and the jurisdiction of the arbitrator to decide the dispute pertaining to a matter of high proportion as raised before the Apex Court was held to be decidable only by the Civil Court. It is material to note that in the said case before the Apex Court, there was no dispute about the existence of an arbitration agreement not there was any dispute that the parties to the suit were the parties to the arbitration agreement. Even then they were not referred to arbitration.
25. In a subsequent decision reported in (2011) 5 Supreme Court Cases 532, in the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and others, the Apex Court referring to Sections 8, 11, 16, 34(2)(b) and 48(2) of the Arbitration and Conciliation Act, 1996, has spelled out all dimensions that are required to be considered before making a reference to arbitration amongst which the emphasis is on arbitrability of dispute. The judgment is an authority in itself. Its exposition of law is with reference to all earlier precedents, and the observations of Apex Court are at galore. The conclusion of Apex Court in the following words will suffice. Para 37 needs reference and it is extract below-
âIt may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself.â
26. Therefore, when we apply this dictum to the suit filed by the 1st respondent, he has sought for a decree in respect of a property, a tangible thing and as observed by the Apex Court it is not seeking a judgment in personam against a person, but is seeking a judgment against the thing right in a status which could only be adjudicated in a detailed enquiry, as provided for under the Code of Civil Procedure, 1908, by a Court of competent jurisdiction and not an arbitrator with a limited jurisdiction to adjudicate upon disputes relating to the transaction between the parties. On this legal proposition, I am constrained to hold that the orders of this Court or trial Court in collateral proceedings are not of such a nature as to non-suit the 1st respondent-plaintiff in filing the suit to vindicate or assert his right in respect of the property, tangible thing.
27. Therefore, the Trial Court was right in holding that arbitration agreement referred to by the applicant did not bind the plaintiff and secondly, did not confer upon the arbitrator jurisdiction to decide the issue raised by the plaintiff in this suit. Rightly, the trial Court has rejected the application.
28. Before parting, I must also address the alternate ground urged by the learned counsel for the petitioner with reference to Section 16 of the Arbitration Act. His contention is that even presuming the plaintiff could show that arbitrator has no jurisdiction that issue has to be raised before the arbitrator who is conferred with the competence to decide the issues. Section 16 of the Arbitration Act to which he has referred to reads thus-
16. Competence of arbitral tribunal to rule on its jurisdiction
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose,-----
(1) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract, and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Sec.34.
29. The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose permit parties to raise such issues. I am constrained to discount the submission for the reason, Section 16 of the Arbitration Act operates in different situation and Section 8 of the Arbitration Act operates in a different situation. Section 8 of the Arbitration Act becomes applicable when a judicial authority is seized of an action. Section 8 of the Act reads thus-
8. Power to refer parties to arbitration where there is an arbitration agreement.- (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
30. Therefore, it will operate only when the suit filed in relation to the dispute is covered under the arbitration agreement. But Section 16 of the Arbitration Act operates in a different situation and spells out the competence of the arbitrator during arbitral proceedings. The competence conferred by Section 16 of the Arbitration Act is âThe arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose.-(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clauseâ. Such a situation arises only when the arbitrator has embarked an arbitration after submission of the parties to its jurisdiction and not otherwise.
31. Learned counsel submits that already there is an arbitration proceeding in which defendant Nos.1 to 4, 16 and 27 are also directed to submit themselves to arbitration is of no avail as far as the plaintiff is concerned. Firstly, because, he is not a party to the arbitration agreement nor is a beneficiary under the relinquishment deed. Therefore, he does not stand at par either with defendant Nos.1 to 4 or defendant No.16 to be held bound by the orders passed in a proceeding initiated by them. However, by this observation, I do not wish to create a cause for those parties to dispute the findings already recorded against them, who are parties to the proceedings. As far as the plaintiff is concerned, it could be said that legally he could avoid the effect of those proceedings.
32. In the result, petition fails and it is dismissed. The impugned order is confirmed. Any observation made with reference to the contention of the petitioners is against the claim of the plaintiff only and shall not have effect on the pleas or contentions of others involved in the litigations.