S.D. Gundewar, J.
1. Heard finally at the stage of admission by the consent of the parties.
2. The present Civil Revision Application is directed against the older dated 19-12-2001 passed by the learned 5th Joint Civil Judge, Junior Division, Nagpur below application (Exh. 23) in Regular Civil Suit No. 4037/2001, whereby the application (Exh. 23) filed by the applicant No, I/original defendant No. 1 under section 9-A of Civil Procedure Code came to be rejected.
3. A few facts necessary for the disposal of the present Civil Revision Application are as under :--
The non-applicant/original plaintiff, who is a businessman was in need of money for the purchase of one Santro-car. The applicant No. I/original defendant No. 1 is a public limited finance company. Sometime in the first week of October, 2000 the non-applicant approached the applicant No. 1 for loan for purchasing the Santro-car. The applicant No. 1 accepted the proposal made by the non-applicant in this regard and advanced the loan of Rs. 3,00,0007- to non-applicant, which was to be repaid in 36 monthly instalments by accepting 36 account payee monthly cheques drawn on Indian Oversees Bank as a security towards the repayment of the said loan amount.
4. On 2-10-2000 the non-applicant deposited Rs. 33,1957- with M/s Ketan Motor Limited, Nagpur, an authorized dealer of Hyundai towards booking charges and initial consideration amount, which was estimated to Rs. 3,31,5877-. On 13-10-2000 the applicant No. 1 communicated its proposal to the Manager of M/s Ketan Motors Limited, Nagpur and in its turn M7s Ketan Motors Limited delivered Santro-car bearing registration No. MH-31726639797 to the non-applicant on 13-10-2000 itself. The non-applicant then insured the said car with the Oriental Insurance Company Limited. Thereafter as agreed between the parties, the non-applicant paid two instalments of Rs. 8520/- and Rs. 12,500/- to applicant No. 1's employee on 25-11-2000 and 28-12-2000 respectively.
5. It is averred by the non-applicant that in the meantime, on 9-11-2000 the said car met with an accident which caused damage to the vehicle and the non-applicant had to spend Rs. 19,884/- towards the repairs of the said car. The said fact was informed by the non-applicant to the Oriental Insurance Company Limited, which sanctioned the non-applicant's accident claim of Rs. 19,884/-. However, since the vehicle was hypothecated with the applicant No. 1, the Insurance Company made payment of the said amount to the applicant No. 1. When the non-applicant learnt about the same, he asked the applicant No. 1 toappropriate the said amount towards the remaining amount of loan but the applicant No. 1 refused to do so without intimating any reasons for the same to the non-applicant and upon non-applicant's insistence for the same, the applicant No. 1 got annoyed. As a fall-out of the said controversy, the applicant No. 1 stopped collecting subsequent instalments from the non-applicant. Ultimately after some negotiations, the applicant No. 1 agreed to accept repayment of the loan amount due upto October, 2001 in monthly instalments of Rs. 16,0007- and the terms regarding repayment of loan were accordingly modified and the non-applicant started making repayment accordingly. However, on 19-10-2001 the applicant No. 1 telegraphically informed the non-applicant that the amount of Rs. 77,920/- was outstanding against him towards the dues of loan amount payable upto October, 2001 though in fact the non-applicant was liable to pay the amount of about Rs. 45,000/- only. The non-applicant thus found that the said demand made by the applicant No. 1 was unjustified. Thereafter on 25-10-2001 at about 8 P.M. the applicant, No. 2 had been to the office of the non-applicant with some persons and demanded the amount of Rs. 60,000/- and threatened him that in case the said amount was not paid he would forcibly take possession of the car in question. Thereafter due to intervention of some persons, the non-applicant was compelled to give consent letter to applicant No. 2 to the effect that the said amount of Rs. 60,000/- would be paid by him by 29-10-2001. At that time, the applicant No. 2 threatened non-applicant that if the said amount was not paid by 29-10-2001 the car in question would be taken away from him forcibly. The non-applicant, therefore, filed Regular Civil Suit No. 4037/01 for declaration that the demand of Rs. 77,920/- made by the applicants by telegram is illegal and unjust and the applicants have no right, interest or lien over the car in question. He also prayed for grant of permanent mandatory injunction directing the applicants to appropriate the amount of Rs. 19,8847- received by them towards insurance claim pertaining to the car in question towards the dues of loan amount and also for permanent injunction restraining the applicants from interfering with peaceful possession and occupation of car in question by the non-applicant.
6. During the pendency of the aforesaid civil suit, the applicant No. 1 filed an application (Exh.23) under section 9-A of Civil Procedure Code for framing preliminary issue regarding the jurisdiction of the Court and deciding the same. It is contended by the applicant No. 1 in the said application that the non-applicant has not properly valued the suit. According to the applicant No. 1, there was a hire purchase agreement entered into between the parties and as per the said agreement the non-applicant ought to have paid the Court fee on the amount of Rs. 4,89,475/- as per Clause 6(iv)(j) of the Bombay Court Fee Act and since the non-applicant has not paid the Court fee on the said amount, the Court of Civil Judge, Junior Division has no jurisdiction to try the suit. It is further contended by the applicant No. 1 that as per clause (V) of the Hire Purchase Agreement, in case any dispute arises under the said agreement, the same shall be referred to an arbitrator at the option of the owner. The arbitrator shall be nominated by the owner and the award of the arbitrator shall be final and Binding on all the parties concerned, including the guarantor. The venue of such arbitration shall be at Madras. According to applicant No. 1, in view of such an agreement entered into between the parties and by virtue of the provisions of Section 8 of the Arbitrationand Conciliation Act, 1996 (hereinafter referred to as 'The Arbitration Act, 1996') the Civil Court has no jurisdiction to entertain suit and the Court should direct the parties to refer the dispute to the arbitrator. It is also contended by the applicant No. 1 that by paying some instalments towards the repayment of loan amount, the non-applicant has accepted the terms of the hire purchase agreement and, therefore, he cannot now deny the execution of the said agreement.
7. In reply filed by the non-applicant to the aforesaid application, it is contended by him that in the present suit he has challenged the telegraphic demand of Rs. 77,820/- made by the applicant No. 1 and valued the suit accordingly and, therefore, the objection raised by the applicant No. 1 in this regard is misconceived and devoid of any substance. It is further contended by the non-applicant that there was no hire purchase agreement between the parties as contended by the applicant No. 1. According to him, he paid some amount to the applicant No. 1 as per oral agreement and not as per hire purchase agreement and, therefore, the question of acceptance of terms of any hire purchase agreement by him does not arise.
8. After considering the contentions raised on behalf of both the sides and having gone through the material that was placed before him, the learned trial Judge rejected the applicant No. 1's application vide order dated 19-12-2001, which is under challenge in this Civil Revision.
9. Heard Shri M. R. Johrapurkar, the learned Counsel for the applicants and Shri Ramesh Darda, the learned Counsel for the non-applicant at length.
10. At the outset, I would like to state that Shri Johrapurkar, the learned Counsel for the applicants, waived the objection raised by the applicant No. 1 regarding the non-payment of the proper Court fee. However, it is contended by Shri Johrapurkar that since there was hire purchase agreement between the parties and as per Clause 5 of the said agreement in case of any dispute arising under the said agreement, the same shall be referred to an arbitrator at the option of the owner and that the arbitrator shall be nominated by the owner and the award of arbitrator shall be final and binding on all the parties concerned including the guarantor and the venue of such arbitration shall be at Madras, it was essential for the learned trial Judge to direct the parties to refer the dispute to an arbitrator in view of the provisions of Section 8 of the Arbitration Act, 1996 but the learned trial Judge failed to consider this aspect of the matter and, therefore, the impugned order needs to be quashed and set aside. For this, he placed reliance on the decisions in Kalpana Kothari (Smt) v. Sudha Yadav (Smt) and Ors. reported in : AIR2002SC404 , P. Anand Gajapathi Raju and Ors. v. P. V. G. Raju (Dead) and Ors. reported in : [2000]2SCR684 , The Executive Director, Hindustan Petroleum Corporation Ltd., Mumbai and Ors. v. Sri Prabh Transport rep. by P. Chokalinga Prabhu, Madurai reported in 2001(3) Arb. LR 69 Jivan Service Centre v. Hindustan Petroleum Corporation Ltd. reported in 1999 (2) Arb. LR 638 (Bom) Sugal and Damani Finlease Ltd. rep. by its Executive Director, City Centre Plaza, Anna Salai, Chennai-2 reported in 2001(1) Arb. LR 263 (Mad) Punjab State Co-operative Supply and Marketing Federation Ltd. vs. Shiv Rice and General Mills reported in 2001 (1) Arb. LR 476 P. Anand Gajapathi Raju and Ors. v. P. V. G. Raju (died) and Ors. reported in AIR 2000 SC 1886 and Bombay Gas Co. Ltd. v. Parmeshwar Mittal and Ors. reported in 1997 (3) Mh.LJ. 863 = AIR 1998 Bom 118.
11. On the other hand, Shri Ramesh Darda, the learned Counsel for the non-applicant, while supporting the impugned order contended that in view of the provisions of Section 8(3) of the Arbitration Act, 1996 though the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. As such, according to Shri Ramesh Darda, though the civil suit is pending, the applicant No. 1 may move the arbitrator but instead of moving the arbitrator the applicant No. 1 has filed an application (Exh.23) asking the Court for directing the parties to refer the dispute to arbitrator, which is misconceived and, therefore, the learned trial Judge has rightly rejected the same. It is also submitted by Shri Darda that the impugned order being just and proper needs no interference at the hands of this Court. For this he placed reliance on the decision in Smt Kalpana Kothari vs. Smt. Sudha Yadav and others reported in : AIR2002SC404 .
12.1 have considered the contentions canvassed by the learned Counsel for both the parties and perused the impugned order.
13. In order to consider the controversy in question, it would be proper to consider the provisions of Section 8 of the Arbitration Act, 1996.
14. Section 8 of the Arbitration Act, 1996 reads as under:--
'Section 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.
(2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or duly certified copy thereof.
(3) Notwithstanding that an application has been made under Sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be a commenced or continued and an arbitral award made.'
15. Now, in a case in Kalpana Kothari (Smt) v. Sudha Yadav (Smt) and Ors reported in : AIR2002SC404 . the Apex Court held that the provisions of section 8 of the Arbitration Act, 1996 are all comprehensive and of mandatory character. Similarly in another decision in P. Anand Gajapathi Raju and others vs. P. V. G. Raju (Dead) and others reported in : [2000]2SCR684 , the Apex Court held that the language of section 8 of the Arbitration Act, 1996 is peremptory and Court is under an obligation to refer the parties to arbitration. Relying upon the said decision of the Apex Court, the learned Single Judge of Madras High Court in The Executive Director, Hindustan Petroleum Corporation Ltd., Mumbai and others vs. Sri Prabh Transport rep. by P. Chokalinga Prabhu, Madural reported in 2001(3) Arb. LR 69 (Mad) took similar view and held that, in view of the provisions of section 8 of the Arbitration Act, 1996 it is obligatory for the Court to refer the parties to arbitration in terms of the arbitration agreement. Yet in another decision in Sugal and Damani Finlease Ltd.rep. by its Executive Director, City Centre Plaza, Anna Salai, Chennai-2 reported in 2001(1) Arb. LR 263 (Mad) the learned Single Judge of Madras High Court held that the provisions of section 8(1) of the Arbitration Act, 1996 are mandatory and when the conditions are satisfied the Court shall refer the parties to the arbitration. Similar view has been taken by this Court in a case in Jivan Service Centre vs. Hindustan Petroleum Corporation Ltd. reported in 1999 (2) Arb. LR 638 (Bom) and the Punjab and Haryana High Court in Punjab State Co-operative Supply and Marketing Federation Ltd. v. Shiv Rice and General Mills reported in 2001(1) Arb. LR 476.
16. Now, In a decision in P. Anand Gajapathi Raju and Ors. v. P. V. G. Raju (died) and others reported in AIR 2000 SC 1886 the Apex Court has laid down the conditions which are required to be satisfied as per Sub-sections (1) and (2) of Section 8 of the Arbitration Act, 1996 before the Court exercises its power to refer the parties to arbitration. The said conditions are :--(1) there is an arbitration agreement; (2) a party to the agreement brings an action in the Court against the other party; (3) subject matter of the action is same as the subject matter of the arbitration agreement; (4) the other party moves the Court for retiring the parties to arbitration before it submits his first statement on the substance of the dispute.
17. In the case in hand, the applicant No. 1 has placed on record the hire purchase agreement alleged to have been arrived at between the parties. Clause (V) of the said agreement reads as under:--
'Clause V--It is agreed between the parties that in case of any dispute arising under this Agreement the same shall be referred to an Arbitrator at the option of the Owner. The Arbitrator shall be nominated by the Owner and the award of the Arbitrator shall be final and binding on all the parties concerned, including the Guarantor. The venue of such arbitration shall be at Madras, it is further agreed that in the event of the said Arbitrator dying or being unable to act for any reason, the Owner shall be entitled to appoint in his place another Arbitrator who shall be entitled to resume the said arbitration proceedings from the stage at which it was left by his predecessor.
Save as aforesaid the courts in Chennai alone and no other courts whatsoever will have jurisdiction to try any suit in respect of any claim or dispute arising out of or under this Agreement or in any way relating to the same.'
The non-applicant has filed Regular Civil Suit No. 4037/01 for declaration and injunction against the applicants and during the pendency of the said suit, the applicant No. 1 moved the Court for referring the parties to arbitration in view of the aforesaid term of the agreement . The non-applicant has simply dented the execution of the said agreement but failed to adduce any evidence to dislodge the contention raised by the applicant No. 1 in this regard. From this it can (be inferred that the applicant No. 1 has satisfied the material conditions required for exercising power under section 8 of the Arbitration Act, 1996 and, therefore. It was obligatory on the part of the learned trial Judge to refer the parties to arbitration.
18. Shri Darda, the learned Counsel for the non-applicant, relying upon the provisions of section 8(3) of the Arbitration Act, 1996 contended that when the issue is pending before the judicial authority, the Court is not required to refer the parties to arbitration and the applicant No. 1 on its own can move the arbitrator since as per the said provision when the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. For this he placed reliance on a decision in Smt. Kalpana Kothari v. Smt. Sudha Yadav and Ors. reported in : AIR2002SC404 . I have gone through the said decision. Even in this case, the Apex Court while considering the scope of section 34 of the old Arbitration Act, 1940 and section 8 of the new Arbitration Act, 1996 observed that in the new 1996 Act there is no provision corresponding to section 34 of the old 1940 Act and section 8 of new 1996 Act mandates that the judicial authority before which an action has been brought in respect of a matter which is the subject matter of arbitration agreement shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. In the instant case, during the pendency of the Regular Civil Suit filed by the non-applicant the applicant No. 1 placed a copy of hire purchase agreement on record wherein there is a clause No. (V) which indicates that in case of any dispute arising under the said agreement the same shall be referred to an Arbitrator at the option of the owner. The said application was filed by the applicant No. 1 before submitting his first statement. Therefore, even according to the aforesaid decision of the Apex Court relied upon by the learned Counsel for non-applicant it was obligatory on the part of the trial Court to refer the parties to the arbitration but unfortunately this has not been done.
19. Further, in a decision in Punjab State Co-operative Supply and Marketing Federation Limited v. Shiv Rice and General Mills reported in 2001(1) Arb. LR 476 the learned Single Judge of Punjab and Haryana High Court observed in paragraph 10 of the said judgment that section 8(3) of the Arbitration Act, 1996 contemplates a situation where the matter may be pending before the Court and still the arbitration may be commenced or continued and arbitral award made. Thus, even if civil suit is pending in civil Court, yet the matter could be referred to the arbitrator. In this view of the case and having regard to the fact that the provisions of section 8 of the Arbitration Act, 1996 are mandatory, I am unable to accept the aforesaid contention raised by the learned Counsel for the applicant.
20. Another contention canvassed by Shri Darda, the learned Counsel for the non-applicant, that since the non-applicant has denied the execution of the hire purchase agreement the dispute cannot be referred to arbitration is also without any merit. Firstly, because the applicant has placed on record a copy of hire purchase agreement, wherein it is specifically mentioned in Clause (V) of the said agreement that in case of any dispute arising under the said agreement, the same shall be referred to an arbitrator and merely because the non-applicant has denied the execution of the said agreement without adducing any evidence in rebuttal, the dispute cannot be taken out of arbitration and secondly, because of the mandatory nature of section 8 of the Arbitration Act, 1996. In this regard, a reference can be made to a decision of this Court in Bombay Gas Co. Ltd. v. Parmeshwar Mittal and Ors. reported in 1997 (3) Mh.LJ. 863 = AIR 1998 Bom 118 relied upon by the learned Counsel for the applicants, wherein while considering the scope of Section 8 of the Arbitration Act, this Court took similar view and held that even if the allegations of fabrication of record were made, the parties can be referred to arbitration.
21. A perusal of the impugned order shows that the learned trial Judge has failed to consider the aforesaid aspects of the matter and, therefore, in my view, the impugned order cannot be sustained and it needs to be quashed and set aside.
22. In the result, the present Civil Revision Application is allowed. The impugned order dated 19-12-2001 passed by the 5th Joint Civil Judge, Junior Division is quashed and set aside. The applicant No. 1's application (Exh.23) is allowed. The parties are directed to refer the dispute to the Arbitrator at Chennai in view of Clause (V) of the Hire Purchase Agreement in question. No order as to the costs.