Judgment:
Mohta Anoop V., J.
1. By consent, heard finally.
2. This is the First Appeal filed by the original plaintiff against the Order dated 22.03.2007 passed in Regular Civil Suit No. 4142/2006 by the learned Judge of Bombay City Civil Court at Bombay, whereby in Notice of Motion, by consent of the parties, a preliminary issue of maintainability of the suit was raised and decided against him by holding that suit is not maintainable in view of the scheme and object of The Arbitration and Conciliation Act, 1996 (for short, 'The Arbitration Act, 1996').
3. On 26.02.2007 the Court has framed the following issues:
Whether defendants prove that in view of Arbitration Act this Hon'ble Court has no jurisdiction to entertain and try the present suit
4. The relevant events and facts are as under:
In November, 2001, respondents 1 to 5 requested the appellant to import waste paper on their behalf and made on account payment of Rs. 10,00,000/-. Appellant imported goods worth about Rs. 21,66,230/- on behalf of respondents 1 to 5.
5. On 28.04.2004 the appellant become entitled to receive Rs. 13,82,835/- as his share of profit in the said import business in view of various amounts already paid by him to respondents 1 to 5.
6. On 29.04.2005, the Advocate for respondents 1 to 5 addressed letter to the appellant contending that the appellant allegedly executed alleged writing dated 1.4.2003 inter alia admitting his alleged liability to pay Rs. 31,80,000/- to the respondents 1 to 5 with interest at 24% and also allegedly agreeing to refer the matter to Arbitrator to be appointed by respondents 1 to 5 in the event of non payment. By the said letter the said Advocate threatened to refer the matter to alleged Arbitrator Mr. Bharat B. Jain if payment was not made as per alleged Arbitration Agreement. On 11.5.2005 appellant through his Advocate denied having executed alleged writing dated 01.04.2003 and asked for inspection of the same. The appellant has not paid the amount. On 21.07.2005 Mr. Bharat B. Jain Advocate claiming to be sole Arbitrator allegedly appointed by respondents 1 to 5 as per said alleged writing dated 1.4.2003, fixed meeting for Arbitration. Number of letters were thereafter exchanged between the parties where appellant pointed out that the alleged Arbitration was without any authority and the said alleged writing dated 01.04.2003 is a forged one.
7. On 7.12.2005 Mr. Bharat B. Jain Advocate addressed letter recording that he was withdrawing from Arbitration as his conscience did not allow to continue as Arbitrator in view of serious allegations of forgery and pendency of criminal case in respect thereof.
8. On 16.12.2005 Mr. Piyush M. Shah, Advocate addressed letter claiming to be appointed by respondents 1 to 5 as Arbitrator under alleged writing dated 01.04.2003. The appellant pointed out the relevant facts to Mr. Piyush M. Shah but he persisted in going on with the alleged Arbitration.
9. On 20.02.2006 Mr. Piyush M. Shah addressed letter directing appellant to deposit Rs. 20,000/- with him on account of alleged Arbitration fee.
10. On 21.08.2006 respondent No. 6 passed an ex parte Order in the alleged Arbitration proceeding for forwarding the alleged confirmation letter dated 01.04.2003 to handwriting expert.
11. On 12.09.2006 the appellant filed the suit.
12. On 29.09.2006 the Judge of the City Civil Court passed order recording that next date for Arbitration is not fixed and directing respondent No. 6 to give notice if he wanted to fix any meeting for hearing. Liberty was granted to the appellant to move Court for ad interim relief if such notice is received. Such notice has thereafter not been issued till date.
13. The relevant Section 16 of Arbitration Act, 1996 is reproduced as under:
16. Competence of arbitral Tribunal to rule on its jurisdiction.-(1) 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.--
(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 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; however, a party shall not be precluded from raising such a plea merely because 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 of the cases referred to in Sub-section (2) or sub-section (3), 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 Section 34.
14. A Constitutional Bench of the Apex Court in SBP and Co. v. Patel Engineering Limited and Anr. : AIR2006SC450 , while dealing with Section 11(6) & (7) and Section 16 of the Arbitration Act has observed as under:
19. Section 16 is said to be the recognition of the principle of Kompetenz-Komopetenz. The fact that the arbitral Tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can and possibly, ought to decide them,. This can happen when the parties have gone to the arbitral Tribunal without recourse to Section 8 or 11 of the Act. But where the jurisdictional issues are decided under these sections, before a reference is made, Section 16 cannot be held to empower the arbitral Tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does not enable the arbitral Tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it....
15. Subsequently, the Supreme Court in Mc Dermott International Inc. v. Bum Standard Co. Ltd. and Ors. reported in : (2006)11SCC181 , while dealing with Sections 16, 34 & 37 has observed in para 51 as under:
51. After the 1996 Act came into force, under Section 16 of the Act the party questioning the jurisdiction of the arbitrator has an obligation to raise the said question before the arbitrator. Such a question of jurisdiction could be raised if it is beyond the scope of his authority. It was required to be raised during arbitration proceedings or soon after initiation thereof. The jurisdictional question is required to be determined as a preliminary ground. A decision taken thereupon by; the arbitrator would be the subject matter of challenge under Section 34 of the Act In the event the arbitrator opined that he had no jurisdiction in relation thereto an appeal there against was provided for under Section 37 of the Act.
The said principle has further been reiterated by Apex Court in National Thermal Power Corporation Limited v. Siemens Atkeingesellschaft reported in : AIR2007SC1491 .
16. Therefore, taking overall view of the scheme of Section 16, one thing is very clear that Arbitrator has power to decide the applications with regard to the existence of arbitration agreement and objection in respect of jurisdiction. The Arbitrator haying once taken decision and rejected the objection with regard to the jurisdiction and observed further that there is existence of arbitration agreement between the parties and proceed accordingly, such order cannot be challenged except the remedy as available under Section 34 and or Section 37 of the Arbitration Act as referred above.
17. Another important facet is Section 5 of the Arbitration Act which is reproduced as under:
Section. 5 Extent of judicial intervention.--Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this part.
18. It is clear that Section 5 applies to the matters governed by Part I. Section 16 is part of this part. The opening non-obstante clause therein clearly indicates that it overrides provisions in any other statute. As a result, judicial intervention is permissible only where it is specifically provided for in this part Shri Subhalaxmi Fabrics v. Chandralal Barodia : AIR2005SC2161 . The principal object of Section 5 is to promote and encourage resolution of disputes expeditiously and less expensively. Especially when there is an arbitration agreement, the Court's intervention should be minimal. T. Anand Gajapatty Raju v. PVG Raju : [2000]2SCR684 .
19. The conclusion in SBP and Co. v. Patel Engineering Ltd. (supra) with regard to Sections 16, 34 and 37 clinches the issue against the appellants, viz.
(vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the orders passed by the Arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of die Act,
(ix) In a case where an Arbitral Tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.
20. Now that the Apex Court has declared as above that there is no option and considering the scheme and purpose of the Arbitration Act, 1996 the order of dismissal of suit needs no interference.
21. The decision of Apex Court in Atul Singh and Ors. v. Sunil Kumar Singh and Ors. : AIR2008SC1016 , as relied upon by the learned Counsel for the appellant is of no assistance to support his submissions. That judgment revolves around Sections 7 and 8 of the Arbitration Act, 1996. Before reference, an objection was raised about the validity of the Arbitration Agreement. In a suit, pursuant to Section 8 no original arbitration agreement or duly certified copy thereof was filed and, therefore, no order for referring the dispute to arbitration was passed in the suit. The relief having the partnership deed as illegal and void can be granted by the Civil Court and not by Arbitrator. Plaintiffs or respondents through whom plaintiffs derive title are not parties to the said Deed and, therefore, also the trial Court refused to refer the matter to Arbitration. The Apex Court in this background has maintained the said order. In the present case, as per agreement and arbitration clause itself, the Arbitrator was appointed. Therefore, this is a case where matter is pending before arbitral Tribunal as contemplated under Section 16 of the Arbitration Act, 1996. In view of the scheme and object of Arbitration Act, 1996 and clear dictum of the Apex Court as recorded above, the facts and circumstances of this case (Atul Singh) itself makes the case distinct and distinguishable. Therefore, it is not applicable as admittedly in the present case the appellant is party to the suit contract/agreement and, therefore, bound by the said arbitration clause based upon which the Arbitrator has been appointed and the parties appeared before the Tribunal. The appellant, after many correspondences, filed the suit for declaration that such agreement/writing is null and void and/or obtained by fraud or misrepresentation and, therefore, not binding. All these facts including the existence of arbitration agreement and its effect on the constitution of the Tribunal including the jurisdiction of the Tribunal to proceed with the matter can very well be decided by the Tribunal.
22. It is apt to quote the observation of the Supreme Court in Maharshi Dayanand Univesity and Anr. v. Anand Co-op. L/C society Ltd. and Anr. : AIR2007SC2441 :
13. But we make it clear that the arbitrator, in the first instance, has to decide whether the existence of an arbitration agreement in terms of Section 7 of die Act is established and also to decide whether die claim now made is a claim that comes within the purview of Clause 25-A of the tender conditions in case it is found to be an agreement within the meaning of Section 7 of the Act. Only on deciding these two aspects can the arbitrator go into the merits of the claim made by the respondent. But we clarify that it does not mean, that he should treat these two aspects as preliminary issues and decide them first but only that he must decide them without fail while proceeding to finally pronounce his award.
14. In this view of the matter, we see no reason to interfere with the appointment of an arbitrator. We dismiss this appeal giving liberty to the parties to raise all their contentions based on lack of jurisdiction of the Arbitral Tribunal before the arbitrator. The arbitrator will permit the appellant to amend or supplement the objections already filed by it if it is felt necessary by the appellant. We make no order as to costs.
As noted the appellant has challenged the said letter dated 1.4.2003, the contents of which are as under:
Multiple Import & Export Inc.
41, Vaidya Mansion, 2nd floor, Flat No. 4, Opp. Cross Road, Haji Ali, Mumbai 400 034, India.
_____________________________________________________1.4.2003
CONFIRMATION LETTER
1. It is agreed and confirmed on part of the Multiple Import & Export Inc. that they are liable to pay a sum of Rs. 42,92,929.99 (Rupees Forty Two Lacs Ninety Two Thousand Nine Hundred Twenty Nine & Paise Ninety Nine only) to M/s. Continental Steel Corporation, comprising of Rs. 31,80,000/- principal amount and a sum of Rs. 11,12,929.99 the amount of interest computed upto 31.03.2003 @ 24% p.a. as per the statements of accounts attached (four pages).
2. It is hereby confirmed on part of the Multiple Import & Export Inc. that the said principal amount of Rs. 31,80,000/- is comprising of the following amounts paid by M/s. Continental Steel Corporation to Multiple Import & Export Inc. and to the concerned various authorities/parties for and on behalf of Multiple Import & Export Inc.
i) Rs. 2,10,795.00 paid for custom duty.
ii) Rs. 16,00,000.00 paid to M/s. New Plastomer (I) Ltd. (Kandla) - paid at Gandhidham-Kutch,
iii) Rs. 13,69,205.00 paid directly to Multiple Import & Export Inc.
3. Multiple Import & Export Inc. agrees to repay the said amount of Rs. 42,92,929.99 to M/s. Continental Steel Corporation with interest thereon @ 24% p.a. within the period of one year and after six months from today.
4. It is agreed between the parties hereto that all the disputes and/or differences including non payment of dues under this writing shall be referred to the Sole Arbitration of a person to be appointed by M/s. Continental Steel Corporation having its address at 12/14, Ardeshir Dady Street, Near Alankar Cinema, Mumbai 400 004. The Arbitration shall be conducted subject to Mumbai jurisdiction under the provisions of the Arbitration & Conciliation Act, 1996.
Kindly return the copy thereof duly confirmed. We confirm,
Sd/-
Sd/-
For Continental Steel For Multiple Im-Corporation.
port & Export Inc.
23. In view of above and considering the scheme of Arbitration Act, 1996 including Section 5 it is appropriate and desirable that the Civil Court should not interfere with the said proceedings which is pending before the Tribunal. The suit for such declaration therefore as filed by the appellant/plaintiff is rightly dismissed on the ground of maintainability as not triable by the Civil Court in view of clear dictum of the Apex Court.
24. In view of this, the present appeal is dismissed.
25. In view of this, Civil application also stands disposed of accordingly.