Sanju Panda, J.
1. This is an application under Article 227 of the Constitution of India. Challenge has been made in this Writ Petition to the Order Dated 1.2.2007 passed by the Learned Civil Judge (Senior Division), Bargarh in Civil Suit No. 57 of 2006 rejecting the application filed by the Defendants Under Section 8 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as 'the Act').
2. The facts, as narrated in the writ application, are as follows:
The present Opposite Party as Plaintiff filed the Civil Suit No. 57 of 2006 for damages & other consequential relief, i.e., to the tune of Rs. 4,12,381 (rupees four lakhs twelve thousand three hundred eighty one) as per Schedule-A & recovery of documents prescribed in Schedule-B of the plaint from the Defendants. The Plaintiff specifically stated in the plaint that Defendant No. 4 is a Company registered under the Companies Act & running financial business in the name & style of Mahindra & Mahindra Financial Services Limited. Defendants 1 to 3 are its employees. She further stated that in order to generate some income from her unemployed son, accepted the proposal of Defendant No. 3 to purchase a Mahindra Champion Cargo Carrier under hire purchase scheme of Defendant No. 4-company. As per the said proposal, the Plaintiff paid Rs. 90,929 as down payment on 20th March, 2004 & got the Mahindra Champion Cargo Carrier from Aakash Jyoti Motors Private Limited, Bargarh which is a branch of Defendant No. 4. The vehicle was registered as OR-17-C-9990. One Bairagi Moharana was the surety & gave his documents, i.e., ROR, telephone bill & other papers along with 10 post dated blank cheques of Andhra Bank, Bargarh Branch. The Plaintiff obtained Rs. 1 lakh finance amount @ 9.5% interest for three years. The interest amount is Rs. 28,500 & monthly instalment for repayment of the said amount was fixed @ Rs. 3,600. The Plaintiff continued to deposit the monthly instalment upto 18.1.2005. All the transactions were made at Bargarh branch office of Defendant No. 4 at Aakash Jyoti Motors Private Limited, Bargarh.
3. While the matter stood thus, Defendant No. 3 was transferred & in his place Defendant No. 1 was posted. He used to grant pay slips as granted by Defendant No. 3 & collect the monthly instalment. Said system continued upto 19.1.2005. On 20th January, 2005 Defendant No. 1 suggested the Plaintiff that since the vehicle was not running by her son she might hand over the vehicle to him so that he would arrange a purchaser & sale the vehicle at Rs. 1,50,000. Out of the sale proceeds, he would repay loan amount of Rs. 37,619 & give the rest amount of the sale proceeds as the vehicle had only run 28,700 Kilometers. The vehicle was for public sale till 20th February, 2005. On the said date, Defendant No. 1 took the vehicle with a driver. Plaintiff in good faith handed over the vehicle to Defendant No. 1. He took away some signatures in the blank paper from the Plaintiff to sell the vehicle but he did not return the sale proceeds or the vehicle & kept himself silent. On the enquiry of the Plaintiff, he assured her to settle the matter. In the meantime the Plaintiff received a demand notice from Defendant No. 4. Defendant No. 1 convinced her to ignore the notice as it was wrongly sent to her & he would look into the matter as an employee of Defendant No. 4. On 21.11.2005, when the Plaintiff insisted for the sale price of the vehicle, Defendant No. 1 neither gave detailed particulars of sale of the vehicle nor refunded any amount to the Plaintiff after repayment of the loan amount. Therefore, the plaintiff filed the suit for the aforesaid relief.
4. Defendant No. 1 took the vehicle on 20.2.2005 to sell the same & square up the loan amount. The vehicle was purchased on 20th March, 2004. Since the loan amount has been squared up within one year, according to law the Plaintiff is entitled to 30% interest if the loan amount is cleared up within one year. The value of the vehicle is Rs. 1,50,000. The Plaintiff has already paid Rs. 1,22,529 & therefore, she has to pay the balance amount of Rs. 32,400. Hence, the Plaintiff is entitled to get the rest amount of Rs. 1,12,381 from the sale price of the vehicle & damages of Rs. 3,00,000.
5. Defendants after receipt of notice in the suit filed their written-statement along with an application Under Section 8 of the Act for reference to the Arbitrator. The Plaintiff filed her objection to the said application. After hearing the parties, the Learned Civil Judge (Senior Division) came to the findings that the application Under Section 8 of the Act was not filed along with the written statement. It was filed later on & the same was not permissible. Therefore, it is needless to examine as to whether the application was filed accompanied with an original agreement for arbitration or a duly certified copy thereof. Since the Defendant did not comply with the mandatory provision of Section 8(1) of the Act, the Court below rejected the application.
6. The Learned Counsel appearing for the Defendants-Petitioners submitted that when there is an arbitration clause in the agreement, the Court below should have considered the said clause of the agreement & referred the matter to the Arbitrator as per the agreement of the parties & should not have proceeded with the suit. He further submitted that they filed the written statement along with the application to refer the matter to the Arbitrator Under Section 8 of the Act before the Court below but oh an erroneous appreciation of facts the Court below rejected the same. Therefore, the impugned order needs to be interfered with.
7. The Learned Counsel appearing for the Plaintiff-Opposite Party submitted that the order sheet of the Court below which reflect that the Defendants filed their written statement on 13.11.2006 & later (on the same date) they filed an application for arbitration. Since the application to refer the matter to the Arbitrator was filed later, the Court below rightly rejected the same. In the present case, the Defendants have not filed the original copy of the agreement. They have only filed a copy of the agreement with a certificate of Notary Public therein.
8. It is not in dispute that the arbitration clause in any agreement by itself does not oust the jurisdiction of the civil Court. If it is held that both the parties are agreed to the provisions of Section 8 of the Act, in such a situation the civil Court may stay the, proceeding & refer the matter to the Arbitrator.
9. Section 8(1) of the Act confers a right upon the parties to the dispute to apply for referring the dispute for arbitration.
For better appreciation, Section 8 of the Act is quoted below:
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 of 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 a duly certified copy thereof.
(3) Notwithstanding that an application has been made under Sub-sections (1) & that the issue is pending before the judicial authority, an arbitration may be commenced or continued & an arbitral award made.
10. On a plain reading of the above Section, it appears that the authority before whom an action is brought, i.e., the dispute in the suit is to refer for adjudication by way of arbitration shall, if a party so applies not later than when submitting his first statement of the substance of the dispute, refer the parties to arbitration. Therefore, before filing the written statement contesting the suit on merits along with the written-statement, the application has to be made first by the parties praying to refer the matter for arbitration. After filing of such written-statement, the party is not entitled to file an application in terms of Section 8 of the Act to refer the matter for arbitration.
11. The Apex Court in the case of P. Anand Gajapathi Raj and Ors. v. P.V.G. Raju (Dead) and Ors. reported in : (2000) 4 SCC 539 has held as follows:
The conditions which are required to be satisfied under Sub-sections (1) & (2) of Section 8 before the Court can exercise its powers are:
(i) there is an arbitration agreement;
(ii) a party to the agreement brings an action in the Court against the other party;
(iii) subject-matter of the action is the same as the subject-matter of the arbitration agreement;
(iv) the other party moves the Court for referring the parties to arbitration before It submits his first statement on the substance of the dispute.
The last provision creates a right in the person bringing the action to have the dispute adjudicated by the Court, once the other party has submitted his first statement of defence. But if the party, who wants the matter to be referred to arbitration, applies to the Court after submission of his statement & the party who has brought the action does not object, there is no bar on the Court referring the parties to arbitration. Therefore, the party must be vigilant enough to file such application before he submits his first statement on the substance of the dispute. The power of the judicial authority to refer the matter for arbitral dispute is depended upon the fulfillment by the applicant the necessary conditions precedent as laid down in Section 8(1) of the Act. Therefore, applying the above test it is seen that in order to refer the matter for arbitral dispute the party has to file an application Under Section 8(1) of the Act prior to filing of the written-statement.
12. In the present case, the order sheet of the Trial Court shows that the Defendants filed their written-statement first & later on they filed an application under Section 8(1) of the Act without a copy of the arbitration agreement. They also did not file an authenticated copy of the arbitration agreement. Therefore, the Petitioners did not comply with the provision of Section 8(1) of the Act, as stated in the foregoing paragraphs.
13. The Learned Counsel for the Petitioners cited the decision of the Apex Court in the case of Agri Gold Exims Ltd. v. Sri Lakshmi Knits & Wovens and Ors. reported in 2007(1) Supreme 687. In paragraph-17 thereof it has been held as follows:
17. Respondents had not filed any written-statement in the suit. They had not disclosed their defence. They indisputably had raised a dispute in regard to the claim of the Appellant. We have noticed the arbitration agreement entered into by & between the parties. It is of wide amplitude....
The aforesaid decision is not applicable to the present case as the facts stated in said case are different from that of the present case.
14. In the case of P. Anand Gajapathi Raju and Ors. v. P.V.G. Raju (dead) and Ors. reported in : (2000) 4 SCC 539 cited by the Learned Counsel for the Petitioners the application under Section 8 of the Act was moved after submission of the first statement on the substance of dispute, but the party which instituted civil suit did not object to the said application. In that situation, the Apex Court held that there was no bar preventing referral of dispute to arbitration.
15. The facts of the present case are different. Here, the party who filed the suit objected to the application filed under Section 8 of the Act after submission of the first statement. Therefore, the decision in P. Anand Gajapathi Raju (supra) is also not applicable to the facts of the present case.
16. The Apex Court in the case of Atul Singh and Ors. v. Sunil Kumar Singh reported in : AIR 2008 SC 1016 has held that Sub-section (2) of Section 8 of the 1996 Act says that the application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.... Therefore, no order for referring the dispute to arbitration could have been passed in the suit.
In view of the above position, if there is a dispute between the parties regarding the validity of agreement, the Court has to first decide the said dispute & thereafter consider whether the matter will be referred to the Arbitrator or not. Since the valid agreement was not before the Court below to scrutinise whether there was an agreement between the parties to refer the matter to the Arbitrator, it rightly rejected the application without referring the matter to the Arbitrator under Section 8 of the Act.
17. In the aforesaid view of the matter, this Court is not inclined to interfere with the impugned Order Dated 1.2.2007 passed by the Learned Civil Judge (Senior Division), Bargarh in Civil Suit No. 57 of 2006 in exercise of the jurisdiction under Article 227 of the Constitution of India.
18. The Writ Petition is accordingly dismissed. No costs.