S.K. Mukherjee, J.
1. This is to consider an application under Article 227 of the Constitution of India read with Section 115 of the Code of Civil Procedure challenging an order dated October 4, 2002 passed by Shri A. Bhattacharya, learned Civil Judge (Senior Division), Fourth Court at Alipore, District: South 24 Parganas in Title Suit No. 69 of 2002.
2. By the order impugned the learned trial Judge rejected an application under Section 8 of the Arbitration and Conciliation Act, 1996 (the said Act of 1996 in short) filed by the defendant, the petitioner in this revisional application, on August 28, 2002.
3. The association of the plaintiff, the opposite party No. 1 in this revisional application, with the defendant and its predecessor-companies was for a considerable period and the plaintiff was the dealer of various motor vehicles manufactured by the defendant and its predecessor-companies. From time to time the dealer agreements were entered into by and between the parties and on January 25, 1999 an agreement was executed between the parties for a period of three years. On October 31, 2001 the defendant, also, accepted the offer of the plaintiff for handling the Kolkata depot of the defendant and authorised the plaintiff to handle and manage the Kolkata sales depot of the defendant.
4. Since the agreement dated January 25, 1999 was for a period of three years, the parties entered into a fresh agreement on January 21, 2003 for a further period of three years. The said dealer agreement contained an arbitration clause. The said arbitration clause is set out herein below:
'Any dispute, controversy or claim arising out of or relating to this agreement or any related agreement or other document, that is or may be executed in pursuance hereof or the validity, interpretation, breach or termination thereof (A 'Dispute'), including claims seeking redress or asserting rights under applicable law, shall, subject to the provisions of Section 17 of the Indian Arbitration and Conciliation Act, 1996 be resolved and finally settled in accordance with the provisions of the Indian Arbitration and Conciliation Act, 1996 as may be amended from time to time or its re-enactment (the 'Arbitration Act'). The parties consent to a single, consolidated arbitration for all Disputes that may at the time exist. In connection with any Dispute, the parties expressly waive and forego any right, to the extent otherwise applicable, to punitive, exemplary, statutorily enhanced or similar damages.
The arbitral tribunal shall be composed of one Arbitrator selected by mutual agreement of the parties, or in the absence of such an agreement within 30 days after a party first proposes an Arbitrator, the arbitral tribunal shall be composed of three Arbitrators, one of whom shall be appointed by each party within 30 days after expiry of the first 30 days period. The third Arbitrator shall be selected by the mutual agreement of the first two Arbitrators within 30 days after last of the first two Arbitrators has been appointed. In the event that the initial two Arbitrators fail to agree on a third Arbitrator, the third Arbitrator shall be chosen by the President/Chairman of the any Chamber of Commerce located in Mumbai, India.
The arbitration proceedings shall be conducted in the English language and any document not in English submitted by any party shall be accompanied by an English translation. The arbitration shall be conducted in Mumbai. The provisions of the India Evidence Act, 1872 shall apply to the said proceedings. A written transcript of the proceedings shall be made and furnished to the parties. The arbitral tribunal shall not appoint any experts under Section 26 of the Arbitration Act. The parties agree to be bound by any award or order resulting from any arbitration conducted hereunder and further agree that:
(i) in the context of an attempt by either party to enforce an arbitral award or order, any defenses relating to the parties capacity or the validity of this agreement are hereby waived; and
(ii) judgment on any award or order resulting from an arbitration conducted hereunder may be entered and enforced in any Court, in any country, having jurisdiction thereof of having Jurisdiction over any of the parties or any of their assets.
(iii) The prevailing in any arbitration conducted hereunder shall be entitled to recover from the other party (as part of the arbitral award or order) its attorneys' fees and other costs of arbitration.'
5. The plaintiff, also, issued performance guarantees in the form of bank guarantees for Rs. 3.50 crore and, also, handed over post-dated cheques to the defendant for Rs. 3 crore in total. It appears that the relationship of the parties was not cordial for the recent past and on August 16, 2002, the defendant asked the plaintiff to hand over 132 cars lying in the Kolkata depot of the defendant along with all the documents to the Manager of the defendant/company and, also, to hand over all the papers relating to sales tax, invoices, weigh bills, registers and all other documents/files belonging to the defendant.
6. On August 20, 2002 the plaintiff instituted the present suit for declaration and injunction in the Court of the learned Civil Judge (Senior Division), Fourth Court at Alipore, District: South 24 Parganas, which has been registered as Title Suit No. 69 of 2002 of the said Court.
7. The plaintiff in the said suit prayed for following reliefs:
'(a) A decree for declaration that the said agreement dated October 31, 2001 regarding godown/depot arrangement, and the dealership agreement between the defendant and the plaintiff are valid, subsisting and binding on the parties.
(b) A decree for declaration that the said letter dated August 16, 2002, and the claim made therein for delivery of 132 cars, is sham, baseless, manufactured, ineffective, incapable of being performed and not binding upon the plaintiff.
(c) A decree for full and true accounts of the receipts and payments relating to the transactions between the parties and for settling of accounts between the parties, if necessary, by an independent Chartered Accountant;
(d) A decree for permanent injunction restraining the defendant from interfering with or disturbing or causing interruption in any manner whatsoever in the day to day carrying on and/or running of the said business including sale of cars from the said godown/ depot or showroom by the plaintiff.
(e) A decree adjudging the letter dated 16th August, 2002 or the claim made therein as void and the same be directed to be delivered up and cancelled;
(f) Receiver;
(g) Injunction;
(h) Attachment;
(i) Costs;
(j) Further and other reliefs.'
8. In the said suit the plaintiff moved an application for temporary injunction and obtained ad interim injunction directing parties to maintain status quo in respect of the suit business. Subsequently, on August 22, 2002 further ad interim injunction was passed by the said Court restraining the defendant from invoking bank guarantees relating to the suit business amounting Rs. 3.5 crore through Union Bank of India, Dharmatala Branch.
9. The defendant entered appearance in the said suit on August 23, 2002 and on August 28, 2002 filed an application under Section 8 of the said Act of 1996 praying for an order referring the parties to arbitration in terms of the arbitration agreement between the parties. Along with the said application a certified copy of the said agreement dated January 21, 2002 was filed before the Court an annexure 'C' to the said application.
10. On September 2, 2002 the defendant preferred two appeals being Miscellaneous Appeal Nos. 380-381 of 2002 in the Court of the learned District Judge at Alipore, District: South 24 Parganas challenging the aforesaid orders of the learned trial Judge granting ad interim orders of injunction.
11. The plaintiff applied on September 11, 2002 under Order 1, Rule 10 read with Section 151 of the Code of Civil Procedure praying for addition of Union Bank of India, Dharmatala Branch, Kolkata as a party in the suit. It is contended, inter alia, that the said bank has already made an application for intervention and/or clarification of the order passed by the learned trial Judge.
12. On October 4, 2002 the learned trial Judge passed four consecutive orders, namely, order Nos. 18, 19, 20 and 21. By order No. 18 the learned trial Judge disposed of the application for temporary injunction filed by the plaintiff in the said suit and directed the parties to maintain status quo in respect of the suit business till the disposal of the said suit. By order No. 19 the learned trial Judge allowed the said application for addition of party and directed addition of Union Bank of India, Dharmatala Branch as a defendant in the said suit. By order No. 20 the learned trial Judge disposed of the application dated August 22, 2002 filed by the plaintiff under Section 151 of the Code of Civil Procedure praying for injunction restraining invocation of the bank guarantees, inter alia, by directing that Rs. 3.50 crore has to be kept in non-lien account with the Union Bank of India, Dharmatala Branch, the added defendant in the suit, in a fixed deposit account till the disposal of the said suit and subject to result of the said suit. It was directed that the amount would be paid to the successful party with interest.
13. By order No. 21 (later) the learned trial Judge rejected the application dated August 28, 2002 filed by the defendant under Section 8 of the said Act of 1996. It was observed by the learned Judge that the matter concerning the application under Section 8 of the said Act of 1996 has been discussed and decided by him while dealing with the application for temporary injunction filed by the plaintiff.
14. Although presently I am concerned with the said order No. 21 (later) dated October 4, 2002 whereby the application of the defendant under Section 8 of the said Act of 1996 has been rejected, but, in view of the nature of the order, I have, also, perused the order No. 18 dated October 4, 2002 to find out the reasons for which the learned trial Judge rejected the said application under Section 8 of the said Act of 1996.
15. My reading of the order of the learned trial Judge is that he has rejected the said application under Section 8 of the said Act of 1996, primarily on two grounds. The learned trial Judge held that the allegations of threat and coercion as stated in the plaint and the question whether the letter dated August 16, 2002 has been manufactured could not be decided by the Arbitrator and as such the suit could not be stayed till the decision of the Arbitrator. In coming to such finding he has heavily relied upon a decision of the Division Bench of the Nagpur High Court in the case of Abdul Quddoos Dost Mohammad Momin and Anr. v. Abdul Gani Abdul Rahman and Anr., reported in AIR 1954 Nagpur 332. The learned trial Judge, further, held that the matter could not be referred to Arbitrator as there are sufficient triable issues based on fact and law and as such the suit was maintainable.
16. Being aggrieved the defendant has come up with this revisional application.
17. Section 8 of the said Act of 1996 runs as under:
'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 a duly certified copy thereof.
(3) Notwithstanding that an application has been made under subsection (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.'
18. The scope of Section 8 of the said Act of 1996 has been considered in details by the Supreme Court of India in the case of P. Anand Gajapathi Raju and Ors. v. P.V.G. Raja (dead) and Ors,, reported in : [2000]2SCR684 and it has been held that the language of the Section 8 of the said Act of 1996 being peremptory. It has, therefore, been obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement and nothing remained to be decided in the original action or the appeal arising therefrom.
19. In the said decision the Supreme Court of India explained the conditions, which are required to be satisfied under Sub-sections (1) and (2) of the said Section 8 of the said Act of 1996 before the Court can exercise its powers, that is, (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 the same as the subject-matter of the arbitration agreement; (4) the other party moves the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute.
20. Sub-section (1) of Section 8 of the said Act of 1996 is somewhat similar to Section 34 of the Arbitration Act, 1940 (the said Act of 1940 in short), but there are substantial differences between the said two sections. Under Section 40 of the said Act of 1940 the judicial authority before whom an action is brought has vested with some discretion either to grant stay or not to grant stay while considering an application under Section 40 of the said Act, but Section 8 of the said Act of 1996 is peremptory in nature and the judicial authority before whom an action is brought has no other option, but to refer the parties to arbitration in the event the tests laid down in the said Section 8 of the said Act of 1996 are satisfied. The element of discretion enjoyed by the Court is, thus, completely taken away. The concept of Section 40 of the said Act of 1940 was to grant stay of the suit, but under Section 8 of the said Act of 1996 once the parties are referred to arbitration there remains nothing to be decided in the suit.
21. The Supreme Court of India in the case of Shrimati Kalpana Kothart v. Shrimati Sudha Yadav and Ors., reported in : AIR2002SC404 held as under:
'Section 34 of the 1940 Act provided for filing an application to stay legal proceedings instituted by any party to an arbitration agreement against any other party to such agreement, in derogation of the arbitration clause and attempts for settlement of disputes otherwise than in accordance with the arbitration clause by substantiating the existence of an arbitration clause and the judicial authority concerned may stay such proceedings on being satisfied that there is no sufficient reason as to why the matter should not be referred to for decision in accordance with the arbitration agreement, and that the applicant seeking for stay was at the time when the proceedings were commenced and still remained ready and willing to do all things necessary to the proper conduct of the arbitration. This provision under the 1940 Act had nothing to do with actual reference to the arbitration of the disputes and that was left to be taken care of under Sections 8 and 20 of the 1940 Act. In striking contrast to the said scheme underlying the provisions of the 1940 Act, in the new 1996 Act, there is no provision corresponding to Section 34 of the old Act and Section 8 of the 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 an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. The provisions of the 1996 Act do not envisage the specific obtaining of any stay as under the 1940 Act, for the reason that not only the direction to make reference is mandatory but notwithstanding the pendency of the proceedings before the judicial authority or the making of an application under Section 8 of the 1996 Act, the arbitration proceedings are enabled, under Section 8 of the 1996 Act to be commenced or continued and an arbitral award also made unhampered by such pendency. We have to test the order under appeal on this basis.'
22. The Supreme Court of India in the case of Sundaram Finance Limited v. NEPC India Limited, reported in : [1999]1SCR89 held that the said Act of 1996 was very different from the said Act of 1940. The provisions of the said Act of 1996 have, therefore, to be interpreted and construed independently and, in fact, reference to the said Act of 1940 might actually lead to misconstructions. In other words, the provisions of the said Act of 1996 have to be interpreted being uninfluenced by the principles underlying the said Act of 1940.
23. Therefore, the learned trial Judge was wrong in relying upon the Nagpur decision (supra) while rejecting the application under Section 8 of the said Act of 1996 filed by the defendant.
24. Mr. Shyamal Sarkar, learned advocate, appearing for the plaintiff, the opposite party No. 1 in this revisional application, argues that assuming that there is an arbitration clause in the agreement dated January 21, 2003, there is no arbitration clause either in the depot agreement or in the performance guarantees and as such the learned trial Judge was right in not referring the parties to arbitration. In this connection Mr. Sarkar relies upon the decision in the case of Garden Finance Limited v. Prakash Industries Limited and Anr., reported in 2002(1) Arb LR 122 (Bombay) and submits, on the strength of the said authority, that unless there is identity of subject matter of the suit and the arbitration agreement, the parties cannot be referred to arbitration under Section 8 of the said Act of 1996. Mr. Sarkar submits, further, that the dealer agreement and the depot agreement between the parties are completely separate, independent and distinct contracts and in this connection he has relied upon the affidavit-in-opposition filed by the defendant in connection with an application under Section 482 of the Code of Criminal Procedure, 1973 praying for quashing of a proceeding pending before the learned Sub-Divisional Magistrate, Alipore, District: South 24 Parganas under Sections 403 and 34 of the Indian Penal Code.
25. I have already quoted the arbitration clause in the said agreement. I have noticed that it is an admitted position that there existed a longstanding relationship between the plaintiff and the defendant and its predecessor-companies. The plaintiff was the dealer of the defendant and its predecessor-companies and time-to-time periodical agreements concerning the dealership were executed. Lastly, the agreement was executed on January 21, 2003 for a period of three years unless otherwise determined earlier as indicated in Clause 8 of the said agreement. It was provided in the arbitration clause that any dispute, controversy or claim arising out of or relating to the said agreement or any related agreement or other document, that is or may be executed in a pursuance hereof or the validity, interpretation, breach or termination thereof, including claims seeking redress or asserting rights under applicable law, shall, subject to the provisions of Section 17 of the Indian Arbitration and Conciliation Act, 1996 be resolved and finally settled in accordance with the provisions of the Indian Arbitration and Conciliation Act, 1996 as may be amended from time to time or its re-enactment.
26. The depot agreement dated October 31, 2001 and the performance guarantees executed by the plaintiff are all arising out of and relating to the dealer agreement. Admittedly, there are disputes and differences between the parties, but I am unable to hold that the questions of threat and coercion and whether the letter dated August 16, 2002 has been manufactured or binding on the plaintiff cannot be decided by the Arbitrator as held by the learned trial Judge. The decision cited by Mr. Sarkar in Garden Finance Limited (supra) is distinguishable. I hold that there is identity of subject matter of the suit and the arbitration agreement between the parties.
27. Mr. Sarkar argued that the defendant filed the application under Section 8 of the said Act of 1996 after submitting the first statement on the substance of the dispute and as such the learned trial Judge did rightly not entertain the said application. Mr. Sarkar argued that the defendant preferred two appeals being Miscellaneous Appeal Nos. 380-381 of 2002 in the Court of the learned District Judge at Alipore challenging the ad interim orders of injunction dated August 20, 2002 and August 22, 2002 before filing the application under the said Act of 1996. Such submissions of Mr. Sarkar are not factually correct. The defendant entered appearance in Title Suit No. 69 of 2002 on August 23, 2002 and filed the application under Section 8 of the said Act of 1996 on August 28, 2002 whereas those appeals were presented on August 31, 2002.
28. Finally, Mr. Sarkar argued that by the order dated October 4, 2002 Union Bank of India, Dharmatala Branch has been added as a party in the said suit and in view of the presence of the said bank, who is not admittedly a party to the agreement, the Court has rightly rejected the prayer to refer the parties to arbitration. In this connection he has relied upon the decisions in the cases of Asiatic Shipping Co. (Private) Ltd. v. P.N. Djakarta Lloyd and Anr., reported in : AIR1969Cal374 and M/s. The Barium Chemicals Ltd. v. Bombay Industrial and Chemical Company, Bombay, reported in : AIR1977AP400 .
29. The dealer agreement, the depot agreement and the performance guarantees in the form of bank guarantees are outcome of and related to the dealer agreement. The performance guarantees are not independent contracts. The performance guarantees are arising out of and are relating to the dealer agreement and in view of the language of Clause 17 of the said agreement, the dispute relating to the payability under bank guarantees is a dispute in connection with the said agreement and, therefore, covered by the said arbitration clause. In this connection I draw inspiration from the decision of a Division Bench of this Court in the case of PWH Analgen and Systeme GMBH v. Damodar Ropeways and Construction Company Private Limited, reported in 1996(2) CHN 97.
30. I, therefore, set aside the order dated October 4, 2002 and I allow the application under Section 8 of the Arbitration and Conciliation Act, 1996 filed by the defendant on August 28, 2002 and refer the parties to arbitration in terms of Clause 17 of the agreement dated January 21, 2003.
The revisional application is, thus, allowed.
The parties are, however, directed to bear their respective costs in this revisional application.
Xerox certified copy of this order, if applied for, is to be supplied to the applicant within ten days from the date of making requisition for such certified copy.
After the above judgment is delivered, Mr. Pradumnya Sinha, learned advocate, appearing for the opposite party No. 1 prays for stay of operation of the order. The prayer is strongly opposed by Mr. Asit Kumar Bhattacharya (I), learned advocate, appearing for the petitioner.
After hearing the learned advocates appearing for the parties, I do not find any reason to grant stay of operation of my order dated April 1, 2003. The prayer for stay is considered and rejected.