Judgment:
The Court : This is an application under Section 8 of the Arbitration and Conciliation Act, 1996. The defendants suggest that the claim cannot be proceeded with in any Civil Court in view of the specific arbitration agreement between the parties.
The principal part of the arbitration agreement, which runs into several sub-paragraphs dealing with the procedure, provides as follows:
12.1 All disputes and differences between the parties hereto regarding the construction or interpretation of any of the terms herein shall be referred to the sole arbitration of Sri R. L. Gaggar, Solicitor and Advocate.or any person nominated by him
It is the plaintiffs case that the second defendant approached the plaintiff for an inter-corporate deposit of Rs.2 crore to finance the purchase of an immovable property in Delhi. The plaint narrates the circumstances in which the plaintiff made over the sum of Rs.2 crore and the execution of an agreement of December 17, 2009 between the parties hereto.
The cause of action in this money suit is found at paragraph 8 onwards of the plaint. The defendants apparently made over a cheque dated April 23, 2010 for Rs.2.5 crore on account of repayment of the inter-corporate deposit of Rs.2 crore and the commitment charges of Rs.50 lakh agreed to be paid thereon.
Such cheque was dishonoured upon presentation. Paragraph 9 speaks of the notice issued under Section 138 of the Negotiable Instruments Act. Paragraph 10 refers to criminal proceedings being launched by the plaintiff. Paragraph 11 is in furtherance of the presumption that the cheque was drawn for consideration received. The claim follows thereafter.
The plaintiff suggests that the arbitration agreement cannot encompass the present suit within its fold. The plaintiffs argument is two-fold: the plaintiff says that the arbitration agreement does not cover all disputes relating to or arising out of the agreement or the underlying transaction, but only covers disputes as to the construction or interpretation of the agreement; and, the cause of action is in respect of a dishonoured cheque for which statutory interest has also been claimed.
The defendants refer to a judgment reported at (2007) 3 SCC 686 (Agri Gold Exims Limited vs. Sri Lakshmi Knits & Wovens) where despite a money claim following cheques having been dishonoured, the Supreme Court held that the suit in furtherance of the claim was liable to be arrested in view of the arbitration clause contained in the substantive agreement between the parties thereto.
There are two points of distinction which would make the rule as laid down in that case inapplicable in this case. First, the arbitration clause in the reported decision, as would be evident from paragraph 3 of the report, was not as constricted as the present clause. The arbitration agreement in the reported case was of widest amptitude and was not confined to disputes relating to the construction or interpretation of the agreement.
The second aspect, as is again evident from paragraphs 10 and 20 of the report, was that the Supreme Court held that the cause of action in the suit was not upon the dishonour of the cheque. The cause of action in the present case is solely on the basis of the dishonour of the cheque for Rs.2.5 crore that had apparently been made over by the defendants to the plaintiff. There is an underlying suggestion that the agreement containing the arbitration clause stood discharged upon the issuance of the cheque for Rs.2.5 crore.
As has been noticed earlier, the reference to the agreement is part of the narrative leading up to the cause of action relating to the present suit and is not integral to the plaintiffs cause of action. The plaintiff has merely described the circumstances culminating in the issuance of the cheque for Rs.2.5 crore to create grounds for the statutory presumption under the Negotiable Instruments Act to operate: that the plaintiff had been issued the cheque against value earlier received.
Since the cause of action in the present suit is founded on the dishonored cheque and the claim does not involve the interpretation or construction of the original agreement, the present application to arrest the suit is liable to be dismissed. GA No.2636 of 2010 is dismissed without any order as to costs.
The defendants say that in view of the present application, the defendants had not filed any opposition to the plaintiffs principal interlocutory application. The defendants seek an extension of time to file their affidavits to the plaintiffs interlocutory application. Accordingly, the time to file the affidavits-in-opposition in GA No.2093 of 2010 is enlarged by a fortnight; reply thereto, if any, within a week thereafter. GA No.2093 of 2010 will appear in the monthly list of December, 2010.
Urgent certified photocopies of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.