HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR S.B. Arbitration Application No. 24 / 2017 [ENTITY] S/o Shri Bhanwar Lal Sharma, Aged About 56 Years, Resident of 18-D, Anand Vihar Colony, Behind Hotel Ramrakhi, Near Maa Sai School, Chittorgarh. Petitioners Versus Smt. [ENTITY] W/o Late Shri [ENTITY], C/o Shakuntala Choudhary W/o Shri Dharmendra Choudharys House C-scheme, Near L.B.S. School, Pratap Nagar, Chittorgarh, Tehsil & District Chittorgarh. Respondents For Applicant(s) : Mr. [ENTITY]. For Respondent(s) : Mr. [ENTITY]. HON'BLE MR. JUSTICE ARUN BHANSALI
Order 04/05/2018 This application under [SECTION] of the [ACT] ('the Act') has been filed by the applicant seeking appointment of sole Arbitrator to resolve the dispute between the parties.
It is, inter alia, claimed in the application that industrial plot no. B & C situated at village Manpura, Tehsil & District Chittorgarh are properties of M/s. Shilpi Marble, wherein, a Crusher Unit is established with machinery, quarters for servants etc. The said M/s Shilpi Marble is a partnership firm for which, the partnership- deed was executed between [ENTITY], the applicant
- [ENTITY] and respondent - Smt. [ENTITY].
(2 of 10) [[CASE NUMBER]] It is claimed that applicant is having 15% share in the partnership firm. The deed of partnership dated 17.8.2015 contains Clause 10, which is an arbitration agreement between the parties. It is also claimed that the three partners applied with the Registrar of Firms for registration of the partnership firm, the firm was duly registered and a certificate of registration dated 26.8.2015 was issued.
One of the partners [ENTITY] expired on 20.4.2016, however, it is claimed that death of a partner did not result into the dissolution of partnership and the same is in existence and continuing with its business.
After death of [ENTITY], it is claimed that the respondent took actions seeking to disintegrate the partnership firm by writing letters to the District Collector, the Registrar of Firms etc. In those circumstances, the applicant filed suit for permanent injunction in the Court of Senior Civil Judge, Chittorgarh ('the trial court').
An application under [SECTION] of the Act was filed by the respondent read with [SECTION] [ACT]. The application was allowed and the plaint was rejected by the trial court by its order dated 30.5.2017.
Whereafter, applicant filed application under [SECTION] of the Act and give a notice dated 12.6.2017 for appointment of Arbitrator in terms of the arbitration agreement between the parties.
The notice was responded by denying the existence of the partnership deed / partnership firm.
(3 of 10) [[CASE NUMBER]] In the above circumstances, the present application has been filed by the applicant seeking reference of the dispute between the parties to a sole Arbitrator.
On notice being issued, a reply has been filed by the respondent, inter alia, denying the existence of an arbitration agreement as it is alleged that the partnership deed itself is a forged document and, therefore, the application be dismissed. Further submissions have been made that FIR has been lodged by the respondent alleging forgery committed by the applicant, in which, the police has given FR, wherein, a protest petition has been filed by the respondent and the matter is pending adjudication before the Criminal Court and on that count also application deserves dismissal.
A rejoinder has been filed by the applicant attaching several documents seeking to establish the conduct of the respondent admitting the existence of the partnership firm.
It is submitted by learned counsel for the applicant that existence of the partnership firm is firmly established in view of partnership deed as well as certificate of registration issued by the Registrar of Firms and the conduct of the respondent in writing letters to the authorities seeking cancellation of registration of firm etc. and, therefore, the submissions made by the respondent seeking to dispute the existence of he partnership deed itself is baseless.
Further submissions were made that the applicant had filed suit for permanent injunction, in which, the respondent herself relied on the arbitration agreement between the parties and based (4 of 10) [[CASE NUMBER]] on that, the plaint filed by the applicant - plaintiff has been rejected by the trial court, now the respondent can't turn around and claim that even the said arbitration agreement doesn't exist.
Further submissions were made that under provisions of [SECTION] of the Act this Court is only required to examine the existence of the arbitration agreement and the defence sought to be raised by the respondent in this regard, cannot be examined at this stage and, therefore, the application deserves to be allowed.
Reliance was placed on [PRECEDENT].
Learned counsel for the respondent vehemently opposed the submissions made by learned counsel for the applicant. It was submitted that once the arbitration agreement itself is under question, it is not open for the applicant to rely on the provisions of [SECTION] of the Act. It was submitted that the fact whether the partnership deed in question is a genuine document having been executed between the parties has to first establish before this Court before relying on the arbitration agreement contained therein and in absence thereof, the applicant is not entitled to any relief.
Further submissions were made that so far as the filing of the application under [SECTION] of the Act in the suit filed by the applicant is concerned, the said application was filed without admitting the execution of the partnership deed and, therefore, the applicant cannot rely on the said aspect.
(5 of 10) [[CASE NUMBER]] Reliance was placed on [PRECEDENT].
I have considered the submissions made by learned counsel for the parties and have perused the material available on record.
A bare perusal of the documents indicates that the applicant has filed a partnership deed dated 17.8.2015 said to have been executed among [ENTITY], respondent - Smt. [ENTITY] and applicant - [ENTITY].
Clause 10 of the partnership deed reads as under:-
"10- fd bl Hkkxhnkjh QeZ esa fdlh Hkh fookn dks fuiVkus ds fy;s iap QSlys dk dkuwu izHkko'kkyh gksxk ,oa mDr le; Hkkjrh; iap fu.kZ; dkuwu izHkko'kkyh gksxkA"
A certificate of registration dated 26.8.2015 issued by the Registrar of Firms, Chittorgarh has also been placed on record. Besides the above, several other documents have been placed on record concerning the partnership firm M/s. Shilpi Marble.
When the dispute arose between the parties, the respondent allegedly started taking steps for cancellation of the registration of the firm as well as disowning the fact of existence of partnership between Lt. [ENTITY], applicant and respondent.
The applicant filed a suit for permanent injunction in the Court of Senior Civil Judge, Chittorgarh. In the said suit, an application under [SECTION] of the [ACT] was filed with the following averments:-
(6 of 10) [[CASE NUMBER]] "2- ;g fd mijksDr okni= ds vFkZiw.kZ iBu ,oa mlds lkFk layXu Hkkxhnkjh foys[k fnukad 17-08-2015 ftls fd izfroknh Lohdkj ugha djrs gSa] ijUrq oknh ds vuqlkj Hkh mls rdZ ds fy, ekuk tkosa rc Hkh ml foys[k dh dye la[;k 10 esa iap QSlys ls fookn fuiVkus ds izko/kku fd;s x;s gSa tks fuEu 'kCnksa esa gS& fd bl Hkkxhnkjh QeZ esa fdlh Hkh fookn dks fuiVkus ds fy, iap QSlys dk dkuwu izHkko"khy gksxk ,oa mDr le; Hkkjrh; iap fu.kZ; dkuwu izHkko"khy gksxk 3- ;g fd mijksDr izHkkodkjh "krZ ds rgr Hkkxhnkjkssa ds e/; ds leLr fookn dk fofu"p; iap QSlys ls gh gksuk fuf"pr gS] ijUrq fQj Hkh oknh us bl "krZ dks njfdukj djrs gq, flfoy U;k;ky; esa mDr okn is"k fd;k gSA 4- ;g fd vkfcZVs"ku ,.M dalhfy,"ku ,DV] 1995 dh /kkjk 8 ds rgr ftu ekeyksa esa i{kdkjksa ds e/; fu"ikfnr foys[k esa iap fu.kZ; dk izko/kku gks] ,sls ekeyksa es flfoy U;k;ky; dk {ks=kf/kdkj oftZr gSA 5- ;g fd mDr Hkkxhnkjh foys[k dh dye la[;k&10 esa tc i{kdkjksa ds e/; fookn ds laca/k esa iap fu.kZ; dk Li"V izko/kku gS rc ,sls fookn ds laca/k esa flfoy U;k;ky; dh vf/kdkfjrk oftZr gSA"
No doubt the said application was filed with a caveat that the respondent herein did not accept the partnership deed dated 17.8.2015, however, the said application filed by the respondent was accepted by the trial court, the application under [SECTION] [ACT] was allowed and the plaint was rejected.
Provision of [SECTION] of the Act, insofar relevant, reads 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 to the arbitration agreement or any person claiming through or under him, so applies not later than the (7 of 10) [[CASE NUMBER]] date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.]"
A bare look at the above provision indicates that the application under [SECTION] of the Act can be filed by a party to the arbitration agreement only or any person claiming through or under him and the court is required to refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. The very fact that respondent chose to file the application, which was entertained and the suit filed by the applicant was rejected, necessarily means that the trial court came to the conclusion that the respondent was party to the arbitration agreement and that a valid arbitration agreement exists between the parties.
Once the case / plea of the respondent was that there was no valid arbitration agreement between the parties, there was no necessity of the respondent for filing the application under [SECTION] of the Act as in that case, the applicant would have proved the existence of the partnership deed / validity thereof in the suit filed for the purpose.
Once the plea raised by the respondent was accepted by the trial court, the consequence of acceptance of the application is that 'parties are referred to arbitration' and now once the application has been filed for appointment of Arbitrator, the respondent is seeking to deny the existence of arbitration (8 of 10) [[CASE NUMBER]] agreement, which has formed the basis for acceptance of her application by the trial court.
It is well established that a party cannot blow hot and cold in the same breath. If the plea of the respondent is accepted, the result would be that the applicant would be rendered remediless as his suit has already been rejected on account of existence of the arbitration agreement and if the application for appointing the Arbitrator is rejected on account of dispute having been raised regarding existence of arbitration agreement, the same would result in proverbial situation of 'heads I win, tails you lose', which cannot be permitted.
So far as the reliance placed by the respondent on the judgment in the case of [PRECEDENT] (supra) is concerned, Hon'ble Supreme Court in the case of [PRECEDENT] (supra) laid down that the said judgment dealt with situation pre 2015 amendment and situation has changed after the amendment and, therefore, the said judgment has no application.
It was observed and laid down by Hon'ble Supreme Court in the case of [PRECEDENT] (supra) in para 18, 47, 48 & 59 as under:-
"18. The language in [SECTION] of the Act "the Chief Justice or any person or institution designated by him" has been substituted by "Supreme Court or as the case may be the High Court or any person or institution designated by such Court". Now, as per [SECTION], the power of the Court has now been restricted only to see whether there exists an arbitration agreement. The amended provision in [SECTION] provides that the [SECTION]] passed under [SECTION] shall not be appealable and thus finality is attached to the order passed under this Section.
47. What is the effect of the change introduced by the [ACT] (hereinafter referred to as "the 2015 Amendment") with particular reference to [SECTION] and the newly added [SECTION] of the [ACT] (hereinafter referred to as "the 1996 Act") is the crucial question arising for consideration in this case.
48. [SECTION] added by the 2015 Amendment, reads as follows:
"11(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub- section (4) or sub-section (5) or sub- section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."
From a reading of [SECTION], the intention of the legislature is crystal clear i.e. the Court should and need only look into one aspect- the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple - it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.
59. The scope of the power under [SECTION] of the 1996 Act was considerably wide in view of the decisions in [PRECEDENT] (supra) and [PRECEDENT] (supra). This position continued till the amendment brought about in 2015. After the amendment, all that the Courts need to see is whether an arbitration agreement exists - nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Court's intervention at the stage of appointing the (10 of 10) [[CASE NUMBER]] arbitrator and this intention as incorporated in [SECTION] ought to be respected."
(emphasis supplied) From the above, it is apparent that post 2015 amendment in the Act, the Court while considering any application under [SECTION] of the Act should and needs to look into the existence of an arbitration agreement, nothing more or nothing less and that the Court only needs to see if the agreement contains a clause, which provides for arbitration pertaining to the disputes, which have arisen between the parties to the agreement.
In view of the above, as it is apparent that a dispute has arisen between the parties and there exists an arbitration agreement between the parties, the dispute between them, deserves to be referred for arbitration.
In view of the above discussion, the application is allowed. Mr. [ENTITY] (Retd. RHJS), residing at 200, Adarsh Colony, Nimbahera, District Chittorgarh, is appointed as sole Arbitrator to adjudicate upon the disputes between the parties as per the [ACT] as amended up to date. The above appointment is subject to the necessary disclosure being made under [SECTION] of the Act.
([ENTITY] Sumit-3