1 In the court of [ENTITY], Additional District Judge-1 North East District, Karkardooma Courts, Delhi. Sh. Hemant Jain vs. Sidharth Jaju (CS no. 323/12) Present:- None. The present suit for declaration and permanent injunction was once exparte decreed on 9-[SECTION]-2013 but on the application of the defendant no. 1 under [SECTION] [ACT], the exparte decree against defendants no. 1 & 2 both was set aside on 26-8-2014
and they were permitted to contest the case. This order dated 26-8-2014 was challenged by the plaintiff in the High Court in CM(M) No. 8[SECTION]1/2014 but that was also dismissed on 16-9-2014.
However, defendants no. 1 and 2 instead of filing any written statement moved two similar applications under [SECTION] and [SECTION] of the [ACT] with prayer to refer the parties to an arbitrator as per arbitration agreement. This application is opposed by plaintiff mainly on the ground that it is time barred and secondly when the plaintiff had already terminated the agreement due to commission of its breach by the defendants by issuing a notice dated 14-3-2012, then the arbitration 2
agreement clause also goes and does not survive so civil court has to decide the controversy in dispute and matter cannot be referred to any arbitrator.
Though both the parties are taking plea that copies of agreement filed by each other are not genuine and their own agreement is correct but still without entering into this controversy whose agreement is genuine and whose is forged, these applications filed by defendants can be disposed off by relying upon the copy of agreement filed by the plaintiff himself and by presuming the same as correct and genuine for the time being for the sake of arguments as this agreement filed by the plaintiff is also containing arbitration clause under [SECTION]. It is important to mention here that the clauses under this [SECTION] are same and similar in the agreements filed by both the parties almost word by word. Hence, I am relying upon the agreement filed on record by the plaintiff himself for disposal of these two applications of the defendants and by ignoring the agreements filed by the defendants which are described allegedly as forged by the plaintiff.
The argument raised by counsel for the plaintiff that once the agreement has been terminated by issuing a notice dated 14-3-2012, then the same cannot be referred to any arbitrator lateron is liable to be rejected as in this regard, Supreme Court in [PRECEDENT] held that subsequent termination of an agreement containing valid arbitration clause for settlement of dispute arising out of and in relation to the subject matter of agreement is of no consequence and dispute still can be referred to arbitration.
If an agreement is executed between parties containing an arbitration clause, then virtually there exist two separate agreements, one in respect of business/commercial/service transaction etc. and second in respect of separate arbitration agreement. As per law, if agreement is terminated due to breach of any term or condition of business/commercial/service transaction then in that situation, the second agreement relating to arbitration still remains in force and has to be implemented. In this regard, decision of Supreme Court in [PRECEDENT] can be relied upon wherein it is held that arbitration clause is an agreement independent of other terms in contract or deed. Arbitration agreement survives for resolution of dispute despite termination of said contract for whatever reasons.
In another decision Supreme Court in [PRECEDENT] held that merely because the contract has come to an end by its termination due to breach, the arbitration clause does not perish nor is rendered inoperative, rather it survives for resolution of disputes arising in respect of or with regard to or under the contract.
In [PRECEDENT] Supreme Court again held that arbitration clause continue to be enforceable even if contract is terminated.
Accordingly, the argument advanced by counsel for the plaintiff that due to issuing of notice of termination dated 14-3-2012, the whole agreement including arbitration clause goes and matter has 4
to be decided only by civil court is liable to be rejected as still the arbitration clause creating separate agreement remains in force and has to be implemented.
Arbitrator is competent to decide which of the agreement is genuine and which is forged because as per [SECTION] of the agreement placed on record by the plaintiff himself, any dispute relating to validity and interpretation of contract can be referred to an arbitrator. This clause further says that matter can be referred during subsistence of the agreement or thereafter which means that the matter still can be referred to arbitrator even after it is terminated by any party. Hence, termination of an agreement on the part of the plaintiff is not sufficient to hold that arbitrator is now precluded from entering into the reference.
Counsel for the plaintiff relied upon provisions of [SECTION] of the [ACT] read with [SECTION] of [ACT] and argued that filing of this application after expiry of 3 years from the date of an agreement is time barred. This agreement was executed on 18-8-2011 whereas the present applications were filed on 9-10-2014 in this Court. However, this submission is without any force because if the contents of the plaint are read as a whole then, cause of action had arisen within the period of 3 years prior to moving of the present application when allegations of breach of agreement were leveled against the defendants by the plaintiff. These applications are not time barred as limitation is to be taken into consideration not from the date of agreement under these provisions but when cause of action arises due to alleged breach of terms due to non payment of the money or [SECTION]
due to alleged infringement of copy rights etc. Otherwise also, [SECTION] of the [ACT] applies only when arbitration has already been invoked and not prior to any proceedings. [SECTION] of the [ACT] has to be read alongwith [SECTION] as per [SECTION] and unless the arbitral proceedings are initiated by making a request to refer the dispute to arbitrator, the limitation will not commence. Accordingly, the ground taken by the plaintiff that applications are time barred and limitation is to be counted from the date of an agreement is accordingly rejected. The case law cited on behalf of plaintiff [PRECEDENT] decided by Delhi High Court on 21-[SECTION]-2010 is not applicable as in this matter, agreement was already been concluded in the year 2002 but the notice invoking arbitration clause was issued in the year 2008 beyond 3 years period. Court rejected the petition being barred by limitation.
Very strange argument is advanced by counsel for the plaintiff that since defendants have not complied with the terms of an agreement so it was not complete agreement and accordingly matter cannot be referred to an arbitrator in respect of incomplete agreement. However, the contents of the plaint itself says that some steps were taken by defendants towards the completion of the agreement by making very small amount of Rs. 60 thousands but mere fact that further payment out of Rs. 2 crores was not made itself is not sufficient to presume that on basis of incomplete agreement, the matter cannot be referred to an arbitrator. The necessity to refer the matter to the arbitrator arises only to settle 6
the dispute where either some terms and conditions are allegedly violated or are left incomplete. [SECTION] of the agreement itself says that if any dispute arises between the parties in connection with implementation or alleged material breach of any provision of this agreement or regarding a question including the questions as to whether the termination of this agreement by one party hereto has been legitimate, then the parties have to settle their disputes amicably at first instance and then to invoke the arbitration proceedings. This clause thus empowers the parties to refer the dispute in respect of incomplete agreement also so the plea taken by the plaintiff that this application cannot be allowed and civil suit is maintainable is liable to be rejected.
The another argument that defendants are debarred under [SECTION] of the [ACT] to enforce the rights over the subject matter is not to be entertained as it was not the case of the plaintiff in the plaint. Otherwise also it is a dispute which is to be looked into by an arbitrator pertaining to implementation of the terms of the contract. The plea taken by counsel for the plaintiff while relying upon case [PRECEDENT] in [CASE NUMBER] decided on 20-1-2012 that by allowing the application, cause or parties will be splitted as decree against defendants no. 3 and 4 has already become final and if these applications are allowed then, separate arbitration proceedings will be started against two defendants no. 1 and 2 before arbitrator who may take contrary view then of the civil court who had already passed the decree against two defendants and it will create 7
anomalous situation so this application should be rejected is not acceptable because agreement was executed in between plaintiff and defendant no. 1 and other defendants are only witnesses of this agreement or middleman/agents of the defendant no. 1. Hence, the reference of dispute to the arbitrator will not amount to any splitting of the subject matter as the decision of the arbitrator will effect the powers and authority of other defendants also who were merely exercising their powers for or on behalf of defendant no. 1.
Case law [PRECEDENT] as cited by counsel for the plaintiff is totally inapplicable to the present facts and circumstances because it is not a case of any dispute between partners or relating to any partnership agreement.
The request made in the application of the defendants that arbitrator be appointed by this court cannot be entertained because as per clause 12.1.1 of the agreement, firstly the parties themselves have to make efforts to settle their disputes amicably and on failure to settle the same, 10 days notice is required to be given to the opposite party for the purpose of invoking the arbitration clause. The parties have not tried to sit together so far to sort out their disputes as per mandate of this clause nor have issued 10 days prior mandatory notice for invoking arbitration clause. They had leveled allegations and counter-allegations, issued or sought informations from each other only through public notices in Trade Magazines and not by sitting in front of each other in amicable atmosphere. In such circumstances, arbitrator directly 8
cannot be appointed. Secondly, the arbitration proceeding as per clause 12.1.3 of the agreement has to be held at Mumbai and not in Delhi. This is an additional ground to reject the request to refer the matter to arbitrator by this court.
In view of the above discussions, the present applications of defendants no. 1 & 2 are allowed. Suit is dismissed being not maintainable due to existence of arbitration clause in the agreement itself relied upon by the plaintiff. Parties are at liberty to invoke the arbitration clause in the territory of Mumbai by taking prior mandatory steps first and then to approach local court having jurisdiction if necessity arises for appointment of an arbitrator in case they themselves fail to appoint the arbitrator by consensus or as per terms of the agreement. Parties to bear their own costs. File be consigned to record room.
([ENTITY]) Date: 14-10-2014 Additional District Judge-01