INDRAJIT .MAHANTY, J. ARBA NO.7 & 9 OF 2008 (Decided on 01.07.2008) DUSHASAN SAHOO & ANR. ….. …. Appellants. .Vrs. GEETARANI MOHANTY & ORS. ……… Respondents. ARBITRATION & CONCILIATION ACT, 1996 (ACT NO.26 OF 1996) – S. 9. For Appellants - Mr. P.C.Chatterji, Sr.Advocate M/s. U.C.Patnaik, A.J.Mohanty, P.K.Swain & S.Patnaik. For Respondents- Mr. R.K.Rath, Sr. Advocate M/s. S.P.Sarangi,B.C.Mohanty,P.P.Mohanty, D.K.Das & P.K.Dash. For Appellant - Mr. Jayanta Mitra, Sr. Advocate M/s. D.K.Dey, C.K.Dey & A.K.Das. For Respondents- Mr. R.K.Rath, Sr.Advocate. M/s. S.P.Sarangi, B.C.Mohanty, P.P.Mohanty, D.K.Das, P.K.Dash & A.Patnaik. I.MAHANTY, J. The aforesaid appeals, under section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (in short “1996 Act” ) have been filed by two sets of Defendants, against a common judgment and order dated 17.3.2008, passed by the learned Dist. Judge Khurda at Bhubaneswar, on an application filed by the Respondents under section 9 of the said Act which was registered as Arbitration Petition No.15 of 2008. 2. The operative part of the impugned order of the learned Dist. Judge, Khurda at Bhubaneswar is quoted hereunder: “ That the arbitration petition u/s. 9 of the Act is allowed on contest against the O.Ps., but in the circumstances without any cost. As an interim measure of protection the scheduled mines are not to be operated by the partners of the reconstituted partnership firm comprising of the Opposite Parties under the partnership deed dated 1.4.93 and the partnership firm constituted under the partnership deed dated 3.8.91 comprising of the petitioner and the O.P.No.1 in which the O.P.No.1 is the Managing Partner is at liberty to carry on mining business in the scheduled mines in terms of the partnership deed dated 3.8.91 comprising of the petitioner and the O.P. No.1 in which the O.P.No.1 is the Managing Partner is at Liberty to carry on mining business in the scheduled mines in terms of the partnership deed dated 3.8.91, till the dispute is decided by arbitration. The petitioner is directed to take steps within three months hence for appointment of arbitrator for settlement of the dispute, failing which this order shall stand automatically vacated.” Whereas, Sri Dushasan Sahoo and Smt. Suprasanna Sahoo (opposite parties 2 and 3 in Arbitration Petition No.15 of 2008) have sought to challenge the same by way of Arbitration Appeal No.7 of 2008. Sri Srinivash Sahoo (opposite party no.1 in Arbitration Petition No.15 of 2008) has filed Arbitration Appeal No.9 of 2008 challenging the self- same order. 3. The facts as revealed in the pleadings leading to the application under Section 9 of the Act are noted as follows: - 30th March 1981 : Smt. Geetarani Mohanty (Respondent-1) filed an Application for obtaining Mining lease at Raikela. 14th November 1990 : Government of Orissa granted mining lease to Smt. Geetarani Mohanty. 10th January 1991 : Smt. Geetarani Mohanty-Respondent No.1 Executed a General Power of Attorney in favour of Srinivas Sahoo (Appellant in ARNA No.9/2008). 2nd July 1991 : State of Orissa executed a Lease Deed in respect of the said area in favour of Smt. Geetarani Mohanty (Respondent No.1). 3rd August 1991 : Partnership firm in the name and style of “M/s. Geetarani Mohanty” was formed with M/s. Geetarani Mohanty and Srinivash Sahoo having 55% and 45% shares respectively. 3rd February 1992 : Smt. Geetarani Mohanty made an application to the Government of Orissa for transfer of the mining lease in favour of the partnership firm. 17th October 1992 : Government of Orissa accorded permission for transfer of the mining lease in favour of the partnership firm-M/s. Geetarani Mohanty. 13th February 1993 : Smt. Geetarani Mohanty executed a Deed of Transfer in Form C of the mining lease in favour of partnership firm. The Deed of Transfer was executed by Geetarani Mohanty through her constituted Attorney Sushanto Sahoo (Annexure-5). 31st March 1993 : Smt. Geetarani Mohanty issued a letter of Resignation for the partnership firm acknowledging having received her share as per books of account upon 31st March 1993. Deed of Retirement executed by Smt.Geetarani Mohanty retiring as a partner from the partnership firm. Her husband, a Senior Govt. Officer signed the Deed of Retirement. (Annexure-5) as a witness. 1st April 1993 : Deed of Reconstitution of the partnership firm M/s. Geetarani Mohanty inducting Dushashan Sahoo and Smt. Suprasanna Sahoo as partners in the reconstituted firm. The said deed is also signed by Smt.Geetarani Mohanty as well as her constituted attorney 2 Sushanto Kumar Sahoo as witnesses. 16th January 2006 : Smt. Geetarani Mohanty purportedly issued a letter purportedly canceling the general Power of Attorney dated 10th January, 1991 in favour of Srinibash Sahoo. 17th February 2006 : Mr.Srinivash Sahoo as the Managing Partner of M/s.Geetarani Mohanty filed Civil Suit No.9 of 2006 in the Court of Civil Judge (Jr. Division), Bhubaneswar for permanent injunction against M/s. Geetarani Mohanty restraining her from interfering with the business, administration and activities in the firm. 21st February 2006 : the Civil Judge (Jr.Division), Bhubaneswar passed order of “status quo” in C.S. No.49 of 2006. 2nd January 2008 : Smt. Geetarani Mohanty sought to invoke the arbitration clause by appointing an Arbitrator. 7th January 2008 : Smt. Geetarani Mohanty filed Arbitration Petition No.15 of 2008 before the court of District Judge, Khurda under Section 9 of the Arbitration and Conciliation Act, 1996. 17th March 2008 : The impugned judgment was passed by the learned District Judge, Khurda at Bhubaneswar. 4. Mr. J.Mitra, learned senior advocate appearing for the Appellant in ARBA No.9/2008, submitted that the judgment and order dated 17.3.2008 passed by the learned District Judge, Khurda at Bhubaneswar is not only erroneous on facts as well as law, but is also wholly without jurisdiction. He submitted that the application under Section 9 of the Act which is in the nature of interlocutory application and could only have been sought as an aid to the main relief in an arbitration proceeding, whereas the prayer in the application U/s.9 has been made seeking in effect “substantive relief” which is impermissible in law. It is further submitted that, since the Partnership Deed of 1991 had came to an end with the retirement of Smt. Geetarani Mohanty (Respondent) on 31.3.1993, neither was an arbitration there under any longer possible nor could any order on an application under Section 9 of the Arbitration Act be passed on the said basis. 5. It is submitted that original partnership deed dated 3rd August, 1991 came to an end on 31st March, 1993 with Smt.Geetarani Mohanty issuing a “Letter of Resignation” and signing the “deed of retirement” where after on 1st April 1993, the partnership firm was reconstituted by inducting Shri Dushashan Sahoo and Smt. Suprasanna Sahoo (Appellant in ARBA No.7/2008) as partners. It is contended that, so long as the Deed of Retirement dated 31st March 1993 and the Deed of Reconstitution dated 1st April 1993 remain valid and operative in law and are not declared void and inoperative, Smt. Geetarani Mohanty, can not be permitted to seek any relief on the basis of the earlier partnership deed dated 3rd August, 1991 in order to claim any relief there under or arising there from. In essence, Mr. Mitra, learned Senior Counsel submitted that it is absolutely essential for Smt. Geetarani Mohanty to have the Partnership Deed dated 1st April, 1993 and the Deed of Retirement dated 31st March, 1993 declared illegal, void and inoperative and to have the same delivered and cancelled. Such relief can only be 3 granted by the Civil Court in a civil suit and not by the Arbitrator under the original partnership deed. It is only thereafter, it becomes lawfully possible for Smt. Geetarani Mohanty if at all to seek for appointment of an Arbitrator under Clause-15 of the Partnership Deed dated 1st April 1993. 6. The learned counsel for the Appellant further submitted that, the learned District Judges’ judgment and order dated 17th March, 2008, becomes wholly without jurisdiction and the interim measure of protection that has been directed by the District Judge, directing the partnership firm of 3.8.1991 comprising Smt.Geetarani Mohanty and Sri Srinivash Sahoo to carry on mining business in the scheduled mines, was in effect in final award, in so far as the status of the Deed of Retirement and Deed of Reconstitution are concerned. Learned counsel submits that the impugned order passed by the District Judge was entirely beyond/outside his jurisdiction and was therefore, liable to be set aside. Mr. Mitra, learned counsel for the appellant placed reliance upon the decision of the Hon’be Supreme Court in the case of Atul Singh and others v. Sunil Kumar Singh and others, AIR 2008 SC 1016 in support of his contentions. 7. It is further submitted that, the impugned order passed by the learned District, Judge, effectively seeks to restrain the Respondent Nos.2 and 3 (Shri Dushashan Sahoo and Smt.Suprasanna Sahoo) who are partners of the reconstituted firm under the Deed of Reconstituted Partnership dated 1st April, 1993, from participating in the operation of the mines. It is submitted that the partners of the reconstituted firm (apart from Srinivash Sahoo) who are obviously not parties to the arbitration agreement contained in the earlier Partnership Deed dated 3rd August, 1991. Therefore, there being no privacy of contract between Smt. Geetarani Mohanty on the one hand and Shri Dushashan Sahoo and Smt. Suprasanna Sahoo on the other, no order could have been passed by the learned District Judge, which would directly or indirectly, affect the interest of Shri Dushashan Sahoo and Smt. Suprasanna Sahoo who were admittedly not parties to the Arbitration Agreement dated 3rd August, 1991. Therefore, learned counsel submits that the order of the learned district Judge is to be held to have been passed without jurisdiction. 8. In support of the aforesaid submissions, learned counsel for the appellants placed reliance upon a decision of the apex Court in the case MD. Army Welfare Housing Organisation Vrs. Sumangal Services Pvt. Ltd., (2004) 9 SCC 619 and in particular, the dicta of the Hon’ble Supreme Court in paragraph-58 of the said judgment which is quoted herein below: “ A bare perusal of the aforementioned provisions would clearly show that even under Section 17 of the 1996 Act the power of the arbitrator is a limited one. He can not issue any direction which would go beyond the reference or the arbitration agreement. Furthermore, an award of the arbitrator under the 1996 Act is not required to be made a rule of court; the same is enforceable on its won force. Even under Section 17 of the 1996 Act, an interim order must relate to the protection of the subject matter of dispute and the order may be addressed only to a party to the arbitration. It can not be addressed to other parties. Even under Section 17 of the 1996 Act, no power is conferred upon the Arbitral Tribunal to enforce its order nor does it provide for judicial enforcement thereof. The said interim order of the learned arbitrator, therefore, being coram non judice was wholly without jurisdiction and, thus, was a nullity.” 4 Learned counsel further placed reliance on another decision of the Hon’ble Supreme Court in the case of Sukanya Holdings Pvt. Ltd. Vrs. Jeyesh H. Pandya and another, (2003) 5 SCC 531 and in particular, the dicta of the apex Court in paragraphs- 13,14 and 15 of the said judgment which are quoted herein below : “13. Secondly, there is no provision in the Act that when the subject matter of the suit includes subject-matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject-matter of the suit to the arbitrators. 14. Thirdly, there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the arbitration agreement; As against this, under section 24 of the Arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the court may refer the same to arbitration provided that the same can be separated from the rest of the subject-matter of the suit. The section also provided that the suit would continue so far as it related to parties who have not joined in such application. 15. The relevant language used in section 8 is “in a matter which is the subject of an arbitration agreement”. The court is required to refer the parties to arbitration. Therefore, the suit should be in respect of “a matter” which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced – “as to a matter” which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of section 8. The words “a matter” indicate that the entire subject-matter of the suit should be subject to arbitration agreement.” 9. Prior to the application under Section 9 of the 1996 Act being filed before the District Judge, it appears that the appellants have filed Civil Suit No.49 of 2006 before the learned Civil Judge (Jr. Divn.), Bhubaneswar seeking an order of permanent injunction against the present respondents from interfering with their mining operations. In the said proceeding, respondents herein have raised objections under section 8 of the 1996 Act challenging its maintainability. Apart from these two proceedings, learned counsel for the respondents submitted that the respondents have also filed a section 11 application before this High Court for appointment of an arbitrator. In other words, it is apparent that the question of existence of arbitral clause is a question which has been raised in all the aforesaid proceedings. A seven Judges Bench of the Hon’ble Supreme Court by way of majority judgment in the case of SBP & Co. Vrs. Patel Engineering Ltd. and another (2005) 8 SCC 618 have taken note of the fact that a question regarding existence or validity of the arbitration agreement may arise in an application under section 8 of the 1996 Act as well as in the process of adjudication of an application under section 9 of the 1996 Act. It would, therefore, relevant to quote paragraph-19 of that judgment which reads as follows : “ It is also not possible to accept the argument that there is an exclusive conferment of jurisdiction on the Arbitral Tribunal, to decide on the existence or 5 validity of the arbitration agreement. Section 8 of the Act contemplates a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, on the terms specified therein, to refer the dispute to arbitration. A judicial authority as such is not defined in the Act. It would certainly include the court as defined in Section 2(e) of the Act and would also, in our opinion, include other courts and may even include a special tribunal like the Consumer Forum (See Fair Air Engineers (P) Ltd. V. N.K.Modi). When the defendant to an action before a judicial authority raises the plea that there is an arbitration agreement and the subject-matter of the claim is covered by the agreement and the plaintiff or the person who has approached the judicial authority for relief, disputes the same, the judicial authority, in the absence of any restriction in the Act, has necessarily to decide whether, in fact, there is in existence a valid arbitration agreement and whether the dispute that is sought to be raised before it is covered by the arbitration clause. It is difficult to contemplate that the judicial authority has also to act mechanically or has merely to see the original arbitration agreement produced before it, and mechanically refer the parties to an arbitration. Similarly, section 9 enables a court, obviously, as defined in the Act, when approached by a party before the commencement of an arbitral proceeding, to grant interim relief as contemplated by the section. When a party seeks an interim relief asserting that there was a dispute liable to be arbitrated upon in terms of the Act, and the opposite party disputes the existence of an arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause or that the court which was approached had no jurisdiction to pass any order in terms of section 9 of the Act, that court has necessarily to decide whether it has jurisdiction, whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by that agreement. There is no indication in the Act that the powers of the court are curtailed on these aspects. On the other hand, Section 9 insists that once approached in that behalf, “the court shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it”. Surely, when a matter is entrusted to a civil court in the ordinary hierarchy of courts without anything more, the procedure of that court would govern the adjudication.” Therefore, in terms of the aforesaid judgment of the Hon’ble Supreme Court, since the appellants who were Opp.Parties in the proceeding before the learned District Judge, in the application filed by the respondents under section 9 of the 1996 Act, disputed the existence of an arbitration agreement and raised a further plea that the dispute raised is not covered under the arbitration clause, that court had the necessary obligation to decide, whether there exists an arbitration agreement, which is valid in law and further as to whether the dispute sought to be raised is covered under that agreement. The present appeal under section 37 also casts a similar obligation on the appellate court. 10. Mr. P.C. Chatterjee, learned senior counsel appearing for the appellants-Sri Dushashan Sahoo in ARBA 7 of 2008 submitted that the impugned order had been passed by the learned District Judge, in an application under Section 9 of the Act, purportedly, relying upon an Arbitration Clause contained in the partnership deed dated 3.8.1991. He submitted that these appellants, namely, Sri Dushashan Sahoo and Smt. Suprasanna Sahoo, were not parties to the partnership deed of 1991 and, therefore, the 6 appellants could neither have been made parties to the application under Section 9 of the Act, nor any order could have been passed against the present appellants. Learned counsel asserted that the purported Arbitration Clause in the partnership deed dated 3.8.1991, is obviously confined to the partners who were existing at the said time and does not bind the present appellants, who came to be inducted as the partners of the firm, pursuant to the reconstituted partnership deed dated 1.4.1993. It is submitted that Respondent No.1-Smt. Geetarani Mohanty, no longer being a partner of the reconstituted firm, is incompetent to raise any dispute under the Arbitration Clause contained in the earlier partnership deed dated 3.8.1991. 11. Learned counsel for the appellants strenuously urged that the respondent- Smt.Geetarani Mohanty had executed a deed of retirement dated 31.3.1993 which was signed not only by her, but was also, signed by her husband (a Government servant) as a witness and, therefore, the validity of the subsequent reconstituted partnership deed to which the respondent-Geetarani Mohanty is a witness, can not be questioned by her through any arbitration proceeding. In other words, it is asserted that no relief against these appellants is or can be made subject matter to an arbitration proceeding, initiated by Smt. Geetarani Mohanty, since they were not parties to the arbitration agreement. 12. Mr. Chatterjee asserted that Section 9 of the Arbitration Act, empowered the civil court to pass limited protective orders in respect of “subject matter of the reference” and since no relief of any kind can be claimed against the present appellant, consequently the civil court acting on an application under Section 9 does not possess the necessary jurisdiction to pass any order, directly or indirectly affecting the rights of the appellants whose rights arise out of the deed of reconstituted partnership dated 1.4.1993. He further asserted that the impugned order directly and severely affects the rights of the appellants to carry on business under the partnership deed dated 1.4.1993, which business they have been carrying on for over fifteen years and more and the consequential order of restraining the appellants or directing status quo as existing prior to 1.4.1993, effectively amounts to a direction dispossessing the appellants from the properties in which they have been peacefully carrying on business for over fifteen years. 13. It is further submitted that the learned District Judge has given findings which are, inter alia, final in nature and it also appears that the District Judge has also sought to exercise jurisdiction of the Civil Judge (Junior Division) before whom the Civil Suit No.49 of 2006 is pending, apart from actually exercising the jurisdiction of an arbitrator, by giving his finding regarding the merit of the application filed by the appellants. Mr. Chatterjee, has also assailed the finding of the learned District Judge at pages-36 and 37 of the judgment wherein, learned District Judge has observed that “it can not be said that the deed of reconstitution is a genuine document and it has been held that the partnership dated 3.8.1991 is still subsists”. Apart from that the District Judge has further held that the deed of retirement and the deed of reconstituted partnership are not in operation. He further assails the finding of the learned District Judge at Page-40 of the judgment, to the effect that, the learned District Judge has held that the Civil Judge (Jr.Division) has no jurisdiction to continue the suit once an appeal under Section 7 of the Act has been filed. Learned counsel asserts that, the learned District Judge has no jurisdiction to give any finding upon a matter pending before another court, which is admittedly a court of competent jurisdiction. Mr. Chatterjee draws the attention of this Court to the finding of the learned District Judge at pages-40 and 41 of the judgment, 7 where in, the learned District Judge has held that Section 9 of the proceeding is maintainable “as the appellants are necessary parties.” He asserts that since the learned District Judge has come to a conclusion that “appellants are necessary parties”, the learned District Judge had, in fact, no other alternative but to dismiss the said Section 9 application, since “the necessary parties” were not parties to the arbitration agreement. 14. Mr. Chatterjee in conclusion of the argument, placed reliance on various decisions including the case of Hindustan Papers Corporation Ltd. Vs. Keneilhouse Angami, 1990 (1) CAL. L.T. 200: Vol.68, Company Cases, 361 wherein, the Calcutta High Court in paragraph-9 of the judgment in which matter arose out of an application seeking an injunction from invoking the bank guarantee held that although the arbitration agreement may be very wide but that certainly does cover the dispute arising under “a separate agreement with a separate party”. Mr. Chatterjee also placed reliance on the judgment of the Apex Court in the case of MD. Army Welfare Housing Organisation Vs. Sumangal Services Pvt. Ltd., (2004) 9 SCC 619 and in particular, observations of the Court in Paragraphs-43 and 69 thereof, wherein, the Apex Court has observed that “an Arbitral Tribunal is snot a court of law. It’s orders are not judicial orders. Its functions are not judicial functions. It can not exercise its power ex debito justiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject matter of reference.” 15. Mr. Chatterjee, further placed reliance on the judgment of the Apex Court in the case of Sukanya Holdings Pvt. Ltd. Vs. Jeyesh H. Pandya and another (2003) 5 SCC 532, and in