IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH MONDAY, THE 1ST NOVEMBER 2010 / 10TH KARTHIKA 1932 CRP.No. 410 of 2010() --------------------- IA NO.964/2010 IN OS.556/2009 of ADDL.MUNSIFF COURT, KANNUR .................... REVN. PETITIONER(S): --------------------- M/S SHRIRAM TRANSPORT FINANCE CO.LTD., HAVING ITS REGISTERED OFFICE AT 123,ANGAPPA NAICKEN STREET, CHENNAI, REP.BY POWER OF ATTORNEY HOLDER SRI.VENUGOPALAN P.T., LEGAL CONSULTANT, M/S.SHRIRAM TRANSPORT FINANCE CO.LTD., SREEPADAM BUILDING, CHEROOTY ROAD, CALICUT. BY ADV. SRI.RAJESH NAMBIAR RESPONDENT(S): --------------- 1. M.K.SATHEESAN, S/O.KUNHIRAMAN, SATHEESH NIVAS, MAKRELI AMSOM, MUNDALLOOR DESOM, KANNUR TALUK P.O., PIN 688704. 2. CITY CORP FINANCE (INDIA) LTD., EF DIVISION, PLOT NO.61, G BLOCK, BANDRA- KURLA COMPLEX, BANDRA(E), MUMBAI-400 051, REPRESENTED BY ITS CHAIRMAN/ MANAGING DIRECTOR. ADV. SRI.C.S.MANU FOR R1 SRI.S.K.PREMRAJ FOR R1 SRI.LAL K.JOSEPH FOR R2 SRI.A.A.ZIYAD RAHMAN FOR R2 SRI.P.MURALEEDHARAN (THURAVOOR) FOR R2 SRI.V.R.REKESH FOR R2 SRI.V.S.SHIRIZ BAVA FOR R2 THIS CIVIL REVISION PETITION HAVING BEEN FINALLY HEARD ON 01/11/2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: THOMAS P. JOSEPH, J. -------------------------------------- C.R.P.No.410 of 2010 -------------------------------------- Dated this the 1st day of November, 2010. ORDER Defendant No.2 in O.S.No.556 of 2009 of the court of learned Additional Munsiff, Kannur is the petitioner before me challenging the order dated June 29, 2010 on I.A.No.964 of 2010. Learned Munsiff vide the impugned order has refused to refer the dispute to arbitration in tune with the terms and conditions in Ext.A1, agreement of hypothecation entered into between petitioner and respondent No.1. 2. Short facts necessary for a decision of this revision are: Respondent No.1/plaintiff availed a loan from petitioner/defendant No.2 for purchase of a vehicle and entered into Ext.A1, hypothecation agreement dated 21.07.2004 which contained an arbitration clause. According to the petitioner, respondent No.1/plaintiff defaulted payment of installments and thereon petitioner took steps for realisation of the amount. Thereon, respondent No.1 filed the suit for a declaration that he is not liable to pay any further amount to either petitioner or respondent No.2/defendant No.1 and for a direction to the petitioner and respondent No.2 to issue 'no objection certificate' (for short, “NOC”) to cancel the entry made in the R.C. Book as regards finance liability. Petitioner, producing Ext.A1, hypothecation agreement filed I.A.No.964 of 2010 under Section 8 of the Arbitration and Conciliation Act (for short, “the Act”) contending that in view of the arbitration clause contained in Ext.A1, CRP No.410/2010 2 hypothecation agreement the civil court has no jurisdiction to entertain the suit and the matter be referred to the Arbitrator. Learned counsel for petitioner contends that direction as regards issue of NOC for cancellation of entry regarding hire purchase in the R.C.book is only a consequence of non-liability of respondent No.1 and respondent No.1 has no privity of contract with respondent No.2/defendant No.1. Learned counsel contends that the transaction is between petitioner and respondent No.1 and it is only that petitioner is making use of funds provided by respondent No.2/defendant No.1. In view of that, merely because respondent No.2/defendant No.1 is impleaded in the suit it cannot be said that the matter falls outside the arbitration clause. The application was opposed by respondent No.1 contending that the suit is not merely for a declaration regarding non-liability but also for a direction to the petitioner and respondent No.2/defendant No.1 to issue NOC for cancellation of hire purchase entry in the R.C. Book, respondent No.2 is not a party to the hypothecation agreement and hence the matter cannot be referred to the arbitration. Learned Munsiff accepted that contention and dismissed I.A.No.964 of 2010. Learned counsel has placed reliance on the decision of the Supreme Court in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya and another (AIR 2003 SC 2252). 3. I am not at the question whether finance arranged by petitioner to respondent No.1 flowed from respondent No.2/defendant No.1. That ofcouse is a matter between petitioner and respondent No.2 and merely for the reason that CRP No.410/2010 3 funds were made available to petitioner by respondent No.2, it could not be said that the dispute is outside the arbitration clause mentioned in Ext.A1, hypothecation agreement. But, it is not disputed that whatever be the arrangement between petitioner and respondent No.2 inter se, the R.C. book contains an endorsement in favour of respondent No.2/defendant No.1 as if the hire purchase agreement was with respondent No.2/defendant No.1. Therefore, even if the entire amount claimed by petitioner is paid by respondent No.1/plaintiff to the petitioner, NOC for cancellation of entry in the RC book has to come from respondent No.2/defendant No.1 also. Hence mere resolution of the dispute between petitioner and respondent No.1 is not sufficient. Respondent No.2 also has to agree to issue the NOC. Admittedly, respondent No.2/defendant No.1 is not a party to Ext.A1, hypothecation agreement. The reference of dispute to the Arbitrator can only be between petitioner and respondent No.1 and whatever award that the Arbitrator may pass between them cannot bind respondent No.2/defendant No.1. Respondent No.2/defendant No.1 is not bound by the award that may be passed by the Arbitrator and issue of NOC as claimed by respondent No.1. It is in the light of above contention that decision of the Supreme Court has to be considered. There, in paragraph No.15 it is stated that the suit should be in respect of “a matter” which the parties have agreed to refer to the Arbitrator and which comes within the ambit of the 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 CRP No.410/2010 4 agreement, question of application of Section 8 of the Act does not arise, it is held. I stated that whatever arbitral award that may be passed between petitioner and respondent No.1 cannot bind respondent No.2/defendant No.1. Since respondent No.1 has claimed relief against respondent No.2 also and since the R.C.book contains endorsement in its favour and respondent No.2 has to issue NOC for cancellation of the entry in the R.C.book I am unable to accept the argument of learned counsel for petitioner that the entire matter is brought within the purview of arbitration agreement and hence the entire matter (even involving respondent No.2) is arbitrarable under Section 8 of the Act. Viewed in that line and in the light of the decision of the Apex Court referred to above I do not find any illegality in the learned Munsiff holding that the dispute is not a matter which is required to be referred to the Arbitrator . Petition is therefore dismissed. I.A.No.1951 of 2010 will stand dismissed. THOMAS P.JOSEPH, Judge. cks