IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.BHAVADASAN WEDNESDAY, THE 16TH MARCH 2011 / 25TH PHALGUNA 1932 WP(C).No. 6698 of 2010(O) -------------------------------------- OS.NO. 99/2009 of SUB COURT, MUVATTUPUZHA .................... PETITIONER(S): ------------------------ M/S.OIKO CREDIT ECUMENICAL DEVELOPMENT CO-OPERATIVE SOCIETY , UA, AMERSFOORT, NETHERLANDS REP BY ITS CREDIT RISK MANAGER, MR.LAM BERTUS CALIS, AGED 60 YEARS,S/O.MR.LAM BERTUS GIJISBERTUS 1072, BUDAPEST, HUNGARY. BY ADV. DR.GEORGE ABRAHAM RESPONDENT(S): -------------------------- 1. NIRMALGRAM VANITHA DAIRY CENTRAL SOCIETY REPRESENTED BY ITS SECRETARY, BHANUMATHI RAJU AGED ABOUT 50 YEARS, NIRMALGRAM VANITHA DAIRY CENTRAL SOCIETY, KEERAMPARA PO,KOTHAMANGALM 686 691, KERALA RESIDING AT MUTHAMKUZHI,PINDIMANA P.O,KOTHAMANGALAM. 2. FR.JOY ARAMBANKUDY, AGED 55 YEARS EXECUTIVE DIRECTOR,NIRMALGRAM VANITHA DAIRY CENTRAL SOCIETY,RESIDING AT NIRMALGRAM ASHRAM BOOTHATHANKETTU P.O,KOTHAMANGALAM. 3. ANNAMMA JACOB, AGED ABOUT 65 YEARS PRESIDENT,NIRMALGRAM VANITHA DAIRY CENTRAL SOCIETY RESIDING AT MANACHERY PUTHAYATHILHOUSE OONNUKAL P.O, NAMBOORIKUP, KOTHAMANGALAM. 4. JOSE EUGINE JOSEPH, AGED ABOUT 49 YEARS S/O.JOSEPH, CHIRAYIL HOUSE, KIZHAKKUMBHAGHAM ETTUMANOOR P.O,KOTTAYAM DISTRICT. 5. PETER DAMIYAN, AGED ABOUT 54 YEARS S/O.JOSEPH, CHIRAYIL HOUSE, KIZHAKKUMBHAGHAM ETETUMANOOR P.O, KOTTAYAM DISTRICT. WPC.NO.6698/2010 6. GEORGE, AGED ABOUT 73 YEARS, S/O.JOSEPH, CHIRAYIL HOUSE, KIZHAKKUMBHAGHAM ETTUMANOOR P.O, KOTTAYAM DISTRICT. 7. BANK OF BARODA, KOTHAMANGALAM BRANCH REPRESENTED BY ITS SENIOR MANAGER POTHANIKKAD BUILDING, HIGH RANGE JUNCTION KOTHAMANGALM PO 686 691. R6 BY ADV. SRI.JOMY GEORGE SRI.M.J.BENNY SRI.SEBASTIAN THOMAS R7 BY ADV. SRI.DEVAN RAMACHANDRAN SRI.ANEESH.K.M. SRI.SANTHOSH KUMAR.K. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16/03/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: sts WP(C)NO.6698/2010 APPENDIX PETITIONER'S EXHIBITS: P1 COPY OF THE JUDGMENT IN A.R.NO.39/2007. P2 COPY OF THE CHEQUE DATED 30/8/2008 P3 COPY OF THE JUDGMENT DATED 4/4/2008 IN WP(C)NO.10836/08. P4 COPY OF THE JUDGMENT DATED 25/4/2008 IN WRIT APPEAL NO.959/08. P5 COPY OF THE JUDGMENT DATED 4/6/2009 IN S.A.NO.68/08 P6 COPY OF THE O.S.NO.99/09 FILED IN THE HON'BLE SUBORDINATE JUDGE'S COURT, MUVATTUPUZHA. P7 COPY OF THE I.A.NO.709/09 IN SUIT O.S.NO.99/09 P8 COPY OF THE WRITTEN STATEMENT FILED BY RESPONDENTS 1 TO 3 AGAINST I.A.NO.709/09 IN O.S.NO.99/09. P9 COPY OF THE COUNTER AFFIDAVIT FILED BY RESPONDENTS 1 TO3 AGAINST I.A.NO.709/09 IN O.S.NO.99/09. P10 COPY OF THE ORDER DATED 22/12/2009 OF THE HON'BLE SUBORDINATE JUDGE'S COURT, MUVATTUPUZHA IN I.A.NO.709/09 IN O.S.NO.99/09. P11 COPY OF THE POSSESSION NOTICE ISSUED BY BANK OF BARODA DATED 14/12/2010. RESPONDENT'S EXHIBITS: NIL /TRUE COPY/ P.A.TO.JUDGE sts P.BHAVADASAN, J. ------------------------------------- WP(C) No.6698 of 2010-O ------------------------------------- Dated this the 16th day of March 2011 Judgment In this writ petition under Article 227 of the Constitution of India, the petitioner seeks to assail Ext.P10 order passed by the Sub Court, Muvattupuzha in IA No.709/09 in OS No.99/09 whereby the court declined the request made by the petitioner to refer the matter for arbitration. 2. The petitioner is a co-operative society registered in Netherlands and it offers loans under various schemes. It appears that the first respondent availed of such a financial facility on 11.1.2001 and an agreement was executed between the parties as per which the repayment had to commence from 10.07.2002. It is stated in the petition that apart from the agreement, collateral security by way of mortgage of immovable properties belonging to respondents 2 and 3 was also given. The respondents defaulted in repayment of the loan and that WPC 6698/10 2 necessitated the suit. The petitioner says that he sent a lawyer notice to the respondents asking to repay the entire loan amount with interest. The respondents on receipt of the notice agreed to settle the claim by referring the matter for arbitration. Accordingly, an Arbitration Request was moved as AR No.39/07 before this court. When this court took up the matter for consideration, the respondents admitted that the amount is due to the petitioner and requested for an instalment facility to pay off the debt. The A.R. was disposed of accordingly by Ext.P1 order. But, in violation of the undertaking given to this court, no payment was made by the respondents. Thereafter, there were several proceedings between the parties, which are not very relevant for the present purpose. Suffice to say that the suit had to be proceeded with. In the suit, the petitioner moved IA NO.709/09 praying that the court below may refer the matter for arbitration. It is seen that only the 5th respondent responded to the petition and his main objection as is seen from the order is that since the High WPC 6698/10 3 Court had declined to refer the matter for arbitration, the present attempt cannot succeed. 3. The court below found that there was no consensus between the parties for referring the matter for arbitration and in such a situation, the court is not empowered to refer it for arbitration. Holding so, the petition was dismissed. 4. Before this court, the learned counsel for the petitioner referred to Section 89 Order X Rule 1 CPC and the rules made by the High Court under the relevant provisions of the Arbitration Conciliation Act and pointed out that the act of the court below in simply dismissing the petition cannot be supported in law. The court below ought to have resorted to one of the modes for resolution of the disputes stated in Section 89 CPC and even if one of the parties is not amenable to such a course, the court has power to send the matter for arbitration as laid down in clause 5(g) & (f) of the Civil Procedure (ADR) Rules, 2008. It is pointed out that going by the spirit of Section 89 and WPC 6698/10 4 the rules framed thereunder, it cannot be said that the court is helpless if one of the parties is not inclined to adopt the alternative modes of resolution in which case the section can be easily defeated. The relevant rule has been accepted by the Apex Court in Salem case and that shows that it is to be enforced. 5. Though the argument may look very attractive, unfortunately for the petitioner, he does not get support from any quarters. Section 89 CPC reads as follows : “89. Settlement of disputes outside court (1) Where it appears to the court that there exist elements of a settlement which may be acceptable to the parties, the court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the court may reformulate the terms of a possible settlement and refer the same for - (a) arbitration (b) conciliation; WPC 6698/10 5 © judicial settlement including settlement through Lok Adalat ; or (d)mediation (2)Where a dispute has been referred - (a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings for arbitration conciliation were referred for settlement under the provisions of that Act ; (b) to Lok Adalat, the court shall refer the same to Lok Adalat in accordance with the provisions of sub-section (1) of Section 20 of the Legal Services Authority Act, 1987 (39 of 1987) and all other provisions of that Act shall apply in respect of the dispute so referred to the Lok Adalat ; © for judicial settlement, the court shall refer the same to a suitable institution or person and such institution or persons shall be deemed to be a Lok Adalat and all the provisions of the Legal Services Authority Act, 1987 (39 of 1987) shall apply as if the dispute were referred to a Lok Adalat under the provisions of that Act ; (d) for mediation, the court shall effect a compromise WPC 6698/10 6 between the parties and shall follow such procedure as may be prescribed.” Order X Rule 1A CPC reads as follows : “IA. Direction of the court to opt for any one mode of alternative dispute resolution – After recording the admissions and denials, the court shall direct the parties to the suit to opt either mode of the settlement outside the court as specified in sub-section (1) of Section 89. On the option of the parties, the court shall fix the date of appearance before such forum or authority as may be opted by the parties.” Sub-clauses (f) and (g) of Rule 3 of the Civil Procedure (ADR) Rules 2008 read as follows : “(f) Where there are more than 2 sets of parties having diverse interests and some of them opt and agree to resolve the dispute between them by arbitration or conciliation or judicial settlement or mediation, they shall apply to the court within 30 days o the direction under clause (b) of Rule 3 and then the court shall within 30 days of the WPC 6698/10 7 application refer the matter for settlement in the manner agreed to by the parties provided that the court is of the opinion that the dispute between the consenting parties can be resolved independently. (g)where there is no consensus among the parties as to the mode of settlement, the court shall, after affording to the parties an opportunity of hearing, persuade the parties to arrive at a consensus as to the mode of settlement and if the parties are not able to arrive at a consensus as to the mode of settlement, consider whether the matter can be referred for decision by arbitration, if one of the parties is willing for settlement by arbitration as provided under clause (f) above.” 6. It is based on the above provisions that the contention is taken by the learned counsel for the petitioner that the matter ought to have been referred for arbitration. WPC 6698/10 8 Before going further, the opening sentence of Section 89 CPC should be noticed. It abundantly makes clear that there should exist elements of a settlement which may be acceptable to the parties and if it feels so, then it may be referred as envisaged by the provision. A plain reading of the provision does not indicate that the court can thrust arbitration or other modes of settlement of the dispute on an unwilling party. Order X Rule 1A also does not say anything else. The reliance placed on Rule 5(f) and (g) is unfortunately misconceived. That cannot be read as giving power to the court to compel the parties to go for arbitration or such other modes for settlement of the disputes. The scope and ambit of Section 89 CPC and the power of the court have been considered in detail in the decision reported in Afcons Infrastructure Limited v. Cherian Varkey Construction Co.(P) Limited (Civil Appeal No.6000 of 2010 arising out of SLP(C) No.760 of 2007). Paragraph 23 of the judgment leaves one in no doubt regarding the scope of Section 89. The said paragraph reads as follows : WPC 6698/10 9 “Arbitration is an adjudicatory dispute resolution process by a private forum, governed by the provisions of the AC Act. The said Act makes it clear that there can be reference to arbitration only if there is an 'arbitration agreement' between the parties, in all probability, even before the suit reaches the stage governed by Order 10 of the Code, the matter would have stood referred to arbitration either by invoking section 8 or 11 of the AC Act and there would be no need to have recourse to arbitration under section 89 oif the Code. Section 89 therefore pre-supposes that there is no pre-existing arbitration agreement. Even if there was no pre-existing arbitration agreement, the parties to the suit can agree for arbitration when the choice of ADR processes is offered to them by the court under section 89 of the Code. Such agreement can be by means of a joint memo or joint application or a joint affidavit before the court or by record of the agreement by the court in the order sheet signed by the parties. Once there is such an agreement in writing signed by parties, the matter can WPC 6698/10 10 be referred to arbitration under section 89 of the Code and on such reference, the provisions of AC Act will apply to the arbitration and as noticed in Salem Bar-I, the case will go outside the stream of the court permanently and will not come back to the court.” 7. The court below has noticed that none of the parties except the petitioner has expressed their willingness to resort to any of the methods enumerated under Section 89. Under such circumstances, the court felt that the petition could not be entertained. 8. It is an admitted fact that the agreement does not contain an arbitration clause. Therefore, the intervention of the court as envisaged under the Arbitration Act does not arise. Then the only option is to seek arbitration under S.89 CPC. For that, consensus of the parties is necessary. It is not available in the present case. If that be so, the court below was perfectly justified in declining to grant reliefs to the petitioner. No grounds are made out to interfere with the order of the court below. WPC 6698/10 11 There is nothing to show that the finding of the court below is either perverse or contrary to law. This petition is without any merits and it is accordingly dismissed. However, the trial court shall make every endeavour to dispose of the suit as expeditiously as possible at any rate, within six months from the date of receipt of a copy of this judgment. P.Bhavadasan, Judge sta WPC 6698/10 12