1 nms-1545-10-ss-399.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION jmi NOTICE OF MOTION NO.1545 OF 2010 IN SUMMARY SUIT NO. 399 OF 2009. Rajesh Udharam Thadani. ..Plaintiff. vs. M/s. Mehul Entertainments P. Ltd. & Anr. ..Defendants. .... Ms. Mamta A. Shah, for Plaintiff. Mr. Rohan Cama, a/w. Mr. Sanjay Udeshi, Ms. Pallavi Dedhia, i/b.M/s. Sanjay Udeshi & Co., for Defendants. .... CORAM : S.J. KATHAWALLA, J. DATE : 22ND FEBRUARY 2011. PC : This Notice of Motion is taken out by the Defendants under section 8 of the Arbitration and Conciliation Act, 1996 praying that the parties to the above Summary Suit be referred to arbitration in accordance with the arbitration clause no. 15 of the Agreement dated 15th November 2002 and the above Summary Suit be rejected/returned for want of jurisdiction. 2. The facts in the matter are as set out hereunder : 3. The above Summary Suit is filed by the Plaintiff against the Defendants for a sum of Rs.61,78,870/- as per the particulars of claim annexed and marked as Exhibit-J to the Plaint along with 2 nms-1545-10-ss-399.doc further interest on Rs.46,00,000/- at the rate of 18% per annum from the date of the filing of the Suit till payment and costs of the Suit. 4. By an Agreement dated 15th November 2002 entered into between the Plaintiff as an Investor and the Defendant No.1 as a Exhibitor, it was agreed between the parties that the Plaintiff will invest a sum of Rs.50,00,000/- (Rupees Fifty Lacs.) in the Defendants’ business of exhibition of feature films at the theatre namely, Mehulkumar Cinema at Jamnagar. In clause 3 of the Agreement, the Defendants have agreed to make the repayment of the said amount by monthly installments of Rs.2,00,000/- and issued 25 post dated cheques commencing from December 2002. In consideration of the said investment of Rs.50,00,000/-, the Defendants under clause 5 of the said Agreement also agreed to give to the Plaintiff fixed profit of Rs.1,43,000/- per month for 25 months and subsequently of Rs.65,000/- for 11 months to the Plaintiff. The Defendants also agreed to pay interest at the rate of 24% per annum for the delay in payment of any of the aforesaid amounts to the Plaintiff. 5. According to the Plaintiff, the Defendant No.1 towards discharge of its liability issued 31 cheques aggregating to a sum of Rs.41,45,000/- to the Plaintiff on 18th January 2006. According to the Plaintiff, all the aforesaid cheques on presentation were dishonoured by the banker of the Defendant No.1 on the ground “EXCEEDS ARRANGEMENT”. The Plaintiff therefore through his Advocate sent a statutory notice dated 30th January 2006 to the Defendants under section 138 read with section 141 of the Negotiable Instruments Act. 3 nms-1545-10-ss-399.doc 6. Thereafter, the Defendants approached the Plaintiff and requested to grant some time as the Defendants were facing financial difficulties. Thereafter, negotiations to settle the matter amicably commenced. After continuous follow up by the Plaintiff, the Defendants vide their letter dated 6th June 2006 recorded the Agreement between the parties to clear all the outstanding dues of the Plaintiff for a sum of Rs.46,00,000/- in full and final settlement and accordingly issued two fresh cheques bearing nos. 407704 and 407705 dated 7th July 2006 and 14th July 2006 each of Rs. 23,00,000/- respectively, drawn on Samata Sahakari Bank Limited, Bandra Reclamation Branch, Mumbai-400 050 in favour of the Plaintiff and took back the earlier 31 dishonoured cheques. However according to the Plaintiff, the Defendants again requested the Plaintiff not to deposit the said two cheques as they had not arranged for the funds and accordingly with the Plaintiff’s consent, the said two cheques were revalidated by putting the date as 16th January 2007 in both the cheques. 7. Both the cheques upon being deposited by the Plaintiff were dishonoured and returned unpaid along with memo of bankers of the Defendant No.1 both dated 18th January 2007 with the reason “EXCEEDS ARRANGEMENT”. The Plaintiff by his Advocate’s notice dated 8th February 2007 inter alia recorded the aforesaid facts and called upon the Defendants to pay Rs.46,00,000/- being the total of both the dishonoured cheques within 15 days of the receipt of the notice. In paragraph 5 of the said letter, the learned Advocate for the Plaintiff has specifically made a mention to the letter dated 6th June 2006 executed by the Defendant No.2. The Defendants by their 4 nms-1545-10-ss-399.doc reply /letter dated 7th March 2007 responded to the Plaintiff’s Advocate’s Notice dated 18th January 2007 wherein they alleged that the two post dated cheques were given to the Plaintiff by the Defendants as a security. However the Defendants have not denied the execution of the letter dated 6th June 2006. 8. The Plaintiff thereafter filed the present Summary Suit on the two bounced cheques and has sought reliefs as set out in paragraph 3 hereinabove. The Defendants filed their Advocates’ appearance in the Summary Suit. The Plaintiffs took out the Summons for Judgment being No.169 of 2009. The said Summons for Judgment is not heard till date since the Plaintiff also filed the present Notice of Motion under section 8 of the Arbitration and Conciliation Act, 1996 and inter alia contended that the parties be referred to the arbitration in view of clause 15 of the Agreement between the parties dated 15th November 2002. 9. The learned Advocate appearing for the Defendant has pointed out that clause 15 of the Agreement dated 15th November 2002 reads as under :- “Any dispute on this Agreement will be settled either by arbitration which is neutrally acceptable or as per prevailing laws in India and the Court of Mumbai will have jurisdiction to decode the dispute.” 10. The learned Advocate for the Defendant has therefore submitted that the parties have agreed to refer the dispute arising out of the Agreement dated 15th November 2002 to arbitration. He submits that the cheques issued to the Defendants are under the Agreement dated 15th November 2002 which contains the arbitration 5 nms-1545-10-ss-399.doc clause and therefore, the disputes pertaining to any payment under the said Agreement is required to be referred to arbitration. He therefore submits that the Notice of Motion be allowed and the parties be referred to arbitration as prayed. 11. The learned Advocate appearing for the Plaintiff has drawn my attention to paragraph 4 of the Affidavit-in-Reply to the Notice of Motion. The learned Advocate has pointed out that in paragraph 4, the Plaintiff has set out how the cheques issued by the Defendants under the Agreement dated 15th November 2002 were dishonoured and by a new letter of settlement-cum-arrangement contained in the letter dated 6th June 2006 the matter was amicably settled out of Court for a sum of Rs.46,00,000/- in full and final settlement of the Plaintiff’s claim against the Defendants. The Advocate for the Plaintiff took me through the following averments in paragraph 4 of the Affidavit-in-Reply dated 25th January 2011 : “I say that all the aforesaid cheques were dishonoured on presentation. I say that therefore accordingly I have issued a statutory notice dated 13.01.2006 under section 138 r/w section 141 of the Negotiable Instrument Act, to the Defendants. I say that in response to my notice the Defendants had approached and requested me to grant some time for payment of the aforesaid dues as they were facing financing difficulties. However, we agreed and settled the matter amicably out of Court for a sum of Rs.46,00,000/- in full and final settlement of entire balance claim and accordingly Defendants have issued fresh two cheques each for Rs.23 lakhs bearing no. 407704 and 407705 dated 7.07.2006 and 14.07.2006, respectively both drawn on Samata Co-op Bank Ltd. along with new letter of settlement cum arrangement dated 06.06.2006.” 12. The learned Advocate appearing for the Plaintiff 6 nms-1545-10-ss-399.doc therefore submitted that the earlier Agreement dated 15th November 2002 was substituted by the new Agreement dated 6th June 2006. The said two cheques which have been dishonoured and are subject matter of the Suit are issued by the Defendants to the Plaintiff pursuant to the said new Agreement/Arrangement contained in the letter dated 6th June 2006 and not under the Agreement dated 15th November 2002. The question therefore of referring the present Suit which is not filed on the basis of the Agreement dated 15th November 2002 cannot be referred to arbitration. 13. I have considered the submissions of the learned Advocates appearing for the Plaintiff as well as the Defendants. Firstly, it is necessary to once again go through clause 15 of the Agreement dated 15th November 2002 which reads as follows :- “15] Any dispute on this Agreement will be settled either by arbitration which is neutrally acceptable or as per prevailing laws in India and the Court of Mumbai will have jurisdiction to decode the dispute.” The bear reading of the arbitration clause shows that the parties have not confined their Agreement to settle any dispute arising out of the said Agreement only by way of arbitration. The parties have under the said clause 15 agreed to give each other an option to either settle the dispute by arbitration or as per the prevailing laws in India with the Court of Mumbai having the jurisdiction to “decode” the dispute. In view thereof, the parties have an option to either submit to arbitration or to file a Suit in the Court of Mumbai to “decode” the dispute. Though the Advocate for the Defendants has not advanced any submission qua the interpretation of clause 15 of the Agreement dated 15th November 2002, it is the duty of the 7 nms-1545-10-ss-399.doc Court whilst deciding an Application under section 8 of the Arbitration and Conciliation Act, 1996 to satisfy itself whether there exists a clear and binding Agreement between the parties to refer their disputes to Arbitration. In my view, clause 15 of the Agreement dated 15th November 2002 does not contain a clear and binding Agreement between the parties to refer their disputes under the Agreement only to Arbitration. The present Notice of Motion deserves to be dismissed on this ground alone. 14. In any event, even if one is to proceed on the basis that clause 15 of the Agreement dated 15th November 2002 can be construed as an Agreement between the parties to refer the disputes to arbitration, the said Agreement would not be applicable in the facts and circumstances of the present case for the reasons set out hereinafter. 15. Admittedly, the cheques issued by the Defendants pursuant to the Agreement dated 15th November 2002 were dishonoured because of which the Plaintiff issued a statutory notice dated 30th January 2006 under section 138 read with section 141 of the Negotiable Instruments Act. Thereafter, the Defendants have issued a letter dated 6th June 2006 addressed to the Plaintiff confirming that a meeting was held on 6th June 2006 and an Agreement as set out in clauses (1) to (7) of the said letter was entered into. The said clauses are reproduced hereunder : “(1) That I would pay you Rs.46,00,000/- (Rupees Forty Six lacs only) in full and final settlement of all your dues till date. (2) That I would give you 2 (Two) post dated cheques of Rs.23,00,000/- (Rupees Twenty Three 8 nms-1545-10-ss-399.doc lacs only) each bearing dates of 7th July 2006 and 14th July 2006 respectively in full settlement of above dues of Rs.46,00,000/- (Rupees Forty Six lacs only). (3) That on receipt of the post dated cheques, you would give me back the remaining cheques issued to you at the time of signing the above agreement dated 15th November 2002. (5) That the above post dated cheques shall be deposited on due dates for payment without recourse to me and would be duly honoured by me and under no circumstances the said cheques would be dishonoured by me. (6) That to further secure you for payment of the above dues of Rs.46,00,000/- (Rupees Forty Six lacs only) I would deposit with you original Title Deeds/ Agreement of plot situated at Jamnagar for creating charge/ lien on the said plot in your favour. The Title Deeds / Agreements shall be deposited with you within 2 (Two) days of signing this arrangement. (7) That if far any reasons whatsoever any of the cheques are dishonoured by me, your original claim of Rs.41,45,000/- (Rupees Forty One lacs Forty Five thousand only) along with interest thereon @ 24% per annum to be calculated from the date of 1st default in payment i.e. 15th March 2004 would remain and you would be at full liberty to take suitable steps against me personally, my company and other directors to recover your legitimate dues.” 16. From the above clauses, it is clear that the earlier Agreement dated 15th November 2002 has come to an end and the Defendants have entered into a fresh Agreement as recorded in the letter dated 6th June 2006. Under the fresh/new Agreement, the Defendants have unconditionally agreed to pay to the Plaintiff an amount of Rs.46,00,000/- in full and final settlement of all his 9 nms-1545-10-ss-399.doc dues and also issued to the Plaintiff, two post dated cheques of Rs. 23,00,000/- each. It was further agreed that on receipt of the two post dated cheques, the Plaintiff would return the cheques issued under the Agreement dated 15th November 2002 to the Defendants which the Plaintiff has admittedly done. The Defendant in order to secure the payment of Rs.46,00,000/- agreed to deposit the original title deeds pertaining to the plot situated at Jamnagar. In fact, in paragraph 7 of the said Agreement, the Defendants have also agreed that if the said two cheques are dishonoured, the Plaintiff would be at liberty to take suitable steps against the Defendants personally to recover his entire claim under the Agreement dated 15th November 2002 and in fact, the said claim is accepted by the Defendants as the “legitimate dues” of the Plaintiff. However, it was for the Plaintiff to avail of the said liberty or to proceed against the Defendants on the basis of the said two cheques issued by the Defendants to the Plaintiff aggregating to Rs.46,00,000/- under the fresh/new Agreement dated 6th June 2006. Both the cheques are dishonoured upon presentation. The Defendants have decided not to invoke paragraph 7 of the fresh/new Agreement but to file the present Suit on the two bounced cheques. 17. In view of the above, the question of referring the parties to arbitration as contended by the Plaintiff does not arise. The Notice of Motion is therefore, dismissed. [ S.J. KATHAWALLA, J. ]