IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD TUESDAY, THE TWENTY FOURTH DAY OF AUGUST TWO THOUSAND AND TEN PRESENT THE HON'BLE MR JUSTICE V.ESWARAIAH & THE HON'BLE MR JUSTICE NOUSHAD ALI CIVIL REVISION PETITION No.6175 of 2006 Between: M/s.Shriram Transport Finance Co.Ltd. Labbipet, Vijayawada, rep.by its Branch Manager ..... APPELLANT AND Mantriraju Venkateswara Rao .....RESPONDENT The Court made the following: THE HON'BLE SRI JUSTICE V.ESWARAIAH & THE HON'BLE SRI JUSTICE NOUSHAD ALI CIVIL REVISION PETITION No.6175 of 2006 ORDER: (per Hon’ble Sri Justice V.Eswaraiah) This Civil Revision Petition is filed under Article-227 of the Constitution of India aggrieved by the order dated 17.10.2006 in I.A.2035/2006 in O.S.2175/2006 on the file of the III Additional Junior Civil judge, Vijayawada in dismissing the said I.A. filed by the petitioner/defendant under Sec.8 of the Arbitration and Conciliation Act, 1996 read with Or.7 Rule-11 and Sec.151 CPC. 2. The respondent/plaintiff filed the said suit before the Court below seeking permanent injunction restraining the defendant finance company/petitioner herein from interfering with the peaceful possession and enjoyment of the Lorry bearing No.AP16X-7736. Even according to the respondent/plaintiff, the plaintiff entered into an agreement with the defendant finance company and as per the said agreement, the plaintiff has to discharge the loan amount of Rs.4,15,000/- in 42 instalments @Rs.13,425/- per month. The plaintiff paid four instalments and the defendant finance company deducted one instalment towards insurance premium of the said vehicle. There are certain disputes with regard to the payment of the instalments. It is stated that the plaintiff was unable to pay monthly instalments and therefore, the defendant company said to have made efforts to take possession of the said lorry without following due process of law and therefore, the said suit is filed for grant of permanent injunction against the defendant finance company. 3. Even before filing the written statement, the petitioner/defendant filed I.A.2035/2006 stating that as per the agreement entered into by the plaintiff with the defendant on 28.12.2005 there is specific understanding between the parties that any and all disputes, differences and or claims arising out of or in connection with the agreement or its performance shall be settled by arbitration to be held in Vijayawada, in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory amendments thereof and shall be referred to the sole arbitrator, as may be appointed by the lender. The arbitrator shall be competent to decide all the disputes and differences arising out of the agreement and therefore, the defendant company sought for rejection of the suit by directing the plaintiff to approach the defendant company for appointment of arbitrator, as per the terms of the agreement, to settle the disputes, if any. 4. The plaintiff filed counter in the said I.A. contending that there are no tenable grounds to invoke the provisions of Sec.8 of the Arbitration and Conciliation Act, 1996 and all the averments and allegations made by the defendant are invented, created and concocted, and requested to dismiss the said application. 5. The Court below dismissed the said application on the ground that the petitioner/defendant only prayed for rejection of the plaint and to direct the plaintiff to approach the defendant seeking reference for arbitration, but not prayed for referring the matter for arbitration. The suit is filed for permanent injunction. The question as to whether the suit can be maintained in view of arbitration clause is to be decided by framing appropriate issues in the main suit, and the suit cannot be rejected at the threshold without considering the merits of the claim. The question as to whether arbitration clause in the loan agreement is valid and binding on the parties shall also have to be tested during the trial of the suit. If the suit is rejected at the threshold on the sole ground of arbitration clause in the loan agreement, it will result injustice to the plaintiff because of the plaintiff will be thrown into the hands of the defendant. With the above observations, the Court below dismissed the said application. 6. We are of the opinion that under Sec.8 of the Arbitration and Conciliation Act, 1996, a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. In the instant case, the respondent/plaintiff filed the suit for permanent injunction. In the said suit even before filing the written statement, the defendant filed application under Sec.8 of the Arbitration and Conciliation Act, 1996 stating that in the subject matter of the suit there is a hypothecation agreement in which all the disputes, differences are liable to be resolved in the arbitration. If there is any arbitration agreement with reference to any dispute resolved by the arbitration under the agreement between the parties, it is for the arbitrator to resolve all the disputes and it is not permissible for the judicial authority to intervene the arbitration proceedings as provided in Part-I of the Arbitration and Conciliation Act, 1996 which contains Secs.2 to 42. Therefore, we are of the opinion that it is for the Court below to refer the parties for arbitration if such a clause of arbitration is provided in the hypothecation agreement. 7. The issues as to whether such a clause exists or not and whether the matter is liable to be referred for arbitration or not cannot be tried in the main suit. Therefore, we are of the opinion that the Court below has to decide on merits whenever an application under Sec.8 of the Arbitration and Conciliation Act, 1996 is filed. As a matter of fact, if once the written statement is filed taking defence, the defendant will loose his right to approach the Court seeking reference for arbitration, and unless the written statement is filed, issues cannot be framed. Therefore, the Court below ought to have decided the issue as to whether there exits any clause of arbitration in the agreement. If that be so, the said application requires to be considered as to whether the subject matter requires to refer for arbitration or not even before calling up on the defendant to file the written statement and framing issues. Accordingly, we set aside the order under revision and remit the matter back to the Court below directing to dispose of the said I.A. afresh, considering the nature of application, in accordance with law. 8. Accordingly, the Civil Revision Petition is allowed. No order as to costs. _____________________ V.ESWARAIAH,J _________________ NOUSHAD ALI,J Dated: 24.08.2010 Dsr