IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN MONDAY, THE 22ND FEBRUARY 2010 / 3RD PHALGUNA 1931 WP(C).NO. 31216 OF 2008(N) -------------------------- (IN IA 7180/2007 IN OS.687/2007 OF PRINCIPAL SUB COURT, ERNAKULAM} .................... PETITIONER(S): --------------- VIJAYAMMA SADASIVAN PILLAI, AGED 59 YEARS, W/O.SADASIVAN PILLAI, MANU NIVAS, PAYIPPADU VILLAGE, CHANGANACHERRY, KOTTAYAM DISTRICT. BY ADV. SRI.JOSEPH GEORGE RESPONDENT(S): --------------- 1. GMAC FINANCIAL SERVICES INDIA LTD., ARIHAND E-PARK, 2ND FLOOR, 117/1, LATTICE BRIDGE ROAD, ADAYAR, CHENNAI-600 020, REPRESENTED BY ITS MANAGING DIRECTOR. 2. THE BRANCH MANAGER, GMAC FINANCIAL SERVICES INDIA LTD., SCEARS TOWERS, RAVIPURAM, ERNAKULAM. ADV. SRI.PHILIP T.VARGHESE SRI.THOMAS T.VARGHESE THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 10/02/2010, THE COURT ON 22/02/2010 DELIVERED THE FOLLOWING: WP(C).No. 31216 OF 2008 :: 2 :: APPENDIX PETITIONERS' EXHIBITS: EXT.P1: TRUE PHOTOCOPY OF FIR IN CRIME NO.56/07 OF THRIKKODITHANAM POLICE STATION. EXT.P2: TRUE PHOTOCOPY OF THE AGREEMENT DTD. 31-1- 03 SUBMITTED BEFORE THE 1ST RESPONDENT. EXT.P3: TRUE PHOTOCOPY OF THE ORDER DATED 15.1.08 IN IA 7180/07 IN O.S.685/07 OF THE SUB COURT, ERNAKULAM. RESPONDENTS' EXHIBITS: NIL //true copy// P.S. To Judge SK/- S.S.SATHEESACHANDRAN, J. ------------------------------------------------ W.P.(C) No.31216 of 2008 ----------------------------------------------- Dated this the 22nd day of February, 2010 JUDGMENT Writ petitioner is the plaintiff in O.S.No.685/07 on the file of the Sub Court, Ernakulam. Suit is one for damages. Suit claim was resisted by the defendant, a financing company and its branch manager contending that the civil court has no jurisdiction to entertain the suit, as the parties are governed by an arbitration agreement. An application moved by the defendants under Section 8 of the Arbitration and Conciliation Act, 1996 {for short “the Act”} for referring the parties to arbitration, after hearing both sides, was allowed by the learned Sub Judge under the order impugned in the writ petition. Propriety and correctness of that order is challenged in the writ petition invoking the supervisory jurisdiction vested with this court under Article 227 of the Constitution of India. W.P.(C) No.31216 of 2008 :: 2 :: 2. The case of the plaintiff, to sustain the suit claim, in short, is that a motor vehicle, which was purchased by her with the financial assistance provided by the defendants was forcibly seized from her by a person engaged by the defendants. She was pulled out of the vehicle by the person so engaged by the defendants and seizing the vehicle with the articles kept therein, he had driven it away, was the case of the plaintiff. She had lost a sum of Rs.1,10,000/- and 9.5 sovereigns of ornaments kept in a bag in the vehicle, on such seizure of the vehicle, was her further case. On her complaint, the police registered a case and later seized the vehicle from the 2nd defendant. On production of the vehicle before the magistrate court, interim custody of the vehicle was handed over to her. She claimed a sum of Rs.1,50,000/- towards damages sustained on account of the forcible seizure of the vehicle at the instance of the defendants in the suit. W.P.(C) No.31216 of 2008 :: 3 :: 3. The defendants on appearance moved an application under Section 8 of the Act contending that the vehicle involved was covered by a loan cum hypothecation guarantee agreement executed by the plaintiff in favour of the first defendant finance company and that agreement provides for resolving all disputes between the parties by arbitration. The defendants therefore canvassed for referring the parties to arbitration. Plaintiff filed an objection that the dispute involved in the suit is not covered by the arbitration agreement and so much so there cannot be any reference to arbitration as contended by the defendants. The learned Sub Judge, after hearing both sides and perusing the agreement produced, found merit in the case canvassed by the defendants that the suit is not entertainable before the Civil Court and the dispute between the parties has to be referred to arbitration. In forming such a conclusion, the court took note of Clause 16 of the agreement entered by the W.P.(C) No.31216 of 2008 :: 4 :: parties which provided for a reference of all disputes by arbitration. Forming such a view, the court passed Ext.P3 order referring the parties to arbitration under Section 8 of the Act. 4. I heard the counsel on both sides. 5. Learned counsel for the petitioner contended that a dispute relating to the forcible seizure of the vehicle covered by the loan agreement and the suit claim for damages based on such seizure is not a matter covered by the arbitration agreement entered by the parties and in fact the arbitrator has no jurisdiction to decide that question. Claim of damages canvassed by the plaintiff in the suit as to the forcible seizure of the vehicle can be considered and decided only by the civil court and not by the arbitrator, is the submission of the counsel. 6. On the other hand, Learned counsel for respondents inviting my attention to Ext.P2 a copy of the agreement, more particularly Clause W.P.(C) No.31216 of 2008 :: 5 :: 16 therein, contended that any dispute between the parties over the vehicle in respect of financial assistance was extended to the plaintiff necessarily has to be resolved only by way of arbitration and not by the civil court. Reliance is also placed by the counsel in I.T.C. Limited v. George Joseph Fernandes {1989 (2) SCC 1} that even where validity of a contract containing the arbitration clause and agreement is impugned contending that such a contract is void, arbitrator has competency to decide the question of jurisdiction, and even in such a case, it is not open to the civil court to entertain that dispute in a suit where it is covered by the arbitration agreement. So much so, according to the counsel, the order passed by the court referring the parties to the arbitration in the given facts of the case does not warrant any interference in exercise of the extraordinary jurisdiction vested with this court. W.P.(C) No.31216 of 2008 :: 6 :: 7. A copy of the plaint in the suit, was handed over to me for perusal. The allegations raised in the plaint, it is seen, disclose that the suit claim is based on the injuries alleged to have been sustained by the plaintiff on account of the forcible seizure of the vehicle for which finance had been extended on the basis of a loan cum hypothecation agreement, by the financing company, 1st defendant. Ext.P2 is the copy of that agreement. Ext.P2 contains an arbitration clause, as covered by Clause 16 therein, is the contention of the defendants for referring the parties to arbitration asserting that in view of the arbitration agreement, the civil court has no jurisdiction to entertain the suit. I am afraid, the learned Sub Judge has not examined the cause of action for the suit claim, nor the allegations imputed in the plaint to canvass for such claim. Without referring to the allegations impugned in the plaint solely on the basis of Clause 16 W.P.(C) No.31216 of 2008 :: 7 :: contained in the agreement Ext.P2, the court has formed a conclusion that the dispute canvassed in the suit is a matter to be decided by the arbitrator. Suit claim is raised setting forth the allegation that the forcible seizure of the vehicle is per se illegal and opposed to public policy and by the acts of the defendants in effecting such seizure by engaging a third party, the plaintiff has suffered serious damages. The injuries so suffered by the plaintiff is liable to be compensated is her case in the suit. That claim is resisted by the defendants on the basis of the arbitration clause in the agreement. The question then emerges for consideration is whether a claim for injuries suffered on account of the forcible seizure of the vehicle which is impugned as against the public policy can be resisted on the basis of the arbitration clause contained in the agreement entered between the parties. In a case involving almost similar and identical issue viz., T.M.L. Financial Services W.P.(C) No.31216 of 2008 :: 8 :: Ltd., Vinod Kumar {2010 (1) K.L.T. 209}, I have held thus: “The arbitration clause in the agreement cannot be put forward as a shield when one of the parties to the agreement commit an act opposed to public policy and per se illegal and cause injury to the other party. In such circumstances, the civil right of the injured party to seek compensation or damages from the wrong doer over and above initiating appropriate criminal proceedings has to be recognised and given effect to. He cannot be denied of that right for the sole reason that he has entered an agreement with the other party containing an arbitration clause, and so much so, he has to work out his remedies only by way of arbitration. The nature of the act imputed and the cause which require to be adjudicated cannot be eschewed from consideration in deciding whether S.8 of the Act has application to the suit or proceeding presented before the court even if the parties had entered into an agreement containing an arbitration clause, and it has W.P.(C) No.31216 of 2008 :: 9 :: some nexus with the dispute presented and the reliefs claimed.” 8. In the above decision, a note of caution has also been struck in examining the question of ouster of jurisdiction when a defence is canvassed on the basis of an arbitration clause in an agreement. The allegations in the plaint disclosing the cause of action and the reliefs sought for therein require to be considered in its entirety, to determine whether the civil court has jurisdiction to entertain the suit irrespective of an agreement between the parties containing an arbitration clause, which has some nexus or connection to the disputes presented before the court. Even if seizure of the vehicle covered by an arbitration clause is permitted under the terms of the agreement, needless to point out, it can be done only lawfully. Illegal seizure of the vehicle, which is opposed to public policy, over and above giving rise to criminal proceedings against the W.P.(C) No.31216 of 2008 :: 10 :: offender will also enable the injured party to seek the assistance of the civil court to claim compensation and in such a case, the civil court is fully competent to entertain such a suit. 9. Setting aside Ext.P3, the court below is directed to examine afresh the application moved by the defendants for reference under Section 8 of the Act and dispose it expeditiously taking note of the observations made above and in accordance with law. Writ petition is disposed of as above. Sd/- (S.S.SATHEESACHANDRAN) JUDGE SK/- //true copy//