Civil Revision No.1101 of 2008 : 1 : IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: April 25, 2008 Ramesh Sharma ...Petitioner VERSUS Mool Chand & others ...Respondents CORAM: HON'BLE MR.JUSTICE RANJIT SINGH 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Present: Mr.V.K.Jain, Senior Advocate with Mr.A.P.Jain and Mr.Prashant Sharma, Advocates, for the petitioner. Mr.M.L.Sarin, Senior Advocate with Mr.Kabir Sarin, Advocate, for respondent No.1. Mr.Ashok Aggarwal, Senior Advocate with Mr.Alok Jain, Advocate, for respondent Nos.2 and 3. Mr.Vikas Behl, Advocate, for respondent Nos.4 to 6. Mr.Rajnish Gupta, Advocate, for respondent Nos.7 and 8. ***** RANJIT SINGH, J. A contest between trustees of a private Trust formed to run an Educational Institute has reached the High Court second time. Civil Revision No.1101 of 2008 : 2 : Means to control this Institute and thus the finances which are generated, seem to be the real aim behind this contest, rather than any aim for doing any welfare, which was the stated aim of the Trust when formulated. Respondent No.1, who claims himself to be the life President of the Trust and thus not removable, filed a civil suit for declaration to this effect, besides other reliefs. Prayer is also made for declaring some meetings held by the defendants in the suit to be null and void and for declaration that the trust deed, which was amended, be declared as not legally enforceable and valid document. He has also challenged the election purported to have been held on 21.5.2007 of the office bearers of the Trust as well as Shri Krishna Polytechnic Kurukshetra to be null and void and not enforceable. Petitioner filed an application under Sections 8 and 11 of the Arbitration and Conciliation Act, 1996 before the court trying this suit, which is declined by the court and thus is impugned through the present revision petition. The facts, as narrated in the petition, would disclose that this Trust was formed with 12 founder trustees on 9.12.1996. The Trust Deed is on record as Annexure P-3 with the petition. Certain amendments were carried out in the Trust Deed subsequently, but however, the amendment carried out on 7.11.2006 seems to be a bone of contention between the parties. According to respondent No.1, the Trust Deed was amended on this date and was executed and registered on 3.1.2007. The petitioner seems to be contesting this amendment, which according to him was not endorsed in the Civil Revision No.1101 of 2008 : 3 : subsequent meeting of the Trust. It is disclosed that this amended Trust Deed was signed by respondent No.1, 7, 8, 2, 3 and 4. This Trust Deed is stated to have been subsequently amended on 15.5.2007, which is challenged by filing a civil suit by respondent No.1. The application filed by the petitioner for appointment of an arbitrator in terms of the Trust Deed was declined by the civil court on 31.8.2007, which was impugned by the petitioner through Civil Revision No.4716 of 2007 before this court. This court while setting-aside the impugned order thought it appropriate to remit the matter back to the trial court to take notice of the contents of one civil misc. application filed before this court in the revision petition and then to pass an order afresh in the context of plea put forth by the petitioner for reference of the dispute to the arbitrator. It is noticed in this order passed by this court, which is annexed with the petition as Annexure P-7, that the trial court had negatived the plea of the petitioner on the finding that the parties before the court were not ad- idem and thus the case law cited was of no avail. The trial court had also found that in such circumstances it would not be just to refer the dispute to the Board of Trustees, in which the defendants have a 2/3 majority. What had necessitated the remand of this case by this court to the trial court apparently is that the three trustees, who were signatory to the amended Trust Deed had filed Misc.Application No.18567-CII of 2007 to the effect that each one of them is fully aware of the arbitration clause in the initial Trust Deed and that they would have no objection in the case the matter is referred to the arbitrator. The trial court has again declined the prayer of the Civil Revision No.1101 of 2008 : 4 : petitioner for referring the matter to the arbitrator and that is how the petitioner is now once again before this court to challenge the said order. While declining the prayer of the petitioner for referring the matter to the arbitrator, the trial court has noticed that defendant No.8 has filed an affidavit objecting to the reference of the dispute to the arbitrator and thus has found that the parties are still at not ad idem to the arbitration clause. The trial court, in addition, has also noticed that some of the reliefs claimed are certainly not covered by the arbitration clause and in this regard has referred to two of the prayers made in the suit in prayer clauses (b) and (c), which are as follows:- “(b) The proceedings prepared by defendant No.2 of the alleged meetings held on 14.05.2007 and 15.05.2007 are null and void and not enforceable on account of the grounds stated hereinbefore. (c ) Amended Trust Deed dated 15.05.2007 is also not legally enforceable and is not valid.” Holding that bifurcation of cause of action of a subject matter of a suit is not permissible, the application filed by the petitioner is dismissed. Mr.V.K.Jain, learned Senior counsel for the petitioner has made submissions in detail in support of his argument to urge that when there is an arbitration clause, the civil court would not have any power or jurisdiction to decline reference to the arbitrator. The counsel would further contend that one of the person cannot be allowed to have sway for ousting the jurisdiction of an arbitrator on Civil Revision No.1101 of 2008 : 5 : the ground that he does not agree for reference. He has also made detailed reference to the terms of the Trust deed to show that the matter is fully arbitrable and as such the impugned order can not be sustained, says the counsel. Mr.M.L.Sarin, learned Senior counsel, on the other hand, would contend that aspect of parties being ad idem is an essential pre-requisite for a reference of dispute to the arbitrator and the civil court is fully justified in declining the application as one of the party has declined to give his consent in this regard. He would highlight the fact that this court had referred the matter to the trial court to see if parties are ad idem or not and as such the decision of the Civil Judge in declining the application would not need any interference either in law or in facts. The counsel would also justify the impugned order wherein the civil court has found that some of the prayers made in the civil suit are not subject to arbitration and hence the matter cannot be referred to the arbitrator as dispute, as per the admitted position of law, cannot be bifurcated for part reference to the arbitrator and the remaining to be decided by the civil court. I have heard the learned counsel for the parties. The copy of the original Trust Deed executed in the year 1996 is on record as Annexure P-3. Respondent No.1 and the petitioner are the signatory to this Trust Deed, besides Durga Dass, Subhash Gupta, Ashok Kumar, Prem Kumar Aggarwal and Saroj Rani. The officers of the Trust are referred as President, Vice- president, Secretary, Treasurer and members. As per clause 7 (a), President, Vice-president, Secretary and Treasurer are to be elected for three years by the trustees. It can be extended upto six years by Civil Revision No.1101 of 2008 : 6 : granting a further period of three years by the majority of trustees. The total founder trustees will be members of the Managing Committee of the trust and the election is to be by way of two-third majority of the trustees. The powers and duties of the President are also mentioned in the Trust Deed, who is to be elected for three years and is eligible for re-election by the founder trustees. There are three class of members known as Founder Trustees, Life Members and Honorary Members. The vacancy due to death/voluntary retirement is to be filled from the legal heirs and if there is no legal heir or the legal heir is not found fit to become Founder Trustees of the Trust, then the same is to be filled by Board of Trustees by 2/3 majority. Twelve founder trustees are named in the Trust Deed. There is a provision made for alteration in the rules and it is provided that the Rules and Regulations may be amended and altered by the Trust but new Rules and Regulations are not to be inconsistent with or repugnant or contrary to the aims and objects of the constitutions or the duties and powers reserved under these rules. The amendment can be carried out otherwise by 2/3 majority of the Trust/Trustees. It is then provided that: “if any question arises whether any person has been duly elected or appointed or is entitled to member of any authorities or other body of Trust, the matter shall be referred to the Board of Trustees, decision thereon shall be final”. It is on the basis of this stipulation in the Trust Deed that petitioner has prayed for reference of the dispute agitated by respondent No.1 in the civil suit to the Board of Trustees as arbitrator Civil Revision No.1101 of 2008 : 7 : as it involves the question of election of a President. This has been termed as an arbitration clause and thus prayer for reference of the dispute to the arbitration by the Board of Trustees was made in the civil suit. It will be a worth notice here that there is another clause in the Trust Deed relating to arbitration which reads “in case of any dispute with the Trust or concerning the functioning of the Trust for any kind of dispute which pertains to the Trust would be referred to the President as arbitrator”. Learned counsel for the petitioner says that this clause would refer to dispute of the Trust or concerning the functioning of the Trust and does not relate to the election or appointment of any member or entitlement of any member of authority which dispute is referable to Board of Trustees in terms of the clause earlier reproduced. There was some debate whether the clause relating to referring the matter to Board of Trustees would be an arbitration clause or not and intention for reference of a dispute to arbitrator being clear from the subsequent clause, where President is to act as an arbitrator. The counsel for the petitioner spent considerable time in addressing argument on this aspect and also to submit that this was not much in dispute when this court earlier had decided to remit the matter to the civil court for decision through order, Annexure P-7. Mr.Sarin, however, would seriously contest this and would refer to the impugned order, Annexure P-8, to show that respondent No.1 has maintained in his pleas before the civil court as well as before this court that there was no arbitration clause regarding the inter se disputes to the Board of Trustees. This is found to be so pleaded, Civil Revision No.1101 of 2008 : 8 : besides the plea that if such a dispute is referred to the Board of Trustees where the defendants are in 2/3 majority, it would make them to be judge of their own case. The copy of the amended Trust Deed dated 3.1.2007 is annexed as Annexure P-4. It is through this amendment that respondent Mool Chand is stated to have become life-time President of the Trust and is not to be removed in any of the circumstances. The clause relating to alteration of rules and reference of question regarding person being duly elected or appointed being referable to the Board of Trustees has been retained and so too to the clause relating to President being arbitrator in regard to dispute with the Trust or concerning the functioning of the trust. This Trust Deed is signed by seven trustees. A copy of the amendment in this Trust Deed carried out on 15.5.2007 is annexed as Annexure P-5. Through this amendment, the clause in regard to tenure of the President appears to have been amended to revert it to the original position whereby President was to be elected for three years terms by the founder trustees and that he being eligible for re-election is again re- introduced. This amendment has been signed by six persons, who are Subhash Gupta, Ramesh Kumar, Ram Pal Sharma, Som Parkash Gupta, Smt.Rama Gupta and Naresh Bhardwaj. The conditions contained therein and the amendment carried out by this Trust is a subject matter of challenge in the suit. Though submissions were made whether the impugned clause could be read as an arbitration clause or not, but I am not going into this aspect of the case as the issues that would arise in the present case can be otherwise adjudicated. It is conceded that Civil Revision No.1101 of 2008 : 9 : this issue may not require determination as it can otherwise be decided if matter would be open to be referred to the arbitrator in terms of the submissions made before me. It can be noticed that while remanding the case back to the trial court, this court had observed that the trial court would consider the prayer for referring the case to arbitration by taking into consideration the affidavits filed by some of the trustees that they would not have any objection for referring the dispute to the arbitrator. The court had accordingly remitted the matter for the trial court to take notice of the contents of the C.M. and to pass an order afresh on the plea put forth by the petitioner for reference of the dispute to the arbitration. The trial court in the impugned order had declined the prayer of the petitioner on the ground that defendant No.8 has filed an affidavit to the contrary and so noticed that all the parties are still not ad idem to the arbitration clause. Mr.Sarin has placed heavy reliance on Bihar State Mineral Development Corporation and another Vs. Encon Builders (I)(P) Ltd. (2003) 7 Supreme Court Cases 418 to urge that one of the essential conditions for referring the dispute to arbitration is that the parties must be ad idem. He has also placed reliance on this case to show that one cannot be permitted to be a judge of his own cause for being appointed as an arbitrator. His contention is that reference of a dispute to Board of Trustees where defendants are 2/3 majority would be meaningless ritual and making them to be a judge of their own cause as they had earlier carried out the amendment which is impugned in the civil suit. He has also referred to the case of Sukanya Holdings (P) Ltd. Versus Jayesh H.Pandya and another , Civil Revision No.1101 of 2008 : 10 : (2003) 5 Supreme Court Cases 531 to say that entire subject matter of the suit should be subject to arbitration agreement and there is no provision in the act for bifurcating the suit into two parts, one to be referred to arbitration for adjudication and the other to be decided by the civil court. In this regard, he would also rely upon India Household and Healthcare Ltd. Versus LG Household and Healthcare Ltd., (2007) 5 Supreme Court Cases 510. The counsel has made reference to Atul Singh and others Vs. Sunil Kumar Singh and others, (2008) 2 Supreme Court Cases 602 to say that where arbitration agreement is alleged to be illegal and void, reference to arbitration in such cases would not be possible and only civil court can decide the question of validity of the arbitration agreement in question. To counter the submissions made by the counsel for the petitioner that such issue can and is to be decided by the arbitrator himself, reference is made to the case of Sudarshan Chopra and others Versus Company Law Board and others, 2004(2) PLR 12, where it is held that Section 16 is not a bar for any judicial authority from determining as to whether the agreement exists or not. It is further held that it would also be anomalous to hold that where there is a doubt with regard to the existence of an arbitration agreement, it is the arbitrator and the arbitrator alone, who could opine on the matter. Mr.V.K.Jain, representing the petitioner, however, would maintain that the language of Section 8 is peremptory and the court is under an obligation to refer the parties to the arbitration where there is an arbitration agreement. He would refer to P.Anand Civil Revision No.1101 of 2008 : 11 : Gajapathi Raju and others Versus P.V.G. Raju (Dead) and others, (2000) 4 Supreme Court Cases 539 to highlight the observations that Section 5 of the Act would clearly bring out the object of the Act, which is the encouragement of expeditious and less expensive resolution of disputes with minimum interference of the court. To meet the objection raised by the defendants (respondents) that this clause can be construed to be an arbitration clause, the learned counsel has referred to Full Bench decision of this court in Messrs Ram Lal Jagan Nath Versus The Punjab State and others, 1966 PLR 522. Learned counsel has then referred to the case of ACE Pipeline Contracts Private Limited v. Bharat Petroleum Corporation Limited, JT 2007(5) SC 105 to say that the parties having entered into a contract with eyes wide open cannot be allowed to contest the terms of the arbitration to seek appointment of a different arbitrator on the ground that the one appointed by the agreement would not be impartial in resolving the disputes. Reference is also made by the counsel to the case of Smt.Rukmanibai Gupta Vs. The Collector, Jabalpur and others, AIR 1981 Supreme Court 479 to say that the arbitration agreement is not required to be made in any particular form and what is required to be ascertained is whether the parties have agreed that if the dispute arises between them in respect of the subject matter of contract it shall be referred to arbitration, then such an agreement would spell out an arbitration agreement. To be fair to Mr.Jain, he has referred to the cases of Rashtriya Ispat Nigam Ltd. And another Vs. Verma Transport Co., (2006) 7 Supreme Court Cases 275 where dispute regarding blacklisting of a firm arising out of term of a contract was said to be Civil Revision No.1101 of 2008 : 12 : referable to an arbitration, though it was a case of termination of a contract. Agri Gold Exims Ltd. Vs. Sri Lakshmi Knits & Wovens and others, (2007) 3 Supreme Court Cases 686 is pressed in support of his contention that the provision is peremptory in nature and the court is obliged to refer the matter to arbitration where arbitration agreement exists. The counsel has also referred to Punjab State and others Vs. Dina Nath, (2007) 5 Supreme Court Cases 28 to submit that the impugned clause would be an arbitration clause. He has also referred to Bharat Sewa Sansthan Vs. U.P.Electronics Corpn. Ltd., (2007) 7 Supreme Court Cases 737 to say that the provisions of the Arbitration and Conciliation Act cannot be by-passed and further referred to Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway Petroleums, (2003) 6 Supreme Court Cases 503 to urge that objection regarding applicability of arbitration clause must be raised before the arbitrator for decision. Reliance is also placed upon V.H. Patel & Company and others Vs. Hirubhai Himabhai Patel and others, (2000) 4 Supreme Court Cases 368 to urge that arbitrator would have powers where a clause in the partnership deed or agreement or order referring the matter to arbitration makes it clear that all the disputes between the partners have been referred to arbitration. The counsel has then made reference to Shree Subhlaxmi Fabrics (P) Ltd. Vs. Chand Mal Baradia and others, (2005) 10 Supreme Court Cases 704 to urge that Section 5 would disclose the legislative intent to minimise the supervisory role of the courts and is to ensure that the intervention of the court is minimum. It may be noticed from the number of judicial precedents cited before me that for reference of a matter to an arbitration apart Civil Revision No.1101 of 2008 : 13 : from other conditions, two conditions are essential to be seen for referring the matter to arbitrator. The trial court, while considering the aspect, has heavily relied on the case of Sukanya Holdings (supra) to say that the entire matter should be referable to the arbitration and there is no provision to bifurcate the suit into two parts. It is also required to be noticed that all the defendants to the suit are not parties to the Trust Deed and the terms of the deed including the arbitration clause may not be binding on them. While interpreting Sections 8 and 5 of the Arbitration Act, the Hon'ble Supreme Court has observed that the matter is not required to be referred to the Arbitral Tribunal if (1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of dispute; (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. From this, it is observed that the Arbitration Act does not oust the jurisdiction to the civil court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under sub- sections (1) and (2) of Section 8 of the Act. It is further observed that there is no provision for splitting the cause or parties and referring the subject matter of the suit to arbitrator and that there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the arbitration agreement. In this case only, the court has interpreted the language used in Section 8, that is “in a matter which is the subject matter of arbitration agreement” to say that the court is required to refer the parties to an Civil Revision No.1101 of 2008 : 14 : arbitration. It is accordingly noticed that suit should be in respect of “a matter” which the parties have agreed to refer the matter and which comes within the ambit of arbitration agreement. Where suit is commenced or a suit which lies outside the arbitration agreement and is also between some of the parties, who are not parties to the arbitration agreement, then the Hon'ble Supreme Court noticed that there is no question of application of Section 8. The words “a matter” are held to indicate that the entire subject matter of suit should be subject to arbitration agreement. Further answer to this can be had from the ratio of law laid down in Bihar State Mineral Development Corporation's case (supra), where the Hon'ble Supreme Court has held that essential elements of an arbitration agreement are as follows:- “(i) there must be a present or a future difference in connection with some contemplated affairs; (ii) there must be intention of the parties to settle such