IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.BHAVADASAN TUESDAY, THE 2ND JUNE 2009 / 12TH JYAISHTA 1931 FAO.No. 285 of 2004() --------------------- RFA.113/2003 of I ADDL. DISTRICT COURT, KOLLAM OS.25/2001 of PRINCIPAL SUB COURT,KOLLAM .................... APPELLANT/APPELLANT/PLAINTIFF: -------------------------------------------------- N.RAMANKUTTY NAIR, PROPRIETOR, GANESH CASHEW COMPANY, AYATHIL, KALLUMTHAZHAM, KOLLAM, RESIDING AT DEVI VIHAR, PUTHOOR, KOLLAM. BY ADV. SRI.T.M.CHANDRAN SRI.S.SUJITH RESPONDENT(S): RESPONDENTS/DEFENDANTS: ------------------------------------------------------------------- 1. PREM SYNDICATE, FINANCIER NO.1, MANAGAPPAN STREET, SOWCARPET, CHENNAI-600 079. 2. PREM PRAKASH BOTHA, MANAGING PARTNER, PREM SYNDICATE NO.1, MANAGAPPAN STREET, SOWCARPET, CHENNAI-600 079. 3. HARIKUMAR, CHARUVILA PUTHENVEEDU, VENDAR, KOTTARAKKARA. 4. BADARUDEEN, AUTOMOBILE DEALER, POLACHIRAYIL HOUSE, MUSLIM STREET, KOTTARAKKARA. 5. BHARAT SINGH, POLACHIRA CONSULTANT, MARKET JUNCTION, NEAR MINERVA THEATRE, KOTTARAKKARA. THIS FIRST APPEAL FROM ORDERS HAVING BEEN FINALLY HEARD ON 02/06/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R. RAMAN & P. BHAVADASAN, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - F.A.O. No. 285 of 2004 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 2nd day of June, 2009. JUDGMENT Bhavadasan, J, Aggrieved by the decision of the District Court, Kollam in R.F.A. No.113 of 2003, the plaintiff before the court below has come up in appeal. 2. Plaintiff instituted a suit as O.S. No.25 of 2001 before the Principal Sub Court, Kollam, which was one for injunction simplicitor. He had entered into a hire purchase agreement with the first respondent and had availed of financial facilities for the purchase of a vehicle. It would appear from the plaint that he had subsequently defaulted payment of instalments. It is seen that thereafter disputes had arisen regarding the actual amount due to the financier. In the suit as initially laid the only prayer made was for injunction to restrain the respondents from forcibly taking possession of the vehicle. 3. The defendants entered appearance and filed their written statement. Subsequently the plaintiff chose to amend the F.A.O.285/04. 2 plaint incorporating a prayer for settlement of accounts also. The trial court also raised an additional issue regarding the maintainability of the suit. 4. In the meanwhile, the defendants in the suit had pointed out by way of additional written statement that the matter has to be sent for arbitration as per the agreement entered into between the plaintiff and the defendant, by which any dispute arising out of the agreement is to be referred to the Arbitrator. 5. The suit, after amendment, stood as one for settlement of accounts and injunction. Taking note of the provision in the agreement dated 3.9.1999 the court below found that all disputes, differences, and claims between the parties arising out of the transaction entered into between them have to be resolved by resorting to arbitration proceedings. The court below also found that the first defendant had already initiated arbitration proceedings. It was revealed that the plaintiff had also entered appearance before the Arbitrator. As the parties had already subjected themselves to arbitration proceedings, the court was of the view that the suit cannot be continued F.A.O.285/04. 3 and is not maintainable. Accordingly, the suit was dismissed. 6. The plaintiff carried the matter in appeal. The District Court took the view that the suit as initially framed was one for injunction simplicitor involving the question regarding the possession of the vehicle alone and that too fall within the ambit of the arbitration clause. The first appellate court went on to hold that that being the position, the defendants had not availed of the arbitration clause at the earliest opportunity and they were precluded from doing so later. The appellate court passed an order as follows: “In the result, the appeal and cross appeal are disposed of as below: (1) R.F.A. 115/2003 is allowed and the impugned decree is set aside. (2) the cross appeal is allowed and the order of amendment allowed vide I.A.2770/2002 is set aside and I.A.2770/02 stands dismissed. (3) O.S.25/2001 shall be taken on file and proceeded with by the trial court as the suit for injunction.” The said order is assailed in this appeal. F.A.O.285/04. 4 7. Assailing the order of the lower appellate court, learned counsel appearing for the appellant pointed out that the orders of the court below cannot be sustained in law. It was pointed out by him that if the defendants had a case that all disputes were to be referred for arbitration, they should have raised that point after entering appearance in the O.S. filed by the plaintiff and before the written statement was filed. After the filing of the written statement, the defendants cannot say that the matter should be referred for arbitration. 8. It may be recalled that the lower court dismissed the suit on the ground that the parties have already initiated arbitration proceedings and also that the plaintiff had appeared before the Tribunal. It is true that the defendants did not, at the time of first appearance, raise the question regarding arbitration as contemplated under Section 8(2) of the Arbitration and Conciliation Act. But one should remember that it was a suit for injunction alone and at that point of time there is nothing to indicate that any dispute as such was in existence between the parties. It could be said that only after the suit was amended incorporating a prayer for settlement of accounts, the real F.A.O.285/04. 5 dispute between the parties arose. If that be so, it may be difficult to reject the plea of the defendants that the issue has to be resolved by arbitration. The lower appellate court has now disallowed the amendment sought for by the plaintiff and the suit remains one for injunction simplicitor. It also directed that the suit should be taken on file and proceeded with by the trial court as if it is a suit for injunction. 9. The lower appellate court in paragraph 22 of its judgment has stated as follows: “It is true that at the first instance, there was no reference to arbitration sought by the defendants; the dispute regarding possession was also a matter coming under Clause 21(a) of the agreement. Therefore there need not be a reference to arbitration u/s.8(1) of act 26/96 in the simple injunction suit filed initially.” If that position is to be accepted, then it may be difficult for the defendants to seek arbitration, because they had entered appearance in the suit and had filed their written statement when the suit was one for injunction alone. F.A.O.285/04. 6 10. If as a matter of fact initially itself, the suit was one for injunction alone, and if that is to be treated as taken in by the arbitration clause, then ofcourse the defendants ought to have taken recourse to Section 8(2) of the Act. If on the other hand the suit as initially laid did not come under the ambit of the arbitration agreement since it does not involve any dispute between the parties, then obviously the defendants could have raised the issue of arbitration only after the amendment was allowed and incorporated. We may recall here that the amendment sought for was to incorporate a prayer for settlement of accounts also and that would indicate that there is a dispute between the parties regarding the amounts due to the parties. That dispute between the parties will squarely fall within the clause providing for arbitration to resolve the dispute between the parties. As rightly pointed out by the learned counsel for the appellant, it may also be necessary to consider whether proceedings for arbitration can be resorted to in a composite suit, that is containing prayers which fall within the arbitration clause and other issues outside the same. In the decision reported in Sukanya Holdings Pvt. Ltd. v. Jayesh H. F.A.O.285/04. 7 Pandya (AIR 2003 SC 2252) it was observed as follows: “Secondly, there is no provision in the Act that when the subject matter of the suit includes subject matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitrators. ................ .................... The next question which requires consideration is – even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act? In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation f the subject matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subjection of an action brought before a judicial authority is not allowed. F.A.O.285/04. 8 Secondly, such bifurcation of suit is two parts, one to be decided by the arbitral tribunal and other to be decided by the civil Court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums.” 11. Neither of the courts have considered the above aspects in the proper perspective. At the risk of repetition one may note that the court below observed that the amendment should not have been allowed and also that the suit should be treated as one for injunction alone. Even though the question regarding possession falls within the arbitration clause, the court can proceed to try the suit, obviously, it must be due to the fact that the defendants had not taken the plea as contemplated under Section 8(2) of the Act. Whatever that be, the whole issue needs reconsideration at the hands of the trial court. The suit initially laid was one for injunction. F.A.O.285/04. 9 Hence it is felt that it is only appropriate to direct the trial court to consider the matter afresh in the light of what has been stated above and in accordance with law. The court below shall dispose of the matter untramelled by any of the observations made by the first appellate court or this court while disposing of the appeal and the miscellaneous appeal. Parties shall appear before the court below on 22.7.2009. P.R. Raman, Judge P. Bhavadasan, Judge sb.