C.R. No. 944 of 2010 -1- ****** IN THE PUNJAB AND HARYANA HIGH COURT AT CHANDIGARH C.R. No. 944 of 2010 (O&M) Date of Decision : August 3, 2010 M/s Aero Club through its authorized representative Mr. Bobby Emmanuel, Regional Sale Manager, North .......... Petitioner Versus V.P. Arora & others ...... Respondents CORAM : HON'BLE MR. JUSTICE VINOD K. SHARMA Present : Mr. Arun Palli, Sr. Advocate with Mr. Sunil Garg, Advocate for the petitioner. Mr. Sanjeev Sharma, Advocate for the respondents / caveator. **** 1. Whether Reporters of Local Newspapers may be allowed to see the judgment? 2. To be referred to the Reporters or not? Yes. 3. Whether the judgment should be reported in Digest? Yes. VINOD K. SHARMA, J. The petitioner / defendant by invoking the jurisdiction of this Court under Article 227 of the Constitution of India, seeks the setting aside of order Annexure P-1, vide which application moved by the petitioner under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') was dismissed. The plaintiff / respondents filed a suit for possession by C.R. No. 944 of 2010 -2- ****** way of ejectment of the petitioner from the leased premises along with the damages and mesne profits, in the Court of learned Civil Judge (Sr. Div.), Panchkula. On notice, the petitioner appeared, and filed an application under Section 8 of the Act for referring the matter to the Arbitral Tribunal in view of the arbitration clause in the lease deed. The arbitration clause on which the reliance was placed reads as under :- “vi) Any dispute arising out of this agreement shall be settled through the arbitration agreed to between the parties mutually subject to the jurisdiction of the Courts situated at Panchkula.” The application was contested by the plaintiff / respondents by contending, that the application was filed to delay the proceedings, and to gain time by asserting, that the matter in the suit could not be referred for arbitration because there was no dispute between the parties with regard to any clause of the agreement. Furthermore, as per the terms of the lease deed three month's notice was issued. The learned Civil Judge (Sr. Div.) Panchkula, in view of the pleadings in the application, recorded a finding, that there was no dispute with regard to the execution of the lease agreement dated 31.07.2006 qua the tenanted premises between the parties, but rejected the application by recording a finding, that there was no dispute between the parties with regard to the terms & conditions of C.R. No. 944 of 2010 -3- ****** the lease agreement dated 31.07.2006. The learned Court also held, that in absence of any material on record on behalf of the defendant with regard to the breach of any terms & conditions of the agreement, there was no reason to hold, that the plaintiffs were trying to seek eviction of the defendant from the suit property in violation of the terms & conditions of the lease agreement, and dismissed the application. Mr. Arun Palli, learned senior counsel appearing on behalf of the petitioner by placing reliance on the judgment of the Hon'ble Supreme Court in the case of Hindustan Petroleum Corpn. Ltd. v. M/s. Pinkcity Midway Petroleums, AIR 2003 Supreme Court 2881 vehemently contended, that the language of Section 8 of the Act is peremptory in nature, and in a case where there is an arbitration clause in the agreement, it is obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement, and nothing remains to be decided in the original action after such an application is made. It is mandatory for the judicial authority to refer the dispute to an arbitrator. The Hon'ble Supreme Court in the case of Hindustan Petroleum Corpn. Ltd. v. M/s. Pinkcity Midway Petroleums (supra) was pleased to lay down, that if there is a clause for arbitration, it is mandatory for the Civil Court to refer the dispute to an arbitrator, specially when under Section 16 of the Act the Arbitral Tribunal is empowered to rule on its own jurisdiction including to rule on any objection with regard to the existence or validity of the C.R. No. 944 of 2010 -4- ****** arbitration agreement. The Hon'ble Supreme Court was further pleased to lay down, that if there is any objection to the applicability of the arbitration clause to the facts of the case, it have to be raised before the Arbitral Tribunal and the Civil Court is not to embark on an enquiry with regard to the applicability of the arbitration clause to the facts of the case. It is also the contention of the learned senior counsel for the petitioner, that as per the arbitration clause any dispute arising out of the agreement was required to be settled between the parties, therefore, whether defendant / petitioner could be evicted or not, or he was entitled to renewal of the lease or that plaintiff / respondents were entitled to mesne profits or damages, was a question to be decided by the Arbitrator and not by the Civil Court. The contention of the learned Senior counsel for the petitioner further was, that the claim with regard to the mesne profits and damages was also one, which would be covered by the Arbitration Clause, therefore, the learned Civil Court committed an error in holding, that there was no dispute in terms of the lease deed to dismiss the application moved under Section 8 of the Act. Prima facie there is a force in the contention raised by the learned counsel for the petitioner. The reasoning given by the learned Civil Court for rejecting the application under Section 8 of the Act can not be sustained in law, as the question whether the terms of the lease deed were properly applied or there was any violation of C.R. No. 944 of 2010 -5- ****** the lease deed, as also the claim of the damages and mesne profits., was within the jurisdiction of the arbitrator. Mr. Sanjeev Sharma, the learned senior counsel appearing on behalf of the plaintiff / respondents contended, that the order passed by the learned Civil Judge (Sr. Div.), Panchkula deserves to be upheld for the following reasons :- i) That there exists no concluded arbitration agreement between the parties, therefore, application moved under Section 8 of the Arbitration and Conciliation Act itself was not competent; ii). That the application moved under Section 8 (2) of the Arbitration and Conciliation Act by the defendant / petitioner was not in accordance with Section 8 of the Arbitration and Conciliation Act, as the application was not accompanied by the original or certified copy of the arbitration agreement, which is mandatory condition; iii) That there was no dispute between the parties falling under the lease deed and in absence of a dispute, matter could not be referred for arbitration; iv) That the relief claimed would not fall within the jurisdiction of Arbitrator as Arbitrator C.R. No. 944 of 2010 -6- ****** could not decide the question of mesne profits and damages. In support of the contention, that there exists no arbitration agreement, the learned senior counsel appearing on behalf of the respondents referred to clause 1(vi) of the lease deed, which reads as under :- “1(vi) Any dispute arising out of this agreement shall be settled through the arbitration agreed to between the parties mutually subject to the jurisdiction of the Courts situated at Panchkula.” The contention of the learned Senior counsel for the respondent was, that the reading of the clause, referred to above, would show that it is not arbitration agreement but a clause providing for reference of a dispute for arbitration with mutual consent on a future date i.e. to say that parties by mutual consent could enter in arbitration agreement and refer the dispute in terms of the said agreement. This argument is based on the contention, that in order to constitute an arbitration agreement, the conditions stipulated in Section 7 of the Act, are required to be fulfilled. Sections 7 of the Act read as under :- “7. Arbitration agreement. - (1) In this Part, 'arbitration agreement' means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them C.R. No. 944 of 2010 -7- ****** in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in- (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.” It was the contention of the learned senior counsel for the respondents, that Section 7 of the Act was interpreted by this Court in the case of Ramesh Sharma Vs. Mool Chand and others 2009 (5) R.C.R.(Civil) 164, wherein it was laid down, that the essential element of the arbitration adjudication are :- C.R. No. 944 of 2010 -8- ****** “(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 differences by a private tribunal; (iii) the parties must agree in writing to be bound by the decision of such Tribunal; and (iv) the parties must be ad idem.” The contention of the learned senior counsel for the respondents was, that even if the word 'arbitration' has been used in clause 1(vi) of the lease deed, but there is no stipulation, that the decision of the arbitrator shall be final and binding, nor any arbitrator has been mentioned therein, rather it has been stipulated, that after the difference arise then the matter would be decided by mutually agreed arbitration. Meaning thereby, that an agreement was required to be entered into in future. In support of this contention, the learned senior counsel for the petitioner placed reliance on the judgment of the Hon'ble Rajasthan High Court in the case of M/s B.Gopal Das, Bombay and others, Petitioners v. M/s. Kota Straw Board (P) Ltd. Kota, Respondent AIR 1971 Rajasthan 258 (V. 58 C63), wherein the Hon'ble Rajasthan High Court has been pleased to lay down as under :- 6. It will appear from the wordings of paragraph (10) of the respondent Company's own letter Ex.2 9supra) to the petitioners, on C.R. No. 944 of 2010 -9- ****** which considerable reliance has been placed by the learned counsel for the respondent Company, that it has made use of the word “may”. And a reading of the paragraph shows that it does not make it clear whether the option to refer the differences to arbitration is of the one party, against the other. At any rate, no such words have been used in their paragraph as to show that an option has been given to any one of the parties in that respect. It will therefore appear that if the option is of both the parties, then both of them will have to agree to refer their differences to arbitration in pursuance of another agreement between them, so that the paragraph amounts to no more than an agreement to enter into an agreement and is quite ineffective. It may be mentioned that such a mutuality for a future agreement is reflected in the subsequent portion of paragraph (10) which provides for an agreement between the parties for proposes of arbitration. At any rate it cannot be said that the parties were ad idem on the question of referring their disputes to arbitration within the meaning of clause (a) of Section 2 of the Arbitration Act so that it cannot be said that there is an arbitration agreement between them. 7. xx xx xx xx 8. The learned counsel for the petitioners has argued that as an arbitration agreement has the effect of ousting the jurisdiction of the Civil Courts, in the normal way,it should C.R. No. 944 of 2010 -10- ****** be construed strictly. He has placed reliance on Tarachand v. Parasram, AIR 1930 Sind 202 which has been followed in M.I. Shahdad v. Mohd. Abdullah Mir. AIR 1967 J and K 120 and on the decision in In re Srikrishna Khanna, AIR 1934 Sind 29; Hormusji and Daruwala v. District Local Board, Karachi, AIR 1934 Sind 200; Seth Kerorimal Adwani v. Union of India,AIR 1959 Cal 430 and M/s. Teameo Pvt. Ltd. v. T.M.S. Mani, AIR 1967 Cal 168, in support of his contention. I do not, however, think it necessary to express any opinion on the question whether an arbitration agreement is of such a special nature as to require a stricter construction of its terms than any other contract for, as has been stated, the relevant clause of the agreement relied upon by the respondent Company does not amount to an arbitration agreement on any construction thereof.” The reliance was also placed on the judgment of the Hon'ble Supreme Court in the case of Jagdish Chander Vs. Ramesh Chander & Ors. 2007(2) R.C.R. (Civil) 860, wherein the Hon'ble Supreme Court was pleased to lay down that: (a) to constitute a valid agreement, the agreement should be in writing, (b) the parties should have agreed to refer the disputes (present or future) between them to the decision of a private tribunal; C.R. No. 944 of 2010 -11- ****** (c) the private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it; and (d) the parties should have agreed, that the decision of the private tribunal in respect of the disputes will be binding on them. Mr. Arun Palli, learned senior counsel appearing on behalf of the petitioner vehemently contended, that the clause reproduced above, is a clause, wherein it has been clearly mentioned that the dispute between the parties is to be adjudicated by way of arbitration. The learned senior counsel for the petitioner further contended ,that no particular form is prescribed, and the intention of the parties to refer the dispute to the arbitrator is necessary. In support of this contention reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Smt. Rukmanibai Gupta, Appellant Vs. The Collector, Jabalpur and & others AIR 1981 Supreme Court 479(1), to contend, that the clause referred to above, were understood by the parties to be an arbitration clause, as would be clear from the stand taken by plaintiff / respondents before the learned trial Court to contend, that the dispute raised was not covered under the Arbitration clause, therefore, no other conclusion than to hold that it is an arbitration clause can be arrived at. On consideration, I find force in the contention raised by C.R. No. 944 of 2010 -12- ****** the learned senior counsel for the respondents. The Court can not stay the suit unless there is a valid arbitration agreement. In order to invoke the arbitration clause there has to be a mandatory arbitration clause in the agreement, and not just a clause for entering into a further arbitration agreement. Reference in this regard can be made to the judgment of the Hon'ble Madras High Court in the case of Sankar Sealing Systemns P. Ltd. v. Jain Motor Trading Co., AIR 2004 Mad 127. The Hon'ble Supreme Court in the case of Jagdish Chander Vs. Ramesh Chander & Ors. (supra),on which reliance was placed by both the counsels, was pleased to lay down, that mere use of word 'arbitration' or 'arbitrator' in a clause will not make it an arbitration agreement, and if it requires or contemplates a further or fresh consent of the parties for reference to arbitration, then it can not be said to be an arbitration clause. This is the only interpretation which can be given to the clause, referred to above. The clause does not stipulate, that the decision of the Arbitral Tribunal would be final and binding on the parties, rather it stipulates, that the arbitration would be with the consent of the parties. Meaning thereby, that something more was required to be done, before invoking the clause for arbitration. Thus, it is held that there is no valid arbitration agreement between the parties,in terms of Section 7 of the Arbitration and Conciliation Act. C.R. No. 944 of 2010 -13- ****** The contention of the learned senior counsel for the petitioner, that it would be for the arbitral tribunal to see the validity of the agreement, can not be sustained, as the Court while referring the matter to the arbitral tribunal is required to see whether there is valid arbitration agreement or not, and in case, it is held, that there is no arbitration agreement between the parties, the matter can not be referred to the arbitral tribunal. The learned senior counsel for the respondents also contended, that the application under Section 8 of the Act moved by the petitioner was not competent, as in order to succeed, it was incumbent upon the petitioner to have appended with the application the original or certified copy thereof. In support of this contention the learned counsel for the respondents referred to the judgment of this Court in the case of Ramesh Sharma Vs. Mool Chand and others (supra), wherein this Court held, that the application under Section 8 (2) of the Act was liable to be dismissed, if application is not accompanied by original arbitration agreement or duly certified copy thereof. Reliance was also placed on the judgment of the Hon'ble Supreme Court in the case of Atul Singh and others Vs. Sunil Kumar Singh and others (2008) 2 Supreme Court Cases 602 (supra) to contend, that if the application is not accompanied by original agreement or its certified copy required under Section 8(2) of the Act, the clause being mandatory the matter can not be referred to the arbitrator. C.R. No. 944 of 2010 -14- ****** The learned senior counsel for the defendant / petitioner controverted this argument by placing reliance on the judgment of the Calcutta High Court in the case of ITC Classic Finance Ltd. Petitioner v. Grapco Mining and Co. Ltd. And another, Respondents AIR 1997 Calcutta 397, judgment of Hon'ble Rajasthan High Court in the case of M/s Ranwa construction Co. v. The Administrator, Pant Krishi Bhawan, Jaipur and another AIR 2006 Rajasthan 70, N. Natarajan v The General Manager, Southern Railway & Ors. AIR 2006(NOC) 1017(Ker) and Tata Finance Ltd. v. Mubarak Khan. AIR 2008(NOC) 595 (Raj.), to contend, that if the terms of the agreement are not disputed then it is not necessary to place on record the certified or original copy. The contention of the learned senior counsel for the petitioner / defendant was, that the plaintiff himself relied on the lease deed, and there being no dispute in this regard, the application of the petitioner could not be dismissed on this score. On consideration, I find no force in the contention of the learned counsel for the respondent / plaintiff. The Hon'ble Supreme Court in the case of Bharat Sewa Santhan V. U.P. Electronic Corpn. Ltd. AIR 2007 Supreme Court 2961 has laid down, that photo copies of the original agreement when placed on record, and the original is not disputed, then it can be read in evidence. There is another aspect to this matter. This objection was not raised by the plaintiff / respondent before the learned trial Court, therefore, the plaintiff / petitioner now C.R. No. 944 of 2010 -15- ****** can not raise this issue. Even though, it can not be disputed, that the provisions of Section 8(2) of the Act are mandatory in nature but the intention of the legislature is met, when there is no dispute qua the arbitration agreement between the parties, as intention of the legislature to incorporate a condition of filing of certified copy or original copy was, that there should be no dispute with regard to the arbitration agreement, as in that event the matter can not be referred without adjudicating it, but once the parties of the agreement admitted validity of the agreement, and the party disputing also places reliance thereon, it can not be said that the application can be dismissed, merely for want of filing of certified or original copy along with the application. The contention of the learned senior counsel for the plaintiff / respondent, that the matter could not be referred to the arbitrator for want of dispute, and that the arbitrator can not decide the question of damages of mesne profits, deserves to be noticed to be rejected. The arbitrator in a contract where all disputes are required to be referred, can decide also the claim of damages and mesne profits. It also can not be said that there is no dispute as assertion of a right by a party and denial by other itself is a dispute. The application, as already observed above, could not have been dismissed on this ground. This contention of the learned counsel for C.R. No. 944 of 2010 -16- ****** the respondent is rejected. In view of the finding, that there is no valid arbitration agreement between the parties, the matter could not be referred for arbitration on an application moved by the petitioner / defendant under Section 8(2) of the Act, as a valid arbitration agreement is pre- requisite for reference of dispute. This revision petition is dismissed by holding, that the application under Section 8(2) of the Act moved was not competent, for want of arbitration agreement. No costs. August 3, 2010 (VINOD K. SHARMA) 'sp' JUDGE