Case: M/S.Agri Gold Exims Ltd Vs. M/S.Sri Lakshmi Knits &amp;Wovens

nine Thousand One Hundred and Forty Nine only) from the date of the suit till the date of realization. 14. Respondents in the said suit filed an application praying for reference of the dispute to the arbitral tribunal in terms of the arbitration clause contained in the said Memorandum of Understanding and contended that the suit filed by the appellant was not maintainable. By reason of a letter dated 23.08.2004, the said application was dismissed opining that no dispute existed between the parties for reference to an arbitration. 15. On a revision application filed by the respondents herein, the High Court, however, reversed the said order by the impugned judgment. 16. Mr. Annam D.N. Rao, learned counsel appearing on behalf of the appellant, would submit that keeping in view of the fact that the respondents herein had accepted their liabilities, it cannot be said that there existed a dispute or dispute by and between the parties within the meaning of Clause 20 of the Memorandum of Understanding dated 8.05.2002. According to the learned counsel, as the respondents accepted their liability, pursuant whereto and in furtherance whereof, they issued post dated cheques, a suit for realization of the amount under the said cheques would not attract the provisions of the 1996 Act. 17. Mr. Anupam Lal Das, learned counsel appearing on behalf of the respondents, on the other hand, submitted that in view of the fact that the respondents had paid the balance amount of Rs. 22,50,000/- by way of two demand drafts dated 18.08.2003 and 12.09.2003, on its own showing, the appellant has no subsisting cause of action and, thus, it should withdraw the suit. 18. Difference between Section 34 of the Arbitration Act, 1940 and Section 8 of the 1996 Act is distinct and apparent. Section 8 of the 1996 Act makes a radical departure from Section 34 of the 1940 Act. The 1996 Act was enacted in the light of UNCITRAL Model Rules. 19. We need not dilate on this issue as this aspect of the matter has been considered by this Court in Rashtriya Ispat Nigam Limited & Anr. v. M/s. Verma Transport Company [2006 (7) SCALE 565 ], wherein this Court noticed: Section 34 of the repealed 1940 Act employs the expression steps in the proceedings. Only in terms of Section 21 of the 1940 Act, the dispute could be referred to arbitration provided parties thereto agreed. Under the 1940 Act, the suit was not barred. The Court would not automatically refer the dispute to an arbitral tribunal. In the event, it having arrived at satisfaction that there is no sufficient reason that the dispute should not be referred and no step in relation thereto was taken by the applicant, it could stay the suit. Section 8 of the 1996 Act contemplates some departure from Section 34 of the 1940 Act. Whereas Section 34 of the 1940 Act contemplated stay of the suit; Section 8 of the 1996 Act mandates a reference. Exercise of discretion by the judicial authority, which was the hallmark of Section 34 of the 1940 Act, has been taken away under the 1996 Act. The direction to make reference is not only mandatory, but the arbitration proceedings to be commenced or continued and conclusion thereof by an arbitral award remain unhampered by such pendency. [See O.P. Malhotras The Law and Practice of Arbitration and Conciliation, 2nd Edition, pp. 346-347] 20. Respondents had not filed any written statement in the suit. They had not disclosed their defence. They indisputably had raised a dispute in regard to the claim of the appellant. We have noticed the arbitration agreement entered into by and between the parties. It is of wide amplitude. The arbitration agreement brings within its fold dispute of any nature whatsoever. It is in broadest term. Respondents had made payments without prejudice to their rights and contentions. Payments were made keeping in view the ongoing business relationship between the parties. Out of the five post dated cheques, two were dishonoured. But, despite pendency of the suit, payments had been made to satisfy the claim of the appellant in respect of the cheques which were dishonoured. Sufficient explanation has been offered by the respondents therefor. Certain contingencies of events, as indicated hereinbefore, are not in dispute. If the suit was confined to the amount in respect of those two cheques, the contention of Mr. Rao could have been accepted. But it is not so. 21. The term dispute must be given its general meaning under the 1996 Act. 22. In P. Ramanatha Aiyars Advanced Law Lexicon, 3rd edition, page 1431, it is stated: In the context of an arbitration the words disputes and differences should be given their ordinary meanings. Because one man could be said to be indisputably right and the other indisputably wrong, that did not necessarily mean that there had never been any dispute between them. 23. Admittedly, the appellants claim is not confined to the question regarding non-payment of the amount under the two dishonoured cheques. Thus, there existed a dispute between the parties. Had the dispute between the parties been confined thereto only, the same had come to an end. 24. Appellant evidently has taken before us an inconsistent stand. If he was satisfied with the payment of the said demand drafts, he need not pursue the suit. It could have said so explicitly before the High Court. It cannot, therefore, be permitted to approbate and reprobate. 25. Section 8 of the 1996 Act is peremptory in nature. In a case where there exists an arbitration agreement, the court is under obligation to refer the parties to arbitration in terms of the arbitration agreement. [See Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503 and Rashtriya Ispat Nigam Limited (supra)] No issue, therefore, would remain to be decided in a suit. Existence of arbitration agreement is not disputed. The High Court, therefore, in our opinion, was right in referring the dispute between the parties to arbitration.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]19. We need not dilate on this issue as this aspect of the matter has been considered by this Court in Rashtriya Ispat Nigam Limited & Anr. v. M/s. Verma Transport Company [2006 (7) SCALE 565 ], wherein this Court noticed:Section 34 of the repealed 1940 Act employs the expression steps in the proceedings. Only in terms of Section 21 of the 1940 Act, the dispute could be referred to arbitration provided parties thereto agreed. Under the 1940 Act, the suit was not barred. The Court would not automatically refer the dispute to an arbitral tribunal. In the event, it having arrived at satisfaction that there is no sufficient reason that the dispute should not be referred and no step in relation thereto was taken by the applicant, it could stay the suitSection 8 of the 1996 Act contemplates some departure from Section 34 of the 1940 Act. Whereas Section 34 of the 1940 Act contemplated stay of the suit; Section 8 of the 1996 Act mandates a reference. Exercise of discretion by the judicial authority, which was the hallmark of Section 34 of the 1940 Act, has been taken away under the 1996 Act. The direction to make reference is not only mandatory, but the arbitration proceedings to be commenced or continued and conclusion thereof by an arbitral award remain unhampered by such pendency. [See O.P. Malhotras The Law and Practice of Arbitration and Conciliation, 2nd Edition, pp. 346-347]20. Respondents had not filed any written statement in the suit. They had not disclosed their defence. They indisputably had raised a dispute in regard to the claim of the appellant. We have noticed the arbitration agreement entered into by and between the parties. It is of wide amplitude. The arbitration agreement brings within its fold dispute of any nature whatsoever. It is in broadest term. Respondents had made payments without prejudice to their rights and contentions. Payments were made keeping in view the ongoing business relationship between the parties. Out of the five post dated cheques, two were dishonoured. But, despite pendency of the suit, payments had been made to satisfy the claim of the appellant in respect of the cheques which were dishonoured. Sufficient explanation has been offered by the respondents therefor. Certain contingencies of events, as indicated hereinbefore, are not in dispute. If the suit was confined to the amount in respect of those two cheques, the contention of Mr. Rao could have been accepted. But it is not so21. The term dispute must be given its general meaning under the 1996 Act22. In P. Ramanatha Aiyars Advanced Law Lexicon, 3rd edition, page 1431, it is stated:In the context of an arbitration the words disputes and differences should be given their ordinary meanings. Because one man could be said to be indisputably right and the other indisputably wrong, that did not necessarily mean that there had never been any dispute between them23. Admittedly, the appellants claim is not confined to the question regarding non-payment of the amount under the two dishonoured cheques. Thus, there existed a dispute between the parties. Had the dispute between the parties been confined thereto only, the same had come to an end24. Appellant evidently has taken before us an inconsistent stand. If he was satisfied with the payment of the said demand drafts, he need not pursue the suit. It could have said so explicitly before the High Court. It cannot, therefore, be permitted to approbate and reprobate25. Section 8 of the 1996 Act is peremptory in nature. In a case where there exists an arbitration agreement, the court is under obligation to refer the parties to arbitration in terms of the arbitration agreement. [See Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503 and Rashtriya Ispat Nigam Limited (supra)] No issue, therefore, would remain to be decided in a suit. Existence of arbitration agreement is not disputed. The High Court, therefore, in our opinion, was right in referring the dispute between the parties to arbitration