Case: State of Orissa Vs.  Klockner and Company and Ors.

have found in favour of the first respondent 25. Now coming to Special Leave Petition (C) No. 19846 of 1995, this petition is filed against the judgment and order of the High Court of Orissa at Cuttack in First Appeal No. 14 of 1995 dated 12-5-1995. By the order under appeal, the High Court has reversed the order of the learned Subordinate Judge, Bhubaneswar dated 26-3-1994, by which the learned Subordinate Judge, accepting an application filed under Order 7 Rule 11 CPC, rejected the plaint in Title Suit No. 231 of 1992 filed by the first respondent in special leave petition. The learned Single Judge of the High Court while reversing the order of the learned Subordinate Judge observed as follows In the present case on a fair reading of the petition filed by Defendant 1 under Order 7 Rule 11 of CPC it is clear that the case of the applicant is that the plaintiff has no cause of action to file the suit. It is not specifically pleaded by the applicant that the plaint does not disclose any cause of action. The learned trial Judge has also not recorded any specific finding to this effect. From the discussions in the order it appears that the learned trial Judge has not maintained the distinction between the plea that there was no cause of action for the suit and the plea that the plaint does not disclose a cause of action. No specific reason or ground is stated in the order in support of the finding that the plaint is to be rejected under Order 7 Rule 11(a). From the averments in the plaint, it is clear that the plaintiff has pleaded a cause of action for filing the suit seeking the reliefs stated in it. That is not to say that the plaintiff has cause of action to file the suit for the reliefs sought that question is to be determined on the basis of materials (other than the plaint) which may be produced by the parties at appropriate stage in the suit. For the limited purpose of determining the question whether the suit is to be wiped out under Order 7 Rule 11(1) or not the averments in the plaint are only to be looked into. The position noted above is also clear from the petition filed by Defendant 1 under Order 7, Rule 11 in which the thrust of the case pleaded is that on the stipulations in the agreement of 20-4-1982 the plaintiff is not entitled to file a suit seeking any of the reliefs stated in the plaint 10. Coming to the question whether the plaint is to be rejected under clause (d) of Rule 11 of Order 7, the Supreme Court in the case of Orient Transport Co. (Orient Transport Co. v. Jaya Bharat Credit and Investment Co. Ltd., has clearly laid down that there is a distinction between a case in which the validity, effect and existence of the arbitration agreement is challenged and suit in which the validity of the contract which contains an arbitration clause is challenged. The bar to suit under Section 32 of the Arbitration Act extends to a case where the existence, effect or validity of an arbitration agreement is challenged and not to the latter type of the suit. On this question too the learned trial Judge has filed to maintain the distinction between the two types of cases. He has failed to notice that the case pleaded by the plaintiff is that the entire agreement including the arbitration clause is null and void and unenforceable and not that the arbitration agreement is null and void 11. From the lower court record in the case and also the records in a similar suit filed by the State of Orissa, Title Suit No. 152 of 1993 in which OMC Ltd. is a defendant, it appears that in both the cases Defendant 1 Klockner and Company filed applications under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961. Such application presupposes that the applicant accepts the position that the said Act applies to the case and the Arbitration Act, 1940 has no application to the case. Under the Foreign Awards Act, there is no specific provision for bar of suit. Further, from the averments in the application filed under Order 7 Rule 11 of CPC, it is clear that the main case pleaded by the applicant was that the parties had agreed that the Swiss law will be applicable to the contract as well as the Arbitration Agreement and the venue of arbitration will be at London and, therefore, the Indian law in general and the Arbitration Act in particular, have no application to the case. Alternatively the applicant has pleaded that even assuming that the Indian law of Arbitration applies to the case then the suit is barred under Section 32 of the Act. The learned trial Judge does not appear to have considered the main case pleaded by the applicant but disposed of the petition on consideration of the alternative case pleaded by it. Therefore this finding against bar of the suit under Order 7 Rule 11(d) is also vitiated 12. On the analysis and discussions in the foregoing paragraphs, it is my considered view that the order passed by the learned trial Judge rejecting the plaint under Order 7 Rule 11(a) of CPC is unsustainable and has to be set aside. Accordingly the appeal is allowed and the order dated 26-3-1994 of the Civil Judge (Senior Division) Bhubaneswar in Miscellaneous Case No. 75 of 1993 is set aside. There will be no order for costs of this Court. 26. After hearing the learned counsel on both sides and after carefully perusing the relevant pleadings, we do not think that the High Court has committed any error in rejecting the application of the appellant under Order 7 Rule 11. We accept the view taken by the High Court and consequently find no case for interference

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]17. A conjoint reading of the clauses extracted from ther Ordinance and the agreement between the State of Orissa and Tata Iron Steel Company will clearly show that the State of Orissa is thet of OMC Charge Chrome Division, taken over by the Government under Ordinance 8 of 1991. In view of this clear position, it is not possible to accept the contention of the learned Senior Counsel for the appellant that the State of Orissa has noting to do with the contract entered into between Klockner and Company and OMC in respect of which the former has initiated arbitration proceedings invoking Section 3 of the Foreign Awards Act11. From the lower court record in the case and also the records in a similar suit filed by the State of Orissa, Title Suit No. 152 of 1993 in which OMC Ltd. is a defendant, it appears that in both the cases Defendant 1 Klockner and Company filed applications under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961. Such application presupposes that the applicant accepts the position that the said Act applies to the case and the Arbitration Act, 1940 has no application to the case. Under the Foreign Awards Act, there is no specific provision for bar of suit. Further, from the averments in the application filed under Order 7 Rule 11 of CPC, it is clear that the main case pleaded by the applicant was that the parties had agreed that the Swiss law will be applicable to the contract as well as the Arbitration Agreement and the venue of arbitration will be at London and, therefore, the Indian law in general and the Arbitration Act in particular, have no application to the case. Alternatively the applicant has pleaded that even assuming that the Indian law of Arbitration applies to the case then the suit is barred under Section 32 of the Act. The learned trial Judge does not appear to have considered the main case pleaded by the applicant but disposed of the petition on consideration of the alternative case pleaded by it. Therefore this finding against bar of the suit under Order 7 Rule 11(d) is also vitiated12. On the analysis and discussions in the foregoing paragraphs, it is my considered view that the order passed by the learned trial Judge rejecting the plaint under Order 7 Rule 11(a) of CPC is unsustainable and has to be set aside. Accordingly the appeal is allowed and the order dated4 of the Civil Judge (Senior Division) Bhubaneswar in Miscellaneous Case No. 75 of 1993 is set aside. There will be no order for costs of this Court26. After hearing the learned counsel on both sides and after carefully perusing the relevant pleadings, we do not think that the High Court has committed any error in rejecting the application of the appellant under Order 7 Rule 11. We accept the view taken by the High Court and consequently find no case for interference