Mrs. Hema Khattar & Anr vs Mr. Shiv Khera

14) From the facts of this case, we find that a suit was filed for declarations, permanent injunction and recovery of money by the appellants stating that a meeting was held in between the parties in which it was decided that appellant No. 1 would no longer be the contractor and the agreement dated 06.06.2009 would stand terminated by mutual consent and the construction would be carried out by the sub-contractors to be appointed as per the suggestions of appellant No.2, who would supervise the same but without any profit/remuneration as per the oral agreement. The respondent agreed to make all payments towards purchase of material, construction, fee of architect etc. Appellant No. 2 incurred an amount of Rs. 45 lakhs for and on behalf of the respondent which is sought to be recovered under this suit. The appellants also claimed a declaration to the effect that the agreement dated 06.06.2009 between appellant No. 1 and the respondent was obtained by fraud and mis-representation, hence, it is null and void. Another declaration sought for in the suit was that the agreement dated 06.06.2009 stood terminated by mutual consent. A decree for injunction is also sought for restraining the respondent from initiating and carrying on any proceeding arising out of and on the basis of agreement dated 06.06.2009 between appellant No. 1 and the respondent. On the other hand, the respondent took the preliminary objection that the suit is bad for misjoinder of parties and causes of action and further that the arbitration proceedings initiated by the respondent, in terms of the arbitration clause, is pending adjudication before the Arbitral Tribunal.

15) Admittedly, the cause of action for recovery of Rs. 45 lakhs claimed in the present suit is the expenditure alleged to have been incurred by appellant No. 2 pursuant to the oral agreement he claims he had with the respondent sometime in April, 2011. On the other hand, the cause of action with respect to reliefs of declarations and injunction is the agreement dated 06.06.2009. The alleged agreement dated 06.06.2009 was, admittedly, between the appellant No. 1 and the respondent to which appellant No. 2 was only a witness, which as per the terms of the plaint terminated later on by mutual agreement between the appellant No. 1 and the respondent. At this stage, it was agreed orally that appellant No. 2, who is the husband of appellant No. 1, would take over the execution of the pending works. Admittedly, Appellant No. 1 is not a party to the alleged oral agreement between Appellant No. 2 and the respondent for supervision of the construction by him.

17) Learned single Judge of the High Court, vide order dated 17.09.2012, directed the parties to elect as to whether they want the suit to be treated as a suit for recovery of money by appellant No. 2 against the respondent or a suit for declarations and injunction by appellant No. 1 against the respondent and to amend the plaint accordingly. Learned single Judge, after taking a considered view that the suit is bad for misjoinder of parties and/or misjoinder of causes of action, held that the application filed by the defendant under Section 8 of the Act would be disposed of only after the appellants make an election in terms of this order. The appellants herein, instead of amending the plaint, went in appeal before the division bench, which got dismissed vide order dated 28.09.2012.

section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”

27) In view of the above, we are of the considered opinion that in the present case, the prerequisites for an application under Section 8 are fulfilled, viz., there is an arbitration agreement; the party to the agreement brings an action in the court against the other party; the subject matter of the action is the same as the subject-matter of the arbitration agreement; and the other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. We have come to the conclusion that the civil court had no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for arbitration. In such a situation, refusal to refer the dispute to arbitration would amount to failure of justice as also causing irreparable injury to the defendant.

29) In view of the foregoing discussion, the appeal succeeds and is allowed. However, instead of remitting the matter back to the learned single Judge for deciding the suit itself on merits, we refer the disputes raised by the appellants in CS(OS) 1532 of 2012 to the sole arbitrator already appointed, viz., Hon’ble Mr. Justice V.K. Gupta (Retd.) and request the arbitrator to decide the disputes expeditiously in accordance with law.

APRIL 10, 2017.