M/S. SUNDARAM FINANCE LIMITED AND ANOTHER versus T. THANKAM
[2015] 2 S.C.R. 228, Supreme Court of India, 2015
Outcome: Disposed off
Segment: Ratio
[2015] 2 S.C.R. 228 
A 
M/S. SUNDARAM FINANCE LIMITED AND ANOTHER 
v. 
T THANKAM 
(Civil Appeal No. 2079 of 2015) 
FEBRUARY 20, 2015 
B 
[M.Y. EQBAL AND KURIAN JOSEPH, JJ.] 
Arbitration and Conciliation Act, 1996 -
s. 8 -
Application under - Maintainability of - Pending suit for 
injunction, application uls. 8 seeking the direction of the 
C case to the arbitral tribunal on the ground that in view of 
the arbitration agreement, the suit was not maintainable -
Courts below rejected the plea - On appeal, held: If a party 
approaches a civil court ignoring the arbitration clause and 
another party moves the court for referring the matter for 
D arbitration, it is obligatory for the court to refer the parties 
for arbitration - Trial Court directed to pass fresh orders 
on the application. 
Maxim -
'generalia specialibus non derogant' -
E Applicability of. 
Disposing of the appeal, the Court 
HELD: 1. Once there is an agreement between the 
parties to refer the disputes or differences arising out of 
F the agreement to arbitration, and in case either party, 
ignoring the terms of the agreement, approaches the civil 
court and the other party, in terms of the Section 8 of the 
Arbitration Act, moves the court for referring the parties 
to arbitration before the first statement on the substance 
G ofthe dispute is filed, in view of the peremptory language 
of Section 8 of the Arbitration Act, it is obligatory for the 
court to refer the parties to arbitration in terms of the
aHreement. [Para 10] [232-G-H; 233-A] 
H 
228
MIS. SUNDARAM FINANCE LIMITED v. T. THAN KAM 
229 
2. Once an application in due compliance of A 
Section 8 of the Arbitration Act is filed, the approach of 
the civil court should be not to see whether the court 
has jurisdiction. Once it is brought to the notice of the 
court that its jurisdiction has been taken away in terms 
of the procedure prescribed under a special statue, the B 
civil court should first see w~ether there is ouster of 
jurisdiction in terms or ce>mpliance of the procedure 
under the special statute. The general law should yield 
to the special law - generalia specialibus non derogant. 
The trial court is directed to pass fresh orders on the c 
application filed by the appellant-defendant u/s 8 of the 
Arbitration Act. [Paras 15 and 16] [235-C-D, F-G] 
P Anand Gajapathi Raju and Ors. v. P VG. Raju (Dead) 
and Ors. 2000 (2) SCR 684 = 2000 (4) SCC 539; Hindustan 
Petroleum Corporation Limited v. Pinkcity Midway D 
Petroleums2009 (14) SCR 815 = 2003 (6) SCC 503; Branch 
Manager, Magma Leasing and Finance Limited and Anr. v. 
Potluri Madhvilata and Anr. (2009) 10 SCC 103; Sukanya 
Holdings (P) Limited v. Jayesh Pandya and Anr. 2003 
(3) SCR 558 = (2003) 5 SCC 531 - relied on. 
E 
Orix Auto Finance (India) Limited v. Jagmander Singh 
and Anr. 2006 (2) SCR 169 = (2006) 2 SCC 598-referred 
to. 
Case Law Reference 
2000 (2) SCR 684 
relied on 
para 10 
2003 (6) sec 503 
relied on 
para 11 
2009 (14) SCR 815 
relied on 
para 12 
2003 (3) SCR 558 
relied on
para 13 
2006 (2) SCR 169 
referred to 
para 14 
F 
G 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 
2079 of 2015 
H
230 
SUPREME COURT REPORTS 
[2015] 2 S.C.R. 
A 
From the Judgment and Order dated 17.03.2014 of the 
High Court of Kerala at Ernakulam in Writ Petition (C) No. 
21076of2010 
Dhruv Mehta, Balaji Srinivasan, J. Thilak, Mayank 
8 
Kshirsagar, Anupam Dhruve, Vaishnavi Subrahmanya, Srishti 
Govil, Vaishali DixitfortheAppellants. 
c 
D 
The Judgment of the Court was delivered by 
KURIAN, J. 1. Leave granted. 
2. Once an_ application is duly filed in terms of Section 8 
of The Arbitration and Conciliation Act, 1996 (hereinafter 
referred to as 'Arbitration Act') before the civil court, what 
should be the approach of the court, is the short question arising 
for consideration in this case. 
3. 
In a suit for injunction filed by the respondent, the prayer 
made was to restrain the first and second defendant institutions 
and their men from illegally taking away from the possession 
of plaintiff or her employee, or interfering with the use and 
E enjoyment of ambassador or causing damage to the car 
bearing registration number KL-11-AA-1473 in the ownership 
and possession of the plaintiff by way of a decree of injunction. 
The car was purchased on loan granted by the appellant. 
4. 
Duly complying with the procedure under Section 8 of 
F the Arbitration Act, the appellant filed an application bringing 
to the notice of the trial court that in view of the agreement for 
arbitration between the parties regarding resolution of the 
disputes, the court did not have jurisdiction to try
the case and 
the parties were to be directed to the process of arbitration in 
G terms of the agreement. The trial court, by order dated 
21.06.2010, declined the relief holding that: 
" ... Even though clause 22 of the Ext.A 1 agreement 
provides that of disputes should be referred to 
H 
arbitration this will not prevent the plaintiff from
MIS. SUNDARAM FINANCE LIMITED v. T. THAN KAM 
231 
[KURIAN, J.] 
approaching this court especially when one of the 
A 
parties to the agreement are trying to commit an 
act opposed to public policy and per se illegal. The 
arbitration clause in the agreement cannot be put 
forward as a shield when one of the parties to the 
agreement commit an act opposed to public policy. 
B 
In such circumstances the plaintiff can seek 
protection under the common civil law. In this matter 
what the respondent alleged that the petitioners are 
trying to take forcible possession of the vehicle 
which is being run by her. Her relief sought for in 
C 
the plaint is only against the illegal acts of the 
defendants. The apprehended acts of the plaintiff 
are against the public policy and per se illegal and 
hence this suit is maintainable .... " 
5. 
The appellant pursued the matter before the High 
Court. By the impugned order dated 17.03.2014, it was held 
as follows: 
" ... Going by Section 8 of the Arbitration and 
Conciliation Act, I am of the opinion that mere 
inclusion of an arbitration clause in the agreement 
does not bar or cause to oust the jurisdiction of the 
civil court provided under Section 9 of the Code of 
Civil Procedure. The above view is further 
supported by Section 5 of the Arbitration and 
Conciliation Act, which says that "in the matters 
governed by first part of the Arbitration and 
Conciliation Act, no judicial authority shall intervene 
except where so provided in
the first part". It mean~ 
that jurisdiction of the Civil Court is not completely 
ousted by Section 8 of the Arbitration and 
Conciliation Act. Section 5 of the Arbitration and 
Conciliation Act does not bar the exercise of 
general power of the civil court to grant interim relief 
including specific injunctive relief under Order 
D 
E 
F 
G 
H
232 
SUPREME COURT REPORTS 
[2015) 2 S.C.R. 
A 
XXXIX of the CPC and the Specific Relif Act. ... " 
B 
c 
D 
E 
F 
G 
6. Aggrieved, the appeal. 
7. Heard the learned counsel appearing for the appellants. 
None appeared for the respondent. 
8. Two clauses of Annexure-P1-Loan Agreement between 
the parties, executed on 29.06.1997, are relevant for the 
consideration of the disputes. Clause 14.6 reads as follows: 
"14.6. Notwithstanding anything contained in this 
Agreement, the Lender shall be entitled to reposess 
the hypothecated Asset, whether the entire Loan 
Amount has been recalled or not, whenever, in the 
absolute discretion of the Lender, there is likelihood 
of the dues of the Lender not being paid by the 
borrower and or/the Asset is likely to be transferred 
by the Borrower to defeat the security and or payment 
of the due any units of the Lender." 
9. Clause 22(a), as to the extent relevant, reads as follows: 
"22. (a) All disputes, differences of any claim arising 
out of this Agreement whether during its subsistence 
or thereafter shall be settled by arbitration in 
accordance with the provisions of the Arbitration and 
Conciliation Act, 1996, or any statutory amendments 
thereof and shall be referred to the sole Arbitration of 
an Arbitrator nominated by the Managing Director/ 
Joint Managing Director of the Lender. The award 
given by such an Arbitrator shall be final and binding 
or.i the Borrower to the agreement." 
10. Once there is an agreement between the
parties to 
refer the disputes or differences arising out of the agreement 
to arbitration, and in case either party, ignoring the terms of 
the agreement, approaches the civil court and the other party, 
H in terms of the Section 8 of the Arbitration Act, moves the court
M/S. SUNDARAM FINANCE LIMITED v. T. THAN KAM 
233 
[KURIAN, J.] 
for referring the parties to arbitration before the first statement A 
on the substance of the dispute is filed, in view of the 
peremptory language of Section 8 of the Arbitration Act, it is 
obligatory for the court to refer the parties to arbitration in terms 
of the agreement, as held by this Court in P. Anand Gajapathi 
Raju and others v. P.V.G. Raju (Dead) and others 1. 
B 
11. The position was further explained in Hindustan 
Petroleum Corporation Limited v. Pinkcity Midway 
Petroleums2. To quote: 
"14. This Court in the case of P Anand Gajapathi Raju 
C 
v. P VG Raju has held that the language of Section 8 is 
peremptory in nature. Therefore, in cases 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 
o 
in the original action after such an application is made 
except to refer the dispute to an arbitrator. Therefore, it 
is clear that if, as contended by a party in an agreement 
between the parties before the civil court, there is a clause 
for arbitration, it is mandatory for the civil court to refer 
E 
the dispute to an arbitrator. In the instant case the 
existence .of an arbitral clause in the Agreement is 
accepted by both the parties as also by the courts below 
but the applicability thereof is disputed by the respondent 
and the said dispute is
accepted by the courts below. 
F 
Be that as it may, at the cost of repetition, we may again 
state that the existence of the arbitration clause is 
admitted. If that be so, in view of the mandatory language 
of Section 8 of the Act, the courts below ought to have 
referred the dispute to arbitration." 
G 
12. In Branch Manager, Magma Leasing and Finance 
Limited and another v. Potluri Madhvilata and another3, 
1 (2000) 4 sec 539 
2 (2003J 6 sec 503 
, (2009) 1 o sec 103 
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234 
SUPREME COURT REPORTS 
[2015] 2 S.C.R. 
A the position has been restated holding that no option is left to 
the court, once the pre-requisite conditions of Section 8 are 
fully satisfied. 
13. The attempt of the trial court and the approach made 
by the high court in bifurcating the cause of action, is fallacious. 
8 
It would only lead to delaying and complicating the process. 
c 
D 
E 
F 
G 
The said issue is also no more res integra. In Sukanya 
Holdings (P) Limited v. Jayesh Pandya and another4 at 
paragraphs-16 and 17, it was held as follows: 
"16. 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 oftheAct. 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 of 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 subject-matter of an action brought 
before a judicial authority is not allowed. 
"17. Secondly, such bifurcation of suit
in two parts, one 
to be decided bytheArbitral Tribunal and the 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." 
H • (2003) s sec 531
M/S. SUNDARAM FINANCE LIMITED v. T. THANKAM 
235 
[KURIAN, J.] 
14. In Orix Auto Finance (India) Limited v. Jagmander A 
Singh and another5, referring to public policy, this Court has 
taken the view that if agreements permit the financer to take 
possession of the finances vehicles, there is no legal 
impediment on such possession being taken, unless the 
contract is held to be unconscionable or opposed to public B 
policy". 
15. Once an application in due compliance of Section 8 
of the Arbitration Act is filed, the approach of the civil court 
should be not to see whether the court has jurisdiction. It should C 
be to see whether its jurisdiction has been ousted. There is a 
lot of difference between the two approaches. Once it is brought 
to the notice of the court that its jurisdiction has been taken 
away in terms of the procedure prescribed under a special 
statue, the civil court should first see whether there is ouster of 0 
jurisdiction in terms or compliance of the procedure under the 
special statute. The general law should yield to the special law 
- generalia specialibus non derogant. In such a situation, the 
approach shall not be to see whether there is still jurisdiction 
in the civil court under the general law. Such approaches would 
E 
only delay the resolution of disputes and complicate the 
redressal of grievance and of course unnecessarily increase 
the pendency in the court. 
16. The order dated 21.06.2010 passed by the trial court 
and order dated
17.03.2014 passed by the High Court, are F 
set aside. The trial court is directed to pass fresh orders on 
the application filed by the appellant-defendant under Section 
8 of the Arbitration Act. The needful shall be done within a period 
of two months from the date of receipt of this order. 
17. The appeal is disposed of as above. There shall be 
no order as to costs. 
Kalpana K. Tripathy 
Appeal disposed of. 
' (2006J 2 sec 598 
G 
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