ANIL S/O JAGANNATH RANA & ORS. Vs. RAJENDRA S/O RADHAKISHAN RANA & ORS.
Arbitration and Conciliation Act, 1996
Section 8 - Power to refer parties to arbitration where there is an arbitration agreement
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 11604 of 2014, Judgment Date: Dec 18, 2014
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11604 /2014
[Arising out of S.L.P. (Civil) No. 15314 of 2014]
Anil s/o Jagannath Rana and others ... Appellant (s)
Versus
Rajendra s/o Radhakishan Rana and others ... Respondent (s)
J U D G M E N T
KURIAN, J.:
Leave granted.
Once a judicial authority takes a decision under Section 8(1) of The
Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the
Act") declining to refer the dispute pending before it to arbitration and
the said decision having become final, whether either party to the
proceedings can thereafter invoke the jurisdiction of the Chief Justice
under Section 11(6) of the Act, is the question arising for consideration
in this case. The scope of Section 8(3) of the Act is also an ancillary
issue.
Appellants are defendant nos. 1, 2, 3 in Special Suit No. 211 of 2009 on
the file of Civil Judge Senior Division at Aurangabad, Maharashtra. The
suit is filed by a partnership firm, viz., M/s. Rana Sahebram Mannulal and
three others. The dispute mainly pertains to the partnership business.
Following are the reliefs claimed:
"A) The special civil suit of the plaintiffs may kindly be decreed with
costs;
B) The plaintiffs may kindly be declared as valid partners of the
registered partnership firm under the name and style M/s S.M. Rana (Rana
Sahebram Mannulal) and further it also may kindly be declared that, the
plaintiffs are the owners and possessors of the land gut no. 240 situated
at Dahegaon Tq. Gangapur to the extent of 81R and the land gut No. 237 to
the extent of 5H. 85R. situated at Dahegaon Tq. Gangapur dist. Aurangabad
and the land gut no. 97/2 admeasuring 1 Acre 34R. situated at Shranapur Tq.
and Dist. Aurangabad and Gut No. 121 admeasuring 1H. 14R. situated at
village Tisgaon Tq. and Dist. Aurangabad and the Plot No. 12 out of the
land Gut No. 17/2 admeasuring 5.30R. situated at Garkheda Tq. and Dist.
Aurangabad and it may also be further declared the said property belongs to
the partnership firm and the plaintiffs are the owners and possessors of
the said property being the valid partners of the registered firm and it
may also be declared that the plaintiffs are the owners of their respective
shares in the said properties.
C) It may kindly be declared that the registered sale deeds dated
1.8.2007 executed by defendant no.1 in favour of defendant no.2 in respect
of land gut no.240 to the extent of 81R. situated at village Dahegaon Tq.
Gangapur Dist. Aurangabad bearing registration Nos.3942/2007 and the
registered sale deed dated 6.9.2007 bearing registration No.4506/2007 in
respect of land gut no.237 to the extent of 2H. 82R, situated at village
Dahegaon Tq. Gangapur Dist. Aurangabad executed by defendant no.1 in favour
of defendant no.7 and the registered sale deed dated 30.7.2007 bearing
registration no.4318/2007 executed by defendant no.2 in favour of defendant
no.1 in respect of land gut no.97/2 to the extent of 20R. situated at
Sharanapur Tq. and Dist. Aurangabad, are null void, ab-initio and not
binding upon the plaintiffs.
D) It may kindly be declared that the property purchased by the
defendant no.4 bearing land gut no.17/2 out of it plot no.1 admeasuring
584.36 sq.mtrs. Situated at Garkheda, Tq. and Dist. Aurangabad and the land
gut no.186 admeasuring 12A. 7G. purchased in the name of defendant no.4 by
defendant no.1 situated at Dahegaon Tq. Gangapur Dist. Aurangabad and the
land Gut No.56 in the name of defendant no.3 to the extent of 25R and
defendant no.5 to the extent of 25R. situated at Sharanapur Tq. and Dist.
Aurangabad and the land gut no.213 admeasuring 35R purchased in the name of
defendant no.3, under registered sale deed no.1781 dated 25.4.2007 situated
at Dahegaon Tq. Gangapur Dist. Aurangabad and the land gut no.185 to the
extent of 4A, 15G purchased in the name of plaintiff no.1 and defendant
no.1 to the extent of 4A, 15G, situated at Dahegaon Tq. Gangapur Dist.
Aurangabad and the land gut no.167/2 purchased in the name of defendant
no.167/2 purchased in the name of defendant no.5 admeasuring 8A. 22G,
situated at Daheaon Tq. Gangapur Dist. Aurangabad, and the land Gut No. 6
purchased in the name of defendant no.5 admeasuring 6A, situated at
Rahimpur Tq. and Dist. Aurangabad and the land plot No.16 admeasuring 419
sq. mtrs. Situated at Mustafabad Tq. and Dist. Aurangabad purchased in the
name of defendant no.4 is the property of partnership firm. As the said
properties are purchased from the nexus and income of the partnership firm
and therefore, it may kindly be declared that, the said properties
belonging to the partnership firm i.e. M/s S.M. Rana (Rana Sahebram
Mannulal).
E) The defendants no. 1 to 7 may kindly be restrained permanently from
alienating and creating the third party interest over the suit properties
by issue of perpetual injunction against the defendants no.1 to 7 their
servants, their relatives, their agents or who so ever claims on their
behalf permanently.
F) The profit from the whole sale kerosene business run through the
partnership firm M/s S.M. Rana (Rana Sahebram Mannulal) pursuant to the
whole sale kerosene dealers license no.20/88 may kindly be recovered from
the defendant nos.1, 2 and 3 from last three years with 18% interest per
annum and it may be awarded to the plaintiffs from the defendant nos. 1, 2
and 3.
G) Any other suitable and equitable relief may kindly be granted in
favour of the plaintiffs."
.
The defendants/appellants had filed an application under Section 9A of the
Code of Civil Procedure, 1908[1] (hereinafter referred to as "the CPC"), as
applicable to the State of Maharashtra, to dismiss the suit for want of
jurisdiction since the partnership deed contained a provision for
arbitration and hence the disputes were liable to be resolved in terms of
the Act. In other words, application filed by defendants, in essence, was
to be treated as an application under Section 8(1) of the Act. The same was
opposed by the plaintiff. The trial court upheld the objection and held
that it was within the jurisdiction of the court to try the dispute and,
therefore, it was not required under law to refer the same to arbitration.
The suit proceeded. The parties have examined all their witnesses.
While so, the respondents herein approached the Chief Justice of the High
Court of Judicature at Bombay in Arbitration Application No. 12/2013 under
Section 11(6) of the Act seeking appointment of an arbitrator as per the
terms of the partnership deed. At paragraph-4 of the application, it is
stated as follows:
"4. The applicants further states and submits that, as per clause 6 of
the Partnership deed dated 13.12.2008 marked and annexed as Exhibit-B, it
was decided between the partners that if any dispute shall arise between
them in respect of the conduct of the business of partnership or in respect
of the interpretation, operation or enforcement of any of the terms and
conditions of the deed in respect of any other matter, cause or thing
whatsoever, the same shall be referred to the arbitration of the person
appointed by the partners whose decision shall be final and binding on all
parties and legal representatives."
And further at paragraph-9 of the application, it is stated as follows:
"9. The applicant has not filed any other petition, application or other
proceedings before this Hon'ble Court or before the Hon'ble Supreme Court
of India, except the present one touching the subject matter of this
Arbitration Application. However, the applicants deems it necessary to
disclose that applicants have filed one civil suit for declaration and for
other reliefs before the learned Civil Judge Junior Division Aurangabad
bearing Regular Civil Suit No.2014/2012 having old special civil suit
No.211/2009 which is still pending for adjudication. However, the subject
mater of the suit involves some third parties also and therefore that would
not be an impediment to allow the present application for appointment of
the sole arbitrator. The applicant craves leave and liberty to file the
copy of the plaint as and when necessary."
The appellants herein opposed the payer. To quote:
"7. The respondents no.1 to 3 humbly submit that from 2009 the parties
are prosecuting the said spl. C.S. No.211/09 (now RCS No. 2014/2012) filed
by applicants/petitioners herein and in fact the evidence on their part
i.e. plaintiffs is closed long back and the evidence of defendants is going
on and rather the defendants are on the verge of closing their evidence
after most probably examining another few witnesses.
8. The respondents no.1 to 3 state that the present application u/s 11
of the said Arbitration Act filed by the applicants is nothing but to
either delay or overcome the proceedings in the suit pending between the
parties.
9. The respondents no.1 to 3 humbly submit that in fact the applicants
have waived their right of invoking the arbitration clause the moment they
opposed the application filed by this answering respondent in the said
suit."
The High Court, as per the impugned order, ignored the objection and held
as follows:
"4. Sub-section (3) of Section 8 of the Act does not preclude appointment
of arbitration during course of litigation pursuant to agreement. Taking
into account sub-section (3) of Section 8 and Section 11 of the Arbitration
and Conciliation Act, 1996, it would be expedient that pursuant to clause 6
of the partnership deed, a proper person be appointed as arbitrator to
entertain dispute between the parties."
Heard learned Counsel appearing for both the parties.
The facts as narrated by us herein before would show that the application
filed by the respondents herein under Section 11 of the Act is nothing but
an abuse of process. The partnership firm itself is the first plaintiff in
the suit. The dispute between the parties is the subject of the suit.
Precisely for that reason, the appellants sought the matter to be referred
to the arbitrator. That was opposed by the respondents. When the suit is at
the final stage, the respondents have sought appointment of an arbitrator
under Section 11(6) of the Act. Having approached the civil court and
having opposed the reference to arbitration under Section 8(1) of the Act
and the decision of the court in that regard having become final, the
respondents cannot invoke jurisdiction under Section 11(6) of the Act; it
is hit by the principle of issue estoppel.
There is yet another angle to the issue. Section 8 of the Act reads as
follows:
"8. Power to refer parties to arbitration where there is an arbitration
agreement.-(1) A judicial authority before which an action is brought in a
matter which is the subject of an arbitration agreement shall, if a party
so applies not later than when submitting his first statement on the
substance of the dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained
unless it is accompanied by the original arbitration agreement or a duly
certified copy thereof.
(3) Notwithstanding that an application has been made under sub-section (1)
and that the issue is pending before the judicial authority, an arbitration
may be commenced or continued and an arbitral award made."
Under Section 8(1) of the Act, either party is free to apply to the
judicial authority within the prescribed time to refer the parties to
arbitration, in case the matter pending before it is the subject matter of
an arbitration agreement. Section 8(3) of the Act however makes it clear
that notwithstanding the application under Section 8(1) of the Act and the
issue pending before the judicial authority, arbitration may be commenced
or continued and an arbitral award can also be made. In other words,
despite the pendency of an application under Section 8(1) of the Act before
the judicial authority, Section 8(3) of the Act permits the parties to
commence and continue the arbitration and the arbitral tribunal is free to
pass an award. That alone is what is contemplated under Section 8(3) of the
Act.
In the suit instituted by the firm and some of the respondents, the order
passed by the civil court that it was well within its jurisdiction to try
the suit, despite the objection regarding the existence of a clause for
arbitration, has become final. Thereafter, Section 11(6) jurisdiction of
the Chief Justice cannot be invoked by either party. The principle of res
judicata will also be attracted in such a case.
In Satyadhyan Ghosal and others v. Deorajin Debi (Smt.) and another[2],
this principle was discussed in detail and it has been settled as follows.
To quote:
"7. The principle of res judicata is based on the need of giving a finality
to judicial decisions. What it says is that once a res is judicata, it
shall not be adjudged again. Primarily it applies as between past
litigation and future litigation. When a matter - whether on a question of
fact or a question of law - has been decided between two parties in one
suit or proceeding and the decision is final, either because no appeal was
taken to a higher court or because the appeal was dismissed, or no appeal
lies, neither party will be allowed in a future suit or proceeding between
the same parties to canvass the matter again. This principle of res
judicata is embodied in relation to suits in Section 11 of the Code of
Civil Procedure; but even where Section 11 does not apply, the principle of
res judicata has been applied by courts for the purpose of achieving
finality in litigation. The result of this is that the original court as
well as any higher court must in any future litigation proceed on the basis
that the previous decision was correct.
8. The principle of res judicata applies also as between two stages in the
same litigation to this extent that a court, whether the trial court or a
higher court having at an earlier stage decided a matter in one way will
not allow the parties to re-agitate the matter again at a subsequent stage
of the same proceedings. ..."
In Hope Plantations Ltd. v. Taluk Land Board, Peermade and another[3], it
was held that the general principle underlying the doctrine of res judicata
is ultimately based on considerations of public policy. One important
consideration of public policy is that the decisions pronounced by courts
of competent jurisdiction should be final, unless they are modified or
reversed by appellate authorities; and the other principle is that no one
should be made to face the same kind of litigation twice over, because such
a process would be contrary to considerations of fair play and justice.
The principles as discussed above on res judicata have been consistently
followed by this Court. And the recent judgments in that regard are in Dr.
Subramanian Swamy v. State of Tamil Nadu and others[4] and in Surjit Singh
and others v. Gurwant Kaur and others[5]. Thus, once the judicial authority
takes a decision not to refer the parties to arbitration, and the said
decision having become final, thereafter Section 11(6) route before the
Chief Justice is not available to either party.
With great respect, the designated Judge has gone wholly wrong in passing
the order under Section 11 of the Act when the civil court is in seisin of
the dispute and where arbitration has already been declined by the said
court.
The impugned order is hence set aside. The appeal is allowed with costs of
Rs.25,000/-.
........................... J.
(ANIL R. DAVE)
............................J.
(KURIAN JOSEPH)
New Delhi;
December 18, 2014.
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[1] "9A. Whereof the hearing of application relating to interim relief
in a suit, objection to jurisdiction is taken such issue to be decided by
the court as a preliminary issue.-(1) Notwithstanding anything contained in
this Code or any other law for the time being in force, if at the hearing
of any application for granting or setting aside an order granting any
interim relief, whether by way of stay, injunction, appointment of a
receiver or otherwise, made in any suit, an objection to jurisdiction of
the Court to entertain such suit is taken by any of the parties to the
suit, the Court shall proceed to determine at the hearing of such
application the issue as to the jurisdiction as a preliminary issue before
granting or setting aside the order granting the interim relief. Any such
application shall be heard and disposed of by the Court as expeditiously as
possible and shall not in any case be adjourned to the hearing of the suit.
(2) Notwithstanding anything contained in sub-section (1), at the
hearing of any such application, the Court may grant such interim relief as
it may consider necessary, pending determination by it of the preliminary
issue as to the jurisdiction".
[2] AIR 1960 SC 941
[3] (1999) 5 SCC 590
[4] (2014) 5 SCC 75
[5] 2014 (9) SCALE 768
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