Broadly but briefly, the relevant facts germane for the disposal of this application would run thus:
(i) The plaintiff filed the suit seeking the following reliefs:
- For judgment and decree against the defendants jointly and severally;
(a) for a sum of Rs.1,02,56,635.42 together with interest at 24% per annum from this date till the date of realisation in full; and
(b) for costs of the suit.
(ii) D1 after entering appearance, filed this application under
Section 8 of the Arbitration and Conciliation Act seeking the following relief:
- To direct the respondent/plaintiff to refer the disputes to arbitration.
(iii) Counter has been filed.
2. Heard both sides.
3. The point for consideration is as to whether the dispute involved in the suit should be referred to arbitration in view of clause 25 of Multimodal Transport Documents dated 13.09.2008 and 20.09.2008 read with
Section 26 of the Multimodal Transportation of Goods Act and
Section 8 of the Arbitration and Conciliation Act?
4. The parties are referred to hereunder according to their litigative status and ranking in the suit, for the sake of convenience.
5. Tour d'horizon of the learned counsel for the first defendant would run thus:
(1) A plain reading of the documents, viz., Multimodal Transport Documents dated 13.09.2008 and 20.09.2008 would exemplify and display, that if there is any dispute arising under the Multimodal Transport Documents, the same should be referred to arbitration. However, throwing to winds the said stipulation, the plaintiff has chosen to file this suit.
(2) The plaintiff in the pre suit notice dated 02.04.2009 elected to go for arbitration, but quite antithetical to the said election in going for arbitration, he has all in a sudden, holus-bolus filed this suit seeking the relief as set out supra.
(3) In fact, the pre suit notice found enclosed in the list of documents appended to the plaint is a cooked up one, because that notice was not at all sent by the plaintiff to D1, but some other notice was sent and in that alone, the plaintiff had elected to go for arbitration.
(4) The contention on the side of the plaintiff that D2 and D3 are not parties to the said Multimodal Transport Documents and therefore, this suit cannot be referred for arbitration is a misconceived one. Once the goods are entrusted for carrying through D1 and when it passes through (i) the transporter and (ii) D2 and ultimately to the hands of D3, the terms and conditions in the Multimodal Transport Documents also are deemed to have passed from one to the other and in such a case, the question of separating the subject matter of the dispute partly as arbitrable and partly as not arbitrable does not arise at all. He also cited various decisions on his side. Ultimately, he has prayed for referring the matter to arbitration.
6. By way of torpedoing and pulverising the arguments as put forth and set forth on the side of the applicant/D1, the learned counsel for the respondent/plaintiff argued the matter; the gist and kernel, the pith and marrow of them would run thus:
(1) This is a case, where, as per the arrangement/ agreement and contract, the goods were entrusted by the plaintiff to D1, who was expected to send them to his agent D2 in America through shipment and there, D2, the agent of D1 was expected to obtain the said nomenclatured Multimodal Transport Documents from D3, who was expected to pay the banker in USA the relevant consideration due under them and obtain the said Multimodal Transport Documents from the Bank, and whereupon, D2 was expected to hand over the goods to D3, but in this case, D2 without insisting upon or without receiving the said Multimodal Transport Documents from D3, simply released the goods in favour of D3; the Banker concerned in USA returned the said Multimodal Transport Documents to the plaintiff on the ground that no one paid the amounts under those documents and got them. Thereupon alone, this suit has been filed. If at all the said Multimodal Transport Documents were properly handed over by D3 to D2 and goods were obtained, then atleast there would be some substance in the contention of the learned counsel for the plaintiff that the terms and conditions in the said documents automatically passed on to D2 and D3 also, and that they are also bound by the arbitration clause.
(2) In fact, the so called Multimodal Transport documents in stricto sensu cannot be nomenclatured as such in view of
Section 2(k) of Multimodal Transportation of Goods Act, 1993, (for short M.T.G.Act) which is extracted hereunder:
"2(k) "multimodal transportation" maeans arriage of goods, by at least two different modes of transport under a multimodal transport contract, from the place of acceptance of the goods in India to a place of delivery of the goods outside India."
If at all more than one mode of transportation is contemplated, then only it could be nomenclatured so. In this connection, he would also cite the decision of the Hon'ble Apex Court reported in AIR 2008 SC 728 [Shipping Corporation of India Ltd. v. Bharat Earth Movers Ltd. and another].
(3) At the most, those documents could only be taken a 'Bills of lading' and unless those documents were handed over by one person to another person dealing with the goods concerned, the question of the terms and conditions in the Bills of landing passing on from one to another does not arise. A tortious act has been committed by the defendants and for which D1, D2 and D3 are liable and the clause 25 as found set out in the said Multimodal Transport Documents cannot be pressed into service.
7. Alternis visibus, the learned counsel for the plaintiff also would argue that even for argument sake without admitting that arbitration is contemplated, nonetheless, such a measure cannot be resorted to as the acts of defendants were fraudulent ones. Voluminous evidence also is required to be taken and in such a case, the question of referring the matter to arbitration does not arise. In this connection also, he would cite various decisions of the Hon'ble Apex Court. Accordingly, he prays for the dismissal of the application concerned.
8. At the outset, I would like to refer to Section 2k of the said M.T.G.Act which is extracted supra, coupled with the decision of the Hon'ble Apex Court reported in AIR 2008 SC 728 [cited supra], the relevant portion which is extracted hereunder:
"11. Before embarking on the questions raised before us, we at the outset may observe that the provisions of the Multimodal Transportation of Goods Act, 1993 whereto reference has been made by the parties before the High Court are not applicable as admittedly the mode of transport was by sea only and did not involve any multimodal transportation as defined in
Section 2(k) thereof."
(emphasis supplied) and they would clearly demonstrate and display that if only one mode of transport is contemplated as in this case, it cannot be termed as Multimodal Transportation. Consequently, those documents referred to supra also in stricto sensu cannot be termed as Multimodal Transport Documents.
9. Whereas, the learned counsel for D1 would submit that simply because in the said documents referred to supra only shipment is contemplated, which was at the time of preparation of those documents was in the mind of the parties concerned as per clause 9(m) of the said Act, it cannot be construed that only one mode of transport was contemplated for the transport of the goods involved in this case. I am at a loss to understand as to how such an argument on the side of D1 could be countenanced. One should go by the words found spelt out in black and white. As per the documents referred to supra, only transportation by shipp is contemplated and nothing more.
10. I recollect the maxim "Acta exteriora indicant interiora secreta : External acts indicate the secret mind." As such, here the parties concerned having chosen to put it in black and white in the documents referred to supra, that only one mode of transport was contemplated, it is too late in the day on the part of D1 to contend unconvincingly that simply because one mode was contemplated, it cannot be taken finally that only one mode, i.e., shipment alone was contemplated and not any other mode of transport.
11. As such, in view of my finding supra, I could on this ground itself hold that clause 25 of the Multimodal Transport Documents cannot be pressed into service.
12. I would also like to point out, that this a case where D2 and D3 prima facie committed a tortious act, namely, act of conversion. As per the arrangement, D2 was expected to demand for documents concerned, which D3 was expected to retrieve from the Bank in the USA after paying necessary amount and only thereafter, after receiving such documents from D3, D2 should have handed over the goods to D3. But the act of D2 and D3, exfacie and prima facie clearly tantamounts to conversion and in such a case, it would not lie in the mouth of D1 to contend that by virtue of clause contained in the documents concerned, when D2 and D3 also are bound by the terms and conditions contemplated therein. D1 being the principal of D2, is vicariously liable for such conversion of the goods. The learned counsel for the plaintiff also invited the attention of this Court to the copy of the correspondences available at page Nos.67, 73 and 149 and submitted that those communications would clearly show that D2 is the agent of D1 indubitably and undisputedly. At page No.67, the copy of communication sent by D1 to the plaintiff is found enclosed. At Page No.73, the copy of the communication sent by the plaintiff to D1 is found enclosed and at page No.149, the copy of the communication sent by D1 to the plaintiff if found enclosed. A mere reading of those correspondences would clearly show that D2 is the agent of D1. As such, in view of the ratiocination adhered to by me supra, the matter cannot be referred to arbitration.
13. The learned counsel for the plaintiff would submit that in view of the reasons set out by him above, at the most those documents could rightly be treated as Bills of lading. Even for that, the same ratiocination cited by him would be applicable, as without those Bills of lading, D2 parted with the goods and thereby indulged in conversion. In support of the same, he would cite the English decision reported in 1959 LLR Volume 2 P.114 [SZE HAI TONG BANK LTD. V. RAMBLER CYCE COMPANY LTD.], certain excerpts from it would run thus:
"pgs.119 & 120 .... In issuing delivery orders and in everything we do we act as agents of the Glen Line. It is an accepted fact that in absence of bills of lading goods are released on an indemnity. I agree we are supposed to deliver the goods on the bill of lading being produced o us. I agree that when we do not have the bill of lading produced we cover ourselves by getting an indemnity. [When it is] suggested to me [that] we get these indemnities because we know we are doing what we should not do I say that if no risk we would not need indemnity. I agree we get indemnity because we are doing something we know we should not do but it is common practice. It is an everyday occurrence .... We rely on the bank's guarantee.
.........
It is perfectly clear law that a ship owner who delivers without production of the bill of lading does so at his peril. The contract is to deliver, on production of the bill of lading, to the person entitled under the bill of lading. In this case it was "unto Order or his or their assigns", that is to say, to the order of the Rambler Cycle Company Ltd., if they had not assigned the bill of lading, or to their assigns, if they had. The shipping company did not deliver the goods to any such person. They are therefore liable for breach of contract unless there is some term in the bill of lading protecting them. And they delivered the goods, without production of the bill of lading, to a person who was not entitled to receive them. They are therefore liable in conversion unless likewise so protected."
(emphasis supplied)
14. The learned counsel for the plaintiff also relied on the decision reported in AIR 1988 CAL 283 [Nepal Food Corporation v. U.P.T. Import and Export Ltd.(PART) and another]; certain excerpts from it would run thus:
"33. The contention of Mr.Bachawatwas that the agent is liable for his wrongful acts even if there is an express authority. For this, he relied on the passage in Halsbury's Volume 1 (4th edition) para 846 which reads as follows:-
"Where a principal gives his agent express authority to do a particular act which is wrongful, or which necessarily results in a wrongful act, the principal is responsible, jointly and severally with the agent, to third persons for any loss or damages occasioned thereby."
34. In Bowstead on Agency (15th edition) it is stated as follows:
"Vicarious liability in the law of tort seems also to have a different basis from agency in contract. In contract the agent is not normally liable, and the effect of agency rules is in the majority of cases to establish the primary liability of the person with whom the third party intended to deal. But in tort the actual tort feasor is in principal liable, and the effect of vicarious liability is to add a defendant, often unknown to and uncontemplated by the victim; on one view its purpose is simply to find a defendant who can pay".
15. The learned counsel for the plaintiff further relied on the decision of the Bombay High Court reported in MANU/MH/0763/2009 [Global Trade Finance Ltd. v. Sudharshan Overseas Limited and Sanjeeve Malhotra, Indian Inhabitant], certain excerpts from it would run thus:
"8. The only question that arises for determination is whether in this case conditions of
Section 8 of the Arbitration and Conciliation act are satisfied or not. A bare perusal of the same would make it clear that the parties can be referred to arbitration only if all the conditions stipulated therein are satisfied. The matter which is before the judicial authority must be the subject matter of an Arbitration Agreement, secondly, the application should be made before the party making the same submits his first statement on the substance of the dispute and thirdly, the application should be accompanied by original arbitration agreement or a duly certified copy thereof. In the present case, the second and third condition may have been satisfied by Defendant No.1/Applicant but the first and most crucial condition cannot be said to be satisfied. The Supreme Court has termed these conditions as condition precedent. In all such cases, what must be looked into and considered is whether the subject matter of the Suit is covered by the arbitration agreement or not. In this behalf, a reference will have to be made to the plaint. In the plaint the Plaintiffs have set out as to how the facilities were extended on a request made by Defendant No.1. The nature of the request made, the documents executed and the facilities extended are referred to in paragraphs 1 to 17 of the plaint. It is also stated that Defendant No.2 executed in favour of the Plaintiffs a letter of guarantee, which is personal. He has guaranteed repayment of the monies lent and advanced by the Plaintiff to Defendant No.1 under various facilities.
13. It is not possible to accept those contentions for more than one reason. In the very decision relied upon by Mr.Narula viz. Rashtriya Ispat Nigam Limited and Anr. v. Nerma Transport Company MANU/SC/3491/2006 : (2006) 7 SCC page 275, the Hon'ble Supreme Court has observed that there is a clear departure from
Section 34 of the Arbitration Act of 1940 and
Section 8 of the 1996 Act.
Section 34 contemplated stay of the Suit whereas
Section 8 of the 1996 Act mandates a reference. Exercise of discretion by the Judicial Authority, which were the hallmark of
Section 34 of the Old 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 remains un-hambered by such pendency.
16. In Rashtriya Ispat (Supra) the Hon'ble Supreme Court distinguished "Sukanya" for the reason that in the facts and circumstances of "Rashtriya Ispat" all parties before the Supreme Court were parties to the arbitration agreement and the question in regard to the jurisdiction of the arbitrator was capable of being decided by the arbitrator himself in terms of
Section 16 of the Act.
20. ....5. Clause 1 of the Conditions of Carriage of the Bills of Lading reads as follows:
All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the law and arbitration clause, are herewith incorporated.
23. The two decisions of High Court of Madras and Delhi relied upon by Mr.Narula once again are distinguishable. Before the learned Judge of the Madras High Court, the submission was that the agreement creating charge refers to the loan agreement which contains an arbitration clause. The argument was that this clause must be deemed to be incorporated in the second agreement creating charge.
25. The mater before the learned Single Judge of Delhi High Court once again, must be seen in the light of the peculiar facts brought to its notice. The learned Single Judge referred to the arbitration clause contained in the carrier cargo sales Agent Agreement dated 20th October 2004 and thereafter, considered the undisputed factual position that the clause governs the Plaintiff and Defendant No.1. There, the application under
Section 8 was opposed on the ground that Defendant No.3 is is a party to the arbitration agreement between the Plaintiffs and defendant No.1 and the claim of the Plaintiffs against Defendant No.3 is independent, based on fraud and collusion between Defendant Nos. 1 and 3. (See paragraph 14 of this Judgement). However, after carefully perusing the plaint averments, the learned Judge concluded that the cause of action against both Defendant Nos. 1 and 2 and Defendant No.3 is common. Merely because the Plaintiff has alleged collusion between Defendant Nos. 1, 2 and 3 and made a reference of fraud and collusion between Defendants Nos. 1 and 3 does not mean that Defendant No.3 is sued in is independent capacity. In these peculiar facts, the learned Single Judge distinguished the judgment of the Hon'ble Supreme Court in Sukanya and made the observations in paragraph 23, which have been factual background of the case before the Delhi High Court. These observations c annot be said to have any general application. The Supreme Court's decision in "Sukanya" is binding upon me. Once, the case before me is that parties to the Suit and parties to the arbitration agreement are not common so also the cause of action against them being distinct and separate, there is no alternative but to hold hat the present application made by Defendant No.1 is not maintainable."
The aforesaid decisions would clearly and axiomatically support the contention of the plaintiff's arguments.
16. Whereas, the learned counsel for D1 would cite the decision of the English Court reported in [1947] A1.ER Vol.2 Pg.260 [Woolf v. Collis Removal Service], certain excerpts from it would run thus:
"H. The arbitration clause in the present case is, as to the subject matter of claims within its ambit, in the widest possible terms. That clause is not in terms limited to claims arising "under" the contract. It speaks simply of "claims." this, of course, does not mean that the term applies to claims of every imaginable kind. Claims which are entirely unrelated to the transaction covered by the contract would no doubt be excluded; but we are of opinion that, even if the claim in negligence is not a claim "under the contract," yet there is a sufficiently close connection between that claim and that transaction to bring the claim within the arbitration clause even though framed technically in tort. ....."
(emphasis supplied) Placing reliance on the same, the learned counsel for D1 would develop his argument that even the claims relating to tort also could be the subject matter of arbitration. The learned counsel for the plaintiff has correctly expounded and explained that the said decision is not applicable, because, in that case, the arbitration clause actually contemplated for such arbitration even though the dispute might arise out of some torts.
17. The learned counsel for D1 further relied on the following decisions:
(i) AIR 1984 SC 1072 [M/s Tarapore and Company v. Cochin Shipyard Ltd., Cochin and another], an excerpt from it would run thus:
"42. In Astro Vencedor Compania Naviera S.A. Of Panama v. Mabanaft G.M.B.H. The Diamianos (1971) 2 QB 588, a question arose whether a claim in tort would be covered by the arbitration clause? It was admitted that the claim for wrongful arrest is a claim in tort. And it was contended that a claim in tort cannot come within the arbitration clause. The Court of Appeal speaking through Lord Denning held that the claim in tort would be covered by the arbitration clause, if the claim or the issue has a sufficiently close connection with the claim under the contract."
(ii) Decision of the Hon'ble Apex Court reported in AIR 2001 SC 3381 [Owners and Parties interested in the Vessel M.V.Baltic Confidence and another v. State Trading Corporation of India Ltd., and another]. An excerpt from it would run thus:
"19. From the conspectus of the views expressed by Courts in England and also in India, it is clear that in condiering the question, whether the arbitration clause in Charter Party Agreement was incorporated by reference in the Bill of Lading: The principal question is, what was the intention of the parties to the Bill of Lading? For this purpose the primary document is the Bill of lading into which the arbitration clause in the Charter Party Agreement is to be read in the manner provided in the incorporation clause of the Bill of Lading. While ascertaining the intention of the parties attempt should be made to give meaning to the incorporation clause and to give effect to the same and not to invalidate or frustrate it giving a literal, pedantic and technical reading of the clause. If on a construction of the arbitration clause of the Charter Party Agreement as incorporated in the Bill of Lading, it does not lead to inconsistency or insensibility or absurdity then effect should be give to the intention of the parties and the arbitration clause as agreed should be made binding on parties to the Bill of Lading. If the parties to the Bill of Lading being aware of the arbitration clause in the Charter Party Agreement have specifically incorporated the same in the conditions of the Bill of Lading then the intention of the parties to abide by the arbitration clause is clear. Whether a particular dispute arising between the parties comes within the purview of he arbitration clause as incorporated in he Bill of Lading is a matter to be decided by the arbitrator or the Court. But that does not mean that despite incorporation of the arbitration clause in the Bill of Lading by specific reference the parties had not intended that the disputes arising on the Bill of Lading should be resolved by arbitrator.
(iii) Decision of this Court reported in 2009(4) CTC 569 [Sanco Trans Ltd., owning Sanco Line, No.46, Moore Street, Chennai 600 001 v. Addison & Co.Ltd., 803, Anna Salai, Chennai 2, rep. By Power Agent, United India Insurance Company Ltd., and two others]. An excerpt from it would run thus:
"18. In Owners and Parties Interested in the vessel M.V. Baltic Confidence and another v. State Trading Corporation of India Ltd. and another, AIR 2001 SC 3381, the Hon'ble Supreme Court considered the Arbitration clause with reference to the Bill of Lading in extenso and reiterated the legal position thus:
"19.From the conspectus of the views expressed by Courts in England and also in India, it is clear that in considering the question, whether the Arbitration clause in a Charter Party Agreement was incorporated by reference in the Bill of Lading, the principal question is, what was the intention of the parties to the Bill of Lading? For this purpose the primary document is the Bill of Lading into which the arbitration Clause in the Charter Party Agreement is to be read in the manner provided in the incorporation Clause of the Bill of Lading. While ascertaining the intention of the parties, attempt should be made to give meaning to the incorporation Clause and to give effect to the same and not to invalidate or frustrate it giving a literal, pedantic and technical reading of the clause. If on a construction of the Arbitration clause of the Charter Party Agreement as incorporated in the Bill of Lading it does not lead to inconsistency or insensibility or absurdity then effect should be given to the intention of the parties and the arbitration clause as agreed should be made binding on parties to the Bill of Lading. If the parties to the Bill of Lading being aware of the Arbitration clause in the Charter Party Agreement have specifically incorporated the same in the conditions of the Bill of Lading then the intention of the parties to abide by the Arbitration clause is clear. Whether a particular dispute arising between the parties comes within the purview of the Arbitration clause as incorporated in the Bill of Lading is a matter to be decided by the Arbitrator or the Court. Bt that does not mean that despite incorporation of the Arbitration clause in the Bill of Lading by specific reference the parties had not intended that the disputes arising on the Bill of Lading should be resolved by an Arbitration."
(iv) Decision of the Hon'ble Apex Court reported in 2002 AIR SCW 2480 [Pyrites, Phosphates and Chemicals Ltd., v. Sebilan Compania and another], an excerpt from it would run thus:
"4. Mr.Mukul Rohtagi, the learned Addl. Solicitor General has drawn our attention to the bill of lading the opening part of which specifically provides that "all terms and conditions of the relevant charter party are deemed to have been incorporated therein". Furthermore, one of the conditions of carriage as provided in the bill of lading further stipulates that all terms and conditions contained in the charter party would stand incorporated. Admittedly, clause 47 of he charter party contains an arbitration clause which provides that each party may appoint an arbitrator clause which provides that each party may appoint an arbitrator out of a panel of arbitrators maintained by the Indian Council of Arbitration and that the disputes between the parties will be settled according to the provisions of the arbitration agreement. The courts below overlooked this aspect and came to an incorrect decision. We are of he opinion that the was binding arbitration agreement between the parties."
(v) Decision of the Bombay High Court reported in AIR 1998 BOMBAY 118 [Bombay Gas Co. Ltd. v. Parmeshwar Mittal and others], an excerpt from it would run thus:
"13. Coming then to second ground of defence, the respondents have alleged that the petitioner has fabricated the record and, therefore, the dispute should not be referred to the Arbitrator. It is contended that the action of the respondents amounts to a criminal offence and such an issue cannot be referred to Arbitrator. The argument is without any merit. In the first place in view of the mandatory nature of S.8, the argument cannot be accepted. In any event, it is settled position of law that it is the person against whom fraud is alleged has an option to have the matter decided by the Civil Court. Merely because the respondents have made allegations of fabrication of record against the petitioner, the dispute cannot be taken out of arbitration."
(v) Decision of Hon'ble Apex Court reported in (1990) 3 SCC 481 [British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries], certain excerpts from it would run thus:
"11. It is a settled principle of Private International Law governing bills of lading that the consignee or an endorsee thereof derives the same rights and title in respect of the goods covered by the bill of lading as the shipper thereof had. For the purpose of jurisdiction the action of respondent 1 is an action in personam in Private International Law. An action in personam is an action brought against a person to compel him to do a particular thing. If clause 3 of the bills of lading is held to be binding on respondent 1 the choice of law by the parties would also be binding. English courts would perhaps use their own Private International Law to decide the dispute. In the event of the English court alone having the jurisdiction, the application of Indian statutes and the jurisdiction of the Indian courts would be, to that extent, inapplicable.
12. Until the Bills of Lading Act, 1855 was passed in England the endorsement of a bill of lading would not affect the contract evidenced in it, and the endorsee could not sue or be sued on such contract, though he was the person really interested in goods, he subject of the contract. By
Section 1 of the Bills of Lading Act, 1855, in England "every consignee of goods named in a bill of lading, and every endorsee of a bill of lading to whom the property of goods shall pass, upon or by reason of such consignment or endorsement shall have transferred to and vested in him all rights of suit and be subject to the same liabilities in respect of such goods as if the contract contained in the bills of lading had been made with himself." In Sewell v. Burdick it is held that
Section 1 is to be given effect in any proceeding in the English court regardless of the proper law governing the transfer of the bill of lading. The property passes by reason of consignment or endorsement and the right to sue passes with it. The consignee or endorsee may lose his right or liability under the Act by such further endorsement of the bill of lading as divests him of the property. Such a vesting of rights and liabilities on endorsement of a bill of lading does not in any way affect the shipowners' rights against the original shippers or owners of the goods for the freight or the shipper's rights under the bill of lading or the liability of the consignee or indorsee by reason of his being such consignee or indorsee, or of his receiving the goods in consequence of such consignment or indorsement, or any right of stoppage in transitu.
18. I would like to point out that there could be no quarrel over such propositions, but here what I would observe is that the clause containing arbitration itself would at the most bind the plaintiff and D1, and a dispute cannot be bifurcated and part of it be sent for arbitration and the remaining be retained by the Court. In support of his case, the learned counsel for the plaintiff relied on the following decisions of the Hon'ble Apex:
(i) (2003) 5 SCC 531 [Sukanya Holdings (P) Ltd., v. Jayesh H.Pandya and another], an excerpt from it would run thus:
"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 of the Act. 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."
(ii) (2007) 5 SCC 510 [India Household and Healthcare Ltd., v. LG Household and Healthcare Ltd.], an excerpt from it would run thus:
"3. The respondent, however, contends that the said agreement was preceded by a memorandum of understanding dated 1.11.2003. The respondent further contends that the said purported memorandum of understanding and licence agreement dated 8.5.2004 are vitiated by fraud of a very large magnitude fructified by a criminal conspiracy hatched between M/s.K.P.Jayram Pillai and Vijay R.Singh representing the petitioner and M/s.C.H. Kim and B.K. Jung representing the respondent. The petitioner company bribed the said C.H.Kim and B.K. Jung for the purpose of creation of the aforesaid documents They had already been convicted and sentenced to undergo imprisonment by the Korean Criminal Court. It was contended that they misused their official position to advance private benefit. There seems to be a substantial and reasonable nexus to promote personal advantage. There was furthermore no ostensible authority on their part to represent the company. The said memorandum of understanding also contravenes the Korean laws interms whereof the execution thereof required the prior approval of and a duly executed power of attorney from t he representative Director and the Chief Executive Officer of the respondent which did not exist in the present case."
A plain reading of those precedents would clearly support the case of the plaintiff.
19. To the risk of repetition, but without being tautologus I would like to point out that D2 and D3 are in no way in possession of the very two documents referred to supra and in such a case, it cannot be held that clauses contained therein also passed on to them so as to bind them. In such a case, D2 and D3 are beyond the said arbitration clause No.25. Here the suit is against all the three defendants claiming damages jointly and severally and in such a case, part of the subject matter of the suit cannot be severed and sent for arbitration and the remaining cannot be retained in this Court.
20. The learned counsel for D1 drawing the attention of this Court to the alleged pre suit notice two in number purported to have been sent by the plaintiff to the three defendants, would develop his argument that there is nothing to indicate as to what prompted allegedly to send on one and the same day two notices to all the three defendants herein concerned and that too in one of the notices sent to all the three parties, the plaintiff elected to get the matter referred to arbitration and in such a case, he cannot now back out, for which the learned counsel for the plaintiff would submit that while filing the plaint, erroneously he has not filed the copy of one other pre suit notice also and that it does not mean that the plaintiff deliberately burked the said one other notice.
21. According to the learned counsel for the plaintiff, in fact, in one of the two notices sent by the plaintiff, it had in mind that D1 alone is bound by arbitration clauses and hence, defensively the remedy of arbitration as well as civil remedies were jointly contemplated. Whereas, in the other notice, since D2 and D3 were not governed by the arbitration clause, that was not included in it.
22. Whereas, the learned counsel for D1 would pick holes in the arguments as put forth by the learned counsel for the plaintiff and point out that after having chosen to type the names of all the three defendants as the intended recipients of those notices, it is too late in the day on the part of the plaintiff to contend otherwise, as though one notice niggard arbitration clauses was sent to D2 and D3 and other notice containing arbitration clause was sent to D1 alone. No doubt, it requires evidence to be entertained and it is a contentious issue. I relegate it to be dealt with at the time of trial. As of now, the said point is not germane.
23. There is no estoppel against law. It is not the case of D1 that in response to the said pre suit notice which he received containing the arbitration remedy, it exercised his option to go for arbitration, but it has not chosen to give any reply at all till the filing of the suit. In such a case, the question of estoppel cannot be pressed into service at all by the first defendant.
24. Relating to the alternative argument as put forth by the learned counsel for the plaintiff that even for arguments sake it is taken that arbitration clause is applicable and binding on all, yet, in view of the fraud perpetrated by the defendants, the question of referring the matter to arbitration would not arise, I am of the considered view that in view of my findings supra, I need not deal with or dilate on that aspect.
25. At this juncture, the learned counsel for the plaintiff would cite the decision of the Hon'ble Apex Court, reported in MANU/SC/1758/2009 [N.Radhakrishnan v. Maestro Engineers and Others], certain excerpts from it would run thus:
"6. The appellant had cited a catena of judicial pronouncements to contend that when there is an express provision to that effect, the civil courts are bound to refer the matter to an Arbitrator in case of any disputes arising between the parties. The appellant had raised various issues relating to misappropriation of funds and malpractices on the part of the respondents and the allegations to that effect have been made in the notice sent to the respondents and the allegations to that effect have been made in the notice sent to the respondents and subsequently in its written statement filed before the civil court. The learned counsel for the respondents on the other hand argued that when a case involves substantial questions relating to facts where detailed material evidence (both documentary and oral) needed to be produced by either parties, and serious allegations pertaining to fraud and malpractices were raised, then the matter must be tried in court and the arbitrator could not be competent to deal with such matters which involved an elaborate production of evidence to establish the claims relating to fraud and criminal misappropriation.
7. In our opinion, the contention of the respondents relating to the jurisdiction of the Arbitrator to decide a dispute pertaining to a matter of this proportion should be held, in view of the facts and circumstances of the case. The High Court it its impugned judgment has rightly held that since the case relates to allegations of fraud and serious malpractice on the part of the respondents, such a situation can only be settled in court through furtherance of detailed evidence by either parties and such a situation ca not be properly gone into by the Arbitrator."
A perusal of the said judgment would show that if the nature of the case is such that voluminous evidence has to be entertained for the purpose of finding out the fraud, then even if there is arbitration clause, yet, the Court has to exercise its discretion not to refer the matter to arbitration.
26. The learned counsel for D1 would refer to the definition of 'Fraud' in the Treatise PC Markanda 'The Law of contract'. I am of the considered view, that in view of my finding supra that the very arbitration clause itself is not applicable as against D2 and D3, the question of considering the other aspects as to whether based on the gravity of the fraud etc., the matter is arbitrable or not need not be decided by this Court. Accordingly, I am of the considered view that this is not a matter which attracts
Section 8 of the Arbitration Act. In the result, this application is dismissed.
gms