1. This petition under Articles 226 and 227 of the Constitution of India is filed by petitioners-original defendant Nos.1 and 2 challenging the order dated 27.04.2011 passed below Chamber Summons Exhs. 16 to 18 in Summary Suit No.559 of 2010 at Annexure-C to the petition, by which, application under section 8 of the Arbitration and Conciliation Act, 1996 [for short, `the Act, 1996'] came to be rejected.
2. It is the case of the petitioners that an agreement dated 15.07.2009 was entered into between the parties by which the Memorandum of Understanding was executed to lift the scrap viz. cut plates of ship and other material lying at the plot allotted to petitioners-original defendants at Kakinada Port, Andhra Pradesh. Approximately 6000 MT of such material was to be lifted by the party of the second part viz. the respondents-original plaintiffs at the price of Rs.11 per kg., as agreed between the parties. The Memorandum of Understanding contained certain other terms and conditions about mode of payment and delivery of the material and in case if the party of the first part does not adhere to the terms of the conditions of the contract within 30 days of its execution, the party of the first part was to pay, by cheque, the advance amount of Rs.25,00,000/- + Rs.3,00,000/- towards damages to the party of the second part. It is also agreed between the parties in Sheet-5 of the agreement that, in case of any dispute, the resolution of dispute will be done out of the court under the provisions of the Arbitration and Conciliation Act,1996 and only Court at Ahmedabad in the State of Gujarat will have jurisdiction to entertain any dispute. It was expressly agreed by and between the parties that Arbitral proceedings will also be conducted in the City of Ahmedabad in the State of Gujarat only.
3. The petitioners-defendants having accepted the amount of Rs.25,00,000/-, failed to deliver the material [scrap] to the respondent-plaintiff- within 30 days, as per the agreement. Therefore, a demand was made by the plaintiff to return Rs.25,00,000/- and Rs.3,00,000/- towards damages. It is also the case of the plaintiff that cheque of Rs.25,00,000/- dated 05.09.2009 was handed over by the defendants to the plaintiff and, upon depositing the same with plaintiff's banker, it came to be dishonoured with an endorsement of `stop payment'. Therefore, the plaintiff preferred Criminal Case No.553 of 2009 under Negotiable Instruments Act, which is pending before the competent court of law. Thereafter, the respondent-plaintiff filed Summary Civil Suit No.559 of 2010 under section 37 of the Code of Civil Procedure, against the defendants, the City Civil Court, Ahmedabad for recovery of the amount amount of Rs.25,00,000/-.
4. In the above proceedings, the petitioners-defendants preferred an application under section 8 of the Act with a prayer to refer the summary suit for resolution of the dispute between the parties to arbitration in accordance with provision of the Act, 1996. The defendants basically relied on Sheet 5 of the agreement which refers to resolution of dispute by taking recourse to the provisions of the Act, 1996. The above application was opposed by the plaintiff by filing a reply specifically pointing out the above facts and submitted that the summary suit was filed for recovery of the outstanding and undisputed amount from the petitioners-original defendants. It was also urged that, when the order was passed by the learned Judge, the defendants were not present and no plea was raised. Even otherwise also filing of application Exh.8 was nothing, but a dishonest plea taken by the defendants for unpaid dues of the plaintiff. It is also submitted that even a proposal to appoint the Arbitrator, Hon'ble Mr. Justice M.S.Parikh [Retired], was not agreed upon.
5. Considering the overall aspects, the learned Chamber Judge passed the order on 27.04.2011, which reads as under:
"Advocate for the defendant has not remained present for the hearing of the chamber summons.
Advocate for the plaintiff referring to his reply at Exh.23 submitted that there is no scope for arbitration in view of the clause on page No.4 sheet No.4 of Memorandum of Understanding the defendant has to pay forthwith the amount Rs. Referred; any other disputes other than this can be the matter for arbitration.
The summary suit without any leave for defence from the defendant will take longer time merely by this chamber summons which the defendant can adhere to, even at the time of leave to defence.
Hence as there is no cause for the present application, the chamber summons is dismissed for No order as to costs."
Thus, according to learned Chamber Judge, no cause had arisen and the chamber summons was accordingly dismissed.
6. Learned advocate for the petitioners would contend that it was incumbent on the learned Judge, City Civil Court, to refer the Summary Suit and the dispute to an Arbitrator in view of clause in Sheet No.5 of agreement / Memorandum of Understanding dated 15.07.2009 entered into between the parties since the City Civil Court has no jurisdiction to entertain the suit. It is, inter alia, contended that Section 8 of the Act, 1996 confers power to refer parties to arbitration where there is an arbitration clause, and more particularly, when the Chamber Summons was pending, notice under Section 11 of the Act was issued by the petitioners / original defendants, and therefore also, the court below ought to have accepted the prayer of the petitioners to refer the dispute to the Arbitrator. It is next contended that the learned Judge erred in holding that the petitioners can raise such defence in leave to defend application and misconstrued the provisions of section 8 of the Act. Learned advocate for the petitioners relying on the decision of this Court in the case of Rupal Textile and Partners of Partnership Firm Madhubhai G. & Anr. v. Partners of Partnership Firm M/s. Rupal Taxtile Mahendra H. & Anr. [2012(2) GLH 86], submits that it is obligatory on the judicial authority to refer the parties to arbitration on being subjectively satisfied about arbitration agreement and when such agreement is already forming the part of the record and pertaining to the subject of arbitration agreement. It is further submitted that in the said judgment it is held that insistence of the trial court of production of the said agreement from defendants and that too along with the application of reference is simply a very pedantic approach. In view of the above, it is submitted that the impugned order passed by the learned Judge is illegal and deserves to be quashed and set aside.
7. Mr.
Shah, learned advocate for the respondent - original plaintiff reiterated the arguments canvassed before the Trial Court and submitted that, in absence of any prejudice to the petitioners / defendants, no case is made out to interfere with the order impugned in exercise of power under Article 227 of the Constitution of India. It is further submitted that the order impugned does not suffer from vice of any illegality much less an error of exercising jurisdiction or contrary to law laid down by the Apex Court and this Court.
8. Having heard learned advocates for the parties and on perusal of the record of the case, it transpires that, before the summary suit was filed, as per the settlement arrived between the parties, petitioners-defendants had decided to return the amount of Rs.25 lakhs by issuing a cheque which was deposited by the plaintiff. However, it was dishonoured on the ground of `stop payment'. Thus, having received the draft of Rs.25 lakhs, as per the terms of Memorandum of Understanding, admittedly the petitioners did not deliver the scrap material, and therefore, by way of settlement, a cheque of Rs.25 lakhs was given to the purchaser-respondent-original plaintiff, which was dishonoured on the ground of `stop payment'. This shows that the plaintiff was justified in filing summary suit for quick recovery of its money and any attempt on the part of the defendants on the ground of existence of arbitration clause would result into delay. Not only that, but while passing the impugned order, the Trial Court has observed that, "the summary suit without any leave for defence from the defendant will take long time and merely by this Chamber summons which the defendant can adhere to, even at the time of leave to defence, hence no cause of action had arisen at the said stage and dismissed the chamber summons".
9. Considering the nature of dispute and contents of the clause of arbitration in Sheet 5 of the agreement, the jurisdiction of City Civil Court to decide the dispute is not ousted, and therefore, the decision of this Court in Rupal Textile and Partners of Partnership Firm Madhubhai G. [supra] relied by the learned advocate for the petitioners - defendants, which was based on facts and circumstances of that case arising out of suit for permanent injunction, is not applicable to the facts of the present case. The dishonest plea on the part of the defendants, who have pocketed Rs.25 lakhs by accepting demand draft from the plaintiff, but failed to deliver the goods, would otherwise preclude this court from exercising discretionary powers in favour of the petitioners.
In view of the above, the impugned order passed by the learned Judge cannot be said to be in any manner illegal or arbitrary, which calls for any interference of this Court in exercise of powers under Articles 226 and 227 of the Constitution of India.
In absence of any merit, this petition is dismissed with costs of Rs.10,000/-.
Notice is discharged.
[Anant S. Dave, J.] *pvv Top