JUDGMENT Tarun Agarwala, J.
1. The respondent Apex Computer Services Pvt. Ltd. filed Original Suit No. 820 of 2004 before the Civil Judge [Senior Division] Agra, praying for the recovery of Rs. 37,64, 214/- [Rupees Thirty Seven Lacs Sixty Four Thousand Two hundred & Fourteen only] along with interest at the rate of Rs. 10.75 % as per the claim detailed in paragraphs 20 to 70 of the plaint, which indicates that the plaintiff raised ten different claims against the petitioner. Upon the receipt of the summons, the petitioner immediately filed an application under Section 8[1] of the Arbitration and Conciliation Act, 1996, praying that the claim and the issues raised in the suit be referred for arbitration in terms of Section 17.1 of the agreement entered between the petitioner and the plaintiff-respondent.
2. It was pleaded by the petitioner that the respondent had entered into an agreement on 1.9.1989 known as "N.I.I.T. Licence Agreement" with the petitioner, whereby the petitioner had granted a licence to the respondents to set up and operate an N.I.I.T. education centre at Agra on certain terms and conditions as mentioned in the agreement. This agreement was for a period of three years which was renewed from time to time and, finally it was last renewed on 30.9.1998 w.e.f. 1.12.1998 for a period of three years. The petitioner, in its application, submitted that the term of the agreement expired on 30.11.2001 and was not renewed thereafter. The petitioner contended that the agreement contained an arbitration clause wherein it was agreed that all claims, disputes and differences arising out of the agreement would be referred for arbitration. The petitioner contended that the respondent was bound by the said agreement and that claim Nos. 1 to 10 raised by the respondents in their suit had arisen out of the above agreement and that the subject matter of the action in the above suit was covered by the agreement. The petitioner therefore, prayed that the claim of the respondent should be referred for arbitration in terms of Section 17.1 of the agreement and that the suit be dismissed.
3. The plaintiff-respondent filed their objection and admitted that an agreement was entered between the plaintiff-respondent and the petitioner, which was renewed from time to time and further admitted that the agreement also contained an arbitration clause. The respondent, however, submitted that the arbitration clause was not attracted inasmuch as, the claim of the plaintiff for a large part pertained to a period after 30.11.2001, i.e., after the expiry of the term of the agreement, when there was no agreement in existence between the plaintiff and the defendant and that both the parties had not agreed to refer the matter for arbitration as required by the arbitration clause under the agreement.
4. The trial court by the impugned order dismissed the application of the petitioner holding that even though claim Nos. 1 to 9 arose out of the agreement, claim No. 10 raised in the suit could not be referred to the arbitrator as it did not arise out of the agreement. The trial court held that Claim No. 10 could not be said to have arisen out of the agreement entered between the parties because the said claim had arisen after the expiry of the agreement and that the said claim was independent to the said agreement. The trial court further found that the Claim No. 10 had arisen due to the non renewal of the licence agreement and that the said claim related to the arrangements made by the plaintiff-respondent for the students education after the expiry of the agreement. The trial court while relying upon the decision of the Supreme Court in Sukanya Holdings [P] Ltd. v. Jayesh H. Pandya and Anr. held that since one part of the claim of the plaintiff was not related to the agreement, consequently, the matter could not be referred for arbitration and that the civil court had the jurisdiction to adjudicate the dispute.
5. Aggrieved by the aforesaid order of the trial court, the petitioner has filed the present writ petition under Article 226/227 of the Constitution of India praying for the quashing of the order dated 5.9.2005 passed by the trial court.
6. Heard Sri K.L. Grover, the learned Senior Counsel for the petitioner assisted by Sri Ramesh Singh, Advocate and Sri Ravi Kant, the learned Senior Counsel for the respondent assisted by Sri Anjani Kumar Mishra, Advocate for the respondent.
7. The learned Counsel for the petitioner submitted that the court below committed a manifest error in rejecting the application of the petitioner and submitted that the subject matter of the action was the same and therefore, the trial court had committed an error in not referring the matter to an Arbitrator under the arbitration clause in the agreement. In support of his submission, the learned Counsel for the petitioner placed reliance upon the decision of the Supreme Court in Sukanya Holdings [P] Ltd. v. Jayesh H. Pandya and Anr. , P. Anand Gajapathi Raju v. P.V.G. Raju and [2000] 4 SCC 539, and in Rashtriya Ispat Nigam Ltd. and Anr. v. Verma Transport Company .
8. On the other hand, Sri Ravi Kant, the learned Senior Counsel for the respondent submitted that the agreement did not cover claim No. 10 and therefore, the court below was justified in not referring the matter for adjudication. The subject matter of the dispute was outside the agreement and therefore, the arbitration clause under the agreement could not be invoked. The learned Counsel for the respondent further submitted that apart from claim No. 10, claim Nos. 2,3,6 and 7 were also not covered under the licence agreement and therefore, the question of referring the dispute to an Arbitrator under the arbitration clause did not arise. In support of his submission, the learned Counsel for the respondent has also relied upon the decision of the Supreme Court in Sukanya Holdings [P] Ltd. v. Jayesh H. Pandya and Anr. [supra].
9. The question whether the claim of the respondent is integrally connected with the dispute arising out from the main contract is to be considered in the present case. Whether the claim of the respondent is the subject matter of the agreement can only be considered upon a perusal of the agreement and the claim made by the respondent in the suit. The question whether the claim relating to a period after the expiry of the term of the agreement could be included in the said arbitration clause is also to be considered and whether such a dispute would be covered under the said arbitration agreement.
10. In order to deal with these aspects, it is necessary to consider some of the provisions of the agreement. The scope of the agreement is contemplated under Article 3 of the agreement. Section 3.1 of the agreement permits the right to the use, by the licensee, the trade name of the licensor, in relation to the education centre and the right to the use of the copyright of the licensor in the name and style of NIIT. The agreement grants the licensee, for the purpose of marketing and conduct of the classes in the education centre, to use the Licensor confidential technical know-how described more in the Manuals, Guides and Training Courses. Under Section 3.3 of the agreement, the Licensee is given the right to operate the education centre only in relation to NIIT. Under Section 4.1 the licensee obligation is only to offer such NIIT courses as are covered by the agreement. Section 17.1 of Article 17 of the agreement provides for an arbitration which is quoted hereunder:
Section 17.1:
All claims disputes and differences of whatsoever nature arising out of this Agreement, raised by the Licensee or the indemnifier whether during its term or after expiry thereof or prior termination shall be referred to the sole arbitration of the Director of the Board of Directors of the Licensor, whose decision shall be final on every matter arising hereunder. The request for arbitration may specify the particular Director of the Board failing which the Licensor shall be entitled to nominate the arbitrator. It is further agreed that the fact that the Director of the Board of Directors of the Licensor may have had occasion to deal with any matter related to this Licence either before or after its execution, shall not disqualify him from acting as Arbitrator. The venue of the Arbitration shall only be Delhi where the Licensor has claims, disputes or differences, it shall be open to the parties toagree to be covered under this clause.
11. A perusal of the aforesaid provision indicates that all claims of whatsoever nature arising out of the agreement whether during its term or after its expiry thereof or prior to its termination shall be referred for arbitration.
12. Before proceedings further, it would be necessary to take a look at Claim No. 10 which, as indicated in the plaint, reads as under:
Claim No. 10-Claim for Providing Services to students on NIIT's behalf-
This claim has arisen on account of unnecessary delay on part of NIIT in providing arrangement for Students' education in spite of letter of Apex dated 28.2.2002.
13. The aforesaid claim indicates that the claim was made on account of unnecessary delay made on the part of the petitioner in providing arrangements for students' education inspite of the letter of the respondent dated 28.2.2002 (infact, the letter is dated 28.8.2002, which has not been disputed by the petitioner) Annexures-C l0(a) and C10(b)and letter dated 28.2.2002 are not part of the record of the writ petition but were provided by the learned Counsel for the respondent during the course of the hearing of the petition which were taken on the record. The calculations pertaining to the claim is given in Annexure-C10 (a) to the plaint which is as follows:
Claim for Services Date Amount Interest 30th Sept. 2002 Rs. 235000 53321 31st Oct. 2002 Rs. 235000 50832 30th Nov.2002 Rs. 235000 48443 Total Rs. 705000 152596
14. Annexure-C10 (b) indicates that the claim was for monthly services provided by the respondent to the petitioner during the period 1.9.2002 to 30.11.2002. The letter dated 28.8.2002 indicates that the manager of the petitioner had sent an e-mail of 23.7.2002 to the respondent as under:
1. As per our license agreement the agreement can be renewed amongst various other conditions, only when the renewal fees is paid by the licensee. In this case the same has not been paid inspite of reminders and therefore the license renewal of the centre has not happened. In absence of payment the license should not be renewed.
2. In order to prevent further loss of market, please find a alternative site and set up the requisite infrastructure at our cost to start a new centre so that fresh enrolments can be taken. Once the infrastructure is ready please transfer all existing students to the new location. Till then as per our agreement and post expiry communication the ex-licensee is to service the students already enrolled.
15. On the basis of the aforesaid e-mail, the respondent advised the petitioner that if the petitioner requires any service from the respondent, in that event, the petitioner would have to pay on a cash basis, month to month and, the immediate payment would be as under:
17. Admittedly, the term of the licence agreement expired on 30.11.2001. The claim is admittedly for the period after the expiry of the term of the agreement. The main question which arises for consideration is whether the claim of the respondent which is admittedly for certain services provided by them after the expiry of the period of the licence agreement could come under the purview of the agreement, namely, under Section 17.1 of the agreement.
18. In order to answer the aforesaid question it becomes necessary to place certain provisions of the agreement namely, Section 9.3 and 14.5 of the license agreement which reads as under:
Section 9.3 Whether the Licensor does not renew the license for an additional period as contemplated in the preceding clause, the Licensee shall ensure that all its Courses including the final examination conclude before the expiry of the term of this Licence. The Licensee shall also ensure that no course which may extend beyond the term of this license is conducted. In the event of any course [s] not concluding before the expiry of the term of this licence, since the Licensor will have to make arrangements for ensuring the completion thereof in the interest of the students, recovery of payments made in advance to the Licensee would be done as per the Destination Centre Share of Fees Policy prevalent at that point of time. The Licensor may also direct the Licensee to make available the infrastructure for the purpose of conducting classes for the existing students. The Licensor would also be entitled to assistance from the Licensee's Employees for the purpose of discharge of the duties. The Licensor may, if it considers necessary, depute a representative to carry out any of the centre's activities. The Licensor shall be provided with adequate working space and access, at all time, to the education centre as well as to all records relating thereto. In the event of the Licensor issuing such a directive, the Licensee shall be obliged to make available the above for such period as determined by the Licensor, notwithstanding the expiry and non-renewal of the Licence.
Section 14.5 In the event of expiry or termination of this Agreement, the Licensee shall ensure that all its courses including the final examination conclude before the expiry or termination of this Agreement. The Licensee shall also ensure that no course which may extend beyond the term of this license is conducted. In the event of any course [s] not concluding before the expiry of this license, or not completed at the time of termination since the Licensor will have to make arrangements for ensuring the completion thereof in the interest of the students, recovery of payments made in advance to the Licensee would be done as per the destination Centre Share of Fees Policy prevalent at that point of time. The Licensor may also direct the Licensee to make available the infra for the purpose of conducting classes for the existing students, the Licensor would also be entitled to assistance from the Licensee's Employees for the purpose of discharge of the duties. The Licensor may, if it considers necessary, depute a representative to carry out any of the centre's activities. The Licensor shall be provided with adequate working space and access, at all time, to the education centre as well as to all records relating thereto. IN the event of the Licensor issuing such directive, the Licensee shall be obliged to make available the above for such period as determined by the Licensor, notwithstanding the expiry and non-renewal of the License or termination as the case may be.
19. Section 9.3 indicates that where the licensor does not renew the license for an additional period, the licensor may direct the licensee to make available the infrastructure for the purpose of conducting the classes for the existing students and, in the event, the licensor issues such directives, the licensee would be obliged to make available the infrastructure, etc., for such period as determined by the licensor, notwithstanding the expiry and the non renewal of the licence. The e-mail of 23.7.2002 of the petitioner as indicated in the letter of the respondent dated 28.8.2002 clinches the said issue. The said e-mail directed the respondents to find an alternate site and set up the requisite infrastructure at the cost of the petitioner and further directed the respondents that till such time the infrastructure was not ready, the respondent was to serve the students already enrolled as per the agreement. Consequently the e-mail of the petitioner was in consonance with the provision of Section 9.3 of the agreement and the service provided by the respondent arose out of the agreement. Consequently, claim No. 10 raised by the respondents was squarely covered by Section 9.3 and Section 14.5 of the agreement.
20. Section 8 of the Arbitration and Conciliation Act provides as under:
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.
21. A perusal of the aforesaid provision indicates that where an action is brought in a matter which is the subject of an arbitration agreement, the dispute between the parties has to be referred for arbitration.
22. In view of the aforesaid, this Court is of the opinion that the claim No. 10 was integrally related to the agreement and even though the claim was of the period after the expiry of the term of the agreement nonetheless, the claim was squarely covered under Section 9.3 and 14.5 of the agreement and, therefore, claim No. 10 was required to be referred to an arbitrator. Even otherwise, the words-"All claims, disputes and differences of whatsoever nature" in Section 17.1 is of wide amplitude and takes into its ambit all disputes, claims and differences arising during the validity of the agreement or even after its expiry.
23. The learned Counsel for the respondents submitted that other claims of the petitioners were not covered under the agreement and that the trial court committed an error in holding that the claim Nos. 1 to 9 arose out of the agreement. This Court is not inclined to dwell upon the submissions made by the learned Counsel for the respondent at this stage, inasmuch as, the Court is of the opinion that in view of the decision of the Supreme Court in P. Anand Gajapathi Raju v. P.V.G. Raju , the language of Section 8 was held to be peremptory in nature. Further in Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums , the Supreme Court held-
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 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 the dispute to an arbitrator.
24. The existence of an arbitration clause in the agreement is accepted by both the parties. The acceptability of the arbitration clause was however, disputed by the respondent. Be that as it may. The mere fact that the existence of an arbitration clause is admitted and in view of the mandatory language of Section 8 of the Act, the court below had no option but to refer the dispute for arbitration.
25. In view of the aforesaid, the impugned order cannot be sustained and is quashed. The writ petition is allowed. The trial court is directed to pass consequential orders for referring the matter to an Arbitrator in the light of the observations made above. In the circumstances of the case, parties shall bear their own cost.