IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17TH DAY OF OCTOBER, 2017 BEFORE THE HON’BLE MR. JUSTICE A S BOPANNA W.P.No.44184/2014 (GM-RES) C/W C.M.P. No.156/2013 W.P.No.44184/2014 BETWEEN:
SRI G.R. AMARNATH S/O G.V.RAJASHEKAR, AGED ABOUT 58 YEARS, RESIDING AT BEHIND VENKATESHWARA TEMPLE, 1ST FLOOR, BYRAVA-SHAMBAVI, MAHALAKSHMI LAYOUT, BATWADI, TUMKUR-572103.
... PETITIONER (BY SRI B V ACHARYA, SR.COUNSEL FOR SRI K R RAMESH, ADV.) AND:
1. M.N. NARASIMHA MURTHY NAIK S/O NANJUNDA NAIK, AGED ABOUT 56 YEARS, RESIDING AT GURUKRUPA, OPPOSITE DDPI OFFICE, SOMESHWARAPURAM, TUMKUR-572102.
2. T M CHANDRASHEKAR NAIK S/O NARASIMHA MURTHY NAIK, AGED ABOUT 38 YEARS, RESIDING AT GURUKRUPA, OPPOSITE DDPI OFFICE, SOMESHWARAPURAM, TUMKUR-572102.
... RESPONDENTS (BY SRI VINAYAK N URANKAR, ADV. FOR C/R1 SRI MADHUKAR DESHPANDE, ADV. FOR R2) THIS PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, WITH A PRAYER TO QUASH THE ORDER DATED 02.09.2014 PASSED BY THE 2ND ADDITIONAL SENIOR CIVIL JUDGE AND JMFC, TUMKUR, IN O.S.NO.132/2013 ON I.A. FILED U/S 8 OF ARBITRATION AND CONCILIATION ACT IN REFERRING THE CASE FOR ARBITRATION AT ANNX-A.
C.M.P. No.156/2013 BETWEEN:
M N NARASIMHA MURTHY NAIK S/O LATE M S NANJUNDA NAIK AGED ABOUT 63 YEARS PARTNER OF M/S PRERANA DEVELOPERS RESIDING AT GURUKRUPA OPP. DDPI OFFICE SOMESHWARAPURAM TUMKUR-572102 (BY SRI SUDARSHAN A M, ADV. & SRI VINAYAK N URANKAR, ADV.) AND:
1. T M CHANDRASHEKAR NAIK S/O M N NARASIMHA MURTHY NAIK AGED ABOUT 38 YEARS ... PETITIONER RESIDING AT MUNICIPAL LAYOUT SIDDAGANGA EXTENSION TUMKUR-572101 2. G R AMARNATH S/O G V RAJASHEKAR AGED ABOUT 54 YEARS R/AT MAHALAKSHMI NAGAR, NEAR VENKATESHWARA TEMPLE BATWADI, TUMKUR-572103 ALSO AT NO. 178, 38TH CROSS 9TH MAIN, 5TH BLOCK, JAYANAGAR BANGALORE-560041 3. T S MAHESH CHANDRA S/O T M SIDDAGANGAPPA AGED ABOUT 60 YEARS SREEKAILASAM HORTICULTURAL GARDEN ROAD S S PURAM TUMKUR-572102 ... RESPONDENTS (BY SRI B V ACHARYA, SR.COUNSEL FOR SRI K R RAMESH, ADV. FOR R2 R1 & 3 ARE SERVED) THIS PETITION IS FILED UNDER SECTION 11(6) OF THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING TO; APPOINT AN ARBITRATOR TO ADJUDICATE THE DISPUTES THAT HAVE BEEN ARISEN BETWEEN THE PETITIONERS AND RESPONDENTS AS PER THE RECONSTITUTION OF PARTNERSHIP DEED DATED 01/04/2010.
W.P.No.44184/2014 AND C.M.P.No.156/2013 HAVING BEEN RESERVED FOR ORDERS ON 09.10.2017, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT PRONOUNCED THE FOLLOWING :
O R D E R W.P. No.44184/2014 The petitioner is before this Court assailing the order dated 02.09.2014 passed by the Court below in O.S. No.132/2013 on the interlocutory application filed under Section 8 of the Arbitration and Conciliation Act, 1996 (‘the Act 1996’ for short).
2. The petitioner herein filed the suit seeking that the reconstitution deed dated 18.03.2010 be declared as a security document for payment of the loan raised by the plaintiff from defendants No.1 and 2 and also for the consequential declarations and injunction. The suit was registered as O.S.No.132/2013 and the suit summons was issued to the defendants. The defendants therein are respondents herein. The respondents contending that the averments as put forth in the suit are not justified had filed a written statement. In the written statement, it was also contended that the parties are governed by an arbitration clause in the partnership deed and the parties are to proceed under the Act, 1996. The respondents herein also indicated that they have initiated the proceedings under the Act, 1996. Subsequent thereto, an application was filed by the respondents herein under Section 8 of the Act, 1996 seeking the Court below to refer the dispute between the parties to Arbitration as provided under the reconstitution partnership deed dated 01.04.2010 which was the subject matter in the suit. The said application was opposed by the petitioner herein. The Court below after taking note of the rival contentions has through its order dated 02.09.2014 allowed the said application and has referred the dispute between the parties to Arbitration. The suit filed before the Court below was accordingly disposed of. It is in that light, the petitioner is before this Court assailing the order dated 02.09.2014.
3. In the above background, I have heard Sri B.V.Acharya, learned senior counsel on behalf of Sri K.R.Ramesh, learned counsel for the petitioner and Sri Madhukar Deshpande, learned Counsel for respondent No.2 and perused the petition papers.
4. The contention on behalf of the petitioner is that the respondents herein having chosen to file the written statement cannot take benefit of the provision as contained in Section 8 of the Act, 1996. Learned Senior counsel would contend that the suit was filed by the plaintiff on 10.05.2013 to which a written statement was filed on 29.06.2013. The application under Section 8 was filed only on 17.02.2014. In that view, referring to Section 8 of the Act, 1996, the learned Senior Counsel would contend that the application was filed after the first statement was filed in the suit and therefore the said application ought to have been rejected. It is further contended that the application was not accompanied by the agreement or a certified copy thereof. In that view, it is contended that the parties were to proceed further in the suit. Further, a contention has been urged that the respondents had made alteration to the document as seen from the one that was filed at the first instance in C.M.P.No.156/2012. Hence, the application seeking that the parties should be relegated to arbitration was not justified and therefore the order passed in that regard is also not justified, is the contention.
5. Learned counsel for the respondents would point out that even though the dates as mentioned is not disputed, the respondents in fact have not subjected themselves to the suit nor have they waived their right. This is evident from the fact that the respondents in the written statement itself in paragraph Nos.17, 23 and 27 had referred to the Arbitration Clause and had contended that the parties are required to be relegated to Arbitration. However, at that point in time since there were certain discrepancies with regard to the appropriate document that was required to be filed, the respondents having obtained a certified copy of the document from the Office of the Sub-Registrar has filed the same along with the application and filed it before the Court below by invoking the provision as contained in Section 8 of the Act, 1996. In that light, it is contended that not only the Court below was justified in taking note of the contention that was put forth, but the respondents herein had also complied with the requirement by producing the certified copy of the document containing the Arbitration clause along with the application. Hence, it is contended that the Court below has not committed any error in this regard.
6. In the background of the above contentions, at the outset, a reference to the provision as contained in Section 8 of the Act, 1996 would disclose that the party would be entitled to apply under the said provision seeking reference to arbitration not later than the date of submitting his first statement on the substance in dispute. If that be the position, the question in the instant case is as to whether the respondents herein having filed the written statement on 29.06.2013, the application which is filed on 17.02.2014 should be held as not maintainable since the application has been filed on a date subsequent to the date on which the written statement was filed, i.e., subsequent to the first statement of the respondents herein. In that regard, the position of law that is required to be noticed is as declared by the Hon’ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd. and Another Vs. Varma Transport Company [(2006)7 SCC 275] relied on by the learned counsel for the respondents.
7. In the above said case, the Hon’ble Supreme Court was considering the effect of the expression ‘first statement’ on the substance of the dispute as contained in Section 8(1) of the Act, 1996. It is held therein that the first statement on the substance of dispute must be contradistinguished from the expression ‘written statement’. It is also indicated therein that waiver of a right on the part of the defendant to the lis must be gathered from the fact situation obtaining in each case. It implies submission of party to the jurisdiction of the judicial authority. It is stated that what is therefore needed is a finding on the part of the judicial authority that the party has waived its right to invoke the arbitration clause. If an application is filed before actually filing the first statement on the substance of the dispute, the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the Court. What is therefore material is as to whether the petitioner has filed his first statement on the substance of the dispute or not, if not his application under the Act, 1996 may not be held wholly un-maintainable.
8. If the parameter as declared by the Hon’ble Supreme Court is kept in view and the instant facts are noticed, as already indicated, though the first statement of the respondents herein was filed on 29.06.2013 and the application was filed on 17.02.2014, what is necessary to be taken into consideration while deciding an application under Section 8 of the Act, 1996 is as to whether the respondents herein had submitted to the jurisdiction of the Court below before filing the application seeking reference to Arbitration so as to waive the right of the respondents. In that regard, the written statement filed by the respondents herein as the first statement is taken note, in the written statement though the respondents have also adverted to the merits of the contention as put forth in the plaint, what is essential to be referred in the present context to gather from the fact situation about the waiver or otherwise is the averments as contained in paragraphs No.17, 23 and 27 of the statement.
“17. The suit is barred under law as there is an arbitral clause in the partnership deed, the parties have to proceed for the relief as per Arbitration and Conciliation Act 1996 and the suit has to be dismissed in “limine”.
23. As per the column 14 of the partnership deed it is specifically mentioned that if any dispute arises between the partners has to be settled by arbitration in accordance with the provision of the Arbitration and Conciliation Act. The firm has decided to initiate arbitral proceedings against the plaintiff in the interest of firm.
27. In order to curtail the rights of these defendants as Managing Partners and also to obtain an order for having suffered an injunction order before the Hon’ble District Judge this frivolous suit has been filed. The defendants has already filed a petition before the Hon’ble High court of Karnataka and the same is pending for initiating arbitral proceedings of the firm. The plaintiff has avoided to appear before the Hon’ble High court of Karnataka and has to take the relief only before the Arbitrator and no suit can be initiated which becomes the prerogative of the Arbitrator and no relief can be obtained from the Hon’ble Civil Court.”
9. In that backdrop, a perusal of the contents in the said paragraphs would indicate that the respondents have referred to the existence of the arbitration clause and also the relief that is required to be urged in the appropriate proceedings, whereby they have challenged the maintainability of the suit. That apart, it was also contended that appropriate action was being initiated for appointment of Arbitrator to commence the arbitration proceedings. In that light, if the contention as put forth by the respondents is taken note, it cannot be said that the respondents had submitted themselves to the jurisdiction of the Court below in the suit by waiving their right to seek reference for arbitration.
10. Apart from the contention that has been put forth in the very first statement itself, the application has been subsequently filed by enclosing the document. Therefore, in the instant facts as noticed, it cannot be said that the respondents had yielded to the jurisdiction even though the application was filed on a later date subsequent to filing of the first statement since the first statement itself had abundantly made clear that the defendants were putting forth the contention that the parties are to get the disputes resolved through arbitration and the proceedings that had taken place as a precursor to the present proceedings is also to be taken note in the present facts.
11. Hence, what would also be relevant in the instant case is to take note that the respondents herein had already set in motion, the process of arbitration even prior to the suit being filed by the petitioner herein on 10.05.2013. In that regard, what is to be noticed is that the respondents herein having got issued the notice invoking the clause as far back as on 13.07.2012 had filed a petition under Section 11 of the Act, 1996 in CMP No.156/2012. The said petition was filed on 08.11.2012 while the suit by the petitioner herein as noticed was filed much subsequent to the same on 10.05.2013. It is no doubt true that the said petition in CMP No.156/2012 was withdrawn on 07.08.2013. However, it cannot be in dispute that such withdrawal was for the technical reason that an appropriate document had not been produced along with the said petition. Even prior to the same, the respondents herein had also filed a petition on 04.07.2012 under Section 9 of the Act, 1996, seeking for interim measure.
12. In that circumstance, even though the said petition in CMP No.156/2012 was withdrawn, on obtaining the appropriate document containing the arbitration clause, the respondents herein had filed another petition under Section 11 of the Act, 1996 in CMP 156/2013 on 26.09.2013. Therefore, these aspects of the matter and facts involved herein would clearly indicate that at no point in time, the respondents had waived their right of having the dispute settled through arbitration by invoking the arbitration clause and in fact had already set in motion, the process of arbitration by issuing notice. In that circumstance, when it is indicated that the respondents had not yielded to the jurisdiction of the Civil Court, the mere filing of the application on 17.02.2014 subsequent to the statement being filed on 29.06.2013 cannot be the basis to hold that the application was liable to be rejected as it was filed on a date subsequent to the first statement being filed, more so when such statement had also resisted the maintainability of the suit.
13. On the second contention that the application was not accompanied by an original document or a certified copy thereof, the learned senior counsel has relied on the decision of the Hon’ble Supreme Court in the case of Atul Singh and Others -Vs- Sunil Kumar Singh and Others (AIR 2008 SC 1016) wherein it has been held that the failure of the applicant to file the original arbitration agreement or duly certified copy thereof, amounts to non-compliance of the mandatory provision of sub-section (2) to Section 8 of the Act, 1996 and therefore the dispute could not be referred to arbitration.
14. Though there can be no dispute with regard to the legal position, in the instant facts, the fact that the respondents had filed the certified copy of the Reconstitution Deed dated 18.03.2010 cannot be disputed. If that be the position, a contention to the effect that a copy of the original document had not been produced cannot be accepted.
15. One other contention which was also raised by the learned senior counsel is that since in the document that had been relied on by the respondents at the first instance when C.M.P.No.156/2012 had been filed, an additional clause had been incorporated so as to take away the right of petitioner and in that circumstance it is contended that such incorporation of the clause in the document would amount to fabrication and tampering of the document due to which a fraud is committed. Hence, it is contended that the appropriate proceedings would be before the Civil Court since such contentions cannot be decided in an arbitral proceedings. In that regard, the learned Senior counsel would refer to the document at Annexure `C’ which is indicated as the Reconstituted Partnership Deed dated 01.04.2010 and by referring to Clause 9 therein would point out that the line therein is added to indicate as if the petitioner herein is to retire after one year, though the actual Reconstitution Deed entered into between the parties as at Annexure –‘H’ does not contain the same. In that view, it is contended that when these questions are to be decided, it is appropriate that the Civil Court decide the same.
16. On that aspect, what is to be noticed is that the respondents no doubt had wrongly relied on the document as at Annexure-‘C’ when the CMP No.156/2012 had been filed at the first instance. However, having noticed that a wrong document had been filed, did not seek to rely on the same. They had thereafter obtained the certified copy of the appropriate document and C.M.P.No.156/2013 was subsequently filed on 26.09.2013. In any event, at this point, there can be no dispute between the parties that the petitioners herein as plaintiffs in the suit are relying on the untainted document as at Annexure-H and the respondents herein are also relying on the very same document both for the purpose of arbitration as also to seek for dismissal of the suit for the purpose of referring the matter to arbitration. In that view, when the parties are relying on the same document at this juncture, the petitioners cannot contend with regard to any fabrication or fraud in the document nor is there need to decide the validity of the document. Hence, the contention in that regard would not be justified.
17. That apart, learned counsel for the respondents has also relied on the decision of the Hon'ble Supreme Court in the case of A. Ayyasamy -vs-
A. Paramasivam and Others –(2016)10 SCC 386 to contend that the Hon'ble Supreme Court has indicated that even if such contentions are taken, the matter is to be referred to arbitration unless serious fraud is alleged. In that background, since at this juncture as already indicated, the fabrication of the document as alleged has lost its relevance, the refusal to have the dispute settled through arbitration on that ground cannot be accepted at this juncture.
18. In the above backdrop, a perusal of the order dated 02.09.2014 impugned in this petition would indicate that the Court below in fact has referred to the factual as well as the legal position and in that light has arrived at the conclusion that in view of the existence of the arbitration clause and there existing a dispute, the application is to be allowed and the parties are to be relegated to arbitration. Therefore, in that circumstance, when the fact that the parties are governed by an arbitration clause and that there are certain disputes arising out of the agreement as relied upon by the parties is evident, the dispute is to be resolved through arbitration. Hence, the order dated 02.09.2014 passed by the Court below does not call for interference.
19. In that view, I do not find merit in this petition. The petition is therefore liable to be dismissed which is accordingly done with no order as to costs.
C.M.P.No.156/2013 20. The parties to this petition are the same parties regarding whom the proceedings in W.P.No.44184/2014 has arisen and the said petition is disposed of through this order which is indicated above. In the circumstance as indicated therein, the Court below on taking note of the contention put forth had relegated the parties to arbitration. If that be the position, a detailed consideration in the instant petition would not be necessary since in the background of the application under Section 8 of the Act, 1996 being allowed and the said order dated 02.09.2014 being upheld in the writ petition, the issue for consideration herein is limited only with regard to the appropriate Arbitrator to be appointed in this case. In that circumstance, all that is necessary to be done herein is to appoint an appropriate Arbitrator.
21. Accordingly, Sri Justice Ashok B. Hinchigeri, a Former Judge is appointed as the Sole Arbitrator to resolve the dispute between the parties.
22. A copy of this order be dispatched to the learned Arbitrator, to the parties and also to the Arbitration Centre, Khanija Bhavan, Bengaluru. The petitioner to also file the claim petition and the necessary papers before the Arbitration Centre, Bengaluru. Thereupon the learned Arbitrator shall enter reference and proceed with the matter in accordance with the provisions as contained in the Act, 1996 and the Rules governing the Arbitration Centre, Bengaluru.
Registry to return the papers if any, sought by the learned counsel for the petitioner.
The petition is accordingly disposed of. No costs.
Sd/- JUDGE akc/bms