These appeals have been preferred under Order XXXVI Rule 9 of O.S. Rules r/w Clause 15 of Letters Patent as against the order passed by the learned single Judge in Application Nos.2355 of 2005 and 628 of 2005 dated 21.6.2005 and 23.2.2005 respectively.
The respondent/plaintiff Corporation is conducting a Broadcasting service and the plaintiff Corporation is also having another ancillary wing for broadcasting on commercial basis. The plaintiff and the defendant entered into an agreement on 26.6.1990 which was given effect from 1.7.1990. Under the terms of agreement, the defendant agreed to pay necessary charges as stipulated therein but there was default in payments. The plaintiff is entitled to get Rs.22,58,670/- from the defendant. Despite service of notice, there was no response from the defendant. Hence, the plaintiff has filed a suit. The suit summons were served and the defendant entered through counsel but they have not filed the written statement and the matter appeared under the caption 'undefended board' on 22.12.2004. Thereafter, the matter was adjourned on number of occasions. While the matter stood thus, the defendant filed an application under
section 8 of the Arbitration and Conciliation Act seeking that the plaint has got to be rejected by invoking Clause 5 of the agreement. The respondent was given opportunity to file his counter. The Court heard the learned counsel on either side and after hearing the submissions made and looking into the available materials, the Court took the view that the application for rejection of the plaint is not maintainable since it is not a fit case where arbitral clause could be invoked, therefore, dismissed the application. Hence, this appeal at the instance of the appellant.
3. Advancing the arguments on behalf of the appellant/defendant, the learned counsel would submit that in the instant case, it was an agreed position that there was an agreement entered into between the parties on 26.6.1990 and clause 5 of the Agreement would clearly indicate that whenever dispute arose between the parties, it should be referred to arbitration. A very reading of the said clause would indicate the same. It is true the defendant did not file the written statement and there was delay of 1338 days in filing the written statement. When the matter was taken up for enquiry, at that time, the application was actually filed with an application to condone the delay in filing the written statement but it remained unnumbered and the same was also brought to the notice of the Court. There is an arbitral clause in the agreement and there was actually a dispute between the parties. When the claim was made by the plaintiff, there was denial on the part of the defendant and the arbitral clause also pave the way for solving the dispute before the arbitration. Hence, it is mandatory and the Court, after putting on notice, should have referred the matter to arbitration but the learned Single Judge has dismissed the application stating that the written statement was not filed in time and that before the defence was actually putforth, the application should have been taken and that would also mean that the written statement should be filed within the time stipulated under the procedural code and since it was not done so, the defendant has lost its right to seek reference to arbitration. That is the view taken by the learned Single Judge which is contrary to the settled decisions of the Apex Court. So long as the written statement was not filed, as the substantial defence, the defendant is entitled to invoke the arbitral clause. It is quite clear that there is dispute between the parties and the finding given by the learned single Judge regarding the liability is not correct. Since it was a claim made by the plaintiff, the defendant should be allowed to file its defence and the question of liability can be decided only after the trial of the suit. The learned single Judge has pointed out as if the collection made by the defendant was not paid to the plaintiff at all. This is also not correct. The defendant has putforth a plea denying the liability. The finding recorded by the trial Court is that there is no difference or dispute between the parties is also not correct. Under such circumstances, it is a fit case where it has got to be referred to arbitration. Hence, the order of the learned single Judge has got to be set aside. In support of his contention, the learned counsel relied on the following decisions.
i) 2004(3) Arb.LR 82 (Everest Electric Works v. Himachal Futuristics Comm.Ltd. )
ii) (2006) 7 SCC 275 ( Rashtriya Ispat Nigam Ltd. & another v. Verma Transport Co.)
iii) 2008 (4) Arb.LR 105 (Kaiser Lands vs. Ethel Robin)
4. Contrary to the above contention, the learned counsel for the respondent would submit that it is a case where no reply was given by the appellant/defendant when there was many a demand made through notices. Thereafter, the suit was filed. Even though the defendant appeared through counsel, the written statement was not filed for number of years when the matter appeared before the Court under the caption ' undefended board'. Under such circumstances, having lost the right to refer the matter to arbitration, the application for rejection of the plaint is only an evasive process. The arbitral clause could be invoked if there was dispute or difference between the parties. In the instant case, no such dispute was ever shown. Once, there is no dispute, no question of referring the matter to arbitration would arise. Hence, the learned single Judge is perfectly correct in dismissing the application. Hence, the order of the learned single Judge has got to be affirmed.
5. Another Appeal viz., Appeal No.319/2006 was filed by the appellant/defendant challenging the order passed in Application No.2355/2005 seeking to set aside the exparte decree passed in C.S.No.245 of 2001. The Court heard the learned counsel on either side and observed that it was a suit for recovery of Rs.22,58,670/- along with interest made by the respondent/plaintiff on the ground that the defendant as an agent has collected amount from different companies which amount was actually payable to the plaintiff but the same was not paid; that the written statement was not filed for a long time, despite appearance through counsel; that when, the matter came before the Court on 22.12.2004 under the caption 'undefended board', the application was filed under
section 8 of the Arbitration and Conciliation Act. The learned single Judge after hearing the counsel on either side and looking into the materials pointed out that it is a case where an exparte decree was passed and this exparte decree has got to be set aside and opportunity should be given to the defendant to prosecute the case by imposing a condition. Hence, passed an order imposing a condition to deposit 50% of the claim on or before 21.7.2005. Under such circumstances, Appeal No.319/2006 has arisen.
6. The learned counsel for the appellant/defendant would submit that the condition to deposit 50% of the entire claim was not only unreasonable but also unjust and it is a case where the learned single Judge has taken a view that the defendant should be given opportunity to putforth the defence. There was denial of liability. Under such circumstances, ordering condition to deposit 50% of the claim amount has got to be set aside.
7. The learned counsel for the respondent made his sincere attempt to sustain the order passed by the learned single Judge.
8. The Court paid its anxious consideration on the submissions made on either side and looked into the material available on record.
9. It is not in controversy the respondent has filed a suit for recovery of money and the defendant has not filed the written statement when the matter appeared under the caption "undefended board" despite the counsel was on record. There was also a delay of 1338 days delay in filing the application to condone the delay to receive the written statement. Even before filing that application, the instant application for rejection of the plaint was made stating that it is a fit case where the parties should be directed to place the matter before the arbitral proceedings since there was agreement between the parties. The agreement would stipulate arbitral clause. Originally, the agreement was not filed before the Court and subsequently, the same came to be placed before the Court. Clause 5 of the agreement would refer to, whenever there is dispute or difference between the parties, it could be referred to arbitration. Insofar as the instant application was concerned, opportunity was given to the plaintiff to putforth the counter. The learned Single Judge took a view that since there was no dispute or difference between the parties, it cannot be referred to arbitration. Secondly an application invoking
section 8 of the Arbitration and Conciliation Act 1996 should have been filed even before filing of the written statement In the instant case, the written statement was not filed and the application under
section 8 of the Arbitration and Conciliation was filed beyond the filing time available for the written statement which would mean that invoking arbitral clause was lost, hence, could not invoke
section 8 of the Arbitration and Conciliation Act and recording such finding, the application was dismissed. Hence, this appeal has arisen.
10. It is apt and appropriate to reproduce
Section 8 of the Arbitration and Conciliation Act, 1996.
"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."
11. From the very reading, it would be quite clear that the condition which are specified to invoke
Section 8 of the Arbitration and Conciliation Act, 1996 (1) there should be an arbitration agreement (2) the party to the agreement should bring action to the Court against the other party (3) the subject matter of action should be the subject matter of arbitration (4) the other party who moves the Court should submit his first statement on the substance of the dispute. If all these conditions are satisfied, there cannot be any impediment in directing the parties to go for arbitration.
12. In the instant case, admittedly, there is arbitral clause and clause 5 of the agreement reads as follows.
"5. In the event of any question, dispute or difference arising under these presents or in connection therewith (except as to any matters the decision of which is specially provided for by these presents), the same shall be referred to the sole arbitration of an officer appointed to be the arbitrator by the Director General, All India Radio. It will be no objection that the arbitrator is a Government servant that he has to deal with the matters to which these presents relate or that in the course of his duties as a Government Servant, he has expressed views on all or any of the matters in dispute or difference. The award of the arbitrator shall be final and binding on the parties to these presents."
From the very reading of the above clause it would be quite clear that whenever there is dispute or difference arises between the parties, they have to go for arbitral proceedings. In the instant case, the contention put forth by the respondent is that originally notices were issued and the same were received and despite receipt of notices, there was no reply which could be inferred that there was no dispute or difference. The contention putforth by the respondent cannot be countenanced since issuance to notices can be taken as a relevant fact and the non reply of the notice can be said to be proved contents of the notice.
13. So far as the first contention that since the application under
section 8 of the Arbitration and Conciliation Act 1996 was not filed by the defendant before the time available for filing the written statement and hence that application cannot be entertained is concerned, this Court is of the considered opinion that this contention cannot be accepted.
14. It is true that the defendant did not file the written statement in time and the matter also appeared before the Court under the caption 'undefended board', at the same time, it should not be forgotten that merely because there is inordinate delay in filing the written statement it cannot in any way take away the rigor of
section 8 of Arbitration and Conciliation Act. The law mandates whenever it is brought to the notice of the court before filing the written statement that there is arbitral clause and the subject matter of the suit is actually be decided by the arbitrator, it has got to be referred to arbitration. It can be well stated that the provisions pertaining to the filing of the written statement however, cannot be applied to the initiation of an application under
section 8 of the Arbitration and Conciliation Act 1996 which, in essence, hits at the root of the jurisdiction of the Court to continue a civil action where the parties have themselves compacted to go to Arbitration. Even if the C.P.C. were to apply the right to file a written statement would stand closed. However, this would in no manner dilute the provisions of
section 8 of the said Act since there is indubitably no first statement on the merits of the case. Even though there is inordinate delay, in the considered opinion of the Court, the rigor of
section 8 of the said Act cannot be diluted. Once, it is brought to the notice that it is a case where it has to be referred to arbitration as understood between the parties and there was also an arbitration clause in the agreement entered into between the parties it has got to be referred to arbitration. Therefore, the order passed by the learned single Judge in Application No.628 of 2005 is set aside. The parties are directed to approach the Arbitrator as understood between them under clause 5 of the agreement. Accordingly, O.S.A.No.378 of 2006 is allowed.
15. The other appeal viz.,O.S.A.No.319 of 2006 arises from the order of the learned single Judge allowing the application to set aside the exparte on condition to deposit 50% of the suit claim. The respondent filed a suit for recovery of money and the defendant appeared through counsel did not file the written statement and it appeared under the caption 'undefended board.' The written statement was not filed and an application to condone the delay of 1338 days in filing the written statement filed was also relied on and it remained unnumbered. Under such circumstances, even before that application under
section 8 of the Arbitration and Conciliation was filed for rejection of the plaint, this application was taken up for consideration and the plaintiff was given an opportunity to file the counter. The court after looking into the materials available took the view that the application could not be maintained and dismissed the same.
After doing so, the defendant was set exparte and the same was recorded and the exparte decree came to be passed. This instant application was filed to set aside the exparte decree. The learned single Judge was of the view that the exparte decree has got to be set aside on imposing a condition. Hence, imposed a condition to deposit 50% of the suit claim.
16. So far as OSA.No.378 of 2006 filed against the order of dismissal of the application for rejection of plaint by invoking
section 8 of the Arbitration and Conciliation Act,1996 is concerned, this Court has set aside the judgment of the trial Court and allowed the appeal and the parties are directed to be referred to arbitration. Since this Court has taken a view in that appeal, the application to set aside the exparte decree imposing condition does not arise for consideration at all. Accordingly O.S.A.No.319 of 2006 is disposed of. No costs. Consequently, connected M.P.Nos.2 & 2 of 2006 are closed.
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