SCRACHI SECURITIES LIMITED v. M/S CHERIAN & KURIAN

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **THURSDAY, THE 7TH DAY OF JUNE 2018 / 17TH JYAISHTA, 1940** **WP(C).No. 12649 of 2007** **O.S.NO. 178/2005 OF THE SUB COURT, ERNAKULAM ------------** ## **PETITIONER(S) :** **SCRACHI SECURITIES LIMITED, A LIMITED COMPANY HAVING ITS REGISTERED OFFICE AT TODI MANSION, P-15, INDIA EXCHANGE PLACE EXTENTION, KOLKATTA, WEST BENGAL REPRESENTED THROUGH IT POWER OF ATTORNEY HOLDER SRI. P.K.RAMESH, SHENOY, 214, PANAMPILLY NAGAR, KOCHI-36.** **BY ADVS. SRI.RUSSEL JOY SRI.JOHN JOSEPH(ROY)** ## **RESPONDENT(S):** **M/S.CHERIAN & KURIAN, MANIKATHU HOUSE, XXVII/PANAMPILLY NAGAR, KOCHI-36, A PARTNERSHIP FIRM, REPRESENTED THROUGH ITS MANAGING PARTNER,, JACOB KURIAN, MANIKATHY HOUSE, XXVII/1257, PANAMPILLY NAGAR, KOCHI-36.** **BY ADV. SRI.BECHU KURIAN THOMAS** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 07-06-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **Msd.** **21.06.2018** **WP(C).No. 12649 of 2007** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** **EXHIBIT P1: TRUE COPY OF THE PETITION FILED UNDER S.8 OF THE ARBITRATION AND CONCEILIATION ACT, I.A.NO.5954/05 IN O.S.NO.178/05. EXHIBIT P2: TRUE COPY OF THE ORDER IN I.A.NO.5954/2005 IN O.S.NO.178/05 OF THE SUB COURT, ERNAKULAM. EXHIBIT P3: TRUE COPY OF THE REVIEW PETITION NO.5748/2006 IN O.S.NO.178/05 OF THE SUB COURT, ERNAKULAM. EXHIBIT P4: TRUE COPY OF THE ORDER IN I.A.NO.5748/2006 IN O.S.NO.178/05 DATED 12.02.2007 OF THE SUB COURT, ERNAKULAM.** ## **RESPONDENT(S)' EXHIBITS :** ## **NIL** **//TRUE COPY//** **P.S.TO JUDGE** **21.06.2018** **Msd.** ## **A.MUHAMED MUSTAQUE, J.** _*******************************************************************************_ ## W.P.(C) No.12649 of 2007 _*******************************************************************************_ Dated this the 7[th] day of June, 2018 ## JUDGMENT The parties entered into an agreement to refer disputes for arbitration within six months upon arising of any dispute in regard to any matter arising out of the contract. The basic agreement was a hire purchase agreement dated 13.3.1999. Clause 36 of the agreement is regarding the referring of the disputes for arbitration within six months upon arising of any dispute. 2. The petitioner is the defendant in O.S.No.178 of 2005. The defendant by a lawyer notice dated 14.7.2003 claimed certain amount from the plaintiff, the other party to the hire purchase agreement. The plaintiff gave a reply dated 14.8.2003 raising certain counter claim. The plaintiff instituted a civil suit to recover the amount as referred in the counter claim dated 14.8.2003. This means W.P.(C) No.12649 of 2007 2 that the dispute between the parties claimed presently, arose on 14.08.2003. 3. In accordance with the arbitration agreement, such dispute will have to be referred to the arbitration within six months. The plaintiff had approached the civil court to recover the amount based on the claim made in the notice dated 14.8.2003 in O.S.No.178/2005 on the file of the Sub Court, Ernakulam. 4. The defendant entered appearance on the first occasion itself raising a dispute regarding the maintainability of the suit. The defendant invoked the arbitration clause and requested the court to refer the parties for arbitration. The defendant also pointed out to the appointment of an Arbitrator as per the letter dated 17.10.2005, appointing Sri.K.S.Gauthaman of Chennai. The plaintiff resisted their request for arbitration on the ground W.P.(C) No.12649 of 2007 3 that there was no valid arbitration agreement between the parties to refer the dispute after the period of six months. Accepting this plea, the objection was overruled. The defendant, challenging this order, has approached this Court in this writ petition under Article 227 of the Constitution. 5. Heard the learned counsel for the petitioner as well as the learned counsel for the respondent. 6. The learned counsel for the petitioner vehemently argued after referring to various provisions under the Indian Contract Act, 1872 and the Arbitration and Conciliation Act, 1996 (for short, the 'Act') that the contract restraining the legal proceedings is void and therefore, the stipulation as to six months as referred in the agreement has to be considered as void. According to the learned counsel, the embargo in initiating the legal W.P.(C) No.12649 of 2007 4 proceedings within six months itself being void, the civil court cannot assume jurisdiction. Further, it is argued that in the light of Section 16 of the Act, the competence of the Arbitral Tribunal has to be decided by the Tribunal. It is further submitted that the judicial authority as referred under Section 18 is that of a Principal Civil Court and not the civil court of ordinary jurisdiction. The learned counsel also placed reference to Section 5 and argued that the judicial intervention is only possible to the extent as permitted under the Act and a Principal Civil Court cannot have the jurisdiction to decide the validity of an arbitration agreement. Per contra, the learned counsel for the respondent argued that the arbitration agreement is a contract and such a contract is saved by Section 28 of the Indian Contract Act, 1872, wherein the parties have unequivocally agreed to refer the dispute, if such a dispute W.P.(C) No.12649 of 2007 5 arise within six months of the arbitration agreement. The fixation of six months was intentionally made and therefore, it cannot be obliterated by the court by holding that after the six months, the parties can still refer the dispute for arbitration. It is also submitted that in the light of Section 8 of the Act, any judicial authority before which an action is brought can find out whether there was any valid arbitration agreement between the parties or not. 7. The short question is whether the Sub Judge before whom the action was brought is competent to decide the validity of the arbitration agreement and if so whether there was any valid arbitration agreement between the parties. Section 8 of the Act is very clear and refers to the power of any judicial authority to decide the question regarding the validity of the arbitration agreement. If there is any valid agreement between the W.P.(C) No.12649 of 2007 6 parties to refer the dispute for arbitration, the court must stop the proceedings and refer the parties for arbitration. It may be appropriate to refer Section 8 of the Act, wherein it is stated that the court shall refer the parties for arbitration, unless it finds that, prima facie, no arbitration agreement exists. Therefore, satisfaction has to be entered by the judicial authority whether there was a valid agreement between the parties or not. 8. The learned counsel for the respondent placed reliance on the judgment of the Hon’ble Supreme Court in SBP & Co. v. Patel Engineering Ltd. and Another[(2005) 8 SCC 618] wherein paragraph 19, it was held as follows: “It is also not possible to accept the argument that there is an exclusive conferment of jurisdiction on the Arbitral Tribunal, to decide on the existence or validity of the arbitration agreement. Section 8 of the Act contemplates a juridical authority before which W.P.(C) No.12649 of 2007 7 an action is brought in a matter which is the subject of an arbitration agreement, on the terms specified therein, to refer the dispute to arbitration. A judicial authority as such is not defined in the Act. It would certainly include the court as defined in Section 2(e) of the Act and would also, in our opinion, include other courts and may even include a special tribunal like the Consumer Forum . When the defendant to a action before a judicial authority raises the plea that there is an arbitration agreement and the subject mater of the claim is covered by the agreement and the plaintiff or the person who has approached the judicial authority for relief, disputes the same, the judicial authority, in the absence of any restriction in the Act, has necessarily to decide whether, in fact, there is in existence a valid arbitration agreement and whether the dispute that is sought to be raised before it, is covered by the arbitration clause. It is difficult to contemplate that the judicial authority has also to act mechanically or has merely to see the original arbitration agreement W.P.(C) No.12649 of 2007 8 produced before it, and mechanically refer the parties to an arbitration.” 9. The judgment is clear as to the competence of any other judicial authority to decide the existence or the validity of an arbitration agreement. Apart from the Arbitral Tribunal which decides the existence or validity of the agreement any other judicial authority before whom such an action is brought is also competent to decide the existence or validity of the agreement. Therefore, the argument on this aspect must be repelled. Thus, the argument raised by the learned counsel for the petitioner on this ground is rejected. 10. The next question is whether there was any valid agreement between the parties. The parties had agreed to refer all disputes arising out of the contract within a period of six months. The arbitration agreement is an exception to the general rule regarding jurisdiction as referred under W.P.(C) No.12649 of 2007 9 the Civil Procedure Code. The parties have agreed to refer any dispute that arises within a period of six months. The plaintiff had filed the suit based on a notice that was issued in the year 2003 and moved the civil court in the year 2005. The defendant appointed the Arbitrator only in the year 2005. By efflux of time, the agreement to appoint an Arbitrator has been worn out and it cannot be said that after six months there exist a valid agreement between the parties to refer the dispute for arbitration. No court can tinker with the terms and conditions of a contract between the parties. If the court has to hold that there was a valid agreement between the parties to refer such dispute for arbitration after six months, that would amount to rewriting the terms and conditions of the agreement. In the light of the discussions as above, the challenge must fail. Accordingly, the writ petition is dismissed. The W.P.(C) No.12649 of 2007 10 Sub Court is directed to proceed with the suit and shall give priority to dispose the same as the suit is of the year 2005. The Sub Court is directed to prepone the hearing of the case to 09.07.2018 and proceed in accordance with law. Sd/- ## **A.MUHAMED MUSTAQUE, JUDGE** ln