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Jagdish Raj & Brothers v. Jagdish Raj & Others
Factual and Procedural Background
This revision petition is filed by the plaintiffs M/s Jagdish Raj & Brothers and another against an order dated 10.1.2001 passed by the Civil Judge (Jr. Div.), Amritsar. The order allowed the defendants' application under Section 151, CPC, which postponed the consideration of the plaintiffs' application under Order 39 Rules 1 and 2, CPC, directing instead that the application under Section 34 of the Arbitration Act, 1940 read with Section 8 of the Arbitration and Conciliation Act, 1996 (the 1996 Act) be taken up first.
The plaintiffs had filed a suit seeking a declaration that certain amounts decreed in earlier cases and received by defendant No. 1 were obtained illegally and fraudulently. They also sought a mandatory injunction for the defendants to pay shares of the amounts to plaintiffs Nos. 2 and 3. Alongside, the plaintiffs filed an application for an ad-interim injunction under Order 39 Rules 1 and 2 CPC.
The defendants filed an application under Section 34 of the Arbitration Act, 1940 read with Section 8 of the 1996 Act, seeking referral of the dispute to arbitration. They also filed an application under Section 151 CPC, contending that filing a reply to the plaintiffs' injunction application would amount to submitting to the jurisdiction of the Court, and thus the arbitration application should be considered first.
The Civil Judge (Jr. Div.) allowed the defendants' Section 151 application and deferred the injunction application.
Legal Issues Presented
- Whether the Court can proceed to decide an application under Order 39 Rules 1 and 2 CPC for interim injunction after an application under Section 34 of the Arbitration Act, 1940 read with Section 8 of the Arbitration and Conciliation Act, 1996 has been filed seeking reference to arbitration.
- Whether filing a reply to an application under Order 39 Rules 1 and 2 CPC amounts to submitting to the jurisdiction of the Court in the presence of an arbitration agreement and an application under Section 8 of the 1996 Act.
- The scope and effect of Section 8 of the Arbitration and Conciliation Act, 1996 regarding judicial authority's power to refer parties to arbitration and the jurisdiction of courts during pendency of such applications.
Arguments of the Parties
Defendants' Arguments
- The defendants argued that filing a reply to the plaintiffs' application under Order 39 Rules 1 and 2 CPC would amount to submitting to the jurisdiction of the Court.
- Once the defendants filed an application under Section 34 of the Arbitration Act read with Section 8 of the 1996 Act, only that application should be considered, and the injunction application should be deferred.
Petitioners' (Plaintiffs') Arguments
- The plaintiffs contended that there was no bar to deciding the application under Order 39 Rules 1 and 2 CPC even if the defendants had filed an application under Section 34 of the Arbitration Act read with Section 8 of the 1996 Act.
- Filing a reply to the injunction application would not tantamount to submitting to the jurisdiction of the Court.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| P. Anand Gajapathi Raju v. P.V.G Raju (2000) 4 SCC 539 | Interpretation of Section 8 of the Arbitration and Conciliation Act, 1996; obligation of Court to refer parties to arbitration; jurisdiction of courts during arbitration proceedings. | The Court relied on this authority to hold that once an application is made under Section 8 of the 1996 Act, the Court must refer the matter to arbitration and cannot proceed to decide the injunction application under Order 39 Rules 1 and 2 CPC. It confirmed that the Court before which the arbitration award can be challenged is the principal Civil Court as defined under Section 2(e) of the 1996 Act, not the Court which refers the matter to arbitration. |
Court's Reasoning and Analysis
The Court analyzed the provisions of Section 8 of the Arbitration and Conciliation Act, 1996, which mandates that a judicial authority before whom an action is brought in a matter subject to an arbitration agreement must refer the parties to arbitration if a party so applies before submitting the first statement on the substance of the dispute. The Court clarified that the term 'judicial authority' includes courts of various grades, but 'Court' as defined in Section 2(e) of the 1996 Act means the principal Civil Court of original jurisdiction or the High Court exercising original civil jurisdiction.
The Court noted the binding precedent of the Supreme Court in P. Anand Gajapathi Raju v. P.V.G Raju, which emphasized the peremptory nature of Section 8, obliging courts to refer parties to arbitration in accordance with their arbitration agreement and that no further proceedings, such as deciding interim injunction applications under Order 39 Rules 1 and 2 CPC, should be entertained by the Court once the referral application is made.
The Court observed that the defendants’ contention that replying to the injunction application would amount to submitting to the Court's jurisdiction was accepted by the Civil Judge (Jr. Div.) and held that the injunction application should be deferred pending arbitration. The Court found no illegality or impropriety in this approach, as the arbitrator is empowered under the 1996 Act to pass interim orders to preserve property during arbitration proceedings.
Holding and Implications
The revision petition is dismissed.
The Court upheld the order deferring the injunction application under Order 39 Rules 1 and 2 CPC in favor of proceeding first with the application under Section 34 of the Arbitration Act, 1940 read with Section 8 of the Arbitration and Conciliation Act, 1996. This decision confirms the mandatory nature of Section 8 in referring disputes to arbitration and clarifies that courts must not proceed with interim relief applications once the arbitration referral is invoked. The ruling does not set new precedent but affirms established principles regarding arbitration and court jurisdiction in such matters.
K.C Gupta, J.:— This revision petition is directed by the plaintiffs M/s Jagdish Raj & Brothers and another against the order dated 10.1.2001 passed by the Civil Judge (Jr. Div.), Amritsar, whereby the application filed by the defendants under Section 151, CPC was allowed and it was ordered that the application under Order 39 Rules 1 and 2, CPC will be taken up at a later stage and first of all application under Section 34 of the Arbitration Act 1940 read with Section 8 of the Arbitration and Conciliation Act, 1996 (for short ‘1996 Act’) would be taken for consideration.
2. Briefly stated the facts are that M/s Jagdish Raj & Brothers etc. filed a suit for declaration that the amount of Rs. 6,72,525/- decreed in case No. 32 of 1998 and the amount of Rs. 10,02,575/- decreed in case No. 33 of 1998 had been received by defendant No. 1 on 4.4.2000 from the Court of Civil Judge (Sr. Div) Amritsar, illegally, fraudulently and by misrepresentation in the execution proceedings as defendant No. 1 alone was not entitled to receive the said amounts. Relief of mandatory injunction was also claimed directing defendant No. 1 and 5 to pay the amount of the shares of plaintiffs Nos. 2 and 3 i.e 10% and 20% respectively out of the aforesaid amounts. In the said suit, the petitioners (plaintiffs) filed an application under Order 39 Rules 1 and 2 read with Section 151, CPC, for grant of ad-interim injunction.
3. On the other hand, the defendants filed an application under Section 34 of the Arbitration Act, 1940 read with Section 8 of the 1996 Act for referring the matter in dispute to the arbitration. The case was accordingly fixed for filing reply of the application as well as for reply to the application under Order 39 Rules 1 and 2 C.P.C Consequently, the defendants moved an application under Section 151 CPC, stating that they were unable to file reply to the application under Order 39 Rules 1 and 2, CPC, as it would tantamount to submitting to the jurisdiction of the Court. They further stated that once application under Section 34 of the Arbitration Act is filed then the only the proceedings have to be taken on that application and not on the application under Order 39 Rules 1 and 2 CPC.
4. The petitioner filed reply stating that there was no bar for deciding application under Order 39 Rules 1 and 2 CPC, even if the defendants had filed an application under Section 34 of the Arbitration Act read with Section 8 of the 1996 Act, as filing of reply to the application under Order 39 Rules 1 and 2 CPC would not tantamount to submitting to the jurisdiction of the Court. However, learned Civil Judge (Jr. Div.) after hearing learned counsel for the parties vide his order dated 10.1.2001 allowed the application of the defendants under Section 151, CPC by holding that if the defendants file reply to the application under Order 39 Rules 1 and 2, C.P.C, then it would tantamount to submitting to the jurisdiction of Court.
5. I have heard Mr. Arun Jain, learned counsel for the petitioner, Mr. B.R Mahajan, learned counsel for respondent No. 1 and Mr. M.S Sidhu, learned counsel for respondent No. 6 and carefully gone through the file.
6. It is an admitted fact that the petitioners have filed a suit for declaration with consequential relief of permanent injunction and in the said suit they have filed an application for ad-interim injunction under Order 39 Rules 1 and 2 CPC. In the said suit, the respondents (defendants) had moved an application for referring the matter in dispute to the arbitration as there is an arbitration agreement between the parties. Section 8 of the Arbitration and Conciliation Act, 1996 reads as under:—
“8. Power to the 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”.
7. Therefore, according to the said provisions a judicial authority before whom an action is brought in the matter which is the subject of an arbitration agreement can refer the parties to the arbitration on an application of a party who applies not later than when submitting his first statement on the substance of the dispute. The words used in the Section are not Court but judicial authority meaning thereby that if a civil suit is filed in a Court of Sub Judge who is not otherwise competent to deal under Section 9 of the Act, then he can refer the parties to the arbitration. Section 2(e) of the Act defines ‘Court’ as principal Civil Court of original jurisdiction in a District and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes. Therefore, according to it the Court means principal Civil Court of original jurisdiction in a District and also includes High Court in its original jurisdiction.
8. Hence, the word used ‘Court’ in section 9 means the principal Civil Court of original jurisdiction i.e the Court of District Judge. It has been observed in P. Anand Gajapathi Raju v. P.V.G Raju (dead), (2000) 4 S.C.C 539 that a matter can be referred to arbitration under Section 8 of the 1996 Act during pendency of the Civil suit even after submission of first statement of the substance of dispute if the party which instituted the suit did not object. Therefore, according to this authority if there is an arbitration agreement though the same is mentioned by the opposite party by way of an application during the civil proceedings before submiting the first statement on the substance of dispute, then the matter could be referred under Section 8 of the 1996 Act for arbitration. However, it has been further observed in it that according to Section 2(e), 8, 34 and 42 of this Act, the Court before which arbitration award could be challenged is the Court as defined under Section 2(e) and not before the Court in which application under Section 8 was made. Thus, if the matter is referred for arbitration by the Civil Judge (Jr. Div.) Amritsar, then that would not be the Court before which arbitration award could be challenged. However, the same would be the principal Civil Court as defined under Section 2(e) of the 1996 Act. It has been further observed by the Hon'ble Apex Court in the above mentioned authority as under:—
“The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom. There is no question of stay of the proceedings till the arbitration proceedings conclude and the award becomes final in terms of the provisions of the new Act. All the rights, obligations and remedies of the parties would not be governed by the new Act including the right to challenge the award. The court to which the party shall have recourse to challenge the award would be the court as defined in clause (e) of Section 2 of the new Act and not the court to which an application under Section 8 of the new Act is made. An application before a court under Section 8 merely brings to the court's notice that the subject-matter of the action before it is the subject-matter of an arbitration agreement. This would not be such an application as contemplated under section 42 of the Act as the court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent court within the meaning of Section 2(e) of the new Act. Thus, according to the observations of the Hon'ble Apex Court it is obligatory for the Court to refer the matter to the arbitrator in terms of the arbitration agreement. Nothing remains to be decided in the original action, meaning thereby that once an application is made by the opposite party in a civil suit for referring the matter to the arbitration in terms of the arbitration agreement, then the Court has to refer the matter to the arbitrator and the Court is required to do nothing further i.e the Court thereafter cannot decide the application under Order 39 Rules 1 and 2 C.P.C as nothing further is required to be done. Under the new Act, an arbitrator to whom the matter is referred can pass appropriate interim orders to preserve the property. In such circumstances, there is no illegality or impropriety in the impugned order. Hence, this revision petition is dismissed.
Revision dismissed.
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