A.K Sikri, J.— The plaintiff has filed this suit for recovery of Rs. 84,17,996.80. Further, a sum of Rs. 17,00,754/- is claimed on account of non-supply of Central Sales Tax Form C. The suit is founded on the allegations that the defendant No. 1 which is the sole proprietorship concern of the defendant No. 2 was appointed as stockist of the plaintiff and a super stockist agreement dated 20th April, 1999 was entered into between the parties. The defendant No. 1 was appointed as the super stockist for the territory of Uttar Pradesh on non-exclusive basis, Under the said agreement, the goods were to be supplied by the plaintiff to the defendants and the defendants were to sell those goods. It is averred that the plaintiff used to regularly supply material to the defendants and the defendants were sending payments on regular intervals. The plaintiff and the defendants were maintaining a running account, There are other allegations made in the plaint stating the reasons because of which disputes arose between the parties as according to the plaintiff there were huge outstanding and the plaintiff had to write various letters to the defendants for making the payments. As on 1st April, 2005 a sum of Rs. 99,93,663.80 became due and payable. The plaintiff addressed letter dated 25th May, 2005 bringing to the attention of the defendants the aforesaid outstanding and asking the defendants to liquidate the same. After various reminders, the defendants made some payments, the details whereof are given in para 13 of the plaint and which are as under:
Date of cheque
Amount
Cheque details
Date of credit
23.5.2005
Rs. 5,00,000/-
767284 Standard Chartered
4.6.2005
7.6.2005
Rs. 5,00,000/-
767285 Standard Chartered
13.6.2005
16.6.2005
Rs. 5,00,000/-
767286 Standard Chartered
22.6.2005
24.6.2005
Rs. 5,00,000/-
767287 Standard Chartered
29.6.2005
30.6.2005
Rs. 5,00,000/-
767288 Standard Chartered
8.7.2005
2. It is further alleged that some differences between the defendant No. 2 and his father arose in respect of some family properties and on this pretext and to win the sympathy of the plaintiff, the defendants got huge credits from the plaintiff company. The plaintiff was expecting that the defendants would make payment. However, the defendants filed a suit in the Court of Senior Civil Judge, Kanpur for permanent injunction restraining the plaintiff herein from terminating the stockist agreement. On receiving the summons from the said Court in the aforesaid suit filed by the defendants, the plaintiff came to know of the intentions of the defendants that they were not willing to make further payment and wanted to entangle the plaintiff in some or the other litigation. Thus on coming to know of this intention, the plaintiff filed the instant suit for recovery.
3. The defendants filed their written statement, inter alia, stating that the suit is barred under the provisions of the arbitration act as, admittedly the invoices issued by the plaintiff itself contained an arbitration clause which is in the following terms:
“Disputes before referring to the Court would be referred to an Arbitrator.”
4. Thereafter, present application has been filed under Order 7 Rule 11 of the Code of Civil Procedure (CPC) seeking rejection/dismissal of the plaint/suit on the basis of same plea, namely, existence of an arbitration agreement between the parties, Apart from this ground, two other grounds are pressed by the learned Counsel for the defendants for dismissal of the suit and I shall deal with those submissions first. These are:
(a) The suit does not disclose any cause of action. In this behalf, reference is made to para 27 of the plaint dealing with the cause of action and opening sentence of this para states that “cause of action arose on 1st August, 2005 when the plaintiff received summons of the suit filed by the defendants in Kanpur”. On the basis of this averment in the opening part of the said para, learned Counsel for the defendants submitted that receipt of summons in th suit filed by the defendants herein would not give cause of action as the cause of action should be relatable to the recovery of the money for which the suit is filed.
While making this submission, learned Counsel has not taken other averments made in the same para into account wherein it is mentioned that cause of action arose when some correspondence was addressed by the plaintiff which was received back unserved and also when the letter dated 23rd August, 2005 was sent to the defendants informing the defendants of termination of tenancy. It is thus clear that the plaintiff had demanded the amount and entered into the correspondence in this behalf. The averments regarding receipt of summons in the suit filed by the defendant are made in the context that from receipt of this summons intention of the defendants not to pay the amount became clear. Therefore, when this para is read in its entirety and along with other averments made elsewhere in the plaint, it is clear that the plaintiff has in no uncertain terms stated that the plaintiff has supplied the material, received certain payments against the said material, was maintaining running account of transactions between the parties, balance due as per the said running account and demand made for payment of the said balance and the intention of the defendants in not making the payment which according to the plaintiff is clear from the fact that the defendants filed the suit for injunction in the Court of Senior Civil Judge, Kanpur. Therefore, I am of the view that the plaint discloses a cause of action and cannot be rejected on this ground.
(b) Other plea raised by the defendants is that the suit filed by the plaintiff is time barred. It is sought to argue that the details when the material was supplied, are not given and the account maintained is not a running account which would fall into the ambit of Article 1 of the Schedule attached to the Limitation Act. It is further stated that certain payments which are made by the defendants to the plaintiff and reflected in para 13 cannot be treated as ‘on account payment’.
5. As already pointed out above, the plaintiff has made a specific averment that it was maintaining a running account. Further, copy of the stock statement as maintained by the defendants itself on its letterhead is filed Annexure-A. Copy of the statement of account is also filed Annexure-B. The payments which are made by the defendants and particulars whereof are given in para 13 have not been disputed by the defendants. Thus payments are made in June and July, 2005. Therefore, issue of limitation cannot be decided at this stage. If the averments of the plaintiff are taken as correct (it is to be borne in mind while considering the application of the defendants under Order 7 Rule 11 of CPC the Court is to look into the averments made in the plaint only), the suit prima facie does not appear to be time barred. It is, of course, an issue which is to be ultimately decided on evidence. In the present case, as would be noted in the latter part of the order, as I am relegating the parties to the arbitration, it would be for the Arbitrator to decide this issue after recording the evidence of the parties.
6. The only other ground which remains is that the suit is not maintainable in view of the arbitration clause. This very plea, as already recorded above, is taken by the defendants in the written statement itself on the basis of which present application is filed. Curiously, when the plaintiff agreed that in view of the arbitration agreement between the parties the matter be referred to the Arbitrator, the defendants took somersault and the statement is made that the defendants do not want the matter to be referred to the arbitration. This attitude of the defendants is not at all understandable. The ingenuous plea taken at this stage is that the present application is filed under Order 7 Rule 11 of the CPC and the matter be referred to arbitration only when appropriate application under Section 8 of the Arbitration and Conciliation Act, 1996 is filed. It is also submitted that after filing of the written statement, application under Section 8 could not have been filed by the defendants.
7. No doubt, written statement has been filed. However, in the written statement the very first objection taken by the defendants is that the suit is barred under the provisions of the arbitration act and the arbitration clause contained in the invoices is reproduced by the defendants. Thus even when the written statement is filed strings are attached by challenging the maintainability of the suit in view of the said arbitration clause. Therefore, in such circumstances the first preliminary objection of the defendants contained in the written statement can be treated as an application under Section 8 of the Arbitration and Conciliation Act, 1996. It is more so when the plaintiff who has filed this suit has no objection for matter to be referred for the arbitration. The defendants after taking such a plea cannot now be allowed to wriggle out of it. Therefore, this plea in the application can be treated as an application under Section 8 of the Arbitration and Conciliation, 1996. At this stage, one may even refer to the provisions of section 89 of the cpc which empower a Court to refer the matter for arbitration, conciliation, mediation or Lok Adalat if the Court is of the opinion if it appears to the Court that there exists element of a settlement which may be acceptable to the parties. There cannot be a better case where such element exists than a case where the parties themselves agree for referring the matter to the arbitration at the time of entering into the contract itself. The Legislature, by amending incorporation section 89 of the cpc in the year 2002, has intended that endeavour should be made by the Courts to encourage settlement of disputes by alternate dispute resolution mechanism. Keeping in view such a legislative intent and when ADR is to be encourage in a case like the present one where the parties had entered into an arbitration agreement, it would be in the interest of both the parties that the matter is referred for arbitration. Mr. Justice S.K Aggarwal, retired Judge of this Court, is appointed as the Arbitrator and the disputes raised by the plaintiff in this suit are referred to him for adjudication. The defendants shall also be entitled to raise its counter claims, if any, Fee is fixed at Rs. 1,10,000/- in lump sum to be shared equally by the parties.
8. The suit and IA are disposed of in the aforesaid term.
Suit and IA disposed of.