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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Mr. Rajdeep Bhattacharya … for the petitioner.
  • Mr. Ashok Kumar Banerjee
  • Mr. Debabrata Banerjee
  • Mr. Ratnanko Banerjee
  • Mr. Rupak Ghosh
  • Mr. R.N Ghosh
  • Ms. Sharmistha Mukherjee … for the opposite parties.
Judges
  • Dara Sheko, J.
Acts
  • Sections 5 and 8 of the Arbitration and Conciliation Act, 1996.2.
  • Sections 5 and 8 of the Arbitration and Conciliation Act.
  • 43 Rule 1(a) of the Code of Civil Procedure,
  • provisions of Order 7 Rule 10 of the Code,
  • ARBITRATION AND CONCILIATION ACT 1996
  • sub-sections(2), (4) and (6) of Section 16
  • Section 16(1) and Section 16(1)(b)
  • Section 8 Sub-section (2). Because
  • Section 8 Sub-section (2)
  • Section 16(1) and 16(1)(b),
  • Section 16(1)(b),
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • Mr. Rajdeep Bhattacharya … for the petitioner.
  • Mr. Ashok Kumar Banerjee
  • Mr. Debabrata Banerjee
  • Mr. Ratnanko Banerjee
  • Mr. Rupak Ghosh
  • Mr. R.N Ghosh
  • Ms. Sharmistha Mukherjee … for the opposite parties.
Judges
  • Dara Sheko, J.
Acts
  • Sections 5 and 8 of the Arbitration and Conciliation Act, 1996.2.
  • Sections 5 and 8 of the Arbitration and Conciliation Act.
  • 43 Rule 1(a) of the Code of Civil Procedure,
  • provisions of Order 7 Rule 10 of the Code,
  • ARBITRATION AND CONCILIATION ACT 1996
  • sub-sections(2), (4) and (6) of Section 16
  • Section 16(1) and Section 16(1)(b)
  • Section 8 Sub-section (2). Because
  • Section 8 Sub-section (2)
  • Section 16(1) and 16(1)(b),
  • Section 16(1)(b),
See more information ...
Smart Summary

Judicial Opinion Summary — Dara Sheko, J.

Factual and Procedural Background

The petitioner challenged the order dated 20 February 2016 passed by the learned Additional District Judge, Second Court, Sealdah in Miscellaneous Appeal No. 57 of 2014. That order had dismissed the petitioner’s application dated 5 October 2015 which questioned the maintainability of the Miscellaneous Appeal. The learned additional district Judge held the proposed Miscellaneous Appeal was not entertainable within the ambit of Order 43 Rule 1(a) of the Code of Civil Procedure and further that the order impugned had not been recorded under the provisions of Order 7 Rule 10 CPC, but had arisen following applications under Sections 5 and 8 of the Arbitration and Conciliation Act, 1996.

The petitioner had earlier filed Title Suit No. 189 of 2012 seeking a declaration that a series of agreements (dated 01.08.2010, 02.10.2010, 19.03.2011 and 14.04.2011), including the arbitration clauses therein, were null and void on the ground that the agreements were the outcome of fraud. The petitioner contended that entertaining applications under Sections 5 and 8 of the Arbitration and Conciliation Act would amount to a mini-trial and would, in effect, accept the existence of the agreements which were under challenge in the suit.

The revisional application before this Court was C.O. No. 1322 of 2016. The opinion also disposes of C.O. No. 1320 of 2016 between the same parties, applying the same reasoning and observations.

Legal Issues Presented

  1. Whether the Miscellaneous Appeal (No. 57 of 2014) and the revisional application attacking the order passed on applications under Sections 5 and 8 of the Arbitration and Conciliation Act were maintainable.
  2. Whether a civil court may entertain applications under Sections 5 and 8 of the Arbitration and Conciliation Act while a suit is pending that challenges the existence and validity of the alleged arbitration agreements.
  3. Whether the requirements of Section 8(2) of the Arbitration and Conciliation Act (production of the original arbitration agreement or certified copies) were complied with and, if not, whether that non-compliance bars reference to arbitration.
  4. What is the effect of Section 16 (competence-competence) — specifically Section 16(1) and Section 16(1)(b) — on the jurisdiction of the civil court to decide challenges to the existence or validity of an arbitration agreement.
  5. Whether the appropriate remedy, in the circumstances, is to challenge the arbitral award under Section 34 of the Act rather than to seek intervention by the civil court under Sections 5 and 8.

Arguments of the Parties

Petitioner’s Arguments (as advanced by Mr. Banerjee, Senior Advocate)

  • The petitioner had filed Title Suit No. 189 of 2012 seeking a declaration that the alleged agreements and arbitration clauses were null and void because they were the result of fraud; thus the existence of the agreements was specifically in issue in the suit.
  • Entertaining applications under Sections 5 and 8 would amount to conducting a mini-trial and would effectively accept the existence of the agreements, rendering the suit infructuous.
  • Even if applications under Sections 5 and 8 were entertained, such orders are illegal for non-compliance with Section 8 because the opposite party did not produce the original arbitration agreements or certified copies.
  • Section 16 of the Arbitration and Conciliation Act is not applicable in the petitioner’s favour because the arbitration agreements themselves have been directly challenged as vitiated by fraud and there is also no competence in the order appointing the arbitrator.
  • Relied upon the decision in N. Radhakrishnan v. Maestro Engineers (2009 SC 1911).

Opposite Parties’ Arguments (as advanced by Mr. Ratnanko Banerjee)

  • The revisional application is not maintainable because the Miscellaneous Appeal and the suit filed before the civil court are barred by law.
  • Having discussed Sections 5, 8 and 16, the opposite party submitted that the proper recourse available to the petitioner, if any, is under Section 34 of the Arbitration and Conciliation Act (challenge to an arbitral award).
  • The learned trial court had recorded on 26 May 2014 that the defendants (opposite parties) had produced a series of original agreements signed by both parties; that the trial court had observed the agreements contained payment and usage terms and arbitration clauses. A passage from that order was quoted in support.
  • Relied upon the following authorities in support of their contentions: Food Corporation of India v. Indian Council of Arbitration (2003) 6 SCC 564; Bharat Sewa Sansthan v. U.P. Electronic Corpn. Ltd. (2007) 7 SCC 737; and Kvaerner Cementation India Ltd. v. Bajranglal Agarwal (2012) 5 SCC 214.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
N. Radhakrishnan v. Maestro Engineers, 2009 SC 1911 That non-production of the original arbitration deed (non-compliance with Section 8(2) of the Act) is a mandatory defect that precludes reference to arbitration. The Court discussed this authority and held it distinguishable on the facts because the learned trial court had earlier recorded that original agreements were produced (order dated 26 May 2014), so the strict non-compliance present in N. Radhakrishnan did not apply in the same manner here.
Food Corporation of India v. Indian Council of Arbitration, (2003) 6 SCC 564 This information was not available in the provided opinion. The Court recorded that the opposite party relied upon this decision; the opinion does not elaborate the specific application beyond noting reliance.
Bharat Sewa Sansthan v. U.P. Electronic Corpn. Ltd., (2007) 7 SCC 737 (AIR 2007 SC 2961) This information was not available in the provided opinion. The Court recorded that the opposite party relied upon this decision; no specific excerpt or principle from the case is set out in the opinion beyond that reliance.
Kvaerner Cementation India Ltd. v. Bajranglal Agarwal, (2012) 5 SCC 214 Confirms that the Arbitral Tribunal has power under Section 16 to rule on its own jurisdiction, including objections to existence or validity of the arbitration agreement, and that such decisions are assailable under Section 34. The Court relied on paragraphs 3 and 4 of this decision to conclude that the civil court cannot go into the question of the existence or validity of the arbitration agreement when Section 16 confers that competence on the arbitral tribunal; this supported the finding that the revisional application was not maintainable.

Court's Reasoning and Analysis

The Court proceeded by examining the submissions of both sides and the statutory scheme under the Arbitration and Conciliation Act, 1996. The analysis unfolded in these principal steps:

  1. The Court noted the procedural history: the learned trial court (order dated 26 May 2014) had recorded that the defendants produced a series of original agreements signed by both parties and observed the existence of arbitration clauses. That order was challenged in Misc. Appeal No. 57 of 2014, and during the proceedings of the Miscellaneous Appeal the originals were not again placed before the court.
  2. The petitioner relied on N. Radhakrishnan to contend that non-production of originals in compliance with Section 8(2) would bar reference to arbitration. The Court accepted the principle stated in N. Radhakrishnan but found it distinguishable because, on the record in this case, the learned trial court had earlier found the originals to have been produced; therefore the strict non-compliance dealt with in N. Radhakrishnan did not apply in the same way here.
  3. The Court then focused on the interplay between Section 8 (power of the court to refer parties to arbitration) and Section 16 (competence of the arbitral tribunal to rule on its own jurisdiction). It set out Section 16(1) and Section 16(1)(b) and noted that Section 16 empowers the arbitral tribunal to rule on any objections with respect to the existence or validity of the arbitration agreement and that a decision by the tribunal that the contract is null and void does not automatically invalidate the arbitration clause.
  4. The Court relied on Kvaerner Cementation India Ltd. v. Bajranglal Agarwal which emphasises that, given Section 16, the civil court cannot go into the existence or validity of the arbitration agreement and that decisions of the arbitral tribunal on jurisdiction are assailable under Section 34 of the Act.
  5. Interpreting Sections 5 (extent of judicial intervention), 8 and 16 together, the Court observed that judicial intervention in matters governed by Part I of the Act is limited to the specific provisions in that Part. Because Section 16 vests competence in the arbitral tribunal to decide on its jurisdiction, the civil court’s intervention to determine the validity/existence of the arbitration agreement is constrained.
  6. Having considered the factual finding recorded by the trial court about production of original agreements and the statutory scheme (Sections 5, 8 and 16), the Court concluded that the case at bar fell within the ambit of Section 16 and the authorities construing it; consequently the revisional remedy was not the appropriate route.
  7. The Court also took note that the petitioner had, in the meantime, taken steps under Section 34 (challenge to the arbitral award), and therefore an efficacious remedy under the Act was being pursued.

Holding and Implications

Primary Holding: The revisional application C.O. No. 1322 of 2016 is not maintainable and therefore stands dismissed.

Consequences and implications explicitly stated in the opinion:

  • The petitioner’s revisional application is dismissed; however, the Court preserved the liberty of both parties to agitate all points that are permissible under law within the ambit of Section 34 of the Arbitration and Conciliation Act, 1996 (i.e., challenge to the arbitral award).
  • As a consequence of the dismissal of C.O. No. 1322 of 2016, C.O. No. 1320 of 2016 between the same parties is also disposed of with the understanding that the fate and observations made in C.O. No. 1322 of 2016 are applicable to C.O. No. 1320 of 2016.
  • The Court’s reasoning rests on Section 16(1)(b) and related authorities (notably Kvaerner) to hold that the civil court cannot entertain the question of existence or validity of the arbitration agreement where Section 16 confers that competence on the arbitral tribunal, and that such tribunal decisions are amenable to challenge under Section 34.

The opinion does not state that it establishes any new legal precedent; it applies existing statutory provisions and precedents (as discussed above) to the facts and disposes of the revisional application accordingly.

End of summary.

Show full summary ...

    M/S. Janardan Nirman Pvt. Ltd. v. Quippo Construction Equipment Ltd. & Ors.

    Dara Sheko, J.:— Heard Mr. Banerjee, learned senior advocate representing the petitioner, who has assailed the order dated 20th February, 2016 passed by the learned additional district Judge, Second Court, Sealdah in Miscellaneous Appeal No. 57 of 2014 by which, upon hearing the application dated 5 October, 2015 questioning the maintainability of the Misc. Appeal it was dismissed holding the appeal is not maintainable by assigning reasons that the proposed Misc. Appeal was not entertainable within the ambit of order 43 Rule 1(a) of the Code of Civil Procedure, and, the order impugned, challenged in that Misc. Appeal, was not recorded under provisions of Order 7 Rule 10 of the Code, but the same arose following an application under Sections 5 and 8 of the Arbitration and Conciliation Act, 1996.

    2. Mr. Banerjee argued that since the petitioner had filed a regular suit before the Court of the learned civil Judge, (Junior Division), Second Court at Sealdah being Title Suit No. 189 of 2012 for declaration that the alleged agreements dated 01.08.2010, 02.10.2010, 19.03.2011 and 14.04.2011 including the alleged arbitration clauses as null and void, and thereby not binding upon the petitioner, since the alleged agreements were outcome of practicing fraud. The order impugned in disposing of application under Sections 5 and 8 of the Act was illegal. Argued that while such a suit is pending questioning the very existence of the alleged agreements, a mini trial would not be taken in entertaining the applications under Sections 5 and 8 of the Arbitration and Conciliation Act. Submitted further, to entertain such applications would indicate that the suit was infractuous and the Court accepted the existence of the agreements though the very existence of these agreements was challenged as an outcome of practicing fraud.

    3. The second fold of argument as advanced by Mr. Banerjee is that even if the applications under Sections 5 and 8 of the Act would have been entertained, the same is also illegal for non-compliance of the provision of Section 8, since the opposite party did not accompany the original alleged arbitration agreements or even the certified copies thereof.

    4. Mr. Banerjee also covering his argument on the provision of Section 16 of the Act submitted of its non-applicability. Since the very arbitration agreements have been challenged in the manner indicated above and there is also no competence in the order appointing the arbitrator.

    5. In support of his contentions he relied upon a judgment of the case of N. Radhakrishnan v. Maestro Engineers, 2009 SC 1911 decided by the Apex Court on 11.10.2009

    6. Mr. Ratnanko Banerjee, learned counsel for the opposite parties, per contra, submitted that the instant revisional application is not maintainable since the Misc. Appeal as well as the suit itself as filed before the Civil Court are barred by law. Discussing the provisions of Sections 5, 8 and 16, Mr. Banerjee concluded that only recourse, if any, to be available, it would be under Section 34 of the Act. However, Mr. Banerjee drew attention of this Court to the observations of the learned trial Court where the learned trial Court recorded the order dated 26 May, 2014 that his clients had produced all the original agreements. The relevant portion from that order is set out:—

    “The defendants has already stated that there are agreements between the parties, containing arbitration clause. They referred the matter to arbitration in terms of the said arbitration clause to resolve payment related dispute. In support of their contention, the defendant produced a series of original agreements, signed by both parties. I failed to understand why the plaintiff singed in a series of documents, which they claim to be non-existing. As stated earlier, the plaintiff failed to give any explanation regarding falsity and forgery committed by the defendants in executing the said agreements. On perusal of the agreements, it transpires that all the agreements contain payment and usage terms in details. The agreements also contain arbitration clause i.c.w any claim and any dispute regarding implementation, execution and interpretation or breach of the agreements between the parties”. Learned advocate for the opposite parties relied upon the following cases:

    1) Food Corporation of India v. Indian Council of Arbitration, (2003) 6 SCC 564;

    1) Bharat Sewa Sansthan v. U.P Electronic Corpn. Ltd., (2007) 7 SCC 737 : AIR 2007 SC 2961 and

    1) Kvaerner Cementation India Ltd. v. Bajranglal Agarwal, (2012) 5 SCC 214.

    7. During the course of argument, Mr. Banerjee, learned counsel for the petitioner has thrown the question that if the arbitrator would have been enjoying the absolute power with all jurisdiction then what would be the intention of the legislature to incorporate Section 8 within the Act. It is obvious that in the suit the very agreements in question have been challenged by the petitioner as non est in the eye of law, which of course is subject to prove provided the petitioner had chosen the right forum for adjudication of the lis and would pursue further. Section 8 formulates the provisions “Power to refer parties to arbitration where there is an arbitration agreement.

    8. Therefore, such provisions may be applicable or acceptable by the opposite party who is banking upon the alleged arbitration agreement. But since the learned counsel for the petitioner is with the different contentions about its existence then Section 8 with its provisions would be of no help to the opposite party. Meaning thereby, had that been arbitration agreement then and then only Section 8 can be invoked. Now to appreciate the submissions of both sides Section 16(1) and Section 16(1)(b) are set out hereinunder:

    “16. Competence of arbitral tribunal to rule on its jurisdiction. - (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement and for that purpose, -

    (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”

    9. The case of N. Radhakrishnan v. Maestro Engineers (supra) was dealt with by the Apex Court since the original arbitration deed was not accompanied. Meaning thereby Section 8 Sub-section (2) was not complied with from the operative part of the said case. The Apex Court held:—

    “But it is to be noted herein that the claim of the appellant regarding the dispute was under the arbitration clause mentioned under the original partnership deed and not on the subsequent one. Since the original deed was not filed within the requirement of Section 8(2) of the Act, it must be held that the mandatory requirement under the Act had not been complied with. Accordingly, even if we accept the factum of a dispute relating to the retirement of the appellant under the original deed dated 7 of April, 2003, still the Court would not be empowered to refer the matter to an Arbitrator due to the non compliance of the provisions mentioned under Section 8(2) of the Act.”

    10. As it was pointed out by Mr. Banerjee, learned counsel for the opposite party, I took note from the order of the learned trial Court, as quoted above, that the opposite party had produced series of original agreements signed by both parties and also had given some other observations. Therefore, though in the Misc. Appeal No. 57 of 2014, which was preferred at the instance of the petitioner, from order Nos. 19 and 21 it appears that though the respondent was directed to file the original arbitration agreement before the Court it was not made available.

    11. I find a bit difference between the proceedings of the original nature and the Misc. Appeal. In the suit vide order dated 26 May, 2014, which was challenged in the Misc. Appeal, learned trial Court found the existence of the alleged original agreements, but at subsequent stage in the midst of proceedings of Misc. Appeal those original agreements could not be placed again, the sequence cannot come within the meaning of non-compliance of Section 8 Sub-section (2). Because the order dated 26 May, 2014 shows that already there was proposed implementation for resolving the dispute in the arbitration clause. In the circumstance, the decision of the Apex Court as formulated in the case of N. Radhakrishnan v. Maestro Engineers (supra) is distinguishable.

    12. Now to appreciate the arguments further let me now set out paragraphs 3 and 4 from the case of Kvaerner Cementation India Ltd. v. Bajranglal Agarwal (supra)

    “3. There cannot be any dispute that in the absence of any arbitration clause in the agreement, no dispute could be referred for arbitration to an Arbitral Trinunal. But, bearing in mind the very object with which the Arbitration and Conciliation Act, 1996 has been enacted and the provisions thereof contained in Section 16 conferring the power on the Arbitral Tribunal to rule on its own jurisdiction, including ruling on any objection with respect to existence or validity of the arbitration agreement, we have no doubt in our mind that the civil court cannot have jurisdiction to go into that question.

    4. A bare reading of Section 16 makes it explicitly clear that the Arbitral Tribunal has the power to rule on its own jurisdiction even when any objection with respect to existence or validity of the arbitration agreement is raised, and a conjoint reading of sub-sections(2), (4) and (6) of Section 16 would make it clear that such a decision would be amenable to be assailed within the ambit of Section 34 of the Act.”

    13. From the above formulation of the Apex Court in the light of Section 16 of the Act it shows about the power and jurisdiction of the Arbitral Tribunal, if pursuant to any alleged arbitration clause the matter is referred to. If we interpret in between lines of Section 16(1) and 16(1)(b), then it reveals that the party to any alleged arbitration agreement even would have the liberty to challenge its existence questioning validity of the same and in turn the Arbitral Tribunal is vested with equal power and jurisdiction to answer to that lis. Therefore, we should not mix together the very intention of the legislature to incorporate Sections 8 and 16 in the Act. Those two provisions have been existing on two different dimensions. The former vesting jurisdiction to a judicial authority to invoke Section 8 before taking any action. The later vests competence to the Arbitral Tribunal providing power and jurisdiction. In this consequence, Section 5 of the Act is also set out below:—

    “5. Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.”

    14. So from the above provisions it has been made clear that no judicial authority shall intervene except where so provided in this part. I am not unmindful to miss the lis since the petitioner had challenged in the suit the very existence of the arbitration agreement. But in view of Section 16 as discussed above coupled with the decision in the case of Kvaerner Cementation India Ltd. v. Bajranglal Agarwal it has been formulated “We have no doubt in our mind that the civil court cannot have jurisdiction to go into that question.”

    15. Therefore, Section 16(1)(b), relevant to the fact and lis of the case, is noticed to be self-contained and therefore the revisional application on merit is not maintainable.

    16. It is apprised upon instruction by learned counsel of both sides that the petitioner already has taken steps under Section 34 of the Act against the arbitral award.

    17. In view of the above and specially when the appropriate efficacious remedy has been availed of in the meantime by the petitioner, and, also in view of above observations the revisional application being C.O No. 1322 of 2016 is not maintainable and therefore stands dismissed preserving the liberty of both the parties to agitate all the points within the ambit of Section 34 of the Act pending before the authority, of course, which are permissible under law.

    18. As a consequence of this order, the C.O 1320 of 2016 pending between the self-same parties is also disposed of with the understanding that the fate and observations as made in the C.O No. 1322 of 2016 also are applicable in the C.O No. 1320 of 2010.

    19. Urgent certified photocopy of this order, if applied for, be supplied to the parties as expeditiously as possible.

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    Comments

    M/S. Janardan Nirman Pvt. Ltd. v. Quippo Construction Equipment Ltd. & Ors.
    (Mar 28, 2017)