1. C.R.P. No. 94 of 2008 is directed against the order granting temporary injunction restraining the revision petitioners/defendants from presenting the Cheque under Negotiable Instruments Act or committing breach in any manner pending reference to Arbitration. For convenience, the parties are referred in their array in the suit.
2. The plaintiff is the absolute owner of the Spinning Mill Anguparameswari Textiles Private Limited. On 14.6.2006 an agreement of sale was entered into between the plaintiff and the defendants for 'slump sale' for consideration of Rs. 4,00,00,002/-. The defendants also entered into conversion agreement and were running the Mill. There is a clause in the agreement that in the event of dispute about the interpretation or implementation of the agreement, it shall be referred to a single Arbitrator appointed by both parties and the verdict of the Arbitrator shall be binding. The sale agreement was renewed on 29.12.2006 with some modifications and additions.
3. The case of the plaintiff is that they were always ready and willing to perform their part of the agreement. But the defendants insisted for reduction of conversion rates and they were delaying the completion of the sale. As per the arrangement, Cheque for Rs. 40,00,000/- was given to the defendants and is encashable if the same does not fructify. According to the plaintiff, the defendants are attempting to wriggle the sale agreement and demanding sum of Rs. 40,00,000/-from the plaintiff. It is the further case of the plaintiff that the question as to who is in fault has to be decided only by the Arbitration and the defendants should not be allowed to present the cheque and encash it when they are at fault and the issue to be decided by the Arbitration. The plaintiff filed O.S. No. 261 of 2007 seeking for Permanent Injunction restraining the defendants from committing breach of the agreement dated 14.6.2006 renewed and modified on 29.12.2006 and from in any manner presenting the Cheque under Negotiable Instruments Act pending reference to Arbitration and committing breach of the agreement. The plaintiff also filed I.A. No. 382 of 2007 for interim injunction under Order 39, R.1 C.P.C. praying for temporary injunction to the same effect pending disposal of the suit.
4. The defendants resisted the application for injunction on the ground that the suit as well as the application was not maintainable. The defendants averred that even according to the plaintiff, the dispute is referable to Arbitration and who is at fault can only be determined by Arbitration proceedings and suit itself is not maintainable. The defendants also contended that no injunction can be granted at any rate. There is no prima facie case. Balance of convenience is in favour of the defendants.
5. When the matter was posted for Orders on 2.1.2008 before the Principal Sub Court, Dindigul, the defendants filed application for re-opening and receiving the additional documents and those applications presented in the open Court were directed to be presented in the Registry and later those papers were returned by the Registry stating that Orders were already pronounced.
6. Upon consideration of the rival contentions, the learned Principal Subordinate Judge allowed I.A. No. 382 of 2007 and granted temporary injunction. The learned Principal Subordinate Judge, held that the issue as to whether the plaintiff or the defendants are at breach can be decided only in Arbitration proceedings and pending reference of the dispute to the Arbitration the defendants should not be allowed to present the Cheque and encash the amount. The Court below further held that if at all the defendants are entitled to refund of the advance amount, they can proceed against the properties of the Mill, but not by presenting the Cheque.
7. C.R.P. Nos. 263 and 264 of 2008 are preferred against the return of applications for re-open and to receive the documents.
8. Contending that the suit itself is not maintainable before the Principal Sub Court and the Principal Sub Court lacks in jurisdiction and the suit is only abuse of process of law, Mr. AR.L. Sundaresan, the learned Senior counsel for the revision petitioners inter alia raised the following contentions:
In view of the Arbitration clause, the dispute has to be settled only in Arbitration and therefore, the suit is not maintainable.
Any interim measure pending Arbitration can be filed only under Section 9 of the Arbitration and Conciliation Act, 1996 (for short Arbitration Act) and as per Section 2(e) of the Arbitration Act, Principal Civil Court of Original jurisdiction in a District is only the Principal District Court and not Subordinate Court and therefore, the Principal Subordinate Judge did not have any jurisdiction to entertain the suit and grant the relief.
As per Section 41(d) of Specific Relief Act, no injunction can be granted from instituting any prosecution and the relief sought for by the plaintiff is barred by Section 41(d) of Specific Relief Act.
Since the impugned order was passed by the Principal Subordinate Judge without any jurisdiction inspite of availability of appeal remedy, Revision under Article 227 of Constitution of India is maintainable.
9. Raising objection as to the maintainability of the Revision in view of availability of alternative remedy by way of appeal, the learned counsel for the plaintiffs submitted, that the suit is well maintainable. The learned counsel for the plaintiffs inter alia made the following submissions:
Under Section 8 of Arbitration Act, the suit is not maintainable only if the subject matter is covered by the agreement and the subject matter of the suit in O.S. No. 261 of 2007 is not covered under the agreement between the parties and therefore, the suit is well maintainable.
So far when no application has been filed by the defendants under Section 8(1) of Arbitration Act, the defendants cannot raise objection as to the maintainability of the suit. When the defendants have not complied with the terms, they cannot complain of nonperformance and therefore, they cannot present the Cheque and encash it and rightly the Court below has granted injunction.
As on date the defendants do not have any cause of action for presenting the Cheque and therefore, the prayer in the suit and the application for temporary injunction are well maintainable.
10. The plaintiff is the absolute owner of the land, building, plant and machinery of 7200 Spindle textile mills of the company located at Sirumalai Road, Reddiapatty Post, Dindigul. The plaintiff agreed to sell all the fixed assets of the company on 'slump sale' basis as a going concern without assigning specific value for any of the assets of the Company to meet the growing losses and outstanding liabilities settlement. Plaintiff and the defendants entered into an agreement on 14.6.2006 for consideration of Rs. 4,00,00,002/-. The defendants agreed to pay an advance of Rs. 60,00,000/- to be paid to the plaintiff. As per the Clause 8 of the agreement, Rs. 40,00,000/- shall be taken as advance paid for the purchase of the property and the balance Rs.20,00,000/- to be treated as advance for running the demised property on conversion basis from 14.7.2006. The terms and conditions of running the factory are separately governed by conversion agreement between the parties. In the event of failure of the agreement, the plaintiff agreed to repay the advance amount of Rs. 40,00,000/-on the expiry of the agreement period and in assurance of which, issued post dated Cheque dated 14.12.2006 No. 575664 for Rs. 40,00,000/-.
11. On 29.12.2006, the parties have renewed the agreement. The plaintiff has confirmed the receipt of advance of Rs. 40,00,000/ from the defendants. As is seen from Clause 4 of the renewal agreement, the plaintiff has confirmed and acknowledged the receipt of sum of Rs. 40,00,000/- so far received from the defendants towards advance amount against the sale of demised property. The plaintiff also confirmed the receipt of Rs. 20,00,000/- towards the advance for running the Mill on conversion basis which is governed by a separate conversion agreement between both parties. In Clause 14 of the renewal agreement, the plaintiff agreed to repay the entire advance amount of Rs. 40,00,000/-, if the sale was not completed and also agreed to refund the amount with interest at the rate of 12% p.a. from 14.6.2007.
12. The Cheque No. 575664 dated 14.12.2006 was cancelled and the plaintiff had issued another Cheque bearing No. 135712 dated 14.12.2006. Clause 14 of the renewal agreement reads as under:
"The Cheque No. 575664 dated 14.12.2006 of first part company current account No. 1207 for Rs. 40,00,000/- on Canara Bank, Chinnalapatty branch issued in favour of the, names of the Directors RM. Subramanian & S. Somasundaram jointly instead of Sri Sethu Spinning Mills (India) P. Ltd since cancelled by the party of the first part and issued/Substituted by another cheque bearing No. 135712 dated 14.12.2006 on Canara Bank, Chinnalapatty branch in favour of "Sri Sethu Spinning Mills (India) P. Ltd" with a view to enable the second part of the party to get back the advance amount in case of failure to transfer the title deeds and complete the sale within the time stipulated."
Presentation of the Cheque issued as per the terms of the renewal agreement is now sought to be injuncted.
13. As per Clause 15 of the agreement dated 14.6.2006 any dispute between the parties shall be referred to Arbitration. Clause 15 reads as under:
"15. If any dispute arises either about the interpretation or Implementation of any of the clauses of this agreement the same shall be referred to a single Arbitrator to be appointed by both the parties and the verdict of the Arbitrator shall be binding on both the parties as per the provisions of the Indian Arbitration Act."
14. Renewal agreement dated 29.12.2006 is only supplemental to the original agreement putting in certain modified terms of understanding and substitution of additional terms. In the renewal agreement, parties have clearly agreed that the renewal agreement dated 29.12.2006 shall form part of the Original agreement dated 14.6.2006 and except the modified clauses, all other clauses shall continue to hold good and shall have legal validity. In view of such clauses in the renewal agreement, the Arbitration clause in the Original agreement dated 14.6.2006 shall continue to hold good.
15. According to the plaintiff, the defendants are at fault and the defendants are insisting for reduction of conversion rates and were delaying the completion of sale and are not paying the balance sale consideration, but are attempting to wriggle out of the sale agreement.
16. Per contra, according to the defendants, there is labour unrest in the Mill and actual delivery of possession as contemplated under law cannot be given and when the plaintiff has not settled the labour dispute, the defendants cannot be compelled to purchase the Mill and get themselves into trouble. In the light of the contentions of both parties, it is evident that there is a serious dispute as to who is at fault and whether the defendants are entitled to present the Cheque and encash it. The controversy between the parties depends upon the interpretation and implementation of the terms of the agreement which could be resolved only by referring the matter to Arbitration.
17. The defendants are resisting the suit by contending that the suit is not maintainable in view of Arbitration clause. It is always open to the defendants to file Petition under Section 8 of Arbitration Act seeking reference to Arbitration.
18. Section 8(1) of Arbitration Act mandates that the judicial authority before which an action has been brought in respect of a matter, which is the subject-matter of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not later than when submitting his first statement. An application before the judicial authority under this Section merely brings to its notice that the subject matter of the action before it is the subject matter of an arbitration agreement. In view of the provisions of this Section, there is no option for the Court for referring the dispute to arbitration once it is raised before it.
19. In cases where there is an arbitration clause in me agreement, it is obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, it is clear that if, in the agreement between the parties before the civil Court, there is a clause for arbitration, it is mandatory for the civil Court to refer the dispute to arbitration.
20. Before taking up the application for temporary injunction and passing interim order, the learned Principal Subordinate Judge should have taken note of Arbitration clause in the agreement between the parties dated 14.6.2006. The learned Principal Subordinate Judge does not seem to have adverted to the objection raised by the defendants as to the maintainability of the suit.
21. The learned counsel for the respondent/plaintiff submitted that Section 8 of Arbitration Act would apply to a suit where subject matter of the dispute is also a subject of the matter of Arbitration agreement and in the absence of taking steps/filing application under Section 8(1) and (2) of Arbitration Act, the jurisdiction of the Civil Court is not ousted. In support of his contention, the learned counsel for the plaintiff placed reliance upon AIR 2003 SC 2252 : (2003) 2 CTC 431 : 2003-4- LW 475. Placing reliance upon (2004) 3 MLJ 252 it was submitted that ouster of Civil Court jurisdiction cannot be readily inferred.
22. It is not known how the suit came to be filed in the Principal Sub Court. What was sought to be injuncted is presentation of Cheque for Rs. 40,00,000/-. But suit has been valued under Section 27(c) and valued at Rs. 1,25,000/-. In my considered view, the suit appears to have been valued at Rs. 1,25,000/- mainly for the purpose of bringing the suit be fore the Principal Sub-Court. If really, the suit relief is incapable of valuation, the suit could have been valued at notional value under Section 27(c) at Rs. 1000/-.
23. Under Section 9 of Arbitration Act, the Court can grant interim measure of protection in situation where there is danger of deterioration, damage or destruction of the goods, it is incumbent on the Court to issue necessary interim measures for protection of the goods, which are the subject matter of arbitration agreement. Under Section 9 of Arbitration Act, the parties entitled to interim protection if action of other party is either in breach of terms of agreement or it is against equity, fairness or in the principle of natural justice.
24. Under Section 9 of Arbitration Act, a party may before or during arbitral proceedings or at any time after the making arbitral award but before it is enforced in accordance with Section 36 may apply to a Court for interim measure of protection in respect of any one of the matters stated in Section 9(a) to (e). If at all any interim measure pending Arbitration, the application can be filed only under Section 9 of Arbitration Act before the Court, as defined under Section 2(e) of Arbitration Act which is the Principal Civil Court of Original jurisdiction in a District. The Principal Civil Court of Original jurisdiction in a District is only the Principal District Court and not any Subordinate Court.
25. Observing that Section 2(1)(e) of Arbitration Act defines the Court as Principal' Civil Court of Original jurisdiction in a District would be District Court and not Subordinate Court. In State of T.N. rep. by Superintending Engineer, PWD/WRO, Periyar Vaigai Basin Circle, Madurai and Another (2006) 1 CTC 178 the Division Bench of this Court has held as under:
".... it is thus apparent that the Court in which application under Section 34 of the Arbitration and Conciliation Act can be filed is the principal Civil Court of original jurisdiction in a district. Moreover, as per the definition clause contained in the Arbitration and Conciliation Act, any Civil Court of a grade inferior to the principal Civil Court is specifically excluded. In view of the specific provision contained in Section 2(e) of the Act read with Section 2(4) of the Code of Civil Procedure, it must be taken that the expression "Court" as contained in Sections 34 and 36 of the Act is the principal Civil Court of original jurisdiction in a district, that is to say, the District Court or the District Judge."
"22. Under the new Arbitration Act, a "Court" has been specifically defined. It provides that the "Court" means the principal Civil Court of original jurisdiction in a district. It does not refer lo every Court of civil jurisdiction in a district but "principal Civil Court of original jurisdiction" in a district. Similarly the definition also excludes any Court which is inferior to such principal Civil Court of original jurisdiction in a district. The definition, therefore, read as a whole, clearly excludes the Court of Subordinate Judge, which is inferior to the Court of District Judge."
26. 26.1n (2008) 1 CTC 7 the Full Bench of Bombay High Court considered the definition of the Court as per Section 2(e) and held as under:
"12. In our opinion, a plain and literal reading of all the aforesaid words/expressions/terms employed in Section 2(e) clearly demonstrate the exact meaning of the term "Court." It means the District Court is the Principal Civil Court of original jurisdiction in a district and not a Civil Court of a grade inferior to such principal Civil Court. The Court of Civil Judge, senior Division may also be a Civil Court of original jurisdiction, but in any case it could not be termed as the Principal Civil Court of original jurisdiction in a district."
"14. Thus, from the language of the definition of "Court" under Section 2(e) of the Act 1996 the Parliament apparently intended to confer the power on the highest judicial authority in a district. It must certainly be taken to have been conscious of the object to be achieved while framing the definition of the term "Court." Besides, it intended to minimize supervisory role of the Courts in arbitral process, it also intended to add the greatest credibility to this process. We find support for the view in the judgments of the Supreme Court. The Supreme Court while dealing with the provisions of Section 11 of the Act of 1996, in S.B.P. & Company (supra) in paragraph 12 of the Judgment has observed that "the Court is defined in the Act to be the Principal Civil Court of original civil jurisdiction of the district and includes the High Court in exercise of its ordinary Original Civil Jurisdiction. The Principal Civil Court of original civil jurisdiction is normally the District Court. The High Courts in India exercising ordinary original civil jurisdiction are not too many. So in most of the States the concerned Court6 would be the District Court." Similarly, the Supreme Court in Garhwal Mandal v. Krishna Travel Agency, in Special Leave Petition (Civil Nos. 18344 of 2004 decided on 24.1.2007, while dealing with the question whether it could entertain all objections to the award and holding that even if the appointment of the Arbitrator is made by High Court or the Supreme Court, the Principal Civil Court of original jurisdiction remains the same as contemplated under Section 2(e) of the Act of 1996, has observed that the Principal Civil Court of Original Jurisdiction remains the "District Court" even if the appointment of the Arbitrator is made by the High Court. It is thus clear that the Legislature clearly circumscribed and specifically narrowed down the definition of "Court" to mean only the Court of Principal Civil original jurisdiction in a district and it is only the Court of "District Judge" in a district which is such a "Court" of Principal Civil Jurisdiction."
27. Following the ratio of the above decisions, in my considered view the suit instituted in Principal Sub Court is without jurisdiction and the temporary injunction granted by the Principal Sub Court is also without jurisdiction.
28. The learned counsel for the Respondent would submit that at any rate the suit can be transferred to the District Court/Forum having jurisdiction and therefore, there is no impediment for treating the suit as application under Section 9 of Arbitration Act. The learned counsel for the Respondent contended that assuming that the suit is not maintainable, the same can be treated as application under Section 9 of Arbitration Act and be transferred to the competent Court/Principal Civil Court of Original jurisdiction. Placing reliance upon In (2005) 2 MLJ 256 : 2005-3-LW 370, it was submitted that as an interim measure injunction could be sought for before the Civil Court as per Section 9 of Arbitration Act. II was further argued that under Section 9 of Arbitration Act interim relief could be granted even before the commencement of the proceedings for the Arbitration or during pendency of arbitral proceedings or even after the conclusion of the arbitral proceedings.
29. Placing reliance upon (2007) 7 SCC 125 : (2007) 6 MLJ 80 it was submitted that well recognised principles applicable to exercise of general power to grant interim relief under Order 39 C.P.C. and Specific Relief Act would be applicable to exercise of power under Section 9 of Arbitration Act. It was further argued since the principles applicable under Order 39 C.P.C. would be applicable to Section 9 of Arbitration Act, the application for temporary injunction filed under Order 39, R.1 C.P.C. can be treated as application under Section 9 of Arbitration Act and the injunction granted by the Sub-Court cannot be said to be without jurisdiction.
30. The aforesaid contention does not merit acceptance. The Sub-Court is not the principal Civil Court of Original jurisdiction and the suit for Permanent Injunction is not maintainable before the Sub-Court. When the suit for Permanent Injunction is non maintainable, the respondent/plaintiff would not be entitled to the equitable relief of temporary injunction when the plaintiff has chosen the Forum of their own choice. It is not open to the respondent/plaintiff to seek for a transfer of the suit to the District Court treating the suit and the petition as application under Section 9 of Arbitration Act. The equitable jurisdiction cannot be stretched to such an extent to treat the suit filed in the Sub Court which is lacking jurisdiction as the one under Section 9 of Arbitration Act.
31. In the suit the respondent/plaintiff has sought for Permanent Injunction restraining the defendants from in any way committing breach of the agreement and restraining the defendants from presenting the cheque under N.I. Act. The learned counsel for the revision petitioner submitted that such a negative covenant restraining the defendants from committing breach of the agreement and from presenting the cheque is not maintainable in view of Section 41(d) of Specific Relief Act.
32. Refuting the contention, the learned counsel for the plaintiff submitted that the cheque was given as security for the advancement received and the agreement to refer the disputes to Arbitration is not void and is expressly saved under Section 28 of Indian Contract Act and therefore, the suit is not barred under Section 41 of Specific Relief Act. The merits of this contention cannot be gone into at this stage when the Court is considering only the prima facie case.
33. The next point falling for consideration is the maintainability of Revision. The learned counsel for the respondent-plaintiff raised strong objection as to the maintainability of the Revision contending that as against the order of temporary injunction, only appeal could be filed under Order 43 C.P.C. and the power under Article 227 cannot be invoked. In support of his contention that the Revision under Article 227 is not maintainable as there is an alternative remedy by way of an appeal under Order 43, R.1 C.P.C., the learned counsel placed reliance upon (2008) 2 MLJ 139 : (2008) 1 CTC 225.
34. Countering the arguments, the learned counsel for the revision petitioners contended that Revision under Article 227 is maintainable, since the Subordinate Judge does not have any jurisdiction in the matter and the proceedings are clear abuse of process of the Court and under such circumstances, alternative remedy would not be a bar to entertain the Revision.
35. When the Court below has entertained the suit without jurisdiction, Revision under Article 227 is certainly maintainable. In a similar factual situation when the Court below was lacking territorial jurisdiction and observing Principal Sub-Court, Pollachi did not have jurisdiction to entertain the suit and the suit filed is only abuse of process of the Court in (2004) 4 MLJ 39 : (2004) 4 CTC 197 Justice M. THANIKACHALAM has held that the Revision under Article 227 is maintainable. Observing that the institution of the suit in Sub-Court, Pollachi is without jurisdiction, the learned Judge has directed the Sub-Court, Pollachi to delete the suit from its file.
36. In (2004) 4 MLJ 131 : (2004) 4 CTC 650 available of alternative remedy by way of appeal, the learned single Judge f this Court has also taken the view that the Revision under Article 227 of Constitution of India is maintainable.
37. It is settled that the power of superintendence conferred upon the High Court by Article 227 is not confined to administrative superintendence only but includes the power of judicial revision also. This power involves a duty on the High Court to keep the inferior Courts and Tribunals within the bounds of their authority and to see that they do what their duty requires and that they do it in a legal manner. The High Court is not bound to interfere in the Revision under Article 227 in all cases where, it is found that the Subordinate Court has acted without jurisdiction or with material irregularity in the exercise of jurisdiction. The High Court will exercise its revisional powers only in aid of justice. When there is patent violation of law and where the Subordinate Court has entertained the suit in flagrant violation of law and has proceeded to grant interim injunction, the High Court would certainly interfere exercising jurisdiction under Article 227. Normally, exercising supervisory jurisdiction under Article 227, the High Court would not interfere with an Interlocutory order, save under exceptional circumstances. In my considered view, the case on hand is one involving such cumstance warranting interference.
38. In the result,
C.R.P. No. 94 of 2008: The order in I.A. No. 382 of 2007 in O.S. No. 261 of 2007 is set aside and this Revision is allowed. Interim injunction granted by the Principal Subordinate Judge, Dindigul is vacated.
C.R.P. Nos. 263 of 2007 and 264 of 2007 are disposed of with a direction to present the applications before the concerned Court, if necessary.
Consequently, the connected M.Ps. are closed. No costs.