Allowed

Naresh Kumar and Anr. v. Sneh Gupta and Anr.

Punjab & Haryana HC10 Aug 2010CR/2811/2010

Case brief

AI extract

What is this about?

The Punjab and Haryana High Court allowed a revision under Article 227 to set aside a trial court order dismissing an application for stay of suit proceedings under Section 8 of the Arbitration and Conciliation Act. The court held that the dispute arose from the partnership deed which contained a valid arbitration clause.

What did the court decide?

The revision petition was allowed; the trial court order dismissing the Section 8 application was set aside; the application was allowed with no order as to costs.

Naresh Kumar and Anr. Vs Sneh Gupta and Anr. — Arbitration | Punjab & Haryana HC (2010)

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CR No.2811 of 2010

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IN THE HIGH OF PUNJAB AND HARYANA AT CHANDIGARH

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CR No.2811 of 2010 Date of Decision: 10.08.2010

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Naresh Kumar Gupta & Anr.

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..Petitioners

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Vs.

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Smt.Sneh Gupta & Ors.

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..Respondents

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Coram: Hon'ble Mr. Justice Vinod K.Sharma

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Present: Mr.S.C.Pathela, Advocate, for the petitioners.

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Mr.Vishal Garg, Advocate, for respondents No.1 and 2.

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Vinod K.Sharma,J. (Oral)

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The petitioners have invoked the jurisdiction of this court under Article 227 of the Constitution of India to challenge the order dated 31.03.2010 passed by the learned trial court vide which application moved by the petitioners under Section 8 of the Arbitration and Conciliation Act, 1996 (for short the Act), stands dismissed.

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The plaintiff/respondent being partner of the firm filed a suit for recovery of Rs.7,82,513/- (Rupees seven lacs eighty two thousand five hundred and thirteen only), on account of dispute in business between the parties.

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CR No.2811 of 2010

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On receipt of notice, the defendants/petitioners appeared in court and filed an application under section 8 of the Act, pleading therein, that the suit filed by the plaintiff/respondent is based on partnership deed, executed between the parties, which contains an arbitration clause which reads as under:-

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“13. That in case of any dispute arising amongst partners the matter shall be referred to an arbitrator to be appointed mutually whose decision shall be binding on all the parties to the deed.”

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The case of the petitioners was, that the dispute raised in the suit falls within the arbitration clause referred to above and therefore, the suit was liable to be stayed and parties be referred to Arbitral Tribunal.

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Application was contested by the plaintiff/respondent by contending therein, that the dispute in suit could not be referred to arbitration, as the suit was filed on the admission in the balance-sheet of the firm, which showed that the amount claimed was due to the plaintiff/respondent. The contention raised, therefore, was that in the absence of any dispute no reference could be made, as the dispute is prerequisite, to make any reference to arbitration.

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The learned trial court accepted this plea and dismissed the application.

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Learned counsel for the petitioners by placing reliance on the judgment of Hon'ble Supreme Court in the case of Branch Manager

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CR No.2811 of 2010

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Magna Leasing and Finance Ltd. & Anr. Vs. Potluri Madhavilta & Anr. 2009 (10) SCC 103, contended that the impugned order cannot be sustained as it is a statutory mandate to the judicial authority adjudicating any dispute, to refer it to arbitration, if there is arbitration clause between the parties.

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Factum of arbitration clause is not in dispute. The only contention raised was, that there was no dispute which could be referred to arbitration.

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This plea has wrongly been accepted by the learned trial court.

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A demand by one party and denial by other is itself a dispute, which could be adjudicated by arbitrator. In the application petitioners/defendants had specifically pleaded, that the dispute raised in the suit was covered under the arbitration clause, therefore, the matter be referred to arbitration.

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The learned counsel for the plaintiff/respondent relied on the judgment of Hon'ble Supreme Court in the case of Yogi Agarwal Vs. Inspiration Clothes & U And Ors. 2008 (4) Arb.L.R. 663, to contend that it is for the defendants to establish, that arbitration agreement related to or is applicable to the suit transaction/ contract, before any reference could be made to the arbitrator.

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Para No.7 of the judgment on which reliance was placed reads

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as under:-

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“ 7. When a defendant invokes Section 8 of the Act by alleging existence of an arbitration agreement, he should

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CR No.2811 of 2010

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establish that such arbitration agreement related to, or is applicable to, the suit transaction/contract. The parties may enter into different contracts at different points of time or may enter into a series of unrelated transactions. It is possible that in regard to some, they may provide for arbitration and in regard to others, may not provide for arbitration. Obviously, the existence of an arbitration agreement with reference to some other transaction/contract to which plaintiff was or is a party, unconnected with the transaction or contracts to which a suit relates, cannot be considered as existence of an 'arbitration agreement' in regard to the suit transactions/contracts. When Sections 7 and 8 of the Act refer to the existence of an arbitration agreement between the parties, they necessarily refer to an arbitration agreement in regard to the current dispute between the parties or the subject matter of the suit. It is fundamental that a provision for arbitration, to constitute an arbitration agreement for the purposes of Sections 7 and 8 of the Act, should satisfy two conditions. Firstly, it should be between the parties to the dispute. Secondly, it should relate to or applicable to the dispute.”

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This judgment does not advance the case of the plaintiff/respondent, as in the case in hand, the petitioners specifically pleaded, that the dispute raised in the plaint was covered under arbitration

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CR No.2811 of 2010

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clause. Reading of the arbitration clause shows, that it stipulates adjudication of all disputes between the partners with regard to the firm.

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In the suit, the plaintiff/respondent was claiming right under the partnership deed executed between the parties, therefore, it could not be said, that the defendant/petitioner had failed to disclose the dispute in the application under section 8 (2) of the Act. The learned trial court order holding that the dispute was not covered under arbitration clause cannot be sustained in law. It also cannot be said that there was no dispute as held by learned trial court.

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In view of the law laid down by Hon'ble Supreme Court in the case of Branch Manager Magna Leasing and Finance Ltd. & Anr. Vs. Potluri Madhavilta & Anr. (supra), this revision petition is allowed. The order passed by learned trial court is set aside. The application moved by the petitioner under section 8 of the Act is allowed but with no order as to costs.

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10.08.2010 rp

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(Vinod K.Sharma) Judge

Naresh Kumar and Anr. v. Sneh Gupta and Anr.

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Naresh Kumar and Anr. v. Sneh Gupta and Anr.

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