Allowed

Ghisa Ram Contractor v. Union of India

Rajasthan HC17 Aug 2020CMA/1146/2019

Case brief

AI extract

What is this about?

In this D.B. Civil Misc. Appeal, the High Court held that a commercial court cannot postpone the decision on a Section 8 of the Arbitration Act application to compel parties to lead evidence, as such an order frustrates the statutory objective of the section. Consequently, the appeal was allowed.

What did the court decide?

The order dated 12/4/2019 passed by the Commercial Court, Jodhpur, was set aside and the matter remanded to the Commercial Court to decide the Section 8 application.

Ghisa Ram Contractor Vs Union of India — Arbitration | Rajasthan HC (2020)

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HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR

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D.B. Civil Misc. Appeal No. 1146/2019

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Ghisa Ram Contractor S/o Shri Ram Lal, Aged About 74 Years, R/o Village And Post Kaliyana, District Biwani, Haryana.

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----Appellant

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Versus

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1. Union Of India, Through The General Manager, North Western Railway, Opp. Railway Hospital, Jaipur (Rajasthan)

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Deputy Chief Engineer (Construction - 1), North Western Railway, Opp. Dholamaru, Puran Singh Circle, Bikaner.

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----Respondents

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For Appellant(s) : Mr. Vishal Sharma. For Respondent(s) : Mr. Kamal Dave.

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HON'BLE MR. JUSTICE SANGEET LODHA HON'BLE MR. JUSTICE ARUN BHANSALI

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Judgment

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PER HON'BLE BHANSALI, J.

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17/08/2020

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This appeal under Section 37 of the Arbitration and Conciliation Act,1996 (‘the Act, 1996’) is directed against the order dated 12/4/2019 passed by the Commercial Court, Jodhpur, whereby, the application filed by the appellant under Section 8 of the Act, 1996 has been disposed of.

¶15

The respondents-plaintiffs filed a suit for a sum of Rs.52,16,775.76 P. against the appellant for recovery of amount pertaining to risk and cost in relation to tender for earth work and agreement dated 19/2/2004. The appellant put in appearance and filed an application under Section 8 of the Act,1996 along with a

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(2 of 6)

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[CMA-1146/2019]

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copy of arbitration agreement and claimed that the parties be referred to arbitration.

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The application was contested by the plaintiffs inter alia claiming that the subject matter of the suit is not governed by the arbitration agreement and, therefore, the application be rejected.

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The Commercial Court after hearing the parties, came to the conclusion that though in terms of clause 69 of the agreement between the parties, clause 64 of the general conditions of contract providing for arbitration exists. However, as there is a dispute between the parties that in terms of clause 35.3 of the agreement, as the subject matter in the suit between the parties is of the value more than 20% of the value of the contract, whether clause 64 would be applicable, the said aspect cannot be decided at the preliminary stage, parties need to lead evidence on the said aspect and that the issue raised by the appellant would be considered at the relevant time. The application was disposed of with the above observations.

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It is submitted by learned counsel for the appellant that the Commercial Court was not justified in disposing of the application by ordering that after the evidence is led by the parties, the issue would be examined. The issue as raised has to be dealt with and decided by the Commercial Court at the stage of application itself and the same cannot be postponed.

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Submissions were made that on account of subject matter of the suit, the parties are required to be referred to arbitration and, therefore, the rejection of application was not justified. The reliance placed on clause 35.3 of the agreement by the plaintiff is misplaced and has no substance.

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(3 of 6)

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[CMA-1146/2019]

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Learned counsel for the respondents vehemently submitted that the dispute sought to be referred by the appellant by filing application under Section 8 of the Act, 1996 is not referable in view of specific provision of clause 35.3 of the agreement between the parties and, therefore, the appeal deserves to be dismissed.

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We have considered the submissions made by learned counsel for the parties and have perused the material available on record.

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The facts are not in dispute, wherein, in the suit filed by the respondents-plaintiffs seeking to recover the amount of risk and cost, the appellant filed an application under Section 8 of the Act, 1996 claiming that the parties be referred to arbitration in view of existence of arbitration clause in the agreement between the parties. The application was opposed.

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The Commercial Court after hearing the parties passed the following order:

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“bl lanHkZ esa i=koyh ij ;g fufoZokn fLFkfr gS fd nksuksa i{kksa ds e/; ftl nLrkost dk fu’iknu gqvk Fkk] mldh en la[;k 69 esa ek/;LFke~ Dykst 64 G.C.C. ds vuqlkj fo| eku gSA mDr ek/;LFke~ Dykst 64 ds ckcr nksuksa i{kksa ds e/; ;g fookn gS fd tgka oknh i{k dk ;g dFku gS fd dsoy dkUVªsDVj ls ek/;LFke~ dk;Zokgh dj ldrk gSA ogha izkFkhZ@izfroknh dk dFku gS fd nksuksa i{kksa ek/;LFke~ dk;Zokgh djus ds fy;s Lora= gSA nksuksa i{kksa us U;k;ky; dk /;ku bl ,xzheasV ds Dykst 35-3 dh vksj Hkh vkdf’kZr fd;k gSA 35-1 Dykst esa dsoy ek/;LFke~ ,oa lqyg vf/kfu;e] 1996 ds rgr fookn dks fuLrkfjr fd;s tkus dh O;oLFkk nh xbZ gS ,oa Dykst 35-3 esa mDr Dykst 63 o 64 ds izko/kku 20 izfr”kr osY;w ds cjkcj vFkok mlls de ds fookn ij gh ykxw gksus dh O;oLFkk nh xbZ gSA i=koyh ij bl Lrj ij ;g Li’V ugha gS fd nksuksa i{kksa ds e/; tks fookn mRiUu gS oks fdrus osY;w dk gS o nksuksa i{kksa dh vksj ls bls Li’V Hkh ugha fd;k x;k gSA ,slh fLFkfr esa ;s leLr rF; bl izkjfEHkd LVst ij fuLrkfjr ugha fd;s tk ldrs gSaA nksuksa i{kksa ds e/; ftl izdkj dk fookn gS mlds fy;s nksuksa i{kksa dh lk{; yh tkuk mfpr izrhr gksrh gS rkfd U;k;ky; }kjk ;g fcUnq r; fd;k tk ldsa

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fd D;k ek/;LFke~ dk;Zokgh ds izko/kku nksuksa i{kksa ij ykxw Fks ;k ugh vkSj D;k okn mDr Dykst 69 dh ifjf/k esa vkrk gS ;k ugha ,oa D;k fookn 20 izfr”kr osY;w ds cjkcj vFkok mlls de dk gS vFkok ugha] bu lHkh ds fy;s ;g mfpr o ;qfDr;qDr izrhr gksrk gS fd bu fcUnq dks mfpr LVst ij lk{; ds }kjk gh r; fd;k tkosaA ,slh fLFkfr esa izkFkhZ@izfroknh }kjk izLrqr mDr izkFkZuki= esa of.kZr /kkjk 8 ek/;LFke~ ,oa lqyg vf/kfu;e] 1996 ls lacaf/kr izko/kkuksa ds ckcr dh xbZ vkifÙk dks lqjf{kr j[kk tkrk gS ftls mfpr LVst ij ckn lk{; fuLrkfjr r; fd;k tk;sxkA vr% mDr izkFkZuki= dk fuLrkj.k mDrkuqlkj fd;k tkrk gSA”

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A perusal of the order would indicate that as the respondents raised objection that the subject matter of the suit on account of clause 35.3 of the agreement would fall within the excepted clause on account of valuation of the suit being more than 20% of the value of the contract, the said aspect pertaining to value could only be decided once the evidence was led by the parties and consequently disposed of the application by observing that the said aspect would be decided at the appropriate stage.

¶34

The provisions of Section 8 of the Act, 1996, insofar as relevant, reads as under:

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“8. Power to 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 to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

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A perusal of the above provision would reveal that if the application is filed by complying with the other provisions of Section 8 of the Act, 1996 in a matter which is the subject matter of arbitration agreement, the court shall refer the parties to

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arbitration. The application under Section 8 of the Act, 1996 has to be decided on the material which is available before the court, as the court is only required to adjudicate as to whether the subject matter of the suit is subject matter of arbitration agreement. The said aspect cannot be left to be decided after framing of issues / parties have led their evidence on the said aspect.

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Even in a case where the plaintiff claims that the subject matter of the suit does not fall within the arbitration agreement and/or the same falls within the excepted clause, as in the present matter, based on the plaint as well as clause/s in the agreement, the application has to be decided either accepting the same or refusing reference of parties to arbitration. Postponing decision on the application till parties lead evidence, essentially frustrates the very object of provisions of Section 8 of the Act, 1996,which requires the filing of the application not later than the date of submitting first statement on substance of dispute and, therefore, in those circumstances, the order passed by the Commercial Court in postponing the decision on the application cannot be sustained.

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So far as the submissions made by learned counsel for the parties in relation to merit of the application under Section 8 of the Act, 1996 is concerned, as the said aspect has not been adjudicated by the Commercial Court, no adjudication at this stage by this Court is required.

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Consequently, the appeal is allowed. The order dated 12/4/2019 passed by the Commercial Court, Jodhpur is set aside and the matter is remanded back to the Commercial Court, Jodhpur with a direction to decide the application filed by the

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(6 of 6)

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appellant under Section 8 of the Act, 1996 keeping in view the observations made hereinbefore.

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As the suit was filed way back in the year 2010, it is expected of the Commercial Court, Jodhpur to decide the application most expeditiously.

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(ARUN BHANSALI),J

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(SANGEET LODHA),J

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8-baweja/-

Ghisa Ram Contractor v. Union of India

Case brief

What is this about?

What did the court decide?

Ghisa Ram Contractor v. Union of India

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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