C.R. No. 5167 of 2008 [1]
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH.
C.R. No. 5167 of 2008
Date of Decision: August 31, 2009
Ashok Kumar Jain
.....Petitioner
Vs.
M/s Haryana Iron & Steel Rolling Mill, Hisar and others
.....Respondents
CORAM: HON'BLE MR. JUSTICE M.M.S. BEDI.
-.-
Present:- Mr. D.V. Sharma, Senior Advocate with
Mr. Nitin Jain, Advocate
for the petitioner.
Mr.Arun Palli, Senior Advocate with
Mr.H.O. Atri, Advocate.
Mr.Ashish Gupta, Advocate for respondent No.16.
-.-
M.M.S. BEDI, J.
Petitioner has filed this revision petition under Article 227 of
the Constitution of India against the order dated September 17, 2008 passed
by Civil Judge, Junior Division, Hisar, allowing the application of
defendant- respondents under Section 8 of the Arbitration and Conciliation
C.R. No. 5167 of 2008 [2]
Act, 1996, (hereinafter referred to as “the Act’) and dismissing the suit of
the plaintiff relegating him to the remedy of approaching the Arbitrator as
per the arbitration agreement, holding that the subject matter of the suit
regarding separate possession by way of partition of the joint land
belonging to the partnership firm M/s Haryana Iron and Steel Rolling Mill
and the validity of the sale deed dated May 16, 2007 executed by defendant-
respondents No.1 to 6 in favour of defendant No.11 regarding 8 kanals 6
marlas of land can be decided by the Arbitrator.
In order to appreciate the controversy and the applicability of
Section 8 of the Act, it is appropriate to refer to the facts leading to the
passing of the impugned order. Plaintiff- petitioner had filed a suit for
separate possession by way of partition of joint land comprising in Khasra
No. 4996 (8-6), 5241 (3-5), 5242 min (2-10) totaling 14 K 1 M situated at
Hisar and in the alternative for possession by way of dissolution of firm M/s
Haryana Iron & Steel Rolling Mill, Delhi Road, Hisar, by declaring sale
deed No. 1791 dated May 16, 2007 executed by defendants No.1 to 6 in
favour of defendant No.11 in respect of land comprising in Khasra No. 4996
measuring 8 K-6M is illegal, against facts, unauthorized, void ab initio and
is not binding upon the right of plaintiff and as a consequential relief of
permanent prohibitory injunction restraining defendants No.1 to 6 and 11
from dispossessing the plaintiff from the above land or alienating it by way
of sale deed, gift deed, decree or allotting it through defendant No.12 and
also making any construction, addition and alteration till the actual partition
of land on the basis of evidence oral and documentary of every kind. Copy
C.R. No. 5167 of 2008 [3]
of the civil suit has been attached with the petition as annexure P-1. The
petitioner was one of the partners alongwith Ferozi Lal Jain, Kul Bhushan
Jain, Parmod Jain and Deepak Jain, as per the partnership deed dated June
19, 1978, after few of the earlier partners consisting partnership firm Ms/
Haryana Iron and Steel Rolling Mill w.e.f. October 1963 retired. Copy of
the partnership deed dated June 19, 1978 has been placed on record as
annexure P-2. The land forming subject matter of the suit is owned by the
partnership firm. The father of the plaintiff- petitioner and defendant-
respondents No.2 to 4 Sh.Ferozi Lal Jain expired on January 29, 2004. The
petitioner- plaintiff claims that dispute regarding the distribution of shares/
properties of the firm arose as such a partnership agreement was entered
into between the sons of Ferozi Lal, including the petitioner. The
Arbitration Agreement dated September 23, 2006, entered into between the
parties reads as follows:-
“We Kulbhushan Jain, Ashok Kumar Jain, Parmod Jain
and Deepak Jain, sons of Sh. Ferozi Lal Jain son of
Sh.Sher Singh are residents of Hisar, Tehsil and District
Hisar. That we have a dispute regarding shares in
following properties/ firms:-
1. Land and machinery of firm Haryana Rolling Mill
and its liabilities and its dates.
2. Firm Khushiram Sher Singh, Moti Bazaar, Hisar,
partnership or HUF.
3. House Moti Bazaar, Hisar, including 3 shops.
C.R. No. 5167 of 2008 [4]
4. Nohra Birkhuwala Hisar which includes a tea
shop.
5. Agricultural land 55 A.P. Bangla Road of which
jamabandi and map is attached.
6. House Factor, House No.77, Urban Estate -2 ,
Farm House Camry Road Hisar, only constructed
area (land will not be included) House No.119,
Sector 15-A, Hisar.
7. That we all state that out of the total land of
Haryana Rolling Mill leaving 1000 square yards
for Kulbhushan’s house, for the remaining 7800
square yards approximately, deal has been done by
Kulbhushan, Pramod and Deepak, all the parties
will be abide by it.
That our father Late Sh.Ferozi Lal Jain for his share in
the abovementioned properties at Sr. No.1, 2 and 3 has
executed one will dated 22.9.2003 which was written by
Sh.M.P. Aggarwal, Advocate in presence of the
witnesses at Holi Hospital, Hisar, which we all consider
to be correct but Sh.Ferozi Lal’s share in percentage in
abovementioned properties is in dispute.
That we all have agreed with our own wish to
appoint Sh.M.P. Aggarwal and Sh.Subhash Gupta,
C.R. No. 5167 of 2008 [5]
Advocate and Sh.Ashok Goyal (C.A.) as our Panch/
Arbitrator.
That abovementioned arbitrators after hearing all
the parties and seeing all the documents will give
decision as to whether each four of us has any share in
each property and to what extent, either by consensus or
by majority decision and this will be binding and we will
not challenge this anywhere.
Now this Arbitration Agreement has been written
which will be binding on us and our legal heirs and
representatives. All the three arbitrators will give their
award prior to the registration of the Haryana Rolling
Mill.”
A perusal of the above said arbitration agreement dated
September 23, 2006 indicates that the plaintiff- petitioner, defendant-
respondent No.2, defendant-respondent No.3 and defendant- respondent
No.4 brothers had agreed that the property of the partnership firm
mentioned in the abovesaid agreement of sale would be decided by the
Arbitrator and Sh.M.P. Aggarwal, Sh.Subhash Gupta, Advocate and
Sh.Ashok Goyal, C.A. Though the Will of Sh.Ferozi Lal Jain dated
September 22, 2003 was agreed to be corrected but his share in percentage
in the properties mentioned in the arbitration agreement was in dispute and
it would be decided by the Arbitrators. An important feature of the
arbitration agreement is that out of the total land of Haryana Rolling Mill,
C.R. No. 5167 of 2008 [6]
1000 sq. yards would be left for the house of Kulbhushan Jain, defendant-
respondent No.2 and for remaining 7800 sq. yards, approximately deal had
been done by defendants No.2, 3 and 4 and all parties to the arbitration
agreement agreed to abide by, b y the said deal.
The plaintiff- petitioner in his suit has sought the partition and
possession of the property of partnership firm besides seeking declaration
that the sale deed dated May 16, 2007 executed by defendant No.1 i.e. in
favour of defendant No.11 regarding Khasra No.4996 measuring 18 K 6 M
was illegal and not binding upon his rights. He also sought injunction
against the said defendants from dispossessing him from the land besides
seeking a prohibitory injunction restraining them from alienating property
through defendant No.12. Grievance of the plaintiff- petitioner is that he is
a partner in view of the partnership deed dated June 19, 1978 and that he did
not retire from the firm. He has asserted in the suit that after the death of
Ferozi Lal Jain, the partnership concern was dissolved and the assets stood
devolved on the partners as per their share. 1/5th share of Ferozi Lal
devolved upon his legal representatives i.e. the plaintiff and defendants-
respondents No.2 to 4 and defendants No.7 to 10 under Section 8 of the
Hindu Succession Act and that no sale deed could have been executed by
defendants No.2 to 6. Copy of the sale deed dated May 16, 2007 regarding
8 K 6M of land has been attached as annexure P-4 which indicates that the
said property had been sold by defendant No.2 Kulbhushan Jain, Parmod
Jain and Deepak Jain, sons of Ferozi Lal Jain and Abhinav Jain and
Abhishek Jain, sons of Kulbhushan Jain, who have been defendants No.5
C.R. No. 5167 of 2008 [7]
and 6. It is specified in the sale deed that the vendor’s partnership concern
M/s Haryana Iron and Steel Rolling Mill and except the sale persons none-
else was partner in the said firm. Defendants No.7 to 10 are the other legal
heirs of deceased Ferozi Lal Jain whereas defendant No.11, vendee is
alleged to have carved out plots for selling it through one Society, defendant
No.12 and had circulated a lay-out plan under a title “Jain Enclave” to
various property dealers for selling plots under a scheme. The contesting
defendants moved an application under Section 8 of the Act before the Civil
Court averring therein that in view of arbitration agreement dated
September 23, 2006, the matter stands referred to the Arbitrator and award
was to be passed by the Arbitrator but the plaintiff- petitioner has filed a suit
which deserves to be referred to the Arbitrator. The plaintiff- petitioner
contested the said application taking up the plea that the agreement had
become infructuous as defendants No.2 to 6 had forged a partnership deed
and had transferred the land measuring 8 K 6 M by a sale deed dated May
16, 2007 and the matter of suit is not covered under the provisions of clause
of any of the arbitration agreement. The trial Court in view of the
arbitration agreement dated September 23, 2006 allowed the application and
dismissed the suit.
Sh.D.V. Sharma, Senior Advocate, on behalf of the plaintiff-
petitioner contended that the relief claimed by the plaintiff- petitioner is not
covered by the arbitration agreement and the matter lies out of the ambit of
the arbitration agreement, besides this the defendant- respondents No.8 to
10 are not party to the arbitration agreement. The trial Court has not
C.R. No. 5167 of 2008 [8]
considered the pleas taken by the plaintiff- petitioner in the suit and illegally
and arbitrarily allowed the application under Section 8 of the Act.
Mr.Arun Palli, Senior advocate for the defendant- respondents
vehemently urged that once it is established that there is an arbitration
clause to settle the controversy amongst the rival parties, in view of
provisions of Section 8 of the Act, it is incumbent on the civil Court to refer
the matter to the Arbitrator. Counsel relies on Hindustan Petroleum
Corporation Ltd. Vs. M/s Pinkcity Midway Petroleums, 2003 (3) RCR
(Civil) 686 to argue that it is mandatory for the Civil Court to refer the
matter to the Arbitrator if there is an arbitral clause accepted by both the
parties. He also refers to M/s Agri Gold Exims Ltd. Vs. M/s Sri Lakshmi
Knits & Wovens and others, 2007 (1) RCR (Civil) 851 to contend that
whenever there exist an arbitration agreement, Court is under an obligation
to refer the parties to Arbitration in terms of the arbitration agreement.
Shree Subhlaxmi Fabrics Pvt. Ltd. Vs. Chand Mal Baradia and others,
2005 (2) RCR (Civil), 363 was relied on to contend that contentious issues
should not be gone into or decided at the stage of appointment of the
Arbitrator and that no time should be wasted in referring the description
forming subject matter of arbitration clause to the Arbitrator. He argued
that the dispute inter-se the parties arise out of the assets of the partnership
firm and as per clause 7 of the Arbitration Agreement, immovable property
of 7800 sq. yards had been agreed to be sold by Kulbhushan Jain, Parmod
Jain and Deepak Jain. The sale deed impugned in the suit falls under the
C.R. No. 5167 of 2008 [9]
ambit of clause 7 of the Arbitration Agreement as such the trial Court has
rightly allowed the application under Section 8 of the Act.
Counsel for the petitioner relies upon M/s Sharda Ginning
Pressing & Oil Mills and others Vs. Smt. Bimla Devi, 2007 (2) PLR 807,
wherein in a dispute amongst the partners pertaining to dissolution of
partnership concern and rendition of accounts, it was held that where the
partnership contained an arbitration clause, the dispute regarding
dissolution of partnership and rendition of accounts has to be adjudicated by
the Civil Court and not by the Arbitrator.
I have heard counsel for the petitioner as well as counsel for
the respondents and carefully gone through each document referred to by
the parties, in context to the provisions of Section 8 of the Act. Section 8 of
the Act reads as follows:-
“Section 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 so applies
not later than when submitting his first statement
on the substance of the dispute, refer the parties to
arbitration.
(2) The application referred to in sub-section (1) shall
not be entertained unless it is accompanied by the
C.R. No. 5167 of 2008
[10]
original arbitration agreement or a duly certified
copy thereof.
(3) Notwithstanding that an application has been
made under sub-section (1) and that the issue is
pending before the judicial authority, an
arbitration may be commenced or continued and
an arbitral award made"
A perusal of the abovesaid provisions indicates that Section 8
of the Act brings out the conditions which are required to be specified by a
party under Sections 8(1) and 8(2) of the Act before a Court can be called
upon to exercise its powers. The language of Section 8 of the Act suggests
that following conditions are necessary before powers under Section 8 of
the Act are exercised:-
"i) there is an arbitration agreement;
ii) a party to the agreement brings an action in the
court against the other party;
iii) subject matter of the action is the same as the
subject matter of the arbitration agreement; and
iv) the other party moves the court for referring the
parties to arbitration when submitting his first
statement on the substance of the dispute.”
Whether the abovesaid conditions stipulated in Section 8 of the
Act are attracted in the present case, are required to be looked into in
context to the pleadings and claim of the plaintiff- petitioner. In the present
C.R. No. 5167 of 2008
[11]
case, the arbitration agreement annexure P-3 dated September 23, 2006 has
been entered into between four persons i.e. the sons of Ferozi Lal Jain
pertaining to the properties of the partnership firm. In the arbitration
agreement there is no reference regarding the rendition of account amongst
the partners of M/s Haryana Iron and Steel Rolling Mills, even the share of
Ferozi Lal Jain, deceased in the properties mentioned in the arbitration
agreement is to be as determined by the Arbitrators. The arbitrators are
required to find out the share of the four persons mentioned in the
Arbitration agreement. Prima facie, the abovesaid four persons had agreed
to abide by the deal which stood already struck regarding the sale of 7800
sq. yards by Kulbhushan Jain but the suit has been filed by the plaintiff
regarding the subject matter which lies out of the cope of the arbitration
agreement. For instance, sale deed executed by Abhinav Jain and Abhishek
Jain, sons of Kulbhushan Jain and its effect cannot be looked into by the
Arbitrators. The sine qua non for directing the provisions of Section 8 of
the Act is that the subject matter of the suit should be the subject matter of
the arbitration agreement and the subject matter of the civil suit should
coincide with the subject matter which can be gone into by the Arbitrator
pursuant to the arbitration agreement between the contesting parties. The
arbitrator in the present case, will not be able to determine the rights of the
parties who are not parties to the arbitration agreement. The sale deed
changed by the plaintiff apparently does not coincide with the deal which is
stated to have been entered into by Kulbhushan and Deepak Jain in the
arbitration agreement. Besides this, it is pertinent to mention that in the
C.R. No. 5167 of 2008
[12]
case of M/s Makar Cotton Mill Vs. Harminder Singh, 2002 (1) RCR
(Civil) 437 (Delhi) and Haryana Telecom Ltd. Vs. Sterlite Industries
(India) Ltd., 1999 (3) RCR (Civil) 619, a suit for dissolution of partnership
and rendition of accounts has to be adjudicated by the Civil Court and not
by Arbitrator. The trial Court while allowing the application under Section
8 of the Act did not take into consideration that the parties to the suit are not
the same as the parties who are subject matter of the arbitration agreement.
The arbitration agreement will bound only the four persons mentioned
therein but rights of the other defendants vis-à-vis the plaintiff- petitioner
cannot be adjudicated upon by the Arbitrator. I have considered the
contention of Mr.Arun Palli, and the judgments cited by him. In view of the
judgments cited, there is no dispute regarding the scope of Section 8 of the
Act but in view of the subject matter of the Arbitration Agreement and the
suit being different, the ratio the abovesaid judgments is not applicable.
In view of the above circumstances, the impugned order dated
September 17, 2008, allowing the application under Section 8 of the Act is
set aside. The parties are directed to appear before the Civil Court on
October 10, 2009 for proceedings in accordance with law.
Allowed in the aforesaid terms.
August 31, 2009 (M.M.S.BEDI) sanjay JUDGE