2003 (5) TMI 414 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of Civil Court in presence of an arbitration agreement.
2. Validity and enforceability of interim orders passed by the trial court.
3. Applicability of Section 9 of the Arbitration and Conciliation Act, 1996.
4. Contesting defendants' rights under Section 8 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Jurisdiction of Civil Court in presence of an arbitration agreement:
The contesting defendants argued that the dispute should be referred to arbitration as per Clause 15 of the partnership deed, and therefore, the suit is not maintainable in a Civil Court. They contended that the Civil Court lacks jurisdiction to entertain the suit and pass interim orders given the arbitration agreement. However, the plaintiffs argued that the retirement agreement superseded the partnership deed, including Clause 15, thus invalidating the arbitration clause. The court noted that the retirement agreement was not on record and its terms were unknown at this stage.

2. Validity and enforceability of interim orders passed by the trial court:
The trial court had passed several ex parte interim orders, including appointing a Commissioner to inspect and seize properties of the first defendant-firm and granting temporary injunctions and conditional attachments. The contesting defendants did not file any written statement or counter in the interim applications nor sought to vacate or modify the ex parte orders. The court held that the trial court had not exercised jurisdiction not vested in it by law, and the contesting defendants could request the trial court to dismiss the applications for appointment of the Commissioner based on relevant provisions or decisions.

3. Applicability of Section 9 of the Arbitration and Conciliation Act, 1996:
Section 9 allows parties to apply to a court for interim measures of protection even before or during arbitral proceedings. The court emphasized that this provision indicates the Civil Court's jurisdiction to entertain suits and pass necessary interim orders, even in cases with an arbitration agreement. The court stated that if the Legislature intended to bar Civil Court jurisdiction in such cases, it would not have included Section 9 in the Act.

4. Contesting defendants' rights under Section 8 of the Arbitration and Conciliation Act, 1996:
The contesting defendants had filed an application under Section 8(1) of the Arbitration and Conciliation Act, 1996, requesting the trial court to refer the matter to arbitration. This application was still pending for consideration. The court noted that the trial court must decide whether Clause 15 of the partnership deed still binds the parties after the retirement agreement. The court clarified that the contesting defendants' filing of the Section 8 application did not preclude them from contesting the interim orders.

Conclusion:
The court dismissed the appeal and the two revisions, affirming the trial court's interim orders. It directed the trial court to expedite the disposal of the pending applications, including the Section 8 application. The court rejected the request for leave to appeal to the Supreme Court, finding no substantial issue warranting such leave.