2015 (2) TMI 865 - SC - Indian Laws

Arbitration clause in the agreement - Matter refer to trial court & High court - Peremptory Section 8 of The Arbitration and Conciliation Act, 1996 - General law should yield to the special law - Generalia specialibus non derogant - Held that - The attempt of the trial court and the approach made by the high court in bifurcating the cause of action, is fallacious. It would only lead to delaying and complicating the process. The said issue is also no more res integra. Already decided in case of Sukanya Holdings (P) Limited. 2003 (4) TMI 435 - SUPREME COURT OF INDIA . Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and the other to be decided by the civil court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums.In Orix Auto Finance (India) Limited 2006 (2) TMI 625 - SUPREME COURT referring to public policy, this Court has taken the view that if agreements permit the financer to take possession of the finances vehicles, there is no legal impediment on such possession being taken, unless the contract is held to be unconscionable or opposed to public policy Once an application in due compliance of Section 8 of the Arbitration Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction. It should be to see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. Once it is brought to the notice of the court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statue, the civil court should first see whether there is ouster of jurisdiction in terms or compliance of the procedure under the special statute. The general law should yield to the special law - generalia specialibus non derogant. In such a situation, the approach shall not be to see whether there is still jurisdiction in the civil court under the general law. Such approaches would only delay the resolution of disputes and complicate the redressal of grievance and of course unnecessarily increase the pendency in the court. Decided in favour of appellant.

Summary

Issues:
Jurisdiction of civil court in cases involving arbitration agreements under Section 8 of the Arbitration and Conciliation Act, 1996.

Analysis:
The case involved a dispute where the appellant, in a suit for injunction, sought to enforce an arbitration agreement between the parties to resolve the matter. The trial court initially declined the relief, citing public policy concerns despite the existence of an arbitration clause in the agreement. The High Court also upheld the trial court's decision, stating that the civil court's jurisdiction is not ousted by the mere presence of an arbitration clause. However, the Supreme Court clarified that once an application is filed under Section 8 of the Arbitration Act, the court's duty is to refer the parties to arbitration, as per the mandatory language of the Act.

The Supreme Court emphasized that the court's role, upon receiving a Section 8 application, is not to determine its own jurisdiction but to ascertain if its jurisdiction has been ousted by the arbitration agreement. The Court cited previous judgments, such as P. Anand Gajapathi Raju v. P.V.G. Raju, to highlight the mandatory nature of Section 8, which requires referral to arbitration when parties have agreed to resolve disputes in that manner. The Court also noted that attempting to bifurcate the cause of action between arbitration and civil court proceedings would only complicate and delay the resolution process, as seen in Sukanya Holdings (P) Limited v. Jayesh Pandya.

Furthermore, the Court referred to Orix Auto Finance (India) Limited v. Jagmander Singh to emphasize that agreements allowing possession of financed assets are permissible unless they violate public policy. In this case, the Court set aside the trial court and High Court orders, directing the trial court to reconsider the appellant's Section 8 application within two months. The appeal was disposed of without costs, affirming the mandatory nature of arbitration referral under Section 8 of the Arbitration Act.