2018 (8) TMI 2022 - HC - Indian Laws

Seeking declaration that they are not obliged to pay an amount under the term loan facility - Section 8 of the Arbitration and Conciliation Act, 1996 - HELD THAT - There is an apparent distinction between an order containing error apparent on the face of the record and the illegal and erroneous order. In former case, Court can exercise the review jurisdiction but in later case, the remedy lies by moving the Higher Forum. The scope under Section 8 of the said Act is very limited and limited to the extent of the cause of action pleaded in the suit in relation to the arbitration clause or agreement. If the subject dispute is covered by an arbitration agreement, it is imperative on the Court to refer the parties to arbitration instead of venturing to proceed to decide the suit on merit. If an express embargo is created under the statute, the Court cannot travel beyond it. The Court cannot pass such a direction which is not contemplated under Section 8 of the said Act and, therefore, the direction as sought for in the instant application is beyond the legal competence of the Court who was in seisin of the suit and was exercising jurisdiction within strict parameters of section 8 of the said Act. Mere granting a liberty to file a review application cannot be perceived to have conferred any right upon the litigant to have the order in his favour as the Court before hearing the review application has to decide the said application within the circumference of the provision applicable in this regard. This Court does not find that the grounds taken for review comes within the periphery of Order XLVII Rule 1 of the Code of Civil Procedure and, therefore, the review application is liable to be dismissed.

Summary

Issues:
1. Interpretation of arbitration clause in agreements.
2. Jurisdiction of the Court under Section 8 of the Arbitration and Conciliation Act, 1996.
3. Scope of review application under Order XLVII Rule 1 of the Code of Civil Procedure.
4. Compensation for costs in review applications.

Analysis:

Issue 1: Interpretation of arbitration clause in agreements
The petitioner filed suits seeking relief and challenged an application under Section 8 of the Arbitration and Conciliation Act, 1996, to refer the parties to arbitration based on an arbitration clause in the agreements. The Court decided to take up the applications analogously due to identical facts in both suits. The Court allowed the application and referred the parties to arbitration, emphasizing the limited scope of Section 8 to refer parties to arbitration if the dispute is covered by an arbitration agreement.

Issue 2: Jurisdiction of the Court under Section 8 of the Arbitration and Conciliation Act, 1996
The petitioner challenged the order before the Supreme Court but withdrew the Special Leave Petition to file a review application before the High Court. The Court highlighted that the review jurisdiction is not an appellate jurisdiction and can only be exercised based on specific grounds under Order XLVII Rule 1 of the Code of Civil Procedure. The Court emphasized that if the subject dispute is covered by an arbitration agreement, the Court must refer the parties to arbitration as per the statutory provisions, and cannot pass directions beyond the legal competence under Section 8 of the Act.

Issue 3: Scope of review application under Order XLVII Rule 1 of the Code of Civil Procedure
The Court found that the grounds for review did not fall within the scope of Order XLVII Rule 1 of the Code of Civil Procedure, leading to the dismissal of the review application. It clarified that the review jurisdiction cannot be used for revisiting or rewriting judgments, and the Court should not act as an appellate Court.

Issue 4: Compensation for costs in review applications
Since the review application was pending for a considerable period, the Court ordered the dismissal of the review applications subject to payment of costs assessed at 1000 GM to be paid to the respondent within a fortnight from the date, emphasizing the need for timely compensation for costs incurred.

This judgment clarifies the Court's interpretation of arbitration clauses, the limited jurisdiction under Section 8 of the Arbitration and Conciliation Act, the scope of review applications, and the importance of compensating costs in legal proceedings.