2017 (7) TMI 1469 - HC - Indian Laws

Maintainability of petition - appropriate forum - whether a petition under Article 227 of the Constitution of India lies to the High Court against an order of the Civil Judge or the District Judge allowing an application under Section 8 of the Arbitration Act? - HELD THAT - The counsel for the petitioner / plaintiff has firstly argued that since there is no arbitration clause in the Sale Deed, the same would be treated as variance with the terms and conditions in the Agreement dated 9th February, 2012 and the arbitration clause contained in the Agreement dated 9th February, 2012 has thus been novated by virtue of Section 62 of the Indian Contract Act, 1872 - this cannot be agreed upon. The only reasonable way to interpret clause 5(j) aforesaid is that unless there is anything in the Sale Deed dated 8th January, 2014 to suggest that the resolution of disputes between the parties would not be by way of arbitration as provided in the Agreement dated 9th February, 2012, the arbitration clause aforesaid in the Agreement would be deemed to have been incorporated in the Sale Deed - Mere absence of an arbitration clause in the Sale Deed cannot be variance with the terms and conditions of the Agreement dated 9th February, 2012 for it to be said that the arbitration clause in the Agreement dated 9th February, 2012 stands novated. In fact from the admission of the counsel for the petitioner / plaintiff that the clauses aforesaid are capable of being interpreted, as have been done by the learned Additional District Judge, the jurisdiction under Article 227 is excluded inasmuch as the said jurisdiction is not intended to interfere with a possible interpretation of the Courts below. The second argument of the counsel for the petitioner / plaintiff is that the Agreement dated 9th February, 2012 was imposed upon the petitioner / plaintiff and the petitioner / plaintiff was compelled to sign the same owing to having made all the payments to the respondent / defendant. The counsel states that an application had also been filed in the suit for seeking production of the original Arbitration Agreement and for amendment of the plaint to seek a declaration in this regard. It is argued that the said application has not been decided - Admittedly in the suit as existing at the time when Section 8 application was filed, there was no such relief of declaration that the petitioner / plaintiff had been compelled to sign the Agreement dated 9th February, 2012 or that the same was not binding on the petitioner / plaintiff. Last argument of the counsel for the petitioner / plaintiff is that the respondent / defendant along with the application under Section 8 of the Act only filed a photocopy of the Agreement dated 9th February, 2012 containing the arbitration clause and never filed original. There is however no dispute that the photocopy which was filed is a true copy of the Agreement signed by the petitioner / plaintiff - Section 8(2) of the Act permits an application under sub Section (1) thereof even when the application is accompanied with a copy of the Arbitration Agreement or the contract containing the Arbitration Agreement. Once there is no dispute as to the genuineness of the document, the said plea also has no merit. Application dismissed.

Summary

Issues Involved:

1. Maintainability of a petition under Article 227 of the Constitution against an order under Section 8 of the Arbitration and Conciliation Act, 1996.
2. Interpretation of arbitration clauses and their incorporation into subsequent agreements.
3. Allegations of coercion and the validity of agreements.
4. Requirement of original arbitration agreement in applications under Section 8 of the Arbitration Act.

Issue-wise Detailed Analysis:

1. Maintainability of Petition under Article 227:
The primary issue was whether a petition under Article 227 of the Constitution of India is maintainable against an order of the District Court allowing an application under Section 8 of the Arbitration and Conciliation Act, 1996. The court noted that although several High Courts have entertained such petitions, the question of maintainability was not discussed in those judgments. The court highlighted the amendment to Section 37 of the Arbitration Act effective from 23rd October 2015, which allows an appeal against an order refusing to refer parties to arbitration but not against an order referring parties to arbitration. The court reasoned that the Arbitration Act is a consolidating and amending statute, intended to minimize judicial intervention. It was held that a constitutional remedy under Article 227 is not barred by statutory prohibition against an appeal, but the court would ordinarily refrain from exercising jurisdiction where the statute gives finality to an order. The court concluded that the same principles that apply to the maintainability of petitions against orders of the Arbitral Tribunal under Article 227 should apply to orders of the District Court under Section 8.

2. Interpretation of Arbitration Clauses:
The court examined whether the arbitration clause in the Agreement dated 9th February 2012 was incorporated into the Sale Deed dated 8th January 2014. The petitioner argued that the absence of an arbitration clause in the Sale Deed indicated a variance, thereby novating the arbitration clause in the Agreement. However, the court disagreed, interpreting clause 5(j) of the Sale Deed as incorporating the arbitration clause unless explicitly negated. The court emphasized that mere absence of an arbitration clause in the Sale Deed does not constitute variance. The court also referred to Section 7(5) of the Arbitration Act, which allows for the incorporation of an arbitration clause by reference in a contract.

3. Allegations of Coercion:
The petitioner claimed that the Agreement dated 9th February 2012 was signed under coercion after making all payments. The court noted that the suit at the time of the Section 8 application did not seek a declaration of coercion or non-binding nature of the Agreement. Consistent judicial precedents held that such suits challenging the validity of arbitration agreements are not maintainable.

4. Requirement of Original Arbitration Agreement:
The petitioner contended that the respondent did not file the original Agreement containing the arbitration clause with the Section 8 application, only a photocopy. The court noted that there was no dispute regarding the genuineness of the photocopy and Section 8(2) permits applications accompanied by a copy of the arbitration agreement. Therefore, the court found no merit in this argument.

The petition was ultimately dismissed, with the court finding no merit in the challenge to the impugned order.