K.B. PEETHAMBARAN Vs. E.V. THOMAS @ KUNJACHAN,

JUDGEMENT

(1.) THIS original petition is filed challenging Ext.P5 order passed by the Additional Munsiff, Ernakulam, and Ext.P6 order closing O.S. No. 1341 of 2002 before that court. The petitioner is the plaintiff in the suit. The suit is filed for a permanent injunction restraining defendants 1 and 2 from carrying on any business in plaint items 1 to 3 other than the business of the firm by name "Slim Collections" of which the plaintiff and 1st defendant are partners and from dealing with, selling out or otherwise disposing of the readymade garments, tailoring units and equipments and the furniture and fittings for any purpose otherwise than for and on behalf of the firm. After receipt of summons in the suit, the defendants filed an application under Section 8 of the Arbitration and Conciliation Act. The trial court accepted the contentions of the defendants and found that in view of the arbitration clause in the partnership deed entered into between the parties, the dispute between the parties has to be settled by an arbitrator and the suit is not maintainable. The learned counsel for the petitioner submits that the respondents are not admitting that they are the partners and therefore the petition filed under Section 8 of the Arbitration Act is not maintainable. In support of the above contention, the learned counsel brought to my notice the description of the defendant in the petition filed under Section 8. In that, the defendant describes himself as the Proprietor of the business and therefore he submits that he cannot claim to be a partner also in which case the claim for referring the matter to the Arbitrator is not maintainable. Under the Scheme of the Arbitration Act when an arbitration agreement is existing between the parties and a dispute arises between them the matter has to be settled by the Arbitrator and if any suit is filed without invoking the arbitration clause, it is open to the defendant to point out the existence of the arbitration clause and request the court to stop further proceedings and refer the parties to the Arbitration. That is why it is stated that the application under Section 8 should be made not later than submitting his first statement on the substance of the dispute. He is not expected to disclose the defence in the statement under Section 8. All that he needs to say is that the parties have entered into an agreement providing for arbitration in the partnership and the court has to see whether the plaintiff has sought relief under the agreement which contains an arbitration clause. The learned counsel for the appellant/plaintiff has no submission that the relief sought for in the suit is not based on the partnership deed which contains an arbitration clause. There is also no submission that the dispute between the parties is not relating to the partnership business. Therefore, both the conditions are satisfied and the matter has to be decided by the Arbitrator.

(2.) THE learned counsel for the petitioner sought the assistance of the decision of the Supreme Court in P. Anand Gajapathi Raju v. P.V.G. Raju ( : AIR 2000 SC 1886). It is stated in paragraph 5 of the judgment that the conditions to be satisfied for invoking Section 8 are (1) there is an arbitration agreement (2) a party to the agreement brings an action in the Court against the other party, (3) subject matter of the action is same as the subject matter of the arbitration agreement, and (4) the other party moves the Court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. According to the learned counsel for the petitioner, conditions 1, 2 and 4 are present and condition No. 3 is not present. Condition No. 3 says that the subject matter of the action is the same as the subject matter of the arbitration agreement. As already noted earlier the reason for the learned counsel to contend that the subject matter is different is that the defendant has described himself as the Proprietor of the business in the petition filed under Section 8. That by itself is not sufficient to take the dispute outside the agreement between the parties as the petitioner himself has approached the Court on the basis of the partnership agreement. He cannot say that he is not having any dispute as per the partnership agreement. The learned counsel also relied on the decision in Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. : AIR 1999 SC 2354). In that decision the Supreme Court has held that Sub -section (1) of Section 8 postulates that what can be referred to the arbitrator is only that dispute or matter which the arbitrator is competent or empowered to decide. That was a case where a petition filed under Section 8 was filed before the High Court dealing with the winding up of a company and the High Court rejected the petition stating that the High Court has no jurisdiction. That was affirmed by the Supreme Court. I do not think that the factual situation in this case is as was present in the case before the Supreme Court and therefore that decision will not apply to the facts of this Case. Learned counsel for the appellant then contended that the respondent had filed a caveat in the District Court and in that caveat he had stated that the partnership agreement has not come into effect and therefore such a person cannot turn round and contend that the parties must be referred to an arbitration. It is not possible for this court to accept this contention. Though the caveat is not produced as an exhibit, a copy of the same was handed over to me for my perusal. In that caveat it is stated by the first respondent that though a document has been executed between the parties and the document is styled as a partnership deed it has not taken effect. According to the learned counsel if the first respondent himself admits that the partnership deed has not taken effect he cannot compel a reference to arbitration under Section 8 of the Act. In support of this argument learned counsel relied on the decision of the House of Lords in Heyman and Anr. v. Darwins Ltd. (1942 (1) All ER 337. The learned counsel relied on the sentences in page 341 which reads as follows:

(3.) THE observation is page 343 that if one party to the alleged contract is contending that it is void ab initio the arbitration clause cannot operate is also relied on. It is also pointed out that in page 360 it is stated that where the contract itself is repudiated in the sense that its original existence or its binding force is challenged, e.g., where it is said that the parties never were ad idem, or where it is said that the contract is voidable (e.g., in cases of fraud, misrepresentation or mistake) and that it has been avoided, the parties are not bound by any contract and escape the obligation to perform any of its terms including the arbitration clause, unless the provisions of the clause are wide enough to include the question of jurisdiction. Learned counsel also relied on the decisions reported in Dinasari Ltd. v. Hussain Ali & Sons and Anr. , B.J. Manufacturing Co. v. Dulichand ( : AIR 1953 Cal. 450), Chartered Bank v. Port Commissioner (AIR 1972 Cal. 198), Subhash Industries v. Bhagwandas , Food Corporation of India v. P.K. and Company (2000 (Supp) Arb. LR 467. All these decisions relied on by the learned counsel except the decision in 2000 (Suppl.) Arb. LR are under Arbitration Act 1940. There is marked difference between Section 34 of the Arbitration Act 1940 and Section 8 of the Arbitration and Conciliation Act 1996.