M VIJAYA NARAYANAN Vs. M PRABHAKARAN

JUDGEMENT

(1.) Whether a court before which an action is brought in a matter which is the subject of an arbitration agreement has only to refer the parties to arbitration or to appoint an arbitrator and refer the parties to arbitration before that arbitrator under Section 8 of Arbitration and Conciliation Act, 1996. This is the vital question to be resolved in the appeal.

(2.) Appellants were the plaintiffs in a suit for dissolution of a partnership firm and for accounting on the file of Sub Court, Kozhikode. Respondents were the defendants in the suit who are the other partners of the firm M/s.Deepa Restaurant and Tourist Home, Ramanattukara. On appearance before court on receipt of the summons, respondents filed I.A.2676/03, a petition under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 1996 Act) for a reference to arbitration. The partnership deed admittedly contained an arbitration clause. Appellants did not oppose the petition. The learned Sub Judge allowed I. A. 2676/03 and referred the parties to arbitration. The suit was disposed accordingly, as per judgment dated 31.7.04. Appellants are challenging the said judgment contending that application of the respondents was for stay and reference of the suit to arbitration and appellants did not oppose that application and the court below should not have disposed the suit itself and instead should have stayed the suit and referred the dispute to an arbitrator. Before filing the appeal, they had filed Arbitration O.P.470/04 before District Court and when the maintainability of the O.P. was disputed, this appeal was filed.

(3.) We heard the learned Counsel appearing for the appellants and the respondents at the admission stage. The learned Counsel for the appellants vehemently argued that under Section 8 of the 1996 Act, the court below could have only referred the dispute to an arbitrator for arbitration and should not have disposed of the suit by an order referring the parties to an arbitration. The learned Counsel relying on the decision of the Apex Court in SBP & Co. v. Patel Engineering Ltd. (2005) 8 SCC 618, in Firm Ashok Traders and Anr. v. Gurumukh Das Saluja (2004) 3 SCC 1433, in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya and Anr. , and in P. Anand Gajapathi Raju v. P.V.G. Raju AIR 2000 SC 1886 argued that Section 8 was enacted to enable the parties to have a speedier decision of the case and in such circumstances, court below should have referred the dispute to a named arbitrator. The argument is that as there is an arbitration clause in the partnership deed and respondents wanted a reference of the dispute for arbitration and appellants did not oppose the request, court below should have called upon the parties to name an arbitrator and should have referred the arbitration to that arbitrator and the disposal of the suit by referring the parties for arbitration is against the ambit and spirit of Section 8 of the 1996 Act and is to be set aside. Learned Counsel appearing for the respondents argued that under Section 8 of the Act, court is bound to refer the parties to arbitration, if there is an arbitration agreement and the subject of the dispute in the suit is the subject of the arbitration agreement and defendants applied for a reference under Section 8 of the Act, before they submitted their first statement in the suit and in such circumstances there is no reason to interfere with the judgment or the procedure adopted by the court below.