VINOD SHANTILAL GOSALIA Vs. ANIL VASSUDEV SALGAOCAR

JUDGEMENT

(1.) THE appellants herein are the original plaintiffs. The appellants filed an application under Section 20 of the Indian Arbitration Act before the Additional Civil Judge, Senior Division, Margao, which was numbered as Special Civil Suit No. 179/1988/b. The interim application moved in the said Special Civil Suit was numbered as Civil Miscellaneous Application No. 325/1988/b. The respondent herein contested the application of the appellants herein and contended that in view of the averments made by the appellants themselves in the application claiming dishonesty on the part of the respondent herein and alternatively having claimed that the contract was vitiated by fraud, the court should not under Section 24 of the Arbitration Act refer the matter for arbitration. The Trial Court on hearing both the parties and/on considering the matter on record by its order dated 18th January, 1992 was pleased to hold that he application/petition under Section 20 of the Arbitration Act is liable to be rejected. Insofar as the interim application is concerned though the Trial Court had rejected the application under Section 20 of the Arbitration Act, the Trial Court on merits held that prayer (b) (i) of the interim application could be granted and that the appellants had failed to make out a case in respect of the other prayers and accordingly rejected the same.

(2.) AGGRIEVED by the said order the appellants herein have preferred this appeal. Notice was issued before admission to the respondent herein. This Court by its order dated 2nd July, 1992 was pleased to admit the appeal, however, no interim relief was granted. The matter has been listed for hearing after a gap of over 4 years.

(3.) MR. Usgaonkar, Senior Counsel appearing on behalf of the appellants, has challenged the findings of the Trial Court on both the counts, namely, that there were serious allegations of fraud and/or dishonesty alleged in the application and also the finding that the appellants themselves had pleaded fraud and consequently, therefore, they could not have moved an application based on a contract which they themselves alleged to be void. Mr. Usgaonkar has taken me through the pleadings of the parties to show that in fact there are no serious allegations made by the appellants against the respondent. That a court in refusing reference under Section 20 (4) must arrive at the conclusion that there are serious allegations of fraud and not merely allegations. For the said proposition Mr. Usgaonkar has relied on the judgment of the Apex Court in the case of Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak and another (AIR 1962 SC 406), as also the judgment of the Apex Court in Damodar Valley Corporation v. K. K. Kar (AIR 1974 SC 158), Mr. Usgaonkar has further relied on a Division Bench judgment of this court in the case of Narsingdas Takhatmal v. Radhakishan Rambakas and others (AIR 1952 Bombay 425), to point out that a party pleading fraud must set out the particulars of fraud and that in the absence of such particulars it could not be said that fraud had been pleaded. He also invited my attention to the provisions of Order VI, Rule 4 of the Code of Civil Procedure which enjoins that the party pleading fraud must specifically set out averments pertaining to fraud. Mr. Usgaonkar then points out that if the pleadings are seen in their entirety, it would be clear that there are no averments of fraud as required and consequently it cannot be said that the appellants though they had alleged that the respondent had no intention of performing the contract by itself would not disclose that the contract was vitiated by fraud. That the averments by the appellants that they have exercised their option to rescind the contract on the ground of fraud should be seen in the light of the totality of the circumstances. If so seen, and more so on the background that there had been no previous correspondence alleging fraud by the appellants, the said averments could not be read in isolation and as such, the Trial Court erred in holding that there were averments of fraud. Mr. Usgaonkar then drew my attention to the judgment of the Apex Court in the case of The Union of India v. Kishorilal Gupta and Bros. (AIR 1959 SC 1362 ). Mr. Usgaonkar points out that the ratio of the said case would only be applicable if the averments of fraud were there to arrive at a strong prima facie conclusion that the contract dated 6th February, 1987 was vitiated by fraud. That as already pointed out there were no such averments and consequently it could not be said that the pleadings disclose that the contract was vitiated by fraud. The other averments regarding the reliefs were in the context that there were breaches committed by the respondent and that the contract had been terminated on account of the said breaches. Mr. Usgaonkar also invites my attention to the provisions of Sections 39 and 65 of the Indian Contract Act, 1872. Mr. Usgaonkar points out that the word 'voidable' has also to be read in Section 65 of the Indian Contract Act and the word 'voidable' is not restricted or referable to the provisions of Section 17 of the Indian Contract Act. That the words used in the pleadings were referable to Section 65 and if so understood the averments and the relief claimant could only be said to be in the context of the various branches averred in the application by the appellants herein. Mr. Usgaonkar further contends that if the appeal is rejected he will be non-suited as the provisions of the Indian Limitation Act by themselves do not apply and that they are made applicable by virtue of the provisions of Section 37 of the Arbitration Act. That if one looks at the provisions of Section 37 of the Arbitration Act, the present proceedings would not be covered and consequently their remedy would be barred. Mr. Usgaonkar relies on various judgments including a Division Bench judgment of this court in the case of Purshottamdas Hassaram Sabnani v. Impex (India) Ltd. (AIR 1954 Bombay 309), Mr. Usgaonkar has also relied on the authority of the Apex Court in The Commissioner of Sales Tax, Uttar Pradesh, Lucknow v. M/s. Parson Tools and Plants, Kanpur (AIR 1975 SC 1039), in the authority of Orissa State Co-operative Marketing Federation Ltd. v. Associated Marketing Co. (AIR 1982 Orissa 1), in the authority of Seumal Nihalchand v. Mulomal Rahumal (AIR 1914 Sind 122), and in the authority of Satish Chandra Bose and other v. Paliram Agarwala (AIR 1921 Patna 161 ).