PAWAN SHARMA Vs. TARKESHWAR SHAH

JUDGEMENT

(1.) IN this petition filed under Article 227 of the Constitution of India, the petitioner has challenged the correctness and validity of the order dated 12th April, 2004 passed by the then learned Sub Judge (1), Shimla. By this impugned order, the learned Court below, while allowing an application filed by the respondent under Section 151 of the Code of Civil Procedure, recalled the order dated 7th April, 1998 passed by his order dated 7th April, 1998 passed by his predecessor. By this order dated 7th April, 1998 the Court had, based upon the agreement of the parties referred the disputes between the parties to an agreed Arbitrator, namely, Shri J.S. Bhogal, Advocate. Brief facts leading to the filing of this petition are as under:

(2.) CIVIL Suit No. 17/1 of 1997 was filed by respondent Shri Tarkeshwar Shah against the petitioner Shri Pawan Kumar Sharma for obtaining a decree of permanent prohibitory injunction. In this suit the petitioner defendant before filing written statement filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (1996 Act, for short) praying for the stay of the said suit as well as for reference of the disputes forming the subject matter of the suit to arbitration because with respect to the subject matter of the suit the parties had executed an agreement in which, under Clause (10), it was provided that the disputes between the parties shall be referred to the arbitration of an Arbitrator to be mutually appointed by both the parties. Vide order dated 9th January, 1998, filed under Section 8 of 1996 Act by the petitioner defendant. In the course of this order, even though it was not strictly required to be done the learned Court below directed the parties to appoint the Arbitrator by their mutual agreement and thereafter to place the matter before the appointed Arbitrator for arbitration in accordance with law. In the course of the said order, it was also mentioned that a reference has to be made by the Court to the Arbitrator after his appointment by the parties based on their agreement. For this purpose, despite allowing the application, the Court below fixed the case for a next date.

(3.) A bare reading of Section 8 (supra) clearly suggests that whenever a Judicial Authority seized of a judicial matter, such as a Civil Court seized of a Civil Suit is approached by a party in that matter with the submission and a prayer that with respect to the subject matter of the judicial matter an arbitration agreement stands executed between the parties, such a Judicial Authority may refer the parties to arbitration. "Referring the parties" to arbitration and making a "reference of the disputes to the Arbitrator" are two distinct situations. Yes, under Section 20 of the Arbitration Act, 1940 and under some other related provisions of that repealed law, the Civil Court had the jurisdictibn to make a reference of disputes to the Arbitrator but under the Scheme of 1996 Act, particularly based upon Section 8 thereof, the limited jurisdiction of a Court seized of a suit is to dispose of the suit, if and when, upon being approached by a party in that suit, it is satisfied that the subject matter of the suit is also the subject matter of an arbitration agreement between the parties. On such satisfaction being recorded, the only jurisdiction vesting in the Civil Court while disposing of the suit is, on the same date to make a formal order of referring the parties to arbitration. Under this Scheme, therefore, it is no part of the Court's duty to adjourn the matter to some other date to enable the parties to report to the Court about the appointment of the Arbitrator and then to make a reference of disputes to the Arbitrator. This is not the intention of the Legislature which can be gathered or spelt out by a reading of 1996 Act. The legislative intent is very clear. It only suggests that once under Section 8 the Court has disposed of the suit by observing and holding that the subject matter of the suit is covered by an arbitration agreement it merely "refers the parties to arbitration". Thereafter it is for the parties and the parties alone, in terms of stipulations contained in the arbitration agreement to start the process of having the disputes adjudicated upon by the mechanism and through the medium of arbitration and in that process to take steps for the appointment of the Arbitrator(s).