Anil S/o Jagannath Rana and Ors Versus Rajendra S/o Radhakishan Rana and another, on 18th December, 2014 Supreme Court Of India: Case Comment

data-matched-content-ui-type="image_card_sidebyside" data-matched-content-rows-num="1" data-matched-content-columns-num="4"

Bench : Anil R. Dave, Kurian Joseph.

Civil Appeal No. 11604 of 2014

Statement of Facts

The Partnership firm namely, M/s. Rana Sahebram Mannulal and others had filed suit against Appellants (First to Third Defendant in special suit) in pursuance to the partnership business. The Plaintiffs sough declaration to the effect that they should be declared as valid partners and owners and possessors of the suit land to particular extent as claimed. Further, declaration was sought to the effect that the said property to be the property of Partnership Firm. The declaration was also sough to the effect that, sale deeds executed by First Defendant in favour of Second Defendant and Seventh Defendant in respect one of the said properties should; and the sale deed executed by Second defendant in favour of First defendant, to be null and void and should not affect and not to be binding upon Plaintiffs. Further, another declaration sought to the effect that, the below given properties to be declared to be the properties of Partnership Firm As the said properties are purchased from the nexus and income of the partnership firm: The property purchased by the Fourth Defendant bearing land gut no. 17/2 out of which plot no.1 and also the concerned land purchased in the name of Fourth Defendant by the first Defendant also the land gut No. 56 in the name of Third and Firth Defendant and the land gut no. 213 purchased in the name of Third Defendant, under registered sale deed and the land gut no. 185 purchased in the name of First Plaintiff and First Defendant and the land gut no. 167/2 purchased in the name of Fifth Defendant and the land gut no. 6 purchased in the name of Fifth Defendant and the land plot No. 16 in the name of Fourth Defendant. Moreover, perpetual injunction is claimed against first to seventh defendant, their servants, relatives, etc. who so ever claims on their behalf, restraining them permanently, from alienating and creating the third party interest over suit properties. Also, the recovery of profit accrued from the whole sale kerosene business run through the Partnership firm was claimed from the First to Third Defendant as from three years back to the filing of suit along with certain rate of annual interests. The Appellant/Defendants filed an application[1] for dismissal of the suit for want of jurisdiction as the Partnership deed contained arbitration clause. The application essentially, was to be treated as an application under Section 8(1) of the Act[2]. The application was opposed by the plaintiffs.

Procedural History

The Objection raised by Plaintiffs was considered by the Trial Court and upheld the objection by holding that the dispute between the parties was within the jurisdiction of the Court and not required to be referred to the Arbitration under any law. Thus, the suit was proceeded further, the parties examined their respective witnesses and during such period, the Respondent in this case, approached to the Chief Justice of Bombay High Court with Arbitration Application[3] and sought appointment of an Arbitrator as per conditions given under Partnership deed. The High Court after ignoring the objection to an application held that the appointment of arbitrator is not prohibited by sub-section (3) of Section 8 of the Arbitration and Conciliation Act, 1996 during course of litigation pursuant to agreement. Considering this the Court found it expedient to appoint proper person as Arbitrator in pursuant to clauses of the partnership deed to entertain dispute between the parties.”[4]

Issue

Whether either party to the proceedings can invoke the jurisdiction of the Chief Justice under Section 11(6) of the Arbitration and Conciliation Act, 1996, when a judicial authority once declined to refer the dispute pending before it to the Arbitrator and when it became final.

data-matched-content-ui-type="image_card_sidebyside" data-matched-content-rows-num="1" data-matched-content-columns-num="4"

Judgment

The Court observed that, the said application filed by the Respondents under Section 11 of the Arbitration and Conciliation Act, 1996 (the Act) was nothing but an abuse of process. The partnership firm was itself being First Plaintiff in the special suit. The application, firstly, filed by the Appellants seeking the matter to be referred to the arbitrator, and the same was opposed by the Respondents. Similarly, at the time when the suit was at the final stage, the Respondents had sought appointment of an Arbitrator under the provisions of the Act. After having approached to the Civil Court and also after having opposed the application to arbitration and also when the decision of the Court in that regard having become final, the Respondents was not entitled invoke the jurisdiction under Section 11(6) of the Act. Thus, this situation attracted the principle of issue estoppel. Further, the Court had pointed that, though there is pending an application as to appointment of an Arbitrator before the judicial authority, the provisions of Section 8(3) of the Act is permitting the parties to commence and continue the arbitration proceedings and the Tribunal is free to pass its award, this is what have been provided under the provisions of Section 8(3) of the Act.[5] In the present matter, the fact that the suit was instituted by the Partnership Firm and some of the Respondents, thereafter the order was passed by the Civil Court to the extent that the dispute was well within its right and jurisdiction so as to try and dispose of the said suit, even though the objection regarding the existence of a arbitration clause under the Partnership deed, the same had become final and after these circumstances, the parties can never be permitted legally to invoke the jurisdiction of Hon’ble Chief Justice of High Court, under section 11(6) of the Act. This will attract the principle of res judicata.[6][7] Thus, the Court held that, the judge of High Court wrongly passed the order under Section 11 of the Act, when Civil Court was dealing dispute and Arbitration clause was already denied by the Court. Hence the Court set aside the impugned order of High Court and allowed the appeal with certain costs.

Comment

Hon’ble Supreme Court of Indian in this judgment has very critically pointed the scope of Section 8(3) of the Arbitration and Conciliation Act, 1996 being an ancillary issue. As such, in the present matter the Court has rightly, explained the importance of the principle of estoppels, when parties have approached to the civil court and opposed the reference to Arbitration under Section 8(1) of the said Act and the decision of the Court in that regard having become final, as such the Respondents could not invoke jurisdiction under Section 11(6) of the Act. The principle of Res judicata is a species of estoppels and had two primary applications, firstly, where it is referred as

by Faim Khalilkhan Pathan.

  1. Under Section 9A of the Code of Civil Procedure , 1908 (As applicable to the State of Maharashtra)
  2. Under Section 8(1) of The Arbitration and Conciliation Act, 1996
  3. Under section 11(6) of the Arbitration and Conciliation Act, 1996
  4. See Paragraph 9 of the Judgment.
  5. See Paragraph 13 of the Judgment.
  6. In Satyadhyan Ghosal and others v. Deorajin Debi (Smt.) and another, AIR 1960 SC 941 under its paragraph 7 and 8 the Court discussed:“7. The principle of res judicata is based on the need of giving finality to judicial decisions. What it says is that once a res is judicata, it shall not be adjudged again. Primarily it applies as between past litigation and future litigation. When a matter — whether on a question of fact or a question of law — has been decided between two parties in one suit or proceeding and the decision is final, either because no appeal was taken to a higher court or because the appeal was dismissed, or no appeal lies, neither party will be allowed in a future suit or proceeding between the same parties to canvass the matter again. This principle of res judicata is embodied in relation to suits in Section 11 of the Code of Civil Procedure; but even where Section 11 does not apply, the principle of res judicata has been applied by courts for the purpose of achieving finality in litigation. The result of this is that the original court as well as any higher court must in any future litigation proceed on the basis that the previous decision was correct. 8. The principle of res judicata applies also as between two stages in the same litigation to this extent that a court, whether the trial court or a higher court having at an earlier stage decided a matter in one way will not allow the parties to re-agitate the matter again at a subsequent stage of the same proceedings. …”
  7. In Hope Plantations Ltd. v. Taluk Land Board, Peermade and another, (1999) 5 SCC 590, it was held that the general principle underlying the doctrine of res judicata is ultimately based on considerations of public policy. One important consideration of public policy is that the decisions pronounced by courts of competent jurisdiction should be final, unless they are modified or reversed by appellate authorities; and the other principle is that no one should be made to face the same kind of litigation twice over, because such a process would be contrary to considerations of fair play and justice.
data-matched-content-ui-type="image_card_sidebyside" data-matched-content-rows-num="4" data-matched-content-columns-num="4"

See Original Judgment Anil S/o Jagannath Rana and Ors Versus Rajendra S/o Radhakishan Rana and another