Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 11604 /2014
[Arising out of S.L.P. (Civil) No. 15314 of 2014]
Anil s/o Jagannath Rana and others … Appellant (s)
Versus
Rajendra s/o Radhakishan Rana and others … Respondent
(s)
J U D G M E N T
KURIAN, J.:
Leave granted.
2. Once a judicial authority takes a decision under Section
JUDGMENT
8(1) of The Arbitration and Conciliation Act, 1996 (hereinafter
referred to as “the Act”) declining to refer the dispute pending
before it to arbitration and the said decision having become
final, whether either party to the proceedings can thereafter
invoke the jurisdiction of the Chief Justice under Section 11(6)
of the Act, is the question arising for consideration in this case.
The scope of Section 8(3) of the Act is also an ancillary issue.
1
Page 1
3. Appellants are defendant nos. 1, 2, 3 in Special Suit No.
211 of 2009 on the file of Civil Judge Senior Division at
Aurangabad, Maharashtra. The suit is filed by a partnership
firm, viz., M/s. Rana Sahebram Mannulal and three others. The
dispute mainly pertains to the partnership business. Following
are the reliefs claimed:
“A) The special civil suit of the plaintiffs may kindly
be decreed with costs;
B) The plaintiffs may kindly be declared as valid
partners of the registered partnership firm under
the name and style M/s S.M. Rana (Rana
Sahebram Mannulal) and further it also may
kindly be declared that, the plaintiffs are the
owners and possessors of the land gut no. 240
situated at Dahegaon Tq. Gangapur to the extent
of 81R and the land gut No. 237 to the extent of
5H. 85R. situated at Dahegaon Tq. Gangapur
dist. Aurangabad and the land gut no. 97/2
admeasuring 1 Acre 34R. situated at Shranapur
Tq. and Dist. Aurangabad and Gut No. 121
admeasuring 1H. 14R. situated at village Tisgaon
Tq. and Dist. Aurangabad and the Plot No. 12 out
of the land Gut No. 17/2 admeasuring 5.30R.
situated at Garkheda Tq. and Dist. Aurangabad
and it may also be further declared the said
property belongs to the partnership firm and the
plaintiffs are the owners and possessors of the
said property being the valid partners of the
registered firm and it may also be declared that
the plaintiffs are the owners of their respective
shares in the said properties.
C) It may kindly be declared that the registered sale
deeds dated 1.8.2007 executed by defendant
no.1 in favour of defendant no.2 in respect of
land gut no.240 to the extent of 81R. situated at
village Dahegaon Tq. Gangapur Dist. Aurangabad
JUDGMENT
2
Page 2
bearing registration Nos.3942/2007 and the
registered sale deed dated 6.9.2007 bearing
registration No.4506/2007 in respect of land gut
no.237 to the extent of 2H. 82R, situated at
village Dahegaon Tq. Gangapur Dist. Aurangabad
executed by defendant no.1 in favour of
defendant no.7 and the registered sale deed
dated 30.7.2007 bearing registration
no.4318/2007 executed by defendant no.2 in
favour of defendant no.1 in respect of land gut
no.97/2 to the extent of 20R. situated at
Sharanapur Tq. and Dist. Aurangabad, are null
void, ab-initio and not binding upon the plaintiffs.
D) It may kindly be declared that the property
purchased by the defendant no.4 bearing land
gut no.17/2 out of it plot no.1 admeasuring
584.36 sq.mtrs. Situated at Garkheda, Tq. and
Dist. Aurangabad and the land gut no.186
admeasuring 12A. 7G. purchased in the name of
defendant no.4 by defendant no.1 situated at
Dahegaon Tq. Gangapur Dist. Aurangabad and
the land Gut No.56 in the name of defendant
no.3 to the extent of 25R and defendant no.5 to
the extent of 25R. situated at Sharanapur Tq. and
Dist. Aurangabad and the land gut no.213
admeasuring 35R purchased in the name of
defendant no.3, under registered sale deed
no.1781 dated 25.4.2007 situated at Dahegaon
Tq. Gangapur Dist. Aurangabad and the land gut
no.185 to the extent of 4A, 15G purchased in the
name of plaintiff no.1 and defendant no.1 to the
extent of 4A, 15G, situated at Dahegaon Tq.
Gangapur Dist. Aurangabad and the land gut
no.167/2 purchased in the name of defendant
no.167/2 purchased in the name of defendant
no.5 admeasuring 8A. 22G, situated at Daheaon
Tq. Gangapur Dist. Aurangabad, and the land Gut
No. 6 purchased in the name of defendant no.5
admeasuring 6A, situated at Rahimpur Tq. and
Dist. Aurangabad and the land plot No.16
admeasuring 419 sq. mtrs. Situated at
Mustafabad Tq. and Dist. Aurangabad purchased
in the name of defendant no.4 is the property of
JUDGMENT
3
Page 3
partnership firm. As the said properties are
purchased from the nexus and income of the
partnership firm and therefore, it may kindly be
declared that, the said properties belonging to
the partnership firm i.e. M/s S.M. Rana (Rana
Sahebram Mannulal).
E) The defendants no. 1 to 7 may kindly be
restrained permanently from alienating and
creating the third party interest over the suit
properties by issue of perpetual injunction
against the defendants no.1 to 7 their servants,
their relatives, their agents or who so ever claims
on their behalf permanently.
F) The profit from the whole sale kerosene business
run through the partnership firm M/s S.M. Rana
(Rana Sahebram Mannulal) pursuant to the whole
sale kerosene dealers license no.20/88 may
kindly be recovered from the defendant nos.1, 2
and 3 from last three years with 18% interest per
annum and it may be awarded to the plaintiffs
from the defendant nos. 1, 2 and 3.
G) Any other suitable and equitable relief may
kindly be granted in favour of the plaintiffs."
4. The defendants/appellants had filed an application
1
under Section 9A of the Code of Civil Procedure, 1908
JUDGMENT
1
“9A. Whereof the hearing of application relating to interim relief
in a suit, objection to jurisdiction is taken such issue to be
decided by the court as a preliminary issue. -(1) Notwithstanding
anything contained in this Code or any other law for the time being in
force, if at the hearing of any application for granting or setting aside an
order granting any interim relief, whether by way of stay, injunction,
appointment of a receiver or otherwise, made in any suit, an objection to
jurisdiction of the Court to entertain such suit is taken by any of the
parties to the suit, the Court shall proceed to determine at the hearing of
such application the issue as to the jurisdiction as a preliminary issue
before granting or setting aside the order granting the interim relief. Any
such application shall be heard and disposed of by the Court as
expeditiously as possible and shall not in any case be adjourned to the
hearing of the suit.
(2) Notwithstanding anything contained in sub-section (1), at the
hearing of any such application, the Court may grant such interim relief as
it may consider necessary, pending determination by it of the preliminary
4
Page 4
(hereinafter referred to as “the CPC”), as applicable to the
State of Maharashtra, to dismiss the suit for want of jurisdiction
since the partnership deed contained a provision for arbitration
and hence the disputes were liable to be resolved in terms of
the Act. In other words, application filed by defendants, in
essence, was to be treated as an application under Section 8(1)
of the Act. The same was opposed by the plaintiff. The trial
court upheld the objection and held that it was within the
jurisdiction of the court to try the dispute and, therefore, it was
not required under law to refer the same to arbitration.
5. The suit proceeded. The parties have examined all their
witnesses.
6. While so, the respondents herein approached the Chief
Justice of the High Court of Judicature at Bombay in Arbitration
JUDGMENT
Application No. 12/2013 under Section 11(6) of the Act seeking
appointment of an arbitrator as per the terms of the
partnership deed. At paragraph-4 of the application, it is stated
as follows:
“4. The applicants further states and submits that, as
per clause 6 of the Partnership deed dated 13.12.2008
marked and annexed as Exhibit-B, it was decided
issue as to the jurisdiction”.
5
Page 5
between the partners that if any dispute shall arise
between them in respect of the conduct of the
business of partnership or in respect of the
interpretation, operation or enforcement of any of the
terms and conditions of the deed in respect of any
other matter, cause or thing whatsoever, the same
shall be referred to the arbitration of the person
appointed by the partners whose decision shall be
final and binding on all parties and legal
representatives.”
7. And further at paragraph-9 of the application, it is
stated as follows:
“9. The applicant has not filed any other petition,
application or other proceedings before this Hon’ble
Court or before the Hon’ble Supreme Court of India,
except the present one touching the subject matter of
this Arbitration Application. However, the applicants
deems it necessary to disclose that applicants have
filed one civil suit for declaration and for other reliefs
before the learned Civil Judge Junior Division
Aurangabad bearing Regular Civil Suit No.2014/2012
having old special civil suit No.211/2009 which is still
pending for adjudication. However, the subject mater
of the suit involves some third parties also and
therefore that would not be an impediment to allow
the present application for appointment of the sole
arbitrator. The applicant craves leave and liberty to
file the copy of the plaint as and when necessary.”
JUDGMENT
8. The appellants herein opposed the payer. To quote:
“7. The respondents no.1 to 3 humbly submit that
from 2009 the parties are prosecuting the said spl.
6
Page 6
C.S. No.211/09 (now RCS No. 2014/2012) filed by
applicants/petitioners herein and in fact the evidence
on their part i.e. plaintiffs is closed long back and the
evidence of defendants is going on and rather the
defendants are on the verge of closing their evidence
after most probably examining another few witnesses.
8. The respondents no.1 to 3 state that the present
application u/s 11 of the said Arbitration Act filed by
the applicants is nothing but to either delay or
overcome the proceedings in the suit pending
between the parties.
9. The respondents no.1 to 3 humbly submit that in
fact the applicants have waived their right of invoking
the arbitration clause the moment they opposed the
application filed by this answering respondent in the
said suit.”
9. The High Court, as per the impugned order, ignored the
objection and held as follows:
“4. Sub-section (3) of Section 8 of the Act does not
preclude appointment of arbitration during course of
litigation pursuant to agreement. Taking into account
sub-section (3) of Section 8 and Section 11 of the
Arbitration and Conciliation Act, 1996, it would be
expedient that pursuant to clause 6 of the partnership
deed, a proper person be appointed as arbitrator to
entertain dispute between the parties.”
JUDGMENT
10. Heard learned Counsel appearing for both the parties.
11. The facts as narrated by us herein before would show
that the application filed by the respondents herein under
Section 11 of the Act is nothing but an abuse of process. The
partnership firm itself is the first plaintiff in the suit. The dispute
7
Page 7
between the parties is the subject of the suit. Precisely for that
reason, the appellants sought the matter to be referred to the
arbitrator. That was opposed by the respondents. When the suit
is at the final stage, the respondents have sought appointment
of an arbitrator under Section 11(6) of the Act. Having
approached the civil court and having opposed the reference to
arbitration under Section 8(1) of the Act and the decision of the
court in that regard having become final, the respondents
cannot invoke jurisdiction under Section 11(6) of the Act; it is
hit by the principle of issue estoppel.
12. There is yet another angle to the issue. Section 8 of the
Act reads as follows:
“8. Power to refer parties to arbitration
where there is an arbitration agreement. — (1) A
judicial authority before which an action is brought in
a matter which is the subject of an arbitration
agreement shall, if a party so applies not later than
when submitting his first statement on the substance
of the dispute, refer the parties to arbitration.
JUDGMENT
(2) The application referred to in sub-section (1)
shall not be entertained unless it is accompanied by
the original arbitration agreement or a duly certified
copy thereof.
(3) Notwithstanding that an application has been
made under sub-section (1) and that the issue is
pending before the judicial authority, an arbitration
may be commenced or continued and an arbitral
award made.”
8
Page 8
13. Under Section 8(1) of the Act, either party is free to
apply to the judicial authority within the prescribed time to
refer the parties to arbitration, in case the matter pending
before it is the subject matter of an arbitration agreement.
Section 8(3) of the Act however makes it clear that
notwithstanding the application under Section 8(1) of the Act
and the issue pending before the judicial authority, arbitration
may be commenced or continued and an arbitral award can
also be made. In other words, despite the pendency of an
application under Section 8(1) of the Act before the judicial
authority, Section 8(3) of the Act permits the parties to
commence and continue the arbitration and the arbitral
tribunal is free to pass an award. That alone is what is
contemplated under Section 8(3) of the Act.
JUDGMENT
14. In the suit instituted by the firm and some of the
respondents, the order passed by the civil court that it was well
within its jurisdiction to try the suit, despite the objection
regarding the existence of a clause for arbitration, has become
final. Thereafter, Section 11(6) jurisdiction of the Chief Justice
cannot be invoked by either party. The principle of res judicata
will also be attracted in such a case.
9
Page 9
15. In Satyadhyan Ghosal and others v. Deorajin Debi
2
(Smt.) and another , this principle was discussed in detail
and it has been settled as follows. To quote:
“7. The principle of res judicata is based on the
need of giving a 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. …”
JUDGMENT
16. In Hope Plantations Ltd. v. Taluk Land Board,
3
Peermade and another , it was held that the general
principle underlying the doctrine of res judicata is ultimately
2
AIR 1960 SC 941
3
(1999) 5 SCC 590
10
Page 10
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.
17. The principles as discussed above on res judicata have
been consistently followed by this Court. And the recent
judgments in that regard are in Dr. Subramanian Swamy v.
4
State of Tamil Nadu and others and in Surjit Singh and
5
others v. Gurwant Kaur and others . Thus, once the judicial
authority takes a decision not to refer the parties to arbitration,
and the said decision having become final, thereafter Section
JUDGMENT
11(6) route before the Chief Justice is not available to either
party.
18. With great respect, the designated Judge has gone
wholly wrong in passing the order under Section 11 of the Act
when the civil court is in seisin of the dispute and where
arbitration has already been declined by the said court.
4
(2014) 5 SCC 75
5
2014 (9) SCALE 768
11
Page 11
19. The impugned order is hence set aside. The appeal is
allowed with costs of Rs.25,000/-.
.. . ..…..…..………… J.
(ANIL R. DAVE)
..………..……………J.
(KURIAN JOSEPH)
New Delhi;
December 18, 2014.
JUDGMENT
12
Page 12