News Details

Arbitrator can pass award even if any application is pending in court.


                        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)
Rajendra s/o Radhakishan Rana and others           ... Respondent (s)
                               J U D G M E N T
Leave granted.
Once a judicial authority  takes  a  decision  under  Section  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. 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
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  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  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
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."
The defendants/appellants had filed an application under Section 9A  of  the Code of Civil Procedure, 1908[1] (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. The suit proceeded. The parties have examined all their witnesses. While so, the respondents herein approached the Chief Justice  of  the  High Court of Judicature at Bombay in Arbitration 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 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."
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."
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. 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
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
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."
Heard learned Counsel appearing for both the parties.
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 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.
There is yet another angle to the issue. Section  8  of  the  Act  reads  as
"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.
(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."
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
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.
In Satyadhyan Ghosal and others v.  Deorajin  Debi  (Smt.)  and  another[2],
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. ..."
In Hope Plantations Ltd. v. Taluk Land Board, Peermade  and  another[3],  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.
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. State of Tamil Nadu and others[4] and in  Surjit  Singh and others v. Gurwant Kaur and others[5]. Thus, once the judicial  authority takes a decision not to refer the  parties  to  arbitration,  and  the  said decision having become final, thereafter  Section  11(6)  route  before  the Chief Justice is not available to either party.
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.
The impugned order is hence set aside. The appeal is allowed with  costs  of
                                              ........................... J.
                                     (ANIL R. DAVE)
                   (KURIAN JOSEPH)
New Delhi;
December 18, 2014.
[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 issue as to the jurisdiction".
[2]     AIR 1960 SC 941
[3]    (1999) 5 SCC 590
[4]    (2014) 5 SCC 75
[5]    2014 (9) SCALE 768