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Monday, April 10, 2017

refusal to refer the dispute to arbitration would amount to failure of justice as also causing irreparable injury to the defendant.= the prerequisites for an application under Section 8 are fulfilled, viz., there is an arbitration agreement; the party to the agreement brings an action in the court against the other party; the subject matter of the action is the same as the subject-matter of the arbitration agreement; and the other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute. We have come to the conclusion that the civil court had no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for arbitration. In such a situation, refusal to refer the dispute to arbitration would amount to failure of justice as also causing irreparable injury to the defendant. 28) As we have already held that the oral agreement as evidenced by the transcript of conversation between the appellant No. 2 and the respondent on 06/07.04.2011 substituting the alleged written agreement dated 06.06.2009 and which contained a clause for arbitration, the same clause for arbitration would also be applicable to the oral agreement. The Division Bench has also erred in law in affirming the order passed by learned single Judge. Both the orders, therefore, cannot be sustained and are set aside and, therefore, in view of the decision in P.R. Shah (supra), there can only be one arbitrator and there can only be a single arbitration. 29) In view of the foregoing discussion, the appeal succeeds and is allowed. However, instead of remitting the matter back to the learned single Judge for deciding the suit itself on merits, we refer the disputes raised by the appellants in CS(OS) 1532 of 2012 to the sole arbitrator already appointed, viz., Hon’ble Mr. Justice V.K. Gupta (Retd.) and request the arbitrator to decide the disputes expeditiously in accordance with law.

                                     REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                    CIVIL APPEAL NO. 8837 OF 2016



Mrs. Hema Khattar & Anr.                      .... Appellant(s)

            Versus

Shiv Khera                                               .... Respondent(s)






                               J U D G M E N T


R.K. Agrawal, J.

1)    Challenge in this appeal is to the legality of the judgment and  order
dated 28.09.2012 rendered by a Division Bench of the High Court of Delhi  at
New Delhi in FAO (OS) No. 470 of 2012 whereby the High Court  dismissed  the
appeal filed by the appellants herein.
2)    Factual position in a nutshell is as follows:-
   a) An agreement to reconstruct  a  building  situated  at  C-6/4,  Vasant
      Vihar, New Delhi was executed between Hema Khattar-the appellant No. 1
      herein, wife of Ashwani Khattar – the appellant No. 2 herein, carrying
      on business in construction under the name and style of  M/s  Dessignz
      and Shiv Khera-the respondent herein on 06.06.2009.
   b) Pursuant to the said agreement, the building site was handed  over  to
      the appellant No. 1 herein on 09.11.2010 and thereafter the  execution
      of the work had started.  In March 2011,  as  per  Clause  16  of  the
      Agreement  dated  06.06.2009,  a  spot  inspection  was  conducted  by
      renowned structural engineers which  pointed  out  several  structural
      lacunae.  On coming to know about the  same,  the  respondent  further
      arranged inspection by various specialized  agencies  which  confirmed
      the same in their reports.
   c) Being aggrieved by the quality of construction, the respondent  served
      a legal notice  dated  19.09.2011  to  the  appellant  No.  1  seeking
      damages.  The respondent,  vide  Clause  33  of  the  said  agreement,
      appointed a sole arbitrator claiming that the appellant No. 1 has  not
      complied with the terms of the agreement whereby  disputes,  requiring
      adjudication, have  arisen  between  the  parties.   In  statement  of
      claims, the respondent, besides other claims, also sought for a sum of
      Rs. 39.85 lakhs paid to the appellant No. 1 along with a  sum  of  Rs.
      35,000/- for the TDS deposited to her credit.
   d) The appellants filed a suit for declarations, permanent injunction and
      recovery before the High Court being CS(OS) No. 1532 of 2012 seeking a
      decree that the agreement dated 06.06.2009 entered  into  between  the
      appellant  No.  1  and  the  respondent  was  vitiated  and  had  been
      terminated by mutual consent by both the parties  and  any  proceeding
      initiated pursuant to the agreement is null, non-est and void and also
      for recovery of an amount of Rs. 45,50,000/-.
   e) It is also pertinent to mention here that it was alleged in the plaint
      that a formal meeting was held between the parties  in  which  it  was
      decided that appellant No.1 will no longer be the contractor  and  the
      agreement dated 06.06.2009 would stand terminated  by  mutual  consent
      and the construction would be carried out by the sub-contractors to be
      appointed as per the advice of appellant No. 2 who would supervise the
      same without remuneration/profit.
   f) The respondent filed I.A. No. 12124 of 2012 in CS(OS) No. 1532 of 2012
      under Section 8 of the Arbitration  and  Conciliation  Act,  1996  (in
      short ‘the Act’) claiming that the subject-matter of  dispute  in  the
      present suit is  already  pending  adjudication  before  the  Arbitral
      Tribunal, hence, the suit cannot be proceeded with which was denied by
      the appellants in their reply to the above said application.
   g) Vide order dated 17.09.2012, learned single Judge of the  High  Court,
      found that the suit is bad for misjoinder of parties as  well  as  for
      causes of action and gave an option to the appellants therein to elect
      whether they want the suit to be treated as a  suit  for  recovery  of
      money by appellant No. 2 herein against the respondent or a  suit  for
      declarations and injunction by appellant No. 1.
   h) Being aggrieved by the order dated 17.09.2012, the appellants went  in
      appeal and filed FAO (OS) being No. 470 of 2012 before the High Court.
       A division bench of the High  Court,  vide  order  dated  28.09.2012,
      dismissed the appeal.
   i) Aggrieved by the order dated 28.09.2012,  the  appellants  have  filed
      this appeal by way of special leave before this Court.
3)    Heard Mr. Jayant Bhushan, learned senior counsel  for  the  appellants
and Mr. Sakal Bhushan, learned counsel for the respondent  and  perused  the
records.
Point for consideration:-
4)    The only point for consideration before this Court is whether  in  the
present facts and circumstances of the case the suit is bad  for  misjoinder
of parties as well as for causes of action?
Rival submissions:-
5)    Learned senior counsel for the appellants contended before this  Court
that the agreement dated 06.06.2009 was executed  with  dishonest  intention
containing the arbitration clause  and  in  any  event  the  same  has  been
superseded by a subsequent oral agreement between  appellant  No.  2  herein
and the respondent.
6)    Learned senior counsel further contended that the High Court erred  in
upholding that the cause of action with respect to relief  of  money  is  an
independent cause of action from that of  the  relief  of  declarations  and
injunction.  The High Court failed to appreciate that common trial of  joint
causes of   action is necessary, if at all, as they raise  common  questions
of law and facts and the course adopted by the  High  Court  would  lead  to
multiplicity of proceedings causing delay.  Learned senior  counsel  finally
contended that in view of the patent illegality in the orders passed by  the
High Court, the same are liable to be set aside.
7)    Without prejudice to the aforesaid, learned  senior  counsel  for  the
appellants, in the alternative submitted that the entire matter be  referred
to another  sole  arbitrator  which  may  be  appointed  by  this  Court  as
according  to  him,  in  the  written  contract,  there  was  a  clause  for
arbitration and, subsequently, in the oral contract also, the terms  of  the
earlier contract continued to remain in operation except  those  which  were
modified in the oral contract.
8)    In support of the above submission, learned  senior  counsel  for  the
appellants placed reliance upon a judgment  of  this  Court  in  P.R.  Shah,
Shares and Stock Brokers  Private  Limited  vs.  B.H.H.  Securities  Private
Limited and Others (2012) 1 SCC 594.  He has referred  to  paragraph  19  of
the judgment which reads as under:-

        “19. If A had a claim against B and C, and there was an arbitration
      agreement between A and B  but  there  was  no  arbitration  agreement
      between A and C, it might not be possible to have a joint  arbitration
      against B and C. A cannot make a claim against  C  in  an  arbitration
      against B, on the ground that the claim was being made jointly against
      B and C, as C was not a party to the arbitration agreement. But  if  A
      had a claim against B and C and if A had an arbitration agreement with
      B and A also had a separate arbitration agreement with C, there is  no
      reason why A  cannot  have  a  joint  arbitration  against  B  and  C.
      Obviously,  having  an  arbitration  between  A  and  B  and   another
      arbitration between A and C in regard to the same claim would lead  to
      conflicting decisions. In such a case, to deny the benefit of a single
      arbitration against B  and  C  on  the  ground  that  the  arbitration
      agreements against B and C are different, would lead  to  multiplicity
      of proceedings, conflicting decisions and cause injustice. It would be
      proper and just to say that when A has a claim jointly against  B  and
      C, and when there are provisions for arbitration in respect of both  B
      and C, there can be a single arbitration.”


9)    Per contra, learned counsel for  the  respondent  submitted  that  the
suit has been filed by the two appellants jointly with respect  to  the  two
separate alleged causes of action. He further  submitted  that  the  alleged
cause of action of the appellant No. 1 is based  upon  the  agreement  dated
06.06.2009  between  the  appellant  No.  1  and  the  respondent  in  which
appellant No. 2 cannot be said to have any joint interest  and  the  alleged
cause of action of appellant No. 2  is  based  upon  an  oral  understanding
arrived at between appellant No.2 and the respondent in which appellant  No.
1 cannot be said to have  any  joint  interest.   Learned  counsel  for  the
respondent further submitted that in such circumstances,  the  instant  suit
in the present form is not maintainable in terms of Order II Rule 3  of  the
Code of Civil Procedure, 1908 (in short ‘the Code’)  and  the  suit  of  the
appellant No. 1 is required to be separated under Order II  Rule  6  of  the
Code.
10)   Learned counsel further submitted that in view  of  the  existence  of
the arbitration clause in the agreement dated  06.06.2009  and  the  subject
matter of dispute between  the  parties  in  the  present  suit  is  already
pending adjudication before the Arbitral Tribunal, the  instant  suit  filed
by the appellant No. 1 cannot be proceeded with and the matter  is  required
to be referred to arbitration.  Learned counsel finally submitted  that  the
judgment rendered by the division bench of  the  High  Court  upholding  the
decision of the learned single Judge  is  correct  and  no  interference  is
called for in the appeal.
11)   Learned counsel further submitted  that  the  oral  contract  did  not
contain any clause for arbitration and the dispute raised by  the  appellant
No. 2 cannot be referred to arbitration.   In  support  whereof,  he  relied
upon a decision of this Court in  Kvaerner  Cementation  India  Limited  vs.
Bajranglal Agarwal and Another (2012) 5 SCC 214 wherein this Court has  held
that there cannot be any dispute that in the absence of  arbitration  clause
in the agreement, no  dispute  could  be  referred  for  arbitration  to  an
Arbitral Tribunal.
12)   Learned counsel, however, submitted that if this Court  comes  to  the
conclusion that the matter should be resolved by  way  of  arbitration,  the
entire matter be referred to the sole arbitrator already  appointed  by  the
respondent.
Discussion:
13)   From the materials on record, it is evident that  an  agreement  dated
06.06.2009 was executed between the parties wherein appellant No. 1 was  the
contractor and the respondent as a client.  The agreement  impugned  clearly
states that there is an arbitration clause therein.  Owing  to  the  dispute
among parties, the respondent, in exercise  of  his  right  under  the  said
clause, appointed a sole arbitrator.  Subsequently, notices were  issued  to
the appellant No. 1 and  the  matter  remained  pending  despite  appearance
before the Arbitral Tribunal.   In  the  meantime,  the  appellants  jointly
filed a suit before the High Court for  declarations,  permanent  injunction
and recovery claiming a formal meeting  was  held  between  the  parties  in
which it was decided that appellant No.1 will no longer  be  the  contractor
and the agreement dated 06.06.2009 would stand terminated by mutual  consent
and the construction would be carried  out  by  the  sub-contractors  to  be
appointed as per the advice of appellant No. 2 who would supervise the  same
without remuneration/profit.  The respondent filed I.A. No.  12124  of  2012
in CS(OS) No. 1532 of 2012 under Section 8 of  the  Act  claiming  that  the
subject-matter  of  dispute  in  the  present  suit   is   already   pending
adjudication before  the  Arbitral  Tribunal,  hence,  the  suit  cannot  be
proceeded with.  Vide order dated 17.09.2012, learned single  Judge  of  the
High Court, found that the suit is bad for mis-joinder of  parties  as  well
as for causes of action and gave  an  option  to  the  appellants  to  elect
whether they want the suit to be treated as a suit for recovery of money  by
appellant No. 2 herein against the respondent or  a  suit  for  declarations
and injunction by appellant No. 1.  The appellants  went  in  appeal  before
the division bench of the High Court.   Vide  order  dated  28.09.2012,  the
division bench also dismissed the same.
14)   From the facts of this case,  we  find  that  a  suit  was  filed  for
declarations, permanent injunction and recovery of money by  the  appellants
stating that a meeting was held in between  the  parties  in  which  it  was
decided that appellant No. 1 would no  longer  be  the  contractor  and  the
agreement dated 06.06.2009 would stand terminated by mutual consent and  the
construction would be carried out by the sub-contractors to be appointed  as
per the suggestions of appellant No.2, who  would  supervise  the  same  but
without any profit/remuneration as per the oral agreement.   The  respondent
agreed to make all payments towards purchase of material, construction,  fee
of architect etc.  Appellant No. 2 incurred an amount of Rs.  45  lakhs  for
and on behalf of the respondent which is sought to be recovered  under  this
suit.  The appellants also claimed a declaration  to  the  effect  that  the
agreement dated 06.06.2009 between appellant No. 1 and  the  respondent  was
obtained by fraud and  mis-representation,  hence,  it  is  null  and  void.
Another declaration sought for in the suit  was  that  the  agreement  dated
06.06.2009 stood terminated by mutual consent.  A decree for  injunction  is
also sought for restraining the respondent from initiating and  carrying  on
any  proceeding  arising  out  of  and  on  the  basis  of  agreement  dated
06.06.2009 between appellant No. 1 and the respondent.  On the  other  hand,
the respondent took the preliminary objection  that  the  suit  is  bad  for
misjoinder of parties and causes of action and further that the  arbitration
proceedings initiated  by  the  respondent,  in  terms  of  the  arbitration
clause, is pending adjudication before the Arbitral Tribunal.
15)   Admittedly, the cause of action for recovery of Rs. 45  lakhs  claimed
in the present suit is the expenditure alleged  to  have  been  incurred  by
appellant No. 2 pursuant to the oral agreement he claims  he  had  with  the
respondent sometime in April, 2011.  On the other hand, the cause of  action
with respect to reliefs of declarations  and  injunction  is  the  agreement
dated 06.06.2009.   The alleged agreement dated 06.06.2009 was,  admittedly,
between the appellant No. 1 and the respondent to which appellant No. 2  was
only a witness, which as per the terms of the plaint terminated later on  by
mutual agreement between the appellant No. 1 and the  respondent.   At  this
stage, it was agreed orally that appellant No. 2,  who  is  the  husband  of
appellant No. 1, would  take  over  the  execution  of  the  pending  works.
Admittedly, Appellant No. 1 is not a party to  the  alleged  oral  agreement
between  Appellant  No.  2  and  the  respondent  for  supervision  of   the
construction by him.
16)   From the materials available on record, particularly,  the  transcript
of conversation between the appellant No. 2 and the respondent  on  6th  and
7th April, 2011, we find that the oral agreement was  substituted  in  place
of the alleged written agreement dated  06.06.2009.   There  is  a  complete
accord and discharge of the responsibilities and  liabilities  of  appellant
No. 1 vis-à-vis the defendant and vice-versa.  The plaint  also  avers  that
after  the  accord  between  appellant  No.  1  and   the   respondent   and
simultaneous discharge of the obligations, a  distinct  oral  agreement  was
entered into between appellant No. 2 and the respondent. It is  quite  clear
from what has been stated above that the cause of action: the right  to  get
declarations with regard to the said contract as null and void  or  a  right
to seek an injunction restraining the respondent from taking any  action  on
the basis of the said contract, if any, with regard  to  the  prior  written
agreement arises in favour of appellant No. 1 against respondent and not  in
favour of appellant No. 2 as he was not  a  party  to  the  agreement  dated
06.06.2009.  On the similar lines, the right to seek  money  decree,  as  is
claimed by the appellants, would be a distinct cause of  action  founded  on
subsequent oral agreement between the appellant No. 2 and the respondent.
17)   Learned single Judge of the High Court, vide order  dated  17.09.2012,
directed the parties to elect as  to  whether  they  want  the  suit  to  be
treated as a suit for recovery of money  by  appellant  No.  2  against  the
respondent or a suit for declarations and  injunction  by  appellant  No.  1
against the respondent and to amend the plaint accordingly.  Learned  single
Judge, after taking a considered view that the suit is  bad  for  misjoinder
of parties and/or misjoinder of causes of action, held that the  application
filed by the defendant under Section 8 of the Act would be disposed of  only
after the  appellants  make  an  election  in  terms  of  this  order.   The
appellants herein, instead of amending the plaint,  went  in  appeal  before
the division bench, which got dismissed vide order dated 28.09.2012.
18)   Since the suit was dismissed for misjoinder of parties  and/or  causes
of action, it is pertinent to mention here the law on the point which is  as
under:-
Order II Rule 3
      “Joinder of causes of action –  (1)  Save  as  otherwise  provided,  a
      plaintiff may unite in the same suit several causes of action  against
      the same defendant, or the same defendants jointly; and any plaintiffs
      having causes of action in which they are jointly  interested  against
      the same defendant or the  same  defendants  jointly  may  unite  such
      causes of action in the same suit.


      (2)   Where causes of action are united, the jurisdiction of the Court
      as regards the suit shall  depend  on  the  amount  or  value  of  the
      aggregate subject matters at the date of instituting the suit.”


Order II Rule 6

      “Power of Court to order separate trials – Where  it  appears  to  the
      court that the joinder of causes of action in one suit  may  embarrass
      or delay the trial or is otherwise inconvenient, the Court  may  order
      separate trials or make such other order as may be  expedient  in  the
      interests of justice.”

In Black's Law Dictionary it has been stated that the expression  ‘cause  of
action’ is the fact or facts  which  give  a  person  a  right  to  judicial
relief.  A cause of action, thus, means every fact, which, if traversed,  it
would be necessary for the plaintiff to prove in order to support his  right
to a judgment of the court. In other words, it is a bundle  of  facts  which
taken with the law applicable to them gives the plaintiff a right to  relief
against the defendant. It must include some act done by the defendant  since
in the absence of such an act no cause of action can possibly accrue. It  is
not limited to the actual infringement of the right  sued  on  but  includes
all the material facts on which it is founded.
19)   Order II, Rule 3, provides  for  the  joinder  of  several  causes  of
action and states that a plaintiff  may  unite  in  the  same  suit  several
causes of action against the same defendant, or the same defendants  jointly
or several plaintiffs having causes of action  in  which  they  are  jointly
interested against the same defendant or defendants jointly may  unite  them
in one suit.  The remedy for any possible inconvenience with regard to  said
rule is supplied by the provisions of Order II,  Rule  6,  which  authorizes
the Court to order separate trials of causes of action which  though  joined
in one suit cannot be conveniently tried or disposed of together.
20)   Similarly, Order I Rule 1 of the Code permits  joinder  of  more  than
one persons any right to relief in respect of, or arising out of,  the  same
act or transaction or series of acts or transactions is alleged to exist  in
such persons, whether jointly, severally or in the alternative; and if  such
persons brought separate suits, any common question of  law  or  fact  would
arise.  Order I Rule 2 provides that where it appears to the court that  any
joinder of plaintiffs may embarrass or delay the  trial  of  the  suit,  the
court may put the plaintiffs to their election or order separate  trials  or
make such other order as may be expedient.
21)   In this connection, it is pertinent to refer to  a  judgment  of  this
Court in Ramesh Hirachand Kundanmal vs.  Municipal  Corporation  of  Greater
Bombay and Others 1992 (2) SCC 524 wherein it was held as under:-
      “14. It cannot be said that the main object of the rule is to  prevent
      multiplicity of actions though it may incidentally have  that  effect.
      But that appears to be a desirable consequence of the rule rather than
      its main objectives. The  person  to  be  joined  must  be  one  whose
      presence is necessary as a party. What  makes  a  person  a  necessary
      party is not merely that he has relevant evidence to give on  some  of
      the questions involved; that would only make him a necessary witness .
      It is not merely that he has an interest in the  correct  solution  of
      some questions involved and  has  thought  or  relevant  arguments  to
      advance. The only reason which makes it necessary to make a  person  a
      party to an action is that he should be bound by  the  result  of  the
      action and the question to be settled, therefore, must be  a  question
      in the action which  cannot  be  effectually  and  completely  settled
      unless he is a party.”

22)   In view of the foregoing discussion, we are of the  opinion  that  the
appellants  even  though  had  different  causes  of  action   against   the
respondent but it was a continuity of the  agreement  dated  06.06.2009  and
oral agreement is evidenced by the transcript of  conversation  between  the
appellant No. 2 and the respondent  on  6/07.04.2011,  therefore,  both  the
appellants could have joined as plaintiffs in a suit and  the  suit  is  not
bad for misjoinder of parties or causes of action.   Hence,  learned  single
Judge as also the division bench, was not right in giving an option  to  the
appellants to pursue reliefs qua appellant No. 1  or  qua  appellant  No.  2
only.
23)   In the present facts  and  circumstances  of  the  case,  it  is  also
imperative to find out whether the High Court was justified in deciding  the
maintainability of the suit when an application under Section 8 of  the  Act
is pending adjudication before the  Arbitral  Tribunal.   Before  proceeding
further, it is appropriate to quote here Section 8 of the  Act  which  reads
as under:-
      “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 to the arbitration agreement or any person
      claiming through or under him, so applies not later than the  date  of
      submitting his first statement on the substance of the dispute,  then,
      notwithstanding any judgment, decree or order of the Supreme Court  or
      any Court, refer the parties to arbitration unless it finds that prima
      facie no valid arbitration agreement exists.]
      (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:
           [Provided that where the original  arbitration  agreement  or  a
           certified copy thereof is not available with the party  applying
           for reference to arbitration under sub-section (1), and the said
           agreement or certified copy is retained by the  other  party  to
           that agreement, then, the party  so  applying  shall  file  such
           application along with a copy of the arbitration agreement and a
           petition praying the Court to  call  upon  the  other  party  to
           produce the original arbitration agreement or its duly certified
           copy before the Court.]
      (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.”


24)   It is also worthwhile to note Clause   33(d) of  the  agreement  dated
06.06.2009 which refers the parties to Arbitration:-
         “Governing Law & Dispute  Resolution:  All  or  any  disputes  and
      differences  whatsoever  between  the  parties  arising  out  of  this
      Agreement or relating to or touching the mutual rights and obligations
      of  the  parties  shall  be  subject  to  the  jurisdiction   of   the
      Courts/Forums in Delhi only and shall be referred for adjudication  to
      the sole arbitrator, to be appointed solely  and  exclusively  by  the
      FIRST PARTY, whose decision  shall  be  final  and  binding  upon  the
      parties.  The arbitration proceedings shall  be  held  at  New  Delhi,
      India and only the  Courts  at  New  Delhi,  India  alone  shall  have
      jurisdiction over the subject matter of this AGREEMENT.”

25)   In Sundaram Finance Limited and Another vs. T. Thankam (2015)  14  SCC
444, this Court has held as under:-

        “8. Once there is an agreement between the  parties  to  refer  the
      disputes or differences arising out of the agreement  to  arbitration,
      and in case  either  party,  ignoring  the  terms  of  the  agreement,
      approaches the civil court and the other party, in terms of Section  8
      of the Arbitration Act, moves the court for referring the  parties  to
      arbitration before the first statement on the substance of the dispute
      is filed, in view of the peremptory  language  of  Section  8  of  the
      Arbitration Act, it is obligatory for the court to refer  the  parties
      to arbitration in terms of the agreement, as held by this Court in  P.
      Anand Gajapathi Raju v. P.V.G. Raju.”



26)   In P. Anand Gajapathi Raju & Others vs. P.V.G. Raju (Dead) and  Others
(2000) 4 SCC 539, it was held as under:-

      “5. The conditions which are  required  to  be  satisfied  under  sub-
   sections (1) and (2) of Section 8  before  the  court  can  exercise  its
   powers are:
        (1) there is an arbitration agreement;
        (2) a party to the agreement brings an action in the court  against
      the other party;
        (3) subject-matter of the action is the same as the  subject-matter
      of the arbitration agreement;
        (4) the other party moves the court for referring  the  parties  to
      arbitration before it submits his first statement on the substance  of
      the dispute.”




In view of the above, where an agreement  is  terminated  by  one  party  on
account of the breach committed by the other, particularly, in a case  where
the clause is framed in wide and general  terms,  merely  because  agreement
has come to an end by its termination by  mutual  consent,  the  arbitration
clause does not get perished nor is rendered inoperative.   This  Court,  in
the case of P. Anand Gajapathi Raju (supra), has held that the  language  of
Section 8 is peremptory in nature.  Therefore, in cases where  there  is  an
arbitration clause in the agreement, it  is  obligatory  for  the  court  to
refer the parties to arbitration in terms  of  their  arbitration  agreement
and nothing remains to be decided in  the  original  action  after  such  an
application  is  made  except  to  refer  the  dispute  to  an   arbitrator.
Therefore, it is clear that in an agreement between the parties  before  the
civil court, if there is a clause for arbitration, it is mandatory  for  the
civil court to refer the dispute to an arbitrator.
27)   In view of the above, we are of the considered  opinion  that  in  the
present case, the prerequisites for  an  application  under  Section  8  are
fulfilled, viz., there  is  an  arbitration  agreement;  the  party  to  the
agreement brings an action  in  the  court  against  the  other  party;  the
subject matter of the action is  the  same  as  the  subject-matter  of  the
arbitration agreement; and the other party moves  the  court  for  referring
the parties to arbitration before it submits  his  first  statement  on  the
substance of the dispute.  We have come to the  conclusion  that  the  civil
court had no jurisdiction to entertain a suit  after  an  application  under
Section 8 of the Act is made for arbitration. In such a  situation,  refusal
to refer the dispute to arbitration would amount to failure  of  justice  as
also causing irreparable injury to the defendant.
28)   As we have already held that the oral agreement as  evidenced  by  the
transcript of conversation between the appellant No. 2  and  the  respondent
on  06/07.04.2011  substituting  the   alleged   written   agreement   dated
06.06.2009 and which contained a clause for  arbitration,  the  same  clause
for arbitration would  also  be  applicable  to  the  oral  agreement.   The
Division Bench has also erred in  law  in  affirming  the  order  passed  by
learned single Judge.  Both the orders, therefore, cannot be  sustained  and
are set aside and, therefore, in view of the decision in P.R. Shah  (supra),
there  can  only  be  one  arbitrator  and  there  can  only  be  a   single
arbitration.
29)   In view of the  foregoing  discussion,  the  appeal  succeeds  and  is
allowed.  However, instead of remitting  the  matter  back  to  the  learned
single Judge for deciding the suit itself on merits, we refer  the  disputes
raised by the appellants in CS(OS) 1532  of  2012  to  the  sole  arbitrator
already appointed, viz., Hon’ble Mr. Justice V.K. Gupta (Retd.) and  request
the arbitrator to decide the disputes expeditiously in accordance with law.


                            ...…………….………………………J.


                                 (MADAN B. LOKUR)


















































                            .…....…………………………………J.


                               (R.K. AGRAWAL)



NEW DELHI;
APRIL 10, 2017.

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