M/s Khaitan & Co. v. M/s Virtue Securities & Anr.

1. Whether reporters of local papers may be allowed to see the judgment?

2. To be referred to the reporter or not?

3. Whether judgment should be reported in Digest?

JUDGMENT

1. The petitioner has assailed an order dated 28th January 2008 whereby the learned Additional District Judge (ADJ) allowed an application of the respondent herein for restoration of the suit.

2. Brief facts relevant for the purpose of deciding the present petition are that the respondent (plaintiff before the trial court) filed a suit for Rs.11.22 lac from the defendant (petitioner herein). After completion of pleadings when the suit was at the stage of admission/ denial of documents and framing issues, an application under Section 8 of the Arbitration & Conciliation Act was made by the petitioner for referring the disputes to the arbitration in terms of byelaws and Article of Association of Delhi Stock Exchange Association Limited (DESA) on the ground that the transaction pertained to contract regarding securities/ shares between the broker and the plaintiff. The matter was referred to the arbitrator, however, arbitrator observed that the amount of Rs.[3] lac paid to respondent was not in respect of transaction of shares and this claim was not adjudicatable by arbitrator as 2010:DHC:1933 per Rules, Regulations and byelaws of DSEA. Regarding rest of the claim, nil award was passed on the ground that the claim pertained to obtaining third party cheques without covering letter, in settlement of obligation of another party, was contrary to the accounting principles, conventions and thus the claim was not tenable. Regarding Rs.[3] lac, arbitrator observed that it was not related to the transaction and was out of the scope of arbitration so he permitted the respondent to initiate civil suit for recovery of Rs.[3] lac from respondent. This award was not challenged by either of the parties. Thus, the award became final. Respondent after that filed an application before the trial court for revival of the suit and the trial court after finding that the arbitrator did not have jurisdiction to entertain the entire claim and the arbitrator himself observed that the civil suit could be filed for recovery of Rs.[3] lac, revived the suit.

3. During arguments, counsel for the respondent stated that he has no objection if the claim in the suit is restricted to Rs.[3] lac although he had paid court fee on more than Rs.11 lac. The respondent submitted that part of the claim before the arbitrator did not pertain to securities/ shares and was not covered by arbitration clause and has not been adjudicated. The suit was a composite suit and thus the matter could not have been referred to the arbitrator, but even if it has been referred, his suit would survive for rest of the claim. The counsel for the petitioner submits that since the dispute in the suit was referred to the arbitrator, the suit stood dismissed and, therefore, it could not be revived.

4. It is settled law that under Section 8 of the Arbitration & Conciliation Act, 1996, the Court has to refer the subject matter of the suit to arbitration if the entire claim made in suit is subject matter of arbitration agreement. It is not the case of the petitioner that Rs.[3] lac received by the petitioner from the respondent was subject matter of arbitration agreement. Since the matter was a composite matter, the learned ADJ should have refused to refer this matter under Section 8 of the Arbitration & Conciliation Act. The entire subject matter of the suit was not subject matter of arbitration agreement. However, without considering this aspect, the matter was referred to the arbitration and the arbitrator gave its award and stated that claim of Rs.[3] lac was not part of the arbitration agreement. Since the award has not been challenged, both the parties were bound by the award and the respondent’s right to recover this amount through civil suit cannot be denied. The respondent had already filed the civil suit and paid the court fee. The respondent has right to get this civil suit revived on account of refusal on the part of the arbitrator to adjudicate upon the claim of the respondent for Rs.[3] lac. The trial court has therefore rightly revived the suit. However, revival of the suit shall remain restricted to claim of respondent to the extent it was not adjudicated upon by the arbitrator.

5. With above observations, the petition stands disposed of. The trial court shall continue with the suit filed by the respondent herein to the limited extent to which the liberty has been given by the arbitrator. April 08, 2010 SHIV NARAYAN DHINGRA J. rd