2015 (3) TMI 1425 - HC - Indian Laws

Arbitration Clause Limits Dispute Scope; Failure to Comply with Section 8(2) Leads to Rejection

The court upheld the trial court's decision to dismiss the petitioner's request to refer the dispute to arbitration, ruling that the arbitration clause ... Maintainability/scope of arbitration proceedings - whether the dispute for recovery of possession and mesne profits is beyond the scope of arbitration clause or not - non-filing of original agreement or duly certified copy of the agreement, which consists of arbitration clause u/s Section 8(2) of the Act - ambiguity in the language used in the arbitration clause in the agreement or not. Whether the arbitration clause covered reference of the dispute relating to delivery of possession and mesne profits, if not, is the impugned order be sustained? HELD THAT:- The clause referred to in the earlier paras referring to arbitrator is unambiguous and the intention of the parties need not be looked into, since, intention would not prevail when the language used in the condition is unambiguous. Therefore, on strict construction of the condition relating to reference to arbitration, the trial Court rightly declined to grant the relief to the petitioner. The case on hand would not cover any of the circumstances to exercise discretion to grant relief. That apart there are no illegal exercise or failure to exercise the power conferred on the trial Court in negating the relief. Hence, it is not a fit case for interference of this Court. When the agreement is not in writing and it is only an understanding, the alleged condition of agreement for reference would not fall within the ambit of Section 7 of the Act. In any view of the matter, it is for the revision petitioner to file, if there is an understanding in writing duly signed by both parties along with the petition. However, it is wholly unnecessary to decide about maintainability of the petition in view of bar to entertain petition under Section 8(2) of the Act, as the petitioner himself admitted about the understanding and that apart it is already concluded that this Court cannot exercise its discretionary power under Section 227 of the Constitution of India to interfere in the order in question. There are no ground or legal infirmity which calls for interference of this Court, devoid of merits and deserves to be dismissed - petition dismissed. Issues Involved:1. Interpretation of the arbitration clause.2. Compliance with Section 8(2) of the Arbitration and Conciliation Act, 1996.3. Scope of powers under Article 227 of the Constitution of India.Issue-wise Detailed Analysis:1. Interpretation of the Arbitration Clause:The petitioner, who is the defendant in the original suit, filed a petition under Section 8 of the Arbitration and Conciliation Act, 1996, seeking to refer the dispute to arbitration based on an arbitration clause in the agreement. The trial court dismissed the petition, stating that the arbitration clause was limited to the interpretation of the agreement and did not cover disputes related to recovery of possession and mesne profits. The court held that the language of the arbitration clause was clear and unambiguous, and thus, the intention of the parties was not relevant. The court emphasized that the arbitration clause explicitly mentioned that P. Subba Rao was appointed as the arbitrator only for interpreting the agreement, not for resolving disputes.2. Compliance with Section 8(2) of the Arbitration and Conciliation Act, 1996:The respondents argued that the petitioner failed to comply with Section 8(2) of the Act, which requires the filing of the original arbitration agreement or a duly certified copy. The petitioner contended that the existence of the arbitration clause was admitted by the respondents in the plaint, and thus, the filing of the agreement was not necessary. The court noted that the understanding mentioned in the plaint did not clarify whether it was reduced to writing and signed by the parties, which is essential for it to fall within the ambit of Section 7 of the Act. Therefore, the petitioner's failure to file the agreement or a certified copy was a valid ground for rejecting the petition.3. Scope of Powers under Article 227 of the Constitution of India:The court discussed the limited scope of its powers under Article 227, which are supervisory in nature and meant to ensure that lower courts and tribunals act within their jurisdiction and follow the principles of natural justice. The court can intervene in cases of jurisdictional errors, refusal to exercise jurisdiction, errors of law apparent on the face of the record, violations of natural justice, arbitrary or capricious exercise of authority, perverse findings, procedural errors, manifest injustice, and errors both on facts and law. However, the court emphasized that it cannot interfere merely to correct erroneous decisions or on technical grounds that do not advance substantial justice. In this case, the court found no grounds for interference under Article 227, as the trial court's decision was based on a correct interpretation of the arbitration clause and compliance with statutory requirements.Conclusion:The court concluded that the trial court correctly interpreted the arbitration clause as limited to the interpretation of the agreement and not covering disputes related to recovery of possession and mesne profits. The petitioner's failure to comply with Section 8(2) of the Act was a valid ground for dismissing the petition. The court found no jurisdictional error or violation of principles of natural justice by the trial court, and thus, there was no basis for exercising its supervisory powers under Article 227. The civil revision petition was dismissed, confirming the trial court's order.