The High Court
Case Details
- 1 - NC: 2025:KHC:14114 CRP No. 410 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF APRIL, 2025 BEFORE THE HON'BLE MR JUSTICE R DEVDAS CIVIL REVISION PETITION NO. 410 OF 2024 BETWEEN: MR. DEEPAK KUMAR SHETTY S/O BALAKRISHAN SHETTY AGED 41 YEARS R/AT LALITH HOUSE ARAMELU ROAD, CHOKKABETTU MANGALORE TALUK-575014 (BY SRI. KETHAN KUMAR., ADVOCATE) AND: 1. MR. XAVIER SUNIL S/O SRI R ANTONY AGED 48 YEARS 2. MRS SOWMYA XAVIER W/O MR XAVIER SUNIL AGED 43 YEARS PROPRIETRIX M/S TRINITY FUELS BOTH ARE R/AT JILU VILLA NO.6-112-1(3) NETHRAVATHI LAYOUT, KANKANADY, MANGALURU-575002 (BY SRI. SHAFEER A., ADVOCATE) …PETITIONER …RESPONDENTS Digitally signed by JUANITA THEJESWINI Location: HIGH COURT OF KARNATAKA - 2 - NC: 2025:KHC:14114 CRP No. 410 of 2024 THIS CRP IS FILED UNDER SEC.115 OF CPC., AGAINST THE ORDER DATED 05.04.2024 PASSED ON IA NO.4 IN OS NO.66/2024 ON THE FILE OF I ADDITIONAL CIVIL JUDGE AND JMFC, MANGALURU. DISMISSING THE IA NO.IV FILED UNDER ORDER 7 RULE 11(d) R/W SEC. 151 OF CPC., FOR REJECTION OF PLAINT. THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE R DEVDAS ORAL ORDER
Facts
The petitioner, who is defendant in O.S.No.66/2024 is before this Court aggrieved of the impugned order dated 05.04.2024 passed by the learned I Addl. Civil Judge & JMFC, Mangaluru, D.K., dismissing I.A.No.4 filed by the defendant under Order VII Rule 11(d) R/w Section 151 of CPC and Section 8 of the Arbitration and Conciliation Act. 2. It is an admitted fact that plaintiff No.1 entered into a registered agreement of lease dated 01.06.2017 with the defendant, who is the owner of the suit schedule property, taking the property on lease for a period of - 3 - NC: 2025:KHC:14114 CRP No. 410 of 2024 twenty years commencing from 01/09/2017 to 31/08/2037. The property was let on lease permitting the Lessee to establish a petrol/diesel/LPG bunk and commercial activities, however without damaging the property. The Lessee along with his wife filed the O.S.No.66 of 2024 against the landowner/Lessor seeking permanent prohibitory injunction restraining the defendants from digging, encroaching or putting up any structure or construction of whatsoever nature or storing any construction materials in the ‘A’ schedule property or interfering with the possession and enjoyment of ‘A’ schedule property under the Agreement of Lease dated 01.06.2017; for mandatory injunction directing the defendant or any other persons claiming under the defendant to restore/rebuild the removed portion of the compound wall in the western side of ‘A’ schedule property and to fill up the trench dug by the defendant in the western portion of ‘A’ schedule property and to provide 32.25 cents of land as mentioned in the agreement, within the time prescribed by the Court and on failure of the - 4 - NC: 2025:KHC:14114 CRP No. 410 of 2024 defendant to do so, to get the same done through the process of the court etc. 3. The defendant entered appearance and filed an application under Order VII Rule 11(d) R/w Section 151 of CPC and R/w Section 8 of the Arbitration and Conciliation Act, 1996 seeking to reject the plaint by holding that the suit does not survive for consideration by virtue of it being hit and struck by operation of law going to the presence of arbitration clause in the Lease Agreement i.e., document No.1 submitted along with the plaint. However, the trial court is of the opinion that though there is a clause that would say that the matter shall be referred to an arbitrator, it also contemplates that fresh consent is necessary for the appointment of sole arbitrator by the parties and therefore if fresh consent of the parties is required, it cannot be held to be an arbitration agreement. It is also held in the impugned order that there is another clause contained in the agreement saying that the Courts of Mangalore shall also have jurisdiction and the parties - 5 - NC: 2025:KHC:14114 CRP No. 410 of 2024 can also approach the Court of law and therefore the parties have agreed to approach the courts of law and therefore the application was dismissed. 4. Learned counsel for the petitioner places reliance on M/s. Asian Avenues Pvt. Ltd.,/vs./ Syed Shoukat Hussain - AIR 2023 SC 2185, where a contention was raised on behalf of the plaintiff that adjudication on the issue whether there is a cancellation of the Development Agreement will operate in rem and therefore, the arbitration clause cannot be invoked. However, the Apex Court held that, it is impossible to hold that an action which was instituted under Section 31 of the Specific Relief Act for cancellation of an instrument is an action in rem. It was therefore held that in view of the applicability of the arbitration clause to the dispute subject matter of the suit, the learned trial judge was justified in passing an order under Section 8 of the Arbitration Act, while directing that the dispute be referred to the arbitration. - 6 - NC: 2025:KHC:14114 CRP No. 410 of 2024 5. It was pointed out that in SUSHMA SHIVKUMAR DAGA AND ANOTHER /vs./ MADHURKUMAR RAMKRISHNAJI BAJAJ AND OTHERS - AIR 2024 SC 197, the Hon’ble Apex Court noticed the recommendation of the Law Commission of India that the amendment brought to Section 8 and 11 of the Act envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. However, if the judicial authority is of the opinion that
Legal Reasoning
prima facie, the arbitration agreement exists, then it shall refer the dispute to arbitration and leave the existence of the arbitration agreement to be finally determined by the Arbitral Tribunal. 6. However, learned counsel for the respondent/plaintiffs would draw the attention of this Court to Clause 10 of the Agreement of Lease, which reads as follows; - 7 - NC: 2025:KHC:14114 CRP No. 410 of 2024 “The parties shall abide by all the terms and conditions specified in this agreement and in the event of default, either party shall have the right to enforce specifically for relief in the court of law”. 7. The learned counsel would therefore submit that the parties themselves have agreed that in the event of default, either party shall have the right to enforce specifically for relief in the Court of law. It is further contended that the suit is filed by the Lessee along with his wife, who is the license holder of Auto LPG Dispensation Station, who is affected by the action of the landowner, who has demolished a part of the compound on the western side and thereby exposing the LPG bunk to further danger. It is contended that a storage tank of 20,000 liters is situated on the western side of the premises and the act of the land owner in demolishing the compound wall has necessitated the parties to approach the civil court for redressal of their grievance. Learned - 8 - NC: 2025:KHC:14114 CRP No. 410 of 2024 counsel sought to place reliance on a decision of a Co- ordinate Bench of this Court in the case of Mr. Saju Thomas/vs./ Mr Prabhakaran Kizhakkeveetil - 2018 SCC OnLine Kar 365, where it was held that without filing a separate application under Section 8 of the Arbitration and Conciliation Act, the defendant cannot say that the civil court has no jurisdiction. Reliance was also placed on another decision of the High Court of Gujarat in the case of Devshibhai Govindbhai Limbani and Others /vs./ Dhavalbhai Bhogilal Vyas and Others- 2024 SCC OnLine Guj 4175, where it was held that there is no clause as to what is required to be done in a case where some parties to a suit are not parties to the arbitration agreement. It has been further held that such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and the other to be decided by the civil court would inevitably delay the proceedings. In that view of the matter, it is submitted that since plaintiff No.2, who is not a party to the agreement of lease, plaintiff No.2 will not be bound by the arbitration clause and therefore the - 9 - NC: 2025:KHC:14114 CRP No. 410 of 2024 suit is maintainable and the suit cannot be rejected in part, the plaint cannot be barred only as against plaintiff No.1. 8. Having heard the learned counsel for the petitioner, learned counsel for the respondents and on perusing the petition papers, this Court finds that the opinion of the learned trial judge that, since, the arbitration clause requires appointment of a sole arbitrator by mutual consent and therefore the arbitration clause cannot be held as an arbitration agreement, would be contrary to the established position of law. As rightly pointed out by the learned counsel for the petitioner that the trial court was required to consider by reading the Agreement of Lease to find out as to whether there is an arbitration clause to resolve the disputes that may arise between the parties. The Law Commission of India has explained the wisdom behind the amendments brought to Sections 8 and 11 of the Act stating that the scope of the judicial intervention is only restricted to situations where - 10 - NC: 2025:KHC:14114 CRP No. 410 of 2024 the court/judicial authority finds that the arbitration agreement does not exist or is null and void. Insofar as the nature of the intervention is concerned, it was recommended that in the event the court is of the prima facie opinion that there exists an arbitration clause, then the Court would have no other option than to refer the parties to arbitration. It is true that the defendant should have simply filed an application under Section 8 of the Arbitration and Conciliation Act instead of filing an application under Order VII Rule 11 seeking rejection of the plaint. However merely because an application has been filed for rejection of the pliant, it does not mean that the trial court could have ignored the application which also contains a ground that in terms of Section 8 of the Arbitration and Conciliation Act, the matter should be referred for arbitration. Technical defects in the application should not result in rejection the application. 9. Insofar as the other limb of the argument of the learned counsel for the plaintiffs regarding Clause 10 - 11 - NC: 2025:KHC:14114 CRP No. 410 of 2024 contained in the Agreement of Lease, which provides for an opportunity to the parties to approach the civil court, the learned counsel for the petitioner/defendant has rightly pointed out to a recent decision of the Apex Court in the case of TARUN DHAMEJA /vs./ SUNIL DHAMEJA AND ANR., in Civl Appeal No.14005/2024 dated 06.12.2024, where similar arbitration clause also provided that the arbitration shall be optional and the arbitrator will be appointed by partners with their mutual consent. It was also provided that in any case of dispute between the parties arising out of the contract, then the jurisdiction of Indore Civil Court shall be applicable and acceptable by the partners. However, the Apex Court held that the first portion of the arbitration clause clearly contains the arbitration clause and provides that if any dispute or differences arose between the partners, the same shall be referred to arbitration. It was therefore held that the legal representatives or anyone claiming through a partner is entitled to invoke the arbitration clause. Insofar as the second portion of the arbitration clause, it was also held - 12 - NC: 2025:KHC:14114 CRP No. 410 of 2024 that it cannot be read in isolation but in the context of the earlier portion of the arbitration clause. This means that the arbitration clause can be invoked by an aggrieved party who wants to take recourse to arbitration. To that extent there is mutual agreement. The later portion of the arbitration clause does not obliterate or write off the arbitration clause. In terms of the Arbitration and Conciliation Act, 1996, where parties cannot agree upon a common name as to who will act as an Arbitrator, the court can appoint an Arbitral Tribunal. 10. In that view of the matter, this Court is of the considered opinion that merely because plaintiff No.2 is added to the suit and plaintiff No.2 is not a party to the Agreement of Lease, it will not enable the parties to the contract to approach the civil court to redress their grievances arising out of the Agreement of Lease, when an arbitration clause is contained in the agreement. Plaintiff No.2 has no separate or independent cause of action against the defendant. - 13 - NC: 2025:KHC:14114 CRP No. 410 of 2024 11. Consequently, the Civil Revision Petition is allowed. The impugned order dated 05.04.2024 passed in O.S.No.66/2024 is hereby quashed and set aside. Consequently, the application filed in I.A.No.4 under order VII Rule 11(d) R/w Section 151 of CPC and R/w Section 8 of the Arbitration and Conciliation Act, 1996 is allowed. 12. The Director of Arbitration and Conciliation Centre, Bengaluru, will appoint an Arbitrator to adjudicate the dispute inter-se the parties. The learned Arbitrator will file his/her declaration under Section 12 of the Arbitration and Conciliation Act within 15 days from the date of appointment. The fees of the learned Arbitrator will be fixed by the said Centre in terms of its Rules. 13. At this juncture, learned counsel for the respondents/plaintiffs would submit that since the matter is now being referred to arbitration, the parties may be directed to maintain status-quo, till the commencement of the arbitration proceedings and await any orders that could be passed by the Arbitral Tribunal. - 14 - NC: 2025:KHC:14114 CRP No. 410 of 2024 14. The said submission of the learned counsel for the respondents/plaintiffs is accepted. The parties are directed to maintain status-quo till the arbitration proceedings would commence and any orders are passed by the Arbitral Tribunal in respect of ‘A’ schedule property measuring 32 cents. Ordered accordingly. Sd/- (R DEVDAS) JUDGE KLY CT: JL