Telangana High Court
M/S Laxmi Transmissions vs M/S Stelmec Ltd on 23 December, 2024
THE HON'BLE SRI JUSTICE K.SURENDER
CIVIL REVISION PETITION No.3706 of 2024
ORDER:
1. This Civil Revision Petition is filed by the petitioner/respondent/defendant No.3 against the orders in
I.A.No.933 of 2023 in O.S.No.7 of 2023 dated 14.08.2024 passed by
the I Additional District Judge, Nizamabad, wherein the petition
filed under Section 8 of the Arbitration and Conciliation Act, 1996
(for short ‘the Act’) r/w Section 151 CPC seeking to refer the suit
matter to Arbitrator was allowed.
2. Briefly, the facts of the case are that summary suit was filed
for recovery of an amount of Rs.1,34,77,261/- along with interest.
The plaintiff’s company was doing business in electrical installation
and transmission lines. The plaintiff was providing technical and
financial assistance to the defendant company in installation and
transmission of lines.
3. The 2nd respondent/Defendant No.2 had approached the
revision petitioner/plaintiff on behalf of the 1st respondent
company/defendant No.1 to file tender works at Orissa Power
Transmission Power Corporation Ltd (OPTCL) and requested the 1st
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defendant in filing bid for tenders at Orissa for technical and
financial documents for the purpose of qualifying the tender. In the
said process, the 1st defendant took assistance from plaintiff
company and entered into memorandum of understanding with
defendant No.1 company. As per the said MoU, the 1st defendant
company has to pay Rs.2,80,00,000/- inclusive of taxes and GST to
the Revision Petitioner as royalty. At the time of securing tender,
the 1st defendant company issued post dated cheque vide cheque
No.002619 drawn on Bank of Baroda, Bandra Branch for an
amount of Rs.2,56,27,119/-. The 1st defendant company paid some
of the amount in installments and an amount of Rs.65,42,360/-
was due out of Rs.2,80,00,000/-. The 1st defendant company issued
several post dated cheques and finally on 30.09.2022 issued a
cheque vide No.002981 drawn on Bank of Baroda, Bandra Branch
for an amount of Rs.65,45,360/- and the said cheque got
dishonoured as per the instructions of respondents “payment
Stopped by the Drawer”. The revision petitioner filed a criminal
case against dishonor of cheque vide STC NI No.7114/2022 on the
file of VI Metropolitan Magistrate, Hyderabad.
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4. The revision petitioner is the plaintiff in the suit OS No.7 of
2023 on the file of I Additional District Judge, Nizamabad. The
defendants 1 and 2 filed petition under Section 8 of the Arbitration
and Conciliation Act r/w Section 151 CPC seeking to refer the suit
matter to arbitrator and to dismiss the suit as not maintainable.
5. The said application under Section 8 of the Act was filed
mainly on the ground that under Clause 34 of the Agreement dated
30.10.2017, it was specifically agreed that disputes shall be subject
to arbitration.
6. Learned District Judge passed the impugned order mainly on
the basis of the clause No.34 in the MoU dated 30.10.2017 and that
the matter has to be referred to arbitration and not before the Civil
Court.
7. Learned counsel appearing for the revision petitioner would
submit that in view of clause 16, the plaintiff had liberty to file civil
suit.
8. For the sake of convenience, clauses 16 and 34 are extracted
hereunder:
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“16. In the event SL fails to pay the Royalty Amount, Laxmi agrees
that there shall be no criminal liability including u/s 138 r/w 14 of
the Negotiable Instruments Act, 1881 to SL with reference to the
Security Cheque but this shall not preclude the right of Laxmi to file a
civil claim for the recovery of the Royalty Amount.”
34. That in case of any dispute or difference arising between the
Parties hereto or any claim or thing herein contained or the
construction thereof or as to any matter in any way connected with
or arising out of these presents or the operation thereof the rights,
duties or liabilities of either Party thereof, then and in every such
case the matter, differences and dispute shall be decided mutually
and in case the same is not decided as such will be essentially
referred to a sole arbitrator in Mumbai being appointed/nominated
by SL in accordance with and subject to the provisions of the
Arbitration and Conciliation Act, 1996, Rules there under and any
other enactment or statutory modifications thereof for the time being
in force. The language of the Arbitration shall be English and the
place of arbitration shall be Mumbai. The decision of the arbitrator
shall be final and binding upon both the Parties.”
9. Learned counsel submits that though there is an arbitration
clause, however, plaintiff is not precluded from filing a civil suit.
She relied on the judgment of the Hon’ble Supreme Court in the
case of Venkataraman Krishnamurthy and another v. Lodha
Crown Buildmart Private Limited 1 and argued that once the
parties have committed themselves to a written
agreement/contract, it would be binding on them. Since two options
are given, it is for the plaintiff to choose the option of filing a civil
suit. The terms of contract in between the parties have to be
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(2024) 4 Supreme Court Cases 230
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interpreted giving actual meaning and Court cannot come up with
new contract terms, which are not mentioned in the clauses of
agreement.
10. Learned counsel for the petitioner also relied on the judgment
of the Hon’ble Supreme Court in the case of Emaar India Limited
v. Tarun Aggarwal Projects LLP and another 2 . The Hon’ble
Supreme Court while dealing with a situation where there were two
clauses one giving right to approach appropriate Court of law and
the other arbitration clause, the Hon’ble Supreme Court held as
follows:
“24. Applying the law laid down by this Court in the aforesaid decisions
and considering Clauses 36 and 37 of the agreement and when a specific
plea was taken that the dispute falls within Clause 36 and not under
Clause 37 and therefore, the dispute is not arbitrable, the High Court was
at least required to hold a primary inquiry/review and prima facie come to
conclusion on whether the dispute falls under Clause 36 or not and
whether the dispute is arbitrable or not. Without holding such primary
inquiry and despite having observed that a party does have a right to seek
enforcement of agreement before the court of law as per Clause 36,
thereafter, has appointed the arbitrators by solely observing that the same
does not bar settlement of disputes through the Arbitration and Conciliation
Act, 1996. However, the High Court has not appreciated and considered
the fact that in case of dispute as mentioned in Clauses 3, 6 and 9 for
enforcement of the agreement, the dispute is not arbitrable at all. In that
view of the matter, the impugned judgment and order passed by the High
Court appointing the arbitrators is unsustainable and the same deserves to
be quashed and set aside.
25. However, at the same time, as the High Court has not held any
preliminary inquiry on whether the dispute is arbitrable or not and/or
whether the dispute falls under Clause 36 or not, we deem it proper to2
2022 SCC OnLine SC 1328
6remit the matter to the High Court to hold a preliminary inquiry on the
aforesaid in light of the observations made by this Court in Vidya
Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1
SCC (Civ) 549] and in Indian Oil Corpn. [Indian Oil Corpn. Ltd. v. NCC
Ltd., (2023) 2 SCC 539 : (2023) 1 SCC (Civ) 88] and the observations made
hereinabove and thereafter, pass an appropriate order.”
11. On the other hand, learned counsel appearing for the
respondents/defendants in the suit argued that clauses 16 and 34
have to be read harmoniously. It is not specifically stated in Clause
16 that the parties can approach the civil Court.
12. Learned counsel relied on the judgment of the Hon’ble
Supreme Court in the case of Sushma Shivkumar Daga v.
Madhurkumar Ramkrishnaji Bajaj & others 3, wherein the Hon’ble
Supreme Court while dealing with the situation where the trial
Court and the High Court have referred the matter to arbitration
held that the role of a ‘Court’ is now in any case, extremely limited
in arbitration matters. The underlying principles of arbitration as
contained in the Arbitration and Conciliation Act,1996, was always
to have as little interference as possible by a judicial authority.
Further, the Hon’ble Supreme Court held that the basic purpose for
bringing an amendment in Section 8 was to minimize the scope of
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Civil Appeal No.1854 of 2023 dated 15.12.2023
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judicial authority in matters of arbitration, except on the ground
where prima facie, no valid arbitration agreement exists.
13. A reading of clause 16 would go to show that the defendant
No.1 company referred to as ‘SL’, fails to pay the Royalty amount, it
shall not preclude the right of plaintiff to file civil claim for the
recovery of the royalty amount. Clause 16 confines to the payment
of royalty amount and right to file civil claim for the recovery of the
said amount. In the present case, the grievance of the plaintiff is
that the defendants were due a sum of Rs.65,42,360/- towards
royalty and after calculating interest, suit was filed for recovery of
Rs.1,34,77,261/-(Rupees One Crore Thirty Four Lakhs Seventy
Seven Thousand Two Hundred and Sixty One only) including
interest and damages.
14. Clause 34 does not specifically refer to the royalty amount, but
generally in case of any dispute that arises in between the parties,
the parties have to approach an arbitrator.
15. Since the suit was specifically filed claiming the royalty
amount covered under Clause 16, it cannot be said that the said
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dispute would fall exclusively within Clause 34 only, to refer to an
arbitrator and no separate suit can be filed. Under Clause 33, it
was agreed that the Courts at Mumbai shall have the exclusive
jurisdiction in all the matters of disputes arising out of the
agreement dated 30.10.2017. Accordingly, though civil suit can be
filed under Clause 16, however, the suit can only be filed in any of
the Courts in Mumbai as per Clause 33.
16. To the extent of finding that a civil suit cannot be filed and it
has to be referred only to the arbitrator is hereby set aside.
However, in view of the above discussion, the suit can only be filed
before the civil Court in Mumbai.
17. Accordingly, Civil Revision Petition is ordered. There shall be
no order as to costs. Consequently, miscellaneous applications, if
any, shall stand dismissed.
__________________
K.SURENDER, J
Date : 23.12.2024
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