Availability of civil or arbitral remedy for breach of contract, does not mean that initiation of criminal proceedings will be an abuse of the process

In the matter under consideration, if we try to analyse the guidelines of which a reference has been made, can it be said that the allegations in the complaint/FIR/charge-sheet do not make out a case against the 2nd respondent or do they disclose the ingredients of an offence alleged against the 2nd respondent or the allegations are patently absurd and inherently improbable so that no prudent person can ever reach to such a conclusion that there is sufficient ground for proceeding against the 2nd respondent.[Para No.29]

   In the instant case, the complaint/FIR/charge-sheet as noticed above, does, however, lend credence to the questions posed. It is settled that one is not supposed to dilate on this score, or intend to present that the allegations in the complaint will have to be accepted on the face of it and the truth or falsity of which would not be gone into by the Court at this stage, as noticed above, whether the allegations in the complaint were true is to be decided on the basis of the evidence led at the stage of trial and the observations on this score in the case of Nagpur Steel & Alloys Pvt. Ltd. Vs. P. Radhakrishna and Others ought to be noticed. In para 3, this Court observed:-

“3. We have perused the complaint carefully. In our opinion it cannot be said that the complaint did not disclose the commission of an offence. Merely because the offence was

committed during the course of a commercial transaction, would not be sufficient to hold that the complaint did not warrant a trial. Whether or not the allegations in the complaint were true was to be decided on the basis of evidence to be led at the trial in the complaint case. It certainly was not a case in which the criminal trial should have been cut short. The quashing of the complaint has resulted in grave miscarriage of justice. We, therefore, without expressing any opinion on the merits of the case, allow this appeal and set aside the impugned order of the High Court and restore the complaint. The learned trial Magistrate shall proceed with the complaint and dispose of it in accordance with law expeditiously.”[Para No.30]

Arbitration agreement bears an independent existence, hence, it can be acted upon, even if the main contract is invalid

The second issue in SMS Tea Estates that a voidable contract would not be arbitrable as it affects the validity of the arbitration agreement, is in our view not the correct position in law. The allegations made by a party that the substantive contract has been obtained by coercion, fraud, or misrepresentation has to be proved by leading evidence on the issue. These issues can certainly be adjudicated through arbitration.

    We overrule the judgment in SMS Tea Estates with respect to the aforesaid two issues as not laying down the correct position in law.[Para No.6.9]

    The Garware judgment has followed the judgment in SMS Tea Estates. The Counsel for the Appellant has placed reliance on paragraph 22 of the judgment to contend that the arbitration clause would be non- existent in law, and unenforceable, till Stamp Duty is adjudicated and paid on the substantive contract.

    We hold that this finding is erroneous, and does not lay down the correct position in law. We have already held that an arbitration agreement is

distinct and independent from the underlying substantive commercial contract. Once the arbitration agreement is held to have an independent existence, it can be acted upon, irrespective of the alleged invalidity of the commercial contract.[Para No.6.10]

Dispute between landlord and tenant is arbitrable in case of lease and it is non arbitrable in case if Rent Act is applicable

Such equitable protection does not mean that the disputes relating to those aspects between the landlord and the tenant is not arbitrable and that only a Court is empowered to waive the forfeiture or not in the circumstance stated in the provision. In our view, when the disputes arise between the landlord and tenant with regard to determination of lease under the TP Act, the landlord to secure possession of the leased property in a normal circumstance is required to institute a suit in the Court which has jurisdiction. However, if the parties in the contract of lease or in such other manner have agreed upon the alternate mode of dispute resolution through arbitration the landlord would be entitled to invoke the arbitration clause and make a claim before the learned Arbitrator. Even in such proceedings, if the circumstances as contained in Section 114 and 114A of TP Act arise, it could be brought up before the learned Arbitrator who would take note of the same and act in accordance with the law qua passing the award. In other words, if in the arbitration proceedings the landlord has sought for an award of ejectment on the ground that the lease has been forfeited since the tenant has failed to pay the rent and breached the express condition for payment of rent or such other breach and in such proceedings the tenant pays or tenders the rent to the lessor or remedies such other breach, it would be open for the Arbitrator to take note of Section 114, 114A of TP Act and pass appropriate award in the nature as a Court would have considered that aspect while exercising the discretion.[Para No.16]

    On the other hand, the disputes arising under the Rent Acts will have to be looked at from a different view point and therefore not arbitrable in those cases. This is for the reason that

notwithstanding the terms and conditions entered into between the landlord and tenant to regulate the tenancy, if the eviction or tenancy is governed by a special statute, namely, the Rent Act the premises being amenable to the provisions of the Act would also provide statutory protection against eviction and the courts specified in the Act alone will be conferred jurisdiction to order eviction or to resolve such other disputes. In such proceedings under special statutes the issue to be considered by the jurisdictional court is not merely the terms and conditions entered into between the landlord and tenant but also other aspects such as the bonafide requirement, comparative hardship etc. even if the case for eviction is made out. In such circumstance, the Court having jurisdiction alone can advert into all these aspects as a statutory requirement and, therefore, such cases are not arbitrable. As indicated above, the same is not the position in matters relating to the lease/tenancy which are not governed under the special statutes but under the TP Act.[Para No.17]

Arbitrator can order to array necessary parties but can not close proceeding with permission to file fresh proceeding

After hearing counsel on both sides, we do not have any doubt in mind that the Arbitrator cannot be justified in closing the proceeding abruptly for the mere reason that the other employees whose names found place in the final report were not impleaded. We cannot lose sight of the fact that the reference was made to the Arbitration Court for the recovery of a whopping amount, nearly Rs.18 crores from the appellants and others, who had defalcated money while working in the employment of the Bank. It is shown that the contesting defendants had contended that the suit is bad for non-joinder of necessary parties. But, from the proceedings, it cannot be inferred whether, in the light of the pleadings, opportunity was afforded to the plaintiff Bank for impleading additional defendants and to amend the plaint. Even though it is a quasi-judicial proceedings, having regard to the scope and ambit of Section 70 of the Co-operative Societies Act, we are of the opinion that the said forum has all the powers and trappings of a civil court and any interpretation restricting the scope and ambit would not be in terms of advancement of justice.[Para No.7]

    Even when we are inclined to uphold the finding of the learned single Judge that Ext.P10 cannot stand judicial scrutiny, we are of the definite opinion that it was open to the Arbitrator to invoke the powers under Rule 10(2) of Order 1 of the Code of Civil Procedure. Though the plaintiff is the dominus litis, and has to decide who are the necessary parties to the suit, if the plaintiff does not implead all the necessary parties, it is open to the Court to add any person as party at any stage of the proceedings, if the person whose presence before the Court is necessary for an effective and complete adjudication of the issues involved in the suit. It is the settled proposition of law that a person may be a necessary party in a suit, namely, (a) if he ought to have been joined as a party to the suit and has not been so joined, and (b) if the suit cannot be decided without his presence. Apex Court has repeatedly held that the theory of dominus litis should not be overstretched in the matter of impleading of parties, because it is the duty of the Court to ensure that, if for deciding the real matter in dispute, a person is a necessary party, the said person is impleaded. In order to do complete justice between the parties the power available under sub-rule (2) of Rule 10 of Order 1 CPC shall be invoked by the Court.[Para No.8]

    It is trite that all powers which are not specifically denied by the statute or the statutory rules should be vouchsafed to a Tribunal that it may effectively exercise its judicial function. In this connection, it is apposite to extract the following paragraph from the decision reported in Ebrahim Ismail Kunju v. Phasila Beevi [1991 (1) KLT 861].

"5. The increasing importance of the Tribunals in the vast changing life of the community cannot be ignored by a modern court. A modern ostrich even in the distant deserts may not make such limited use of its eyes. Many valuable rights of the modern citizen are deeply involved with the adjudicator, processes of the Tribunals. Many areas hitherto occupied by courts, are now the domains of the Tribunals. A liberal approach towards their functioning and a larger view about the powers they need, are the requirements of the times. A Tribunal should be facilitated to do all that a court could do in similar situations; and much more than that. Greater speed and a total liberation from the tentacles of technicalities, give a better look and greater efficiency for effectively manned Tribunals. If there be no statutory prohibition, the Tribunal should therefore normally be in a position to ordain its affairs and modulate its procedures in such a manner as to best subserve the interest of the public, and in particular the litigant public."[Para No.11]

Arbitrator can pass an award directing specific performance of an agreement of sale

Point 3: This point becomes relevant because if the arbitrators cannot grant specific performance, a point can be raised under Section 34(2)(b)(i) that the subject matter of the dispute is not capable of arbitration. [Para No.35]

   One of the points raised in the grounds in this Court is that the grant of specific performance is discretionary and the discretion to grant or not to grant specific performance has been conferred by the Specific Relief Act, 1963 on the Civil Court and hence the arbitrator cannot be deemed to have been empowered to grant such a relief. [Para No.36]

    We may point out that the Punjab High Court in Laxmi Narayan vs. Raghubir Singh [AIR 1956 Punjab 249] the Bombay High Court in Fertiliser Corporation of India vs. Chemical Construction Corporation [ILR 1974 Bombay 856/858 (DB)] and the Calcutta High Court in Keventer Agro Ltd. vs. Seegram Comp. Ltd. [Apo 498 of 1997 & Apo 449 of (401)] (dated 27.1.98) have taken the view that an arbitrator can grant specific performance of a contract relating to immovable property under an award. No doubt, the Delhi High Court in M/s PNB Finance Limited vs. Shital Prasad Jain & Others [AIR 1991 Del. 13] has however held that the arbitrator cannot grant specific performance. The question arises as to which view is correct. [Para No.37]

   In our opinion, the view taken by the Punjab, Bombay and Calcutta High Courts is the correct one and the view taken by the Delhi High Court is not correct. We are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree - with a view to shorten litigation in regular courts - to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immoveable property. [Para No.38]

Setting aside of the arbitral Award in rejecting the counter-claims of the respondent does not result in the same being decreed in its favour

Arbitration proceeding - Counter claim by respondent - counter claim dismissed - Award challenged u/s. 34 in District Court - District Court set aside that dismissal-award - consequences of such decision:

Held:

The Court which exercises jurisdiction u/s. 34 of The Arbitration and Conciliation Act is not a court of first appeal under the provisions of the C.P.C. hence the setting aside of an arbitral award rejecting a claim/counter claim does not result in the claim/counter claim which was rejected by the Arbitrator being decreed as a result of the judgment of the court in a petition under Section 34 of The Arbitration and Conciliation Act.

So, it follows that the Award of the Arbitral Tribunal ensures to the benefit of the petitioners being a successful party. It is the successful party who can seek its enforcement under Section 36 of the Act and also secure the Award under section 9 of the Act and not the respondent being the losing party. This position of law is well settled by the judgment of the Bombay High Court as upheld by the Supreme Court in case of Dirk (Supra) wherein in paragraphs 13 & 14, the Court has held as under: