Calcutta High Court rules to enforce arbitration clause, emphasizing it’s significance and procedures laid in the Arbitration and Conciliation Act.

Case title: M/S Fullerton India Credit Company Limited vs. Manju Khati

Case No.: C.O. No. 3689 of 2015

Decided on: 02.04.2024

Quorum: Hon’ble Justice Prasenjit Biswas

FACTS OF THE CASE:

The case involves a dispute between M/S Fullerton India Credit Company Limited and Ms. Manju Khati. Ms. Khati filed a suit against Fullerton India Credit Company Limited seeking declaration, injunction, and consequential relief. Fullerton India Credit Company Limited, the defendant, filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, along with Section 5 of the Act, requesting to refer the matter to arbitration due to an arbitration clause in their agreement. The Trial Court rejected Fullerton India Credit Company Limited’s application, leading to a revisional application being filed challenging the Trial Court’s decision.

LEGAL PROVISIONS:

The legal provisions involved in the case were Section 8 and Section 5 of the Arbitration and Conciliation Act, 1996. Section 8 of the Act deals with the power to refer parties to arbitration when there is an arbitration agreement. It mandates that a judicial authority, upon application by a party, must refer the parties to arbitration if there is an arbitration agreement. Section 5 of the Act pertains to the extent of judicial intervention in matters governed by the Act, stating that judicial authorities should not intervene unless provided for in the Act.

APPELLANTS CONTENTION:

The appellant, Fullerton India Credit Company Limited, contended that the Trial Court had erred in not referring the matter to arbitration as per the arbitration clause in their agreement. They argued that the Trial Court misinterpreted Section 8(1) and (2) of the Arbitration and Conciliation Act, 1996, and failed to appreciate that the Trial Court lacked jurisdiction to try the suit. The appellant emphasized that the Trial Court should have considered the arbitration agreement and referred the dispute to arbitration for proper adjudication.

RESPONDENTS CONTENTION:

The respondent, Ms. Manju Khati, argued against the appellant’s application under Section 8 of the Arbitration and Conciliation Act, 1996. They contended prmarily that the arbitration clause in the agreement only applied to disputes connected with the agreement itself, not to the broader issues raised in the suit. The respondent disagreed with the appellant’s assertion that the civil court lacked jurisdiction, stating that the Arbitral Tribunal should only decide on the terms and conditions of the agreement, not the entire dispute.

COURT ANALYSIS AND JUDGMENT:

In the case of M/S Fullerton India Credit Company Limited versus Ms. Manju Khati, the High Court analyzed the application of Section 8 of the Arbitration and Conciliation Act, 1996. The Court considered the presence of an arbitration agreement between the parties and the jurisdiction of the civil court in referring disputes to arbitration. It emphasized the importance of complying with the procedures outlined in the Act and the need to respect arbitration clauses in agreements.

The Court found that the Trial Court had erred in not referring the parties to arbitration despite the existence of a valid arbitration clause. It highlighted that the Trial Court’s decision was contrary to the provisions of Section 8 of the Act, which mandate referral to arbitration when an arbitration agreement exists. The  High Court set aside the Trial Court’s order and directed the matter to be referred to arbitration within a specified timeframe, emphasizing the significance of upholding arbitration agreements and following the procedures outlined in the Act for dispute resolution.

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Judgement reviewed by – Ayush Shrivastava

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