Orient Transport Co. Gulbara and ANR. Vs Jaya Bharat Credit and Investment Co. Ltd.
Court: Supreme Court of India.
Case Type: Civil Appeal.
Case No.: 2286 of 1987.
Citation: 1987 AIR 2289, 1988 SCR (1) 47.
Date of Judgement: 07/09/1987.
Petitioner: Orient Transport Co. Gulbara and Another.
Respondent: Jaya Bharat Credit and Investment Co. Ltd. and Another.
Bench:
- Justice Sabyasachi Mukharji.
- Justice G.L. Oza.
Statutes Referred:
- Arbitration Act,1940. (hereafter ‘the Act’)
Cases Referred:
- State of Bombay vs Adamjee Hajee Dawood and Co., AIR 1951 Calcutta.
Facts:
- This appeal was from a judgement and order of the Madhya Pradesh High Court dated 17/12/1986.
- The petitioner’s suit in the High Court was for a declaration that the eight agreements/contracts executed between it and respondent no.1- Jaya Bharat Credit and Investment Co. Ltd. were not ‘hire purchase agreements’ but were loan agreements. The petitioner pleaded that an injunction must be passed restraining the respondent from enforcing the agreements until the suit was decided. The High Court dismissed the suit because it was not maintainable according to the provisions of Section 32 of the Arbitration Act.
Issue:
Whether the courts were right in holding that Section 32 of the Arbitration Act barred the suit and in dismissing the same on that ground?
The contention by the petitioner:
- The so-called ‘hire-purchase agreements’ between the petitioner and respondent no.1 were nothing but agreements related to transaction of loan.
- The alleged arbitration agreements were not entered into as such in the sense that though certain documents were executed, they were not properly understood as hire purchase agreements.
- The entire agreement was a transaction of loan, and there was no agreement of arbitration.
- The documents of the agreement were fraudulent.
The contention by the respondent:
- The judgements of the Trial Court, Appellate Court and the High Court were valid and must be upheld.
Obiter Dicta:
- Section 32 of the Act stipulates that notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be enforced, set aside, amended, modified or in any way affected otherwise than as provided in the Act.
- Section 32 of the Act has a very limited application, namely, where the validity of the arbitration agreements and not the validity of contracts containing arbitration agreements are challenged.
- The petitioner did not deny the execution of the documents but alleged that these were manipulated documents and that there were no agreements that contained the arbitration agreement.
- As per State of Bombay v. Adamjee Hajee Dawood and Co., A.I.R. 1951 Calcutta 147-Section 32 of the Act does not contemplate the case of a suit challenging the validity of a contract merely because it contains an arbitration clause.
- The Appellate Court and the High Court were in error in dismissing the suit and appeals, respectively.
Judgement:
- The judgements of the High Court, the Appellate Court and the Trial Court were set aside.
- The appeal was allowed.
Rationale:
- If the legislature intended that all documents and agreements containing arbitration clause should come within the purview of Sections 32 and 33 of the Act, it would have mentioned so in appropriate words.
- The very existence of the agreement was put in issue.
- The position of law in Adamjee Hamjee Dawood and Co. (supra) is correct.
Conclusion:
- Every individual has a right to bring suits of Civil nature, and the Court has the jurisdiction to try all such suits under Section 9 of Code of Civil Procedure/ Section 32 of the Arbitration Act 1940 does not take away that right.
