K B PEETHAMBARAN Vs.

E V
THOMAS & Ors
BY MOHAN KRISHNA
CITATIONS FROM THE ARBITRATION
AND CONCILIATION ACT IN THE CASE
 SECTION 5 OF THE 1996 ACT
 SECTION 8 OF THE 1996 ACT
 SECTION 9 OF THE 1996 ACT
 SECTION 16 OF THE 1996 ACT
 SECTION 17 OF THE 1996 ACT
 SECTION 34 OF THE ARBITRATION ACT 1940
SECTION 5 OF THE 1996 ACT

Extent of judicial intervention—Notwithstanding anything contained in any other law

for the time being in force, in matters governed by this Part, no judicial authority
shall intervene except where so provided in this Part.
 SECTION 8 OF THE 1996 ACT
Power to refer parties to arbitration where there is an arbitration agreement.—

(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration
agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so
applies not later than the date of submitting his first statement on the substance of the dispute, then,
notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to
arbitration unless it finds that prima facie no valid arbitration agreement exists.]

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by
the original arbitration agreement or a duly certified copy thereof:

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is
pending before the judicial authority, an arbitration may be commenced or continued and an arbitral
award made.
 SECTION 9 OF THE 1996 ACT
Interim measures, etc., by Court

(1) A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is
enforced in accordance with section 36, apply to a court—
(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:—
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the
subject-matter of the dispute in arbitration, or as to which any question may arise therein and
authorising for any of the aforesaid purposes any person to enter upon any land or building in the
possession of any party, or authorising any samples to be taken or any observation to be made, or
experiment to be tried, which may be necessary or expedient for the purpose of obtaining full
information or evidence;
(c) the detention, preservation or inspection of any property or thing which is the
subject-matter of the dispute in arbitration, or as to which any question may arise therein and
authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any
party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may
be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and
convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation
to, any proceedings before it.

(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under
sub-section (1), unless the Court finds that circumstances exist which may not render the remedy
provided under section 17 efficacious.
 SECTION 16 OF THE 1996 ACT
Competence of arbitral tribunal to rule on its jurisdiction.—

(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the
existence or validity of the arbitration agreement, and for that purpose,—
(a) an arbitration clause which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration
clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the
submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely
because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter
alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a
later plea if it considers the delay justified.

(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the
arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an
arbitral award.

(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral
award in accordance with section 34.
 SECTION 17 OF THE 1996 ACT
Interim measures ordered by arbitral tribunal.—

(1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in
accordance with section 36, apply to the arbitral tribunal—
(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of
arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely:—
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the
subject-matter of the dispute in arbitration, or as to which any question may arise therein and
authorising for any of the aforesaid purposes any person to enter upon any land or building in the
possession of any party, or authorising any samples to be taken, or any observation to be made, or
experiment to be tried, which may be necessary or expedient for the purpose of obtaining full
information or evidence;
(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the arbitral tribunal to be just
and convenient, and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of,
and in relation to, any proceedings before it.

(2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under
this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the
Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court.]
 SECTION 34 OF THE 1940 ACT

Power to stay legal proceedings where there is an arbitration agreement:

Where any party to an arbitration agreement or any person claiming under him commences any legal
proceedings against any other party to the agreement or any person claiming under him in respect of any
matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written
statement or taking any other steps in' the proceedings, apply to the judicial authority before which the
proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the
matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the
time when the proceedings were commenced. and still remains, ready and willing to do all things necessary
to the proper conduct of the arbitration, such authority may make an order staying the proceedings.
BRIEF FACTS OF THE CASE
 K B Peethambaran filed a suit at Additional Munsiff court, Ernakulam for a permanent
injunction restraining defendants 1 and 2 i.e, E V Thomas and other from carrying on
any businesses mentioned in plaint items 1 to 3 other than the business of the firm,
“SLIM COLLECTIONS” of which the Plaintiff i.e, K B Peethambaran and Defendant 1,
E V Thomas are partners and the firm operates from dealing with, selling out the
readymade garments, tailoring units and the furniture and fittings.
 After receiving the summons, the defendants filed an application under section 8 of the
Arbitration and Conciliaon Act, 1996
 The trial court accepted the contentions of the defendants
 The Munsiff court ruled out that in view of the Arbitration clause in the partnership
agreement, the dispute should be settled by the Arbitrator and suit is not maintainable
 The learned counsel for petitioner stated that, the defendant describes himself as
Proprietor in the application and therefore, he cannot claim to be a partner to invoke
Arbitration clause. Hence, the reference of suit by the Munsiff court to the
Arbitrator is also not maintainable. The Counsel also sought the assistance of the
decision of Supreme Court in P Anand Gajapathi Raju Vs. P V G Raju AIR 2000 SC
1886 the conditions to be satisfied for invoking Section 8.
 The Counsel for Petitioner also relied upon the decision of HOUSE OF LORDS in
Heyman and Anr Vs. Darwins Ltd. (1942(1) AII ER) on the sentences in page 341
which reads as follows
“ If the respondents were denying that the contract had ever bound them at all, such
an attitude would disentitle them from relying on the arbitration clause which it
contains; but that is not the position they take up. They admit the contract, and deny
that they have repudiated it. Whether they have, or have not, is one of the disputes
arising out of the agreement."
 The counsel also relied on decisions reported in Dinasari Ltd. v. Hussain Ali &
Sons and Anr. , B.J. Manufacturing Co. v. Dulichand (: AIR 1953 Cal. 450),
Chartered Bank v. Port Commissioner (AIR 1972 Cal. 198), Subhash Industries v.
Bhagwandas , Food Corporation of India v. P.K. and Company (2000 (Supp) Arb.
LR 467. All these decisions relied on by the learned counsel except the decision in
2000 (Suppl.) Arb. LR are under Arbitration Act 1940.
 There is marked difference between Secion 34 of the Arbitration Act 1940 and
Section 8 of the Arbitration and Conciliation Act. The counsel for respondents
emphasised the word "may" in Section 34 of 1940 Act and the word "shall" used
in Section 8 of the 1996 Act. It is therefore contended by the learned counsel for
the respondents that the decision under the old Arbitration Act cannot be blindly
followed for interpreting the corresponding provisions as changes are made in the
new Act.
 JUDGMENT AND INTERPRETATION
 In a contract consisting of an arbitration clause, if a suit is filed before invoking the Arbitration clause, it is
for the defendant to point out the existence of the Arbitration clause and request the court to stop proceedings
and refer the parties to Arbitration. The application under Section 8 should not be made not later than
submitting his first statement on the substance of dispute by the defendant. The Counsel for appellant has no
submission that relief sought for suit is not based on partnership deed which contains Arbitration clause or the
dispute between the parties is not related to the partnership business. Therefore, both the conditions are
satisfied and the matter has to be settled by the Arbitrator.
 The defendant claiming to be Proprietor by itself is not sufficient to take the dispute outside the agreement
between the parties as the petitioner himself has approached the court on the partnership agreement. He
cannot say that he is not having any dispute as per the partnership agreement.
 Section 5 of the 1996 Act says that, there is complete exclusion of judicial authority except as provided in the
Act. When the petitioner admits the execution of the partnership deed and the existence of an arbitration
clause and the respondent points out that the matter has to be left for arbitration in view of the existence of
such a clause, the court has to refer the parties to an arbitration. Since it is a mandatory provision in the Act,
the court has no jurisdiction to deal with the matter thereafter. This aspect has been considered by this Court
in Asokan v. Jayan (1998 (1) KLT 430 and by the Supreme Court in Kalpana Kothari v. Sudha Yadav and Ors.
 In Kalpana Kothari's case the Supreme Court has stated that Section 8 of the 1996 mandates that the
judicial authority before which an action has been brought in respect of a matter which is the subject matter
of an arbitration agreement, shall refer the parties to arbitration if a party to such an agreement applies not
later than submitting his first statement. The provisions of the 1996 Act do not envisage the specific
obtaining of any stay as under the 1940 Act.
 In P. Anand Gajapathi Raju and Ors. v. P.V.G. Raju and Ors. the Supreme Court has even stated that a
reference of the dispute under Section 8 can be made even after the submission of the first statement, if the
party which instituted civil suit did not object.
 Under Section 16 of the Arbitration and Conciliation Act 1996 the Arbitral Tribunal has got the jurisdiction
to rule on its own jurisdiction including ruling on any objections with respect to the existence or validity of
the arbitration agreement and a party aggrieved by such an arbitral award may make an application for
setting aside such an arbitral award in accordance with Section 34.
 There is difference between the 1940 Act and the present Act. Under the old Act the Arbitrator had no power
to decide upon the validity of the contract. Such disputes were to be decided by the court and not by the
Arbitrator. But under the new Act the Tribunal can decide its own jurisdiction. In this case the plaintiff has
admitted the existence of the partnership and has filed the suit on that basis. The agreement contained the
arbitration clause. The defendants have invoked the arbitration clause and requested to refer the parties to
arbitration. Therefore on the admission of the plaintiff with regard to the existence of arbitration clause the
civil court lacks jurisdiction to decide the dispute. The further dispute as to whether the parties have acted
upon the agreement etc are for the Arbitrator to decide.
 The only other contention put forward by the counsel for the petitioner is that the Arbitrator has no power to
grant reliefs prayed for in the suit by the petitioner. That contention also is without any force as Section 17 of
the 1996 Act gives the Arbitral Tribunal power to order a party to take interim measure of protection as the
arbitral tribunal may consider necessary in respect of the subject matter of the dispute.
 Section 9 of the 1996 Act also gives powers to the court to pass orders for appointment of a guardian, for
interim measure of protection, the preservation of interim custody or sale of any goods which are the subject
matter of the arbitration agreement, secure the amount in dispute in the arbitration, for detention, preservation
or inspection of any property, interim injunction or the appointment of a receiver and such other interim
measures. Section 2(e) of the Act defines the court as the principal Civil Court of original jurisdiction in a
district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to
decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a
suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small
Causes. It is therefore clear that the court before which the present suit is filed being a Munsiff Court,
Ernakulam is not a Court under Section 9 which has no jurisdiction to pass orders.
 The Petitioner admitted the existence of partnership agreement and the agreement contained Arbitration clause.
Hence, the Munsiff court of Ernakulum lacks the jurisdiction to decide the dispute on admission of plaintiff of
excistence of Arbitration clause.
 The Petition was dismissed.
MENTIONS
SIMILAR JUDGEMENTS

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 Booz Allen and Hamilton Inc. Vs. SBI Home Finance limited and Others
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 N Radhakrishnan Vs. Maestro Engineers and Others
 Akshay Kapur & Ors Vs. Rishav apur & Ors.
CONCLUSION

 There is a difference between the 1940 Act and the present Act. Under the old
Act the Arbitrator had no power to decide upon the validity of the Contract. Such
disputes were to be decided by the court and not by the Arbitrator. But ur the new
Act, the Tribunal can decide its own Jurisdiction
 The Arbitration and Conciliation Act, 1996 has provided wide range of Powers
and Functions to the Arbitration Tribunal under the Act excluding Judicial
Authority from most of the spheres while passing an Arbitral award.
 Parties should rely on Alternative Dispute Resolutions like Arbitration for
deciding the disputes among and reduce the burden on main stream Judicary.