Recent Judgments

Shin-Etsu Chemical Co.Ltd. v. Vindhya Telelinks Ltd. & Ors
CIVIL APPEAL NO. 4998 of 2007 decided by R. V. Raveendran & Markandey Katju, JJ. on March 27, 2009

• Facts: Vindhya Telelinks Ltd. (Vindhya) and Optic Fibre Goa Ltd (Optic) on the one hand and Shin-Etsu (Shin) one the other entered into a long sale and purchase agreement. Vindhya and Optic filed a civil suit before the Civil Judge, Class-I, Rewa, Madhya Pradesh for a declaration that the said Agreement was null and void and also for the relief of permanent injunction restraining Shin from from relying upon/invoking/giving effect to any term of the said agreement. Birla Ericsson Optical Ltd. (Birla) and Optic on the one hand and Shin-Etsu (Shin) one the other entered into a long sale and purchase agreement. Birla and and Optic filed a civil suit for similar reliefs. Shin filed an application before the civil court for dismissal of the said civil suit under Order VII Rule 11 of the Code of Civil Procedure and Sections 5 & 8 of the Arbitration and Conciliation Act, 1996 (Act). The said provision reads as follows:

• 11. Rejection of plaint— The plaint shall be rejected in the following cases:—

(a) where it does not disclose a cause of action;
(b) where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so;
(c) where the relief claimed is properly valued, but the plaint is returned upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so;
(d) where the suit appears from the statement in the plaint to be barred by any law :
Provided that the time fixed by the Court for the correction of the valuation or supplying of the requisite stamp-paper shall not be extended unless the Court, for reasons to be recorded, is satisfied that the plaintiff was prevented by any cause of an exceptional nature form correcting the valuation or supplying the requisite stamp-paper , as the case may be, within the time fixed by the Court and that refusal to extend such time would cause grave injustice to the plaintiff.

• 5. Extent of judicial intervention. -Notwithstanding anything contained in any other law for the time being in force, in matter governed by this Part, no judicial authority shall intervene except where so provided in this Part.
  

• 8. 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 so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(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.

• The Civil Judge, Class-I, Rewa, Madhya Pradesh (trial court) dismissed the Civil Suit. A revision petition filed before the Madhya Pradesh High Court also met the same fate. A Civil Appeal was then filed before the Supreme Court, which, on 7.12.2005 set aside the decisions of the trial court and of the MPHC, and ordered the trial court to consider the “matters afresh treating the applications filed by the appellant herein (under Order 7 Rule 11 CPC read with sections 5 and 8 of the Act) as applications under Section 45 of the Act and dispose them in terms of the decision in Aksh Optifibre Ltd.” Section 45 of the Act reads:

45. Power of judicial authority to refer parties to arbitration.
Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908) a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

• Re-consideration by the Trial Court and thereafter: On remand, the Trial Court held that the application filed on the basis of S 45 was inoperative, the parties cannot be referred to arbitration “and the matter should be proceeded with and decided on merits by the court.” On appeal, the IV Additional District Judge, Rewa, allowed the appeals, and remitted the matters to the Trial Court with a direction to consider the applications of the appellant under section 45 of the Act, in accordance with the procedure and principles laid down in Para 111 of the decision in Shin Etsu. Against the order of the IV Additional District Judge, Rewa, Shin filed an appeal under Article 136 of the Constitution before the Supreme Court contending that: the IV Additional District Judge, Rewa should not have remanded the matter back to the trial court as it had not found that the arbitration agreement was null, void, inoperative or incapable of being performed. Rather, it should have merely allowed the appeal. It was contended by the Respondents that a petition under Article 136 was not, and the High Court was the appropriate forum to seek remedy. Against, this Shin contends that the matter has been pending for two years and the matter should not be sent back to the High Court.

Decision of the Supreme Court:

• ·The SC framed two issues:

Whether the appellants can directly approach this Court under Article 136 of the Constitution, against the orders of the District Court, without approaching the High Court?
Even if the answer to the first question is in the negative, whether leave having been granted by this Court, these appeals should be considered and decided on merits?

The SC Held:

• Section 50 of the Act which reads as follows saves the right to appeal to the Supreme Court, from the bar against second appeals.

50. Appealable orders : 1) An appeal shall lie from the order refusing to--
(a) refer the parties to arbitration under section 45;
(b) enforce a foreign award under section 48,
to the Court authorized by law to hear appeals from such order.
(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

• The SC has, under Article 136, the power to grant leave to appeal in suitable cases. This power, according to the court, but had to be used sparingly.

• An appeal by special leave to Supreme Court cannot therefore be considered as an appeal as of right or as an appeal in pursuance of a right to appeal to the Supreme Court.

• An appeal cannot lie from the court of first appeal to the Supreme Court (under Article 136) as mentioned in Section 50 as efficacious alternative remedy of revision to the High Court is available under Section 115 of the Code of Civil Procedure.

Section 115 provides:
115. Revision—
(1) The High Court may call for the record of an case which has been decided by any Court subordinate to such High Court and in which no appeal lies thereto, and if such subordinate Court appears—
(a) to have exercised a jurisdiction not vested in it by law, or
(b) to have failed to exercise a jurisdiction so vested, or
(c) to have acted in the exercise of its jurisdiction illegally or with material irregularity,
the High Court may make such order in the case as it thinks fit :
Provided that the High Court shall no, under this section, vary or reverse any order made, or any order deciding an issue, in the course of a suit or other proceeding, except where—
(a) the order, if it had been made in favour of the party applying for revision, would have finally disposed of the suit or other proceedings, or
(b) the order, if allowed to stand, would occasion a failure of justice or cause irreparable injury to the party against whom it was made.
(2) The High Court shall not, under this section, vary or reverse any decree or order against which an appeal lies either to the High Court or to any Court subordinate thereto.
Explanation.—In this section, the expression "any case which has been decided" includes any order made, or any order deciding an issue in the course of a suit or other proceeding.

• ·In Punjab Agro Industries Corporation Ltd. v Kewal Singh Dhillon – 2008 (11) SCALE 616, it was held by the Supreme Court that Article 136 is not intended to permit direct access to this Court where other equally efficacious remedy is available and the question involved is not of any public importance; and that this Court will not ordinarily exercise its jurisdiction under Article 136, unless the appellant has exhausted all other remedies open to him.

• Once leave for appeal is granted, the court continues to have discretionary power, including the power to “refuse to go into merits, or even if it goes into merits, to merely declare the law and refuse to interfere if interests of justice and/or facts of the case do not call for interference”. The extent of such discretionary power extends to “even revoke the leave already granted.”

• In spite of the fact that the matter has been pending before this Court for more than two years and relegation to alternative remedy will further delay the consideration of the issue. Supreme Court has been consistently following the practice of not entertaining appeals directly from the orders of district courts or court subordinate thereto, if an alternative remedy by way of appeal or revision was available before the High Court.

• The Court found no special and exceptional circumstance that warrants direct interference with an order of a district court bypassing the remedy available before the High Court and hence dismissed the appeal.