M/S. SUNDARAM FINANCE LIMITED AND ANOTHERversusT. THANKAM

                        [2015] 2 S.C.R. 228


A     M/S. SUNDARAM FINANCE LIMITED AND ANOTHER
                              v.
                         T THANKAM
               (Civil Appeal No. 2079 of 2015)
                     FEBRUARY 20, 2015
B
            [M.Y. EQBAL AND KURIAN JOSEPH, JJ.]

       Arbitration and Conciliation Act, 1996 - s. 8 -
  Application under - Maintainability of - Pending suit for
  injunction, application uls. 8 seeking the direction of the
C case to the arbitral tribunal on the ground that in view of
  the arbitration agreement, the suit was not maintainable -
  Courts below rejected the plea - On appeal, held: If a party
  approaches a civil court ignoring the arbitration clause and
  another party moves the court for referring the matter for
D arbitration, it is obligatory for the court to refer the parties
  for arbitration - Trial Court directed to pass fresh orders
  on the application.

     Maxim - 'generalia specialibus non derogant' -
E Applicability of.
        Disposing of the appeal, the Court

       HELD: 1. Once there is an agreement between the
  parties to refer the disputes or differences arising out of
F the agreement to arbitration, and in case either party,
  ignoring the terms of the agreement, approaches the civil
  court and the other party, in terms of the Section 8 of the
  Arbitration Act, moves the court for referring the parties
  to arbitration before the first statement on the substance
G ofthe dispute is filed, in view of the peremptory language
  of Section 8 of the Arbitration Act, it is obligatory for the
  court to refer the parties to arbitration in terms of the
  aHreement. [Para 10] [232-G-H; 233-A]

H                                228
  MIS. SUNDARAM FINANCE LIMITED v. T. THAN KAM         229



     2. Once an application in due compliance of A
Section 8 of the Arbitration Act is filed, the approach of
the civil court should be not to see whether the court
has jurisdiction. Once it is brought to the notice of the
court that its jurisdiction has been taken away in terms
of the procedure prescribed under a special statue, the B
civil court should first see w~ether there is ouster of
jurisdiction in terms or ce>mpliance of the procedure
under the special statute. The general law should yield
to the special law - generalia specialibus non derogant.
The trial court is directed to pass fresh orders on the c
application filed by the appellant-defendant u/s 8 of the
Arbitration Act. [Paras 15 and 16] [235-C-D, F-G]
     P Anand Gajapathi Raju and Ors. v. P VG. Raju (Dead)
and Ors. 2000 (2) SCR 684 = 2000 (4) SCC 539; Hindustan
Petroleum Corporation Limited v. Pinkcity Midway D
Petroleums2009 (14) SCR 815 = 2003 (6) SCC 503; Branch
Manager, Magma Leasing and Finance Limited and Anr. v.
Potluri Madhvilata and Anr. (2009) 10 SCC 103; Sukanya
Holdings (P) Limited v. Jayesh Pandya and Anr. 2003
(3) SCR 558 = (2003) 5 SCC 531 - relied on.               E
    Orix Auto Finance (India) Limited v. Jagmander Singh
                           =
and Anr. 2006 (2) SCR 169 (2006) 2 SCC 598-referred
to.
                 Case Law Reference                        F

    2000 (2) SCR 684           relied on     para 10
    2003 (6) sec 503           relied on     para 11
    2009 (14) SCR 815          relied on     para 12       G
    2003 (3) SCR 558           relied on     para 13
    2006 (2) SCR 169           referred to   para 14
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
2079 of 2015                                               H
230          SUPREME COURT REPORTS                      [2015] 2 S.C.R.



A         From the Judgment and Order dated 17.03.2014 of the
      High Court of Kerala at Ernakulam in Writ Petition (C) No.
      21076of2010

          Dhruv Mehta, Balaji Srinivasan, J. Thilak, Mayank
      Kshirsagar, Anupam Dhruve, Vaishnavi Subrahmanya, Srishti
8
      Govil, Vaishali DixitfortheAppellants.

          The Judgment of the Court was delivered by

           KURIAN, J. 1. Leave granted.
c          2. Once an_ application is duly filed in terms of Section 8
      of The Arbitration and Conciliation Act, 1996 (hereinafter
      referred to as 'Arbitration Act') before the civil court, what
      should be the approach of the court, is the short question arising
      for consideration in this case.
D
           3. In a suit for injunction filed by the respondent, the prayer
      made was to restrain the first and second defendant institutions
      and their men from illegally taking away from the possession
      of plaintiff or her employee, or interfering with the use and
E     enjoyment of ambassador or causing damage to the car
      bearing registration number KL-11-AA-1473 in the ownership
      and possession of the plaintiff by way of a decree of injunction.
      The car was purchased on loan granted by the appellant.

       4. Duly complying with the procedure under Section 8 of
 Fthe Arbitration Act, the appellant filed an application bringing
  to the notice of the trial court that in view of the agreement for
  arbitration between the parties regarding resolution of the
  disputes, the court did not have jurisdiction to try the case and
  the parties were to be directed to the process of arbitration in
G terms of the agreement. The trial court, by order dated
  21.06.2010, declined the relief holding that:

            " ... Even though clause 22 of the Ext.A 1 agreement
            provides that of disputes should be referred to
H           arbitration this will not prevent the plaintiff from
  MIS. SUNDARAM FINANCE LIMITED v. T. THAN KAM                   231
                  [KURIAN, J.]

    approaching this court especially when one of the             A
    parties to the agreement are trying to commit an
    act opposed to public policy and per se illegal. The
    arbitration clause in the agreement cannot be put
    forward as a shield when one of the parties to the
    agreement commit an act opposed to public policy.              B
    In such circumstances the plaintiff can seek
    protection under the common civil law. In this matter
    what the respondent alleged that the petitioners are
    trying to take forcible possession of the vehicle
    which is being run by her. Her relief sought for in            C
    the plaint is only against the illegal acts of the
    defendants. The apprehended acts of the plaintiff
    are against the public policy and per se illegal and
     hence this suit is maintainable .... "
                                                                   D
     5. The appellant pursued the matter before the High
Court. By the impugned order dated 17.03.2014, it was held
as follows:

     " ... Going by Section 8 of the Arbitration and
                                                                   E
     Conciliation Act, I am of the opinion that mere
     inclusion of an arbitration clause in the agreement
     does not bar or cause to oust the jurisdiction of the
     civil court provided under Section 9 of the Code of
     Civil Procedure. The above view is further
     supported by Section 5 of the Arbitration and                 F
     Conciliation Act, which says that "in the matters
     governed by first part of the Arbitration and
     Conciliation Act, no judicial authority shall intervene
     except where so provided in the first part". It mean~
     that jurisdiction of the Civil Court is not completely        G
     ousted by Section 8 of the Arbitration and
     Conciliation Act. Section 5 of the Arbitration and
     Conciliation Act does not bar the exercise of
      general power of the civil court to grant interim relief
      including specific injunctive relief under Order             H
232         SUPREME COURT REPORTS                    [2015) 2 S.C.R.



A          XXXIX of the CPC and the Specific Relif Act. ... "

          6. Aggrieved, the appeal.

         7. Heard the learned counsel appearing for the appellants.
      None appeared for the respondent.
B
          8. Two clauses of Annexure-P1-Loan Agreement between
      the parties, executed on 29.06.1997, are relevant for the
      consideration of the disputes. Clause 14.6 reads as follows:

          "14.6. Notwithstanding anything contained in this
c         Agreement, the Lender shall be entitled to reposess
          the hypothecated Asset, whether the entire Loan
          Amount has been recalled or not, whenever, in the
          absolute discretion of the Lender, there is likelihood
          of the dues of the Lender not being paid by the
D
          borrower and or/the Asset is likely to be transferred
          by the Borrower to defeat the security and or payment
          of the due any units of the Lender."

          9. Clause 22(a), as to the extent relevant, reads as follows:
E
          "22. (a) All disputes, differences of any claim arising
          out of this Agreement whether during its subsistence
          or thereafter shall be settled by arbitration in
          accordance with the provisions of the Arbitration and
F         Conciliation Act, 1996, or any statutory amendments
          thereof and shall be referred to the sole Arbitration of
          an Arbitrator nominated by the Managing Director/
          Joint Managing Director of the Lender. The award
          given by such an Arbitrator shall be final and binding
          or.i the Borrower to the agreement."
G
        10. Once there is an agreement between the parties to
  refer the disputes or differences arising out of the agreement
  to arbitration, and in case either party, ignoring the terms of
  the agreement, approaches the civil court and the other party,
H in terms of the Section 8 of the Arbitration Act, moves the court
    M/S. SUNDARAM FINANCE LIMITED v. T. THAN KAM                       233
                    [KURIAN, J.]

for referring the parties to arbitration before the first statement A
on the substance of the dispute is filed, in view of the
peremptory language of Section 8 of the Arbitration Act, it is
obligatory for the court to refer the parties to arbitration in terms
of the agreement, as held by this Court in P. Anand Gajapathi
Raju and others v. P.V.G. Raju (Dead) and others 1.                   B
     11. The position was further explained in Hindustan
Petroleum Corporation Limited v. Pinkcity Midway
Petroleums 2 . To quote:
     "14. This Court in the case of P Anand Gajapathi Raju              C
     v. P VG Raju has held that the language of Section 8 is
     peremptory in nature. Therefore, in cases where there is
     an arbitration clause in the agreement, it is obligatory for
     the court to refer the parties to arbitration in terms of their
     arbitration agreement and nothing remains to be decided             o
     in the original action after such an application is made
     except to refer the dispute to an arbitrator. Therefore, it
     is clear that if, as contended by a party in an agreement
     between the parties before the civil court, there is a clause
     for arbitration, it is mandatory for the civil court to refer       E
     the dispute to an arbitrator. In the instant case the
     existence .of an arbitral clause in the Agreement is
      accepted by both the parties as also by the courts below
     but the applicability thereof is disputed by the respondent
      and the said dispute is accepted by the courts below.              F
      Be that as it may, at the cost of repetition, we may again
      state that the existence of the arbitration clause is
      admitted. If that be so, in view of the mandatory language
      of Section 8 of the Act, the courts below ought to have
      referred the dispute to arbitration."                              G
    12. In Branch Manager, Magma Leasing and Finance
Limited and another v. Potluri Madhvilata and another3,

1
  (2000) 4 sec 539
2
  (2003J 6 sec 503
, (2009) 1o sec 103                                                      H
234          SUPREME COURT REPORTS                       [2015] 2 S.C.R.


A the position has been restated holding that no option is left to
  the court, once the pre-requisite conditions of Section 8 are
  fully satisfied.
           13. The attempt of the trial court and the approach made
      by the high court in bifurcating the cause of action, is fallacious.
8     It would only lead to delaying and complicating the process.
      The said issue is also no more res integra. In Sukanya
      Holdings (P) Limited v. Jayesh Pandya and another4 at
      paragraphs-16 and 17, it was held as follows:
c         "16. The next question which requires consideration is
          - even if there is no provision for partly referring the
          dispute to arbitration, whether such a course is possible
          under Section 8 oftheAct. In our view, it would be difficult
          to give an interpretation to Section 8 under which
D         bifurcation of the cause of action, that is to say, the
          subject-matter of the suit or in some cases bifurcation
          of the suit between parties who are parties to the
          arbitration agreement and others is possible. This would
          be laying down a totally new procedure not contemplated
E         under the Act. If bifurcation of the subject-matter of a suit
          was contemplated, the legislature would have used
          appropriate language to permit such a course. Since
          there is no such indication in the language, it follows that
          bifurcation of the subject-matter of an action brought
          before a judicial authority is not allowed.
F
          "17. Secondly, such bifurcation of suit in two parts, one
          to be decided bytheArbitral Tribunal and the other to
          be decided by the civil court would inevitably delay the
          proceedings. The whole purpose of speedy disposal of
G         dispute and decreasing the cost of litigation would be
          frustrated by such procedure. It would also increase the
          cost of litigation and harassment to the parties and on
          occasions there is possibility of conflicting judgments
          and orders by two different forums."
H • (2003) s sec 531
   M/S. SUNDARAM FINANCE LIMITED v. T. THANKAM                    235
                   [KURIAN, J.]

     14. In Orix Auto Finance (India) Limited v. Jagmander A
Singh and another5, referring to public policy, this Court has
taken the view that if agreements permit the financer to take
possession of the finances vehicles, there is no legal
impediment on such possession being taken, unless the
contract is held to be unconscionable or opposed to public B
policy".
      15. Once an application in due compliance of Section 8
of the Arbitration Act is filed, the approach of the civil court
should be not to see whether the court has jurisdiction. It should C
be to see whether its jurisdiction has been ousted. There is a
lot of difference between the two approaches. Once it is brought
to the notice of the court that its jurisdiction has been taken
away in terms of the procedure prescribed under a special
statue, the civil court should first see whether there is ouster of 0
jurisdiction in terms or compliance of the procedure under the
special statute. The general law should yield to the special law
- generalia specialibus non derogant. In such a situation, the
approach shall not be to see whether there is still jurisdiction
in the civil court under the general law. Such approaches would E
only delay the resolution of disputes and complicate the
 redressal of grievance and of course unnecessarily increase
the pendency in the court.
      16. The order dated 21.06.2010 passed by the trial court
and order dated 17.03.2014 passed by the High Court, are              F
set aside. The trial court is directed to pass fresh orders on
the application filed by the appellant-defendant under Section
8 of the Arbitration Act. The needful shall be done within a period
of two months from the date of receipt of this order.
                                                                      G
    17. The appeal is disposed of as above. There shall be
no order as to costs.

Kalpana K. Tripathy                             Appeal disposed of.

' (2006J 2   sec 598                                                  H