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Section 10 of the Arbitration Act

No legal bar to initiate suit before Civil Court in case of failed settlement

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16th-Nov-2019       
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High Court Division :
(Civil Revisional Jurisdiction)
SM Emdadul Hoque J
Mohi Uddin Shamim J
Cityscape Planners Ltd ......Defendant-Petitioner
vs
Kari Abul Kashem.........Plaintiff-Opposite-Party
Judgment
April 28th, 2019
Arbitration Act (1 of 200l)
Section 10(1)(3)
There is no legal bar to initiate a suit before the civil Court if 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 to arbitration, any party to such legal proceedings may, at any time before filing of written statement, apply to the Court before which the proceedings are pending to refer the matter to arbitration.............(16)
Ismat Zerin Khan vs The World Bank, 11 MLR (AD) 58 = 58 DLR (AD) 1 ref.
Md Zakir Hossain, Advocate-For the Petitioner.
Abdul Momen Chowdhury Rifat. Advocate with Enamul Hossain Chowdhury. Md Shafikul Alam-For Opposite-Party No. 1.
Judgment
Mohi Uddin Shamim J : This Rule was issued, at the instances of defendant-petitioner, calling upon the opposite-party No. 1 in the  following terms:-
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2. The facts necessary for disposal of the instant Rule are that opposite-party No.1, as plaintiff, filed the original suit for cancellation of Deed of Contract and for compensation alleging, inter-alia, that Mr Abul Kashem Mohammad Wahidul Anwar got the allotment of the land and after his death, Farzana Begum and others, being his legal heirs, got their names mutated in the office of Housing and Public Works and they also got permission to sell the property and accordingly, they sold the land to the plaintiff vide registered deed No. 366 dated 18-3-2001 and delivered possession thereof and the plaintiff has been owning and possessing the same. A contract was signed on 13-12-2010 with defendant No.1 and he executed a registered Deed of Power of Attorney for development of the land with some terms and conditions for construction of 6-storied building and got the plan approved. Defendant No. 1 got delivery of possession of the land on 13-1-2011 and the plaintiff has been giving proper assistance to the defendant, but the defendant had been wasting time and failed to complete the construction works within the stipulated time for which the plaintiff persuaded repeatedly. Thereafter, the plaintiff served a notice upon the defendant on 22-10-2014 and also tried to settle the matter by the local elites. The defendant gave reply to the said legal notice stating that he would complete the construction works as per the Deed of Contract and the Deed of Power of Attorney and since the plaintiff was residing abroad, he trusted upon him but the defendant could not complete the construction works and deliver 50% flats. Moreover, the defendant committed breach of terms of the contract and was going slowly to complete the construction works and they are also using low quality construction materials causing serious damage and they also did not pay various utility bills. Lastly, the plaintiff served a notice upon the defendant on 3-9-2015 requesting him to form an Arbitration Council but the defendant did not take any step and at last, the plaintiff cancelled the Deed of Power of Attorney and the plaintiff has been compelled to file this suit for declaration that the Deed of Contract being deed No. 5179 is not operative and the plaintiff also claimed Taka 90,000 for each month against the monthly house rent.
3. Thereafter, the defendant-petitioner entered appearance in the suit and, on 6-6-2016, filed an application under Order VII, rule II of the Code of Civil Procedure (shortly, the Code) before the Trial Court for rejection of plaint of the suit. The plaintiff-opposite-party contested the said application by filling a written objection. After hearing both the parties, the learned Judge of the Trial Court rejected the application for rejection of the plaint by the impugned order dated 19-2-2018.
4. Being aggrieved by the impugned order, the defendant-petitioner has preferred the instant revision and obtained the Rule.
5. After filing of the application under Order VII, rule II of the Code by defendant No.1 for rejection of plaint of the suit, defendant No.1, on 21-6-2017, filed written statement in the suit denying all material allegations contending, inter-alia, that the suit is false, there is no cause of action and the plaint is liable to be rejected. The specific case of the defendant, in short, is that the defendant-Company is registered. under the Companies Act and defendant No. 2 is the Chairman of the Company. The Company is involved in the business of constructions and it has a good reputation in this field and the plaintiff entered into a contract with it by executing a Deed of Agreement and an irrevocable Power of Attorney with specific terms and conditions that after obtaining plan from Chittagong Development Authority (CDA) and after getting delivery of possession of the land, the construction work will be completed within 36 months and with further a grace period of 6 (six) months if requires, the Chittagong Development Authority (CDA) gave approval to the project and the defendant duly started construction work and in Clause 24 of the Contract, there is a specific term for settlement of the dispute through arbitration and also mentioned in clause 28 of the Contract regarding arbitration and it has been clearly mentioned that the decision of the umpire shall be final. The defendant invested huge amount of money and the Deed of Power of Attorney may not be cancelled by the desire of any party and since the Power of Attorney is irrevocable without amicable settlement, the Power of Attorney cannot be cancelled. The defendant already constructed 7-storied apartment building by spending an amount of Taka 3,50,000 and only the work of making doors, windows and furnishing tiles are going to be completed and the purchaser of the flats are requesting to hand over the flats to them and at this stage, the plaintiff has no right to cancel the Deed of Power of Attorney and the suit is liable to be dismissed.
6. Mr Md Zakir Hossain, the learned Advocate appearing on behalf of the defendant petitioner, takes us to the revisional application, the impugned order and the connected materials on record and submits that the suit is barred by the provision of Section 7 of the Arbitration Act, 2001 (shortly, the Act). Therefore, the learned Joint District Judge has no jurisdiction to hear the matter and, as such, the petitioner rightly filed the application for rejection of the plaint. But the learned Judge of the Trial Court wrongly passed the impugned order rejecting the application which resulted error of law occasioning failure of justice. He next submits that at the initial stage of the suit, the application for rejection of the plamt had been filed because of that if the suit is proceeded with for taking evidence to decide the question of maintainability of the suit, the valuable time of the Court will be wasted and the defendant will be harassed unnecessarily. But the learned Judge of the Trial Court, without considering the above aspect of the case, whimsically passed the impugned order which resulted error of law occasioning failure of justice. He lastly submits that in the impugned order, the learned Judge of the Trial Court wrongly observed that there is no ingredient of Order VII, rule 11 of the Code of Civil Procedure in the application for rejection of the plaint without considering the provision of Section 7 of the Arbitration Act, which debars the Trial Code to proceed with the suit and thus, he committed error of law occasioning failure of justice.
7. Mr Abdul Momen Chowdhury Rifat, the learned Advocate for opposite-party No.1 appearing with Mr Enamul Hossain Chowdhury and Mr Md Shafikul Alam, takes us. through the counter-affidavit, the other connected materials on record and contends thereon that plaintiff-opposite-party No.1 being the absolute owner and possessor of the suit land, entered into a contract with the defendant-petitioner, a developer Company, to develop the suit land. For the above purpose, subsequently, on 13-12-2010, registered a deed of contract and a power of attorney bearing Nos. 5179 and 5180 respectively between them in the concerned Sub-Registry Office stipulating some terms and conditions. He next contends that the defendant-petitioner failed to complete the construction works within the stipulated time as stipulated in Clauses 9 and 10 of the contract. Therefore, the plaintiff-opposite-party incurred huge loss. He further contends that in such a position, on 22-10-2014, the plaintiff served a legal notice upon the defendant. To which, the defendant replied assuring the plaintiff that he would complete the works as per the deed of contract, but, ultimately, he did not do so. He also contends that on 3-9-2015, the plaintiff again served a legal notice upon the defendant asking him to complete the construction works and to solve the dispute within 30 days by way of arbitration as per deed of contract, but the defendant did not pay heed to it. As a result, having no other alternative, on 18-10-2015, the plaintiff had cancelled the power of attorney vide cancellation deed No. 3348 and filed the instant suit. He lastly contends that the defendant appeared in the suit and at the first instance, on 6-6-2016, he filed an application of rejection of the plaint of the suit, but the said application was rejected by the impugned order. Thereafter, on 21-6-2017, the defendant filed written statement in the suit. But, in the eye of law, there is no scope to file an application for rejection of the plaint before filing of written statement in the suit. Therefore, the learned Judge of the Trial Court has rightly rejected the application under Order VII, Rule-11 of the Code. In this connection, the learned Advocate for the plaintiff-opposite-party has referred to a decision in the case of Ismat Zerin Khan vs World Bank, reported in 11 MLR  (AD) 58 = 58 DLR (AD) 1.     
8. In the above claims and counter-claims of the parties, the sole question to be decided in the instant Rule whether the application under Order VII, rule 11 of the Code of Civil Procedure had been filed lawfully.
9. We have heard Mr Md Zakir Hossain, the learned Advocate for the petitioner and Mr Abdul Momen Chowdhury Rifat, the learned Advocate for opposite-party No.1. We have also perused the revisional application, the annenxres thereto, the counter-affidavit filed by opposite-party No. 1 and the other connected materials on record.
10. It is palpably clear from the counter affidavit filed by the plaintiff-opposite-party that the defendant, immediately after appearing in the suit, filed an application on 6-6-2016 under Order VII, rule 11 of the Code for rejection of plaint of the suit, which has been rejected by the learned Judge of the Trial Court by the impugned order. It is also clear from the submissions of the learned Advocate for the defendant-petitioner and from the written-statement (Annexure-B to the revisional application) that the defendant, on 21-6-2017, filed written statement in the suit i.e. the defendant filed the application for rejection of the plaint prior to 1iling of the written statement in the suit. But the defendant is not legally entitled to file an application under Order VII, rule 11 of the Code either on the question of law or on fact before filing of the written statement in the suit, as the preliminary issue as to the maintainability of the suit cannot be decided before filing of written statement and that the maintainability of the suit can be determined at the time of trial. Therefore, the plaint cannot be rejected in limine under Order VII, rule 11 of the Code. In this connection, reference may be made to the decision in the case of Ismat Zerin Khan vs The World Bank, reported in 11 MLR (AD) 58 = 58 DLR (AD) I, wherein, the principle laid down by their lordships of the Appellate Division that rejection of plaint under Order VII, rule 11 of the Code of Civil Procedure on the ground of maintainability of the suit is not maintainable before filing of written statement. Further, Preliminary issue as to the maintain ability of the suit cannot be decided before filing of written statement.
11. Further, the learned Advocate for the defendant-petitioner emphatically and repeatedly argued that the suit is hit by the provision of Section 7 of the Arbitration Act 2001; that in view of the above provision of the Act, the Civil Court is debarred to proceed with the suit and that the defendant rightly filed the application for rejection of plaint, but the learned Judge of the Trial Court wrongly passed the impugned order rejecting the application which resulted error of law occasioning failure of justice.
12. On the face of the above submissions of the learned Advocate, let us study the provision of Section 7 of the Arbitration Act, 2001, which reads as follows:
"Section 7. - Jurisdiction of Court in respect of matters covered by arbitration agreement:-Notwithstanding anything contained in any other law for the time being in force, where any of the parties to the arbitration agreement files a legal proceedings in a Court against the other party, no judicial authority shall hear any legal proceedings except in so far as provided by this Act."
13. We have carefully studied the above provision of section 7 of the Act. In this regard, it is clear from the counter-affidavit filed by the plaintiff-opposite-party that the plaintiff firstly issued a legal notice upon the defendant on 22-10-2014 requesting him to complete the construction works and the defendant assured the plaintiff that he would complete the construction works as per terms and conditions of the Deed of Contract, but the defendant allegedly did not do so. In such a situation, the plaintiff-opposite-party again on 3-9-2015 issued another legal notice upon the defendant-petitioner asking him to complete the construction works and also to solve the disputes between them within thirty days by way of arbitration as per terms of the Deed of Contract in compliance with the provisions of sub-sections (1), (2) and (3) of Section 36 of the  wi‡qj G‡÷U Dbœqb I e¨e¯'vcbv AvBb, 2010. But the defendant-petitioner did not pay any heed to it. Therefore, the plaintiff having no other alternative cancelled the Power of Attorney and filed the instant suit seeking legal remedy. The above assertions as made in the counter-affidavit by the plaintiff-opposite-party have not been denied by the defendant-petitioner by filing any affidavit-in-reply. Therefore, we have no scope to overlook the same and, as such, we are of the view that there is no legal bar to file and proceed with the instant suit under the provisions of the Code of Civil Procedure.
14. Furthermore, we are of the view that in view of the provisions of Section 10 of the Arbitration Act, 2001, there is no legal bar to proceed with the matter by initiation of a civil suit, if in the meantime, the parties have sought for remedy by forming an Arbitration Council. But, in the instant case, no Arbitration Council has been formed and arbitration has not been commenced due to the silence of the defendant, although the plaintiff requested the defendant by serving legal notice upon him to solve the dispute through arbitration as per terms of the Deed of Contract. In such view of the matter, it is better to study the provisions of Section 10 of the Act.
15. Section 10 of the Arbitration Act, 2001 reads as under:-
"Section 10. - Arbitrability of the dispute- (1) 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 to arbitration, any party to such legal proceedings may, at any time before filing a written statement, apply to the Court before which the proceedings are pending to refer the matter to arbitration.
(2) Thereupon, the Court shall, if it is satisfied that an arbitration agreement exists, refer the parties to arbitration and stay the proceedings, unless the Court finds that the arbitration agreement is void, inoperative or is incapable of determination by arbitration.
(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."
16. It is clear from the provisions of sub-sections (l) and (3) of Section 10 of the Arbitration Act that there is no legal bar to initiate a suit before the Civil Court if 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 to arbitration, any party to such legal proceedings may, at any time before filing of written statement, apply to the Court before which the proceedings are pending to refer the matter to arbitration. But, we have already mentioned that here in the instant case, the matter has been referred to arbitration.
17. In view of the discussions made in the foregoing paragraphs, vis-a-vis the law, we are of the view that the application under Order VII, rule 11 of the Code of Civil Procedure has not been filed lawfully and the same has rightly been rejected by the learned Judge of the Trial Court.
18. In such view of the matter, the Rule has got no merit.
19.    Accordingly, the Rule fails.
20.    In the result, the Rule is discharged.
21.    The order of stay granted earlier by this Court stands vacated.
22. Since the suit is an old one of the year 2015, the learned Judge of the Trial Court is directed to dispose of the sit expeditiously preferably within 6 months from the date of receiving of this judgment.

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