Page No.# 1/9 GAHC010174602016 2025:GAU-AS:8020 THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) Case No. : CRP/400/2016 M/S COTTON COUNTY RETAIL LTD. FORMERLY KNOWN AS, M/S NAHAR RETAIL LTD., A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING ITS REGD. OFFICE AT THE PREMISES OF NAHAR INDUSTRIAL ENTERPRISES LTD., FOCAL POINT, LUDHIANA-141010, PUNJAB VERSUS SMT. TARA BOTHRA and ANR PROP. M/S TARA ENTERPRISES, MAIN ROAD, DHEKIAJULI, P.O., P.S. and MOUZA- DHEKIAJULI, DIST- SONITPUR, ASSAM 2:UNION BANK OF INDIA BRANCH MANAGER TEZPUR BRANCH A.C. PLAZA 1ST FLOOR MAIN ROAD TEZPUR DIST- SONITPUR ASSA B E F O R E HON’BLE MR. JUSTICE DEVASHIS BARUAH Advocates for the petitioner(s) : Mr. B Kaushik Page No.# 2/9 Advocates for the respondent(s) : Mr. RK Jain Date of hearing & judgment : 16.06.2025 JUDGMENT & ORDER(ORAL) Heard Mr. B Kaushik, the learned counsel appearing on behalf of the petitioner. Mr. RK Jain, the learned counsel who appears on behalf of the respondent. 2. The petitioner herein has invoked the revisional jurisdiction of this Court under Section 115 of the Code of Civil Procedure, 1908 (for short, the Code) challenging the order dated 16.03.2016 passed by the Court of the learned Civil Judge, Sonitpur at Tezpur in Misc.(J).Case No.649/2013 arising out of Title Suit No.30/2012 whereby the application filed under Section 8 of the Arbitration and Conciliation Act. 1996 (for short, ‘the Act of 1996’) was rejected. 3. It is relevant to take note of that the petitioner herein had entered into an agreement with the respondent herein dated 08.09.2009, whereby the respondent herein was appointed as an exclusive dealer/retailer of the petitioner herein for sale of its range of readymade garments sold under the brand name Cotton County in the territory of Main Road, Dhekiajuli, in the Sonitpur District, Assam. The said agreement contained various clauses. Relevant herein to take note of Clauses 8, 9 and 10 which relates to furnishing of an irrevocable bank guarantee of a nationalized bank/reputed private bank by the respondent herein in favour of the petitioner. Clauses 8, 9 and 10 of the said agreement being relevant are reproduced hereinunder: Page No.# 3/9 “8 The buyer will have to furnish an irrevocable bank guarantee of a nationalized bank / reputed private bank as security for a sum equal to the value of the stocks to be kept in the showroom and the credit limit of the buyer will be equal to the amount of the bank guarantee furnished by it. 9. The duration of this agreement will be coterminous with the duration of the bank guarantee. In the event of the failure of the buyer to take steps to renew the bank guarantee one month before its expiry the company shall be entitled to invoke the same. 10. That further the said bank guarantee can be invoked at any time by the company for any violation whatsoever of this agreement. The invocation of the bank guarantee will be wholly without prejudice to the right of the company to terminate this agreement for any violation thereof.” 4. It is further relevant to take note of Clause 13 of the said agreement which is the arbitration clause. Clause 13 of the said agreement being relevant is reproduced hereinunder: “All disputes, difference and claims arising out of and in connection with the agreement shall be resolved by recourse to the provisions of the Arbitration and Conciliation Act, 1996. The venue of the arbitration shall be at Ludhiana.” 5. The records reveal that the agreement dated 08.08.2009 entered into by and between the petitioner and the respondent herein was terminated and thereupon the Bank guarantee so submitted by the respondent herein was invoked by the petitioner. It is under such circumstances, a suit was filed by the respondent herein before the Court of the learned Civil Judge at Sonitpur, Tezpur which was registered and numbered as Title Suit No.30/2012 seeking declaration of right and status of the plaintiff/the respondent herein upon determination of the retail dealership/franchisee w.e.f. the expiry of 15.08.2012 Page No.# 4/9 in terms with Clause 12.18 of the agreement dated 08.08.2009; for mandatory injunction obliging the petitioner herein to purchase the stock of goods kept at the showroom as provided by Clause 12.18 of the agreement and thereupon furnish a true statement of account for the dues for enabling the plaintiff/respondent herein to make further payment upon reconciliation; to restrain and prohibit the defendant No.1/petitioner therein from invoking and enforcing the bank guarantee as sought for by them; to restrain and prohibit the defendant No.2 i.e. the bank from making any payment against the bank guarantee as falsely and unlawful claimed by the petitioner herein and thereupon requiring the defendant No.2 bank to release the plaintiff’s fixed deposit receipts offered as security etc. 6. 6. Pursuant to the filing of the said suit, an application was filed under Section 9 of the Code of Civil Procedure, 1908 (for short, ‘the Code) for rejection of the plaint as the suit was barred under Section 5 and Section 8 of the Act of 1995 on the ground that the agreement entered into by and between the petitioner as well as the respondent dated 08.09.2009 contained an arbitration clause i.e. Clause 13. 7. Objections were filed to the said application by the plaintiff/respondent. The learned Trial Court vide the order dated 16.03.2016 rejected the said application and it is under such circumstances, the present proceedings has been filed. 8. This Court had duly taken note of the reasons assigned by the learned Trial Page No.# 5/9 Court for rejecting the application. The first reason is that the defendant No.2 which is the bank was not a party to the arbitration agreement. The second reason is that the arbitrator would not have the power to pass orders of prohibitory and mandatory injunction as has been sought for and as such the application which was filed by the petitioner/the defendant No.1 in the suit was rejected. 9. Mr. B Kaushik, the learned counsel for the petitioner submitted that though the said application was mentioned as application under Section 9 of the Code and has also referred to Order VII Rule 11(d) of the Code, but in essence the said application was an application under Section 8 read with Section 5 of the Act of 1996. He submitted that the reasons so assigned by the learned Trial Court in rejecting the application is completely misconceived, taking into account that the very perusal of the suit would show that the plaintiff/respondent herein had no cause of action insofar as the defendant No.2 is concerned. The entire cause of action relates to the dispute between the petitioner herein with the respondent herein and the said dispute has to be resolved by way of arbitration as per the arbitration clause contained in the agreement. 10. The learned counsel appearing on behalf of the petitioner had referred to the judgment of the Supreme Court in the case of Hindustan Petroleum Corporation Ltd. Vs. Pinkcity Midway Petroleums, reported in (2003) 6 SCC 503 and submitted that it was obligatory on the part of the learned Trial Court to refer the parties to arbitration and thereby the suit ought to have been dismissed. Page No.# 6/9 11. Per contra, Mr. RK Jain, the learned counsel appearing on behalf of the respondent submitted that the question of referring the dispute to arbitration did not arise taking into account that the dispute which is sought to be resolved could not have been resolved by way of arbitration on the ground that there were allegations of fraud. He further submitted that as the defendant No.2 was a party in the said suit and the Code of Civil Procedure does not permit bifurcation of the suit, the question of referring the dispute to Arbitration does not arise and in that regard referred to the judgment of the Supreme Court in the case of Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya & Anr., reported in (2003) 5 SCC 531. 12. Having heard the learned counsels appearing on behalf of the parties, let this Court now consider as to whether the learned Trial Court was justified in rejecting the application filed seeking dismissal of the suit on the ground that there was an arbitration clause. This Court finds it relevant to take note of the judgment of the Supreme Court in the case of P. Anand Gajapathi Raju & Ors Vs. P.V.G. Raju (Died ) & Ors reported in (2000) 4 SCC 539 wherein the Supreme Court made it clear that the language of Section 8 is peremptory in nature. It was observed that 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 in the original action after such an application is made except to refer the dispute to an arbitrator. 13. In the backdrop of the above, let this Court consider as to whether there Page No.# 7/9 has been any allegation of fraud of such nature that the arbitrator would not be in a position to decide. It is seen from a perusal of the plaint, more particularly, at paragraph 8, there is a reference that the defendant No.1/the petitioner herein had chosen to commit a fraud on the defendant No.2 i.e. the bank by demanding upon it to pay the maximum guaranteed amount of Rs.7,00,000/-. A question, therefore, arises as to whether such allegations contained in the plaint can be adjudicated by the Arbitral Tribunal. The Supreme Court in the case of A. Ayyasamy Vs. A. Paramasivam & Ors reported in (2016) 10 SCC 386 observed that mere allegations of fraud simplicitor may not be a ground to nullify the effect of an arbitration agreement between the parties. It is only in those cases where the Court, while dealing with an application under Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the Civil Court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits. The concurrent judgment delivered by His Lordship DY Chandrachud, J (as His Lordship then was) observed that the allegation of fraud are not alien to ordinary Civil Courts. Generation of Judges have dealt with such allegations in the context of civil and commercial disputes. If an allegation of fraud can be adjudicated upon in course of a trial before an ordinary Civil Court, there is no reason or justification to exclude such disputes from the ambit and purview of a claim in arbitration. This observation so made by the Supreme Court was also confirmed by the three Judges Bench of the Supreme Court in the case of Vidya Drolia Vs. Durga Trading Corporation reported in (2021) 2 SCC 1. Page No.# 8/9 14. Taking into account the above settled principles of law and having perused the plaint, the allegations of fraud so made are not of such a serious nature which cannot be adjudicated by an Arbitral Tribunal. 15. The next question which arises for consideration is on the aspect whether the suit should be referred to arbitration when the defendant No.2 which is the bank which had issued the irrevocable bank guarantee favouring the petitioner herein was not a party to the said agreement dated 08.08.2019 and, more so, in view of the judgment of the Supreme Court in the case of Sukanya Holding (supra). 16. This Court finds it very relevant to take note of that a perusal of the plaint would show that there is no cause of action against the defendant No.2. The defendant No.2 had issued an irrevocable bank guarantee on the basis of the agreement entered into by and between the plaintiff as well as the defendant No.1. Under such circumstances, the question of bifurcation of the suit does not arise as the plaintiff does not have any cause of action against the defendant No.2 separately. 17. In that view of the matter, it is, therefore, the opinion of this Court that the learned Trial Court was not justified in rejecting the application for referring the parties to arbitration. Accordingly, this Court, therefore, allows the application being Misc.(J)Case No.48/2013 and the dispute between the petitioner and the respondent herein is referred to be settled by way of an arbitration. The suit Page No.# 9/9 being Title Suit No.30/2012, accordingly, stands dismissed. 18. The dismissal of the suit, however, is without prejudice to the rights of both the parties to the suit to agitate their grievances before the Arbitral Tribunal, if so advised, as well as seek interim directions in terms with Section 9 and 17 of the Act of 1996. 19. With the above, the instant proceedings stands disposed of. JUDGE Comparing Assistant