Case Note & Summary
The petitioner, Shri Narayan Shankar Thakur, filed Special Civil Suit No.252 of 2008 seeking specific performance of a Development Agreement dated 14.2.2005 entered into with defendant nos.1 to 14 (Sitabai Sitaram Thakur and others). The suit also impleaded CIDCO as defendant no.15, alleging that CIDCO had agreed to lease the suit properties to defendant nos.1 to 14. The Development Agreement contained Clause-9 providing for arbitration of disputes arising out of payment of consideration. The trial court allowed an application (Exhibit 14) filed by defendant nos.1 to 14 under Section 8 of the Arbitration and Conciliation Act, 1996, referring the parties to arbitration. The petitioner challenged this order in the High Court, arguing that since CIDCO was not a party to the arbitration agreement, the dispute could not be split—part to arbitration and part to civil court. The High Court examined the plaint and found that no claim was made against CIDCO; the only relief sought was against defendant nos.1 to 14 for specific performance. Relying on the Supreme Court's decision in Sukanya Holdings (P) Ltd v. Jayesh H. Pandya, the court held that where no relief is claimed against a non-signatory party, the presence of such party does not prevent reference to arbitration. The court also noted that the trial court had correctly found that the dispute fell within the arbitration clause. Accordingly, the writ petition was dismissed, upholding the order of reference to arbitration.
Headnote
A) Arbitration Law - Reference to Arbitration - Section 8 of Arbitration and Conciliation Act, 1996 - Non-Signatory Party - Suit filed by plaintiff against signatory defendants and non-signatory CIDCO - Trial court referred dispute to arbitrator under Clause-9 of Development Agreement - Held that mere presence of CIDCO as party does not bar reference as no claim was made against CIDCO in plaint - Reference to arbitration is mandatory if dispute falls within arbitration clause (Paras 1-6).
Issue of Consideration
Whether the presence of a non-signatory party (CIDCO) in a suit prevents the court from referring the dispute between signatory parties to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996.
Final Decision
The High Court dismissed the writ petition, upholding the trial court's order referring the parties to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996.
Law Points
- Arbitration agreement binding on parties
- non-signatory party does not prevent reference
- no splitting of claims if no claim against non-signatory
- Section 8 mandatory if dispute covered by arbitration clause
Case Details
2013 LawText (BOM) (08) 129
Writ Petition No. 1882 of 2010
Shriram S. Kulkarni for Petitioner, A.Y. Sakhare (Senior Advocate) with Jeetendra Sachdev for Respondent Nos.1 to 14
Shri Narayan Shankar Thakur
Sitabai Sitaram Thakur (deceased) through legal heirs
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Nature of Litigation
Writ petition challenging trial court order referring parties to arbitration under Section 8 of Arbitration and Conciliation Act, 1996 in a suit for specific performance of a Development Agreement.
Remedy Sought
Petitioner sought to set aside the trial court's order referring the dispute to arbitration and to allow the suit to proceed in civil court.
Filing Reason
Petitioner contended that the presence of CIDCO (non-signatory to arbitration agreement) prevented reference to arbitration as it would lead to splitting of claims.
Previous Decisions
Trial court allowed application Exhibit 14 and referred parties to arbitration under Clause-9 of Development Agreement dated 14.2.2005.
Issues
Whether the presence of a non-signatory party (CIDCO) in the suit prevents reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996?
Whether the dispute falls within the scope of the arbitration clause (Clause-9) of the Development Agreement?
Submissions/Arguments
Petitioner argued that the suit involved claims against CIDCO, a non-signatory, and thus the dispute could not be split; reference to arbitration would leave the claim against CIDCO in civil court, which is impermissible.
Respondents argued that no claim was made against CIDCO in the plaint, and the dispute between signatory parties fell within the arbitration clause; mere presence of CIDCO does not bar reference.
Ratio Decidendi
Where a suit involves parties to an arbitration agreement and a non-signatory party, but no relief is claimed against the non-signatory, the court is bound to refer the dispute between signatory parties to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The presence of a non-signatory does not prevent reference if the subject matter of the suit falls within the arbitration clause and no claim is made against the non-signatory.
Judgment Excerpts
In a Special Civil Suit No.252 of 2008 filed by the Petitioner-Orig. Plaintiff, the Trial court has allowed the Application Exhibit 14 for referring the parties to the Arbitrator, in terms of Clause-9 of the Development Agreement dated 14.2.2005.
He therefore submits that there cannot be splitting of claims; one to be referred to the Arbitrator and the another to be dealt with by the Civil Court in between the Plaintiff and the Defendant No.-15-CIDCO.
Per contra, Mr. Sakhare, the learned Senior Counsel for the Defendant Nos.1 to 14 has urged that in the plaint there is absolutely no claim made against the Defendant No.-15-CIDCO.
Procedural History
Petitioner filed Special Civil Suit No.252 of 2008 for specific performance of Development Agreement dated 14.2.2005. Defendant nos.1 to 14 filed application Exhibit 14 under Section 8 of Arbitration and Conciliation Act, 1996 seeking reference to arbitration. Trial court allowed the application on finding that dispute fell within Clause-9. Petitioner challenged the order by filing Writ Petition No.1882 of 2010 in the Bombay High Court.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 7, Section 8, Section 2(b)
