Case Note & Summary
The petitioner, Mukesh Chandrashekhar Kumaran, filed a Regular Civil Suit No. 451/2013 before the 4th Joint Civil Judge, Junior Division, Nagpur, seeking declarations that an amendment to a partnership deed dated 16.11.2007 was false and bogus, that a gift deed executed by defendant No.1 in favor of defendants No.3 to 5 was null and void, and for a perpetual injunction restraining defendants No.1 and 2 from relying on the amendment. The suit was filed against five defendants: Smt. Suman Vitthalrao Ikhankar (defendant No.1), Prakash Vitthalrao Ikhankar (defendant No.2), and three others (defendants No.3 to 5). The original partnership deed was executed on 09.09.2005 between the plaintiff and defendant No.1, and an amendment deed dated 16.11.2007 contained an arbitration clause. However, defendants No.2 to 5 were not parties to either deed. The defendants No.1 and 2 filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking reference to arbitration. The trial court allowed the application, holding that in view of the arbitration clause, the civil court had no jurisdiction. The petitioner challenged this order in the High Court. The High Court observed that the arbitration clause binds only the parties to the agreement. Since defendants No.2 to 5 were not parties to the arbitration agreement, they could not be referred to arbitration. The reliefs sought in the suit were against all defendants, including non-signatories. Therefore, the civil court retained jurisdiction to entertain the suit. The High Court set aside the trial court's order and directed the trial court to proceed with the suit in accordance with law.
Headnote
A) Arbitration Law - Section 8 of Arbitration and Conciliation Act, 1996 - Reference to Arbitration - Where the suit seeks reliefs against defendants who are not parties to the arbitration agreement, the civil court cannot be directed to refer the matter to arbitration - The arbitration clause binds only the parties to the agreement, and non-signatory defendants cannot be compelled to arbitrate - Held that the trial court erred in allowing the application under Section 8 (Paras 2-5).
Issue of Consideration
Whether the civil court can be divested of its jurisdiction under Section 8 of the Arbitration and Conciliation Act, 1996 when the suit involves reliefs against defendants who are not parties to the arbitration agreement.
Final Decision
The High Court allowed the writ petition, set aside the order dated 2nd May 2013 passed by the 4th Joint Civil Judge, Junior Division, Nagpur below Exh. 17 in Regular Civil Suit No. 451/2013, and directed the trial court to proceed with the suit in accordance with law.
Law Points
- Arbitration agreement binding only on parties to the agreement
- Civil court jurisdiction not ousted when non-signatory defendants are involved
- Section 8 of Arbitration and Conciliation Act
- 1996 requires all parties to be parties to arbitration agreement
