Case Note & Summary
The petitioner, Smt. Sushma Swaraj, filed a suit for specific performance (O.S. No. 458/2014) against M/s Blue Valley Properties Pvt. Ltd. (1st defendant) and Shageer Shereef (2nd defendant) based on an Agreement to Sell dated 14.09.2012. The 1st defendant filed a written statement resisting the suit on merits. However, the 2nd defendant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (I.A. No. 2) seeking to relegate the plaintiff to arbitration, claiming that the agreement contained an arbitration clause. The trial court allowed the application, prompting the plaintiff to file a writ petition under Article 227 of the Constitution of India. The High Court examined whether the 2nd defendant, who was not a signatory to the agreement, could invoke Section 8. The court held that Section 8(1) prior to the 2016 amendment could be invoked only by a party to the arbitration agreement or a person claiming under such party. Since the 2nd defendant was not a party to the agreement, he could not seek relegation. The court also noted that the 2016 amendment, which changed the forum from the judicial authority to the arbitral tribunal, is procedural and retrospective, but it does not allow a non-party to compel arbitration. Consequently, the court set aside the impugned order and allowed the writ petition.
Headnote
A) Arbitration Law - Section 8 of Arbitration and Conciliation Act, 1996 - Who can invoke - The provision can be invoked only by a party to the arbitration agreement or a person claiming under such party, not by a non-signatory. The 2nd defendant, who was not a party to the agreement to sell containing the arbitration clause, could not seek relegation of the plaintiff to arbitration. (Para 3(a)) B) Arbitration Law - Amendment to Section 8 in 2016 - Retrospective operation - The amendment, which changed the forum of adjudication from the judicial authority to the arbitral tribunal, is procedural in nature and thus has retrospective operation. However, this does not confer a right on a non-party to compel arbitration. (Para 3(b)) C) Civil Procedure - Specific Performance - Agreement to Sell - Arbitration Clause - The suit for specific performance based on an agreement to sell dated 14.09.2012 was resisted by the 1st defendant on merits, but the 2nd defendant, a non-signatory, sought to invoke the arbitration clause. The court held that the 2nd defendant could not do so. (Paras 1-3)
Issue of Consideration
Whether a person who is not a signatory to the arbitration agreement can invoke Section 8 of the Arbitration and Conciliation Act, 1996, to seek relegation of the plaintiff to arbitration, and whether the amendment to Section 8 in 2016 has retrospective effect.
Final Decision
The writ petition is allowed. The impugned order dated 26.02.2018 passed by the Senior Civil Judge and JMFC, Anekal in O.S. No. 458/2014 allowing I.A. No. 2 is set aside.
Law Points
- Section 8 of Arbitration and Conciliation Act
- 1996
- can be invoked only by a party to the arbitration agreement or a person claiming under such party
- not by a non-signatory
- Amendment to Section 8 in 2016 is procedural and has retrospective operation
- A person who is not a party to the arbitration agreement cannot seek relegation to arbitration under Section 8.
