SUKANYA HOLDINGS PVT. LTD v. JAYESH H. PANDYA AND ANR

Citation: [2003] 3 S.C.R. 558

Court: Supreme Court of India

Bench: M.B. SHAH, ARUN KUMAR

Judgment text

) SUK. ANYA HOLDINGS PVT. LTD. - V. JAYESH H. PANDYA AND ANR. APRIL 14, 2003 [M. B. SHAH AND ARUN KUMAR, JJ. ] Arbitration and Conciliation Act. I996-Section 8-Power to refer parties to arbitration where there is an arbitration agreement-Dissolution of partnership--Suit for dissolution by one-Arbitration petition by other- Dismissal ofpetition by High Court-Justification of-Held: Order of High Court does not call for any interference since Arbitration Act does not oust the jurisdiction ofCivil Court to decide the dispute in a case where parties to arbitration agreement do not take :c,::yropriate steps under Section 8(1) and (2)-Section 8 does not apply when suit is commenced as to a matter which lies outside the arbitration agreement and is also between some ofthe parties who are not parties to arbitration agreement-Also bifurcation of subject matter to the action is not allowed and Section 89 cannot be resorted to for interpreting Section 8--Code of Civil Procedure, I908, Section 89.

Words and Phrases: .. "A matter"-Meaning of in the context ofSection 8 of the Arbitration and Conciliation Act, 1996. Appellant and respondents entered into a partnership agreement for carrying out construction of flats. The agreement contained an arbitrat~on clause. Dispute arose between the parties. Respondent No. I filed a suit for dissolution of partnership and accounts and various other reliefs against contracting parties and also raised disputes against purchasers of the disputed flats. Appellant filed arbitration petition under Section 8 of the Arbitration and Conciliation Act, 1996. High Court rejected the ' petition as suit has been filed and as the defendants of the suit are not party or partners in the partnership firm and the terms of the partnership deed including the arbitration clause are not binding to them. Hence the present appeal. Appellant contended that under Section 8 of the Act the Court was required to refer the dispute arising to the arbitrator as !!

contemplated by the arbitration clause because of the dissolution of the SUKANYA HOLDINGS PVT. LTD. v. J. H. PANDYA 559 partnership; that in any case there is no bar in referring the dispute which arises between the appellant and respondents who are bound by the agreement to the arbitrator; that if the interpretation given by the High Court is accepted, arbitration clause could be defeated by an interested party by adding some reliefs which are not covered by the arbitration clause or by adding a few parties who are not bound by the arbitration clause; that this interpretation would be against the object and purpose of the Act and against the spirit of Section 89 CPC; and that the third parties who purchased the flat are not necessary parties to the dispute amongst the partners relating to dissolution and accounts of the firm and, therefore, dispute ought to have been referred to the arbitrator.

Respondent contended that the order passed by the High Court does not call for any interference as the plaintiffs have claimed various reliefs in the suit which could not be referred to the arbitrator; and that few of the defendants are not parties to the arbitration agreement. Dismissing the appeal, the Court HELD: I. I. Except Section 8 of the Arbitration and Conciliation Act, 1996 there is no other provision in the Act that in a pending suit, the dispute is required to be refrrred to the arbitrator. Further, the matter is not required to be referred to the arbitral tribunal, if the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or such application is not accompanied by the original arbitration agreement or duly certified copy thereof.

Therefore, the Act does not oust the jurisdiction of the Civil Court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under section 8 (1) and (2) of the Act. 1564-B-DI 1. 2. There is no provision in the Act that when the subject matter of the suit includes subject matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration and for splitting the cause or parties and referring the subject matter of the suit to the arbitrators. Also there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the arbitration agreement.

Against this, under section 24 of the Arbitration Act, 1940, some of the parties to a suit could not apply that the matters in difference between them be referred to arbitration and Court may refer the same to arbitration provided that the same can be separated from the rest of the subject matter of the suit. The Section also provided that the suit would continue so far as it related to parties who have not joined in such application. [564-F, G) 2. Under Section 8 of the Act the suit should be in respect of 'a matter' which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commencedas to a matter which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8 of the Act. (564-G-H; 565-A) 3. 1.

Section 8 of the Act cannot be interpreted as bifurcation of the cause of action-subject matter of the suit or in some cases bifurcation of the suit between parties who are p"' Ort ofthe argument that the matter should have been referred to arbitration. In our view, Section 89 CPC cannot be resorted to for interpreting Section 8 of the Act as it stands on a different footing and it would be applicable even in cases where there is no arbitration agreement for referring the dispute for arbitration. Further, for that purpose, the Court has to appiy its mind to the condition contemplated under Section 89 CPC and even if application under Section 8 of the Act is rejected, the Court is required to follow the procedure prescribed under the said Section.

Lastly, considering the language used in Section 8, in our view, it is not necessary to refer to the decisions rendered by various High Courts interpreting A Sectioll 34 of Indian Arbitration Act, 1940 which gave a discretion to the Court to stay the proceedings in a case where the dispute is required to be referred for arbitration. For the reasons stated above, there is no substance in this appeal and •' is, therefore, dismissed. There shall be no order as to costs. B It would be open to the parties to request the Court for expeditious disposal of the suit. N. J. Appeal dismissed. I