2011 (12) TMI 723 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of referring disputes to arbitration u/s 8 of the Arbitration and Conciliation Act, 1996.
2. Appealability of the order passed u/s 8 of the Arbitration and Conciliation Act, 1996.
3. Jurisdiction of the Trial Court in dismissing the suit while referring disputes to arbitration.

Summary:

1. Validity of Referring Disputes to Arbitration u/s 8 of the Arbitration and Conciliation Act, 1996:
The appellants filed a suit seeking a declaration that the defendants had no right, title, or interest in the dissolved partnership firm, M/s. Bharat Industries and Commercial Corporation. The defendants filed an application u/s 8 of the Arbitration and Conciliation Act, 1996, to refer the disputes to arbitration based on an arbitration clause in the partnership deed dated 23rd December 1972. The plaintiffs contested, arguing that the arbitration agreement was no longer subsisting and that the subject matter of the suit was beyond the scope of the arbitration agreement. The learned Trial Judge found the arbitration agreement valid and referred the matter to arbitration, dismissing the suit.

2. Appealability of the Order Passed u/s 8 of the Arbitration and Conciliation Act, 1996:
The appellants argued that the impugned order was appealable under Clause 15 of the Letters Patent as it involved questions of jurisdiction and limitation. They contended that the order was not merely an order u/s 8 of the 1996 Act but also involved the dismissal of the suit, which made it a "judgment" within the meaning of Clause 15. The court agreed, stating that the order was not an order under section 8 of the Act, 1996, as it sought to bind a non-party to the arbitration agreement (Mimani). Hence, the order was appealable under Clause 15 of the Letters Patent.

3. Jurisdiction of the Trial Court in Dismissing the Suit While Referring Disputes to Arbitration:
The appellants contended that the Trial Court lacked jurisdiction to dismiss the suit while referring the disputes to arbitration, especially since Mimani, a non-party to the arbitration agreement, was involved. The court found that the disputes in the suit were closely interlinked with the interests of Mimani, and referring the matter to arbitration without his participation would lead to gross injustice. The court also noted that the application for reference to arbitration was not accompanied by the original arbitration agreement or a duly certified copy thereof, violating section 8(2) of the 1996 Act. Consequently, the court held that the Trial Judge's order was not sustainable and set it aside, directing that the suit and Mimani's suit for specific performance be heard analogously.

Conclusion:
The appeal was allowed, and the judgment and order of the learned Trial Judge were set aside. The court directed that both the suit filed by the appellants and the suit filed by Mimani for specific performance be heard analogously. The operation of this judgment and order was stayed for four weeks after the Christmas Vacation.