Madras High Court
T. Jaganathan vs J.R.S. Crusher on 20 October, 2021
Author: Abdul Quddhose
Bench: Abdul Quddhose
CMA.No.1592 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 04.10.2021
PRONOUNCED ON : 20.10.2021
CORAM:
THE HON'BLE MR. JUSTICE ABDUL QUDDHOSE
C.M.A.No. 1592 of 2021
and
C.M.P. No.8270 of 2021
T. Jaganathan ... Appellant
Vs.
1. J.R.S. Crusher
2. M. Sathiamurthy
3. M. Santhamurthy
4. N. Ramesh
5. A. Jayakanthan
6. J. Jayanth
7. Thiru. L. Yousuf Ali ...Respondents
Civil Miscellaneous Appeals filed under Section 37 (2) (b) of the
Arbitration and Conciliation Act, 1996 against the order of the Learned
Sole Arbitrator Thiru. L. Yousuf Ali, District Judge (Retired) dated
26.02.2020 in M.P.No.10/2018 in O.P. No.347/2016.
For Appellant : Mr.L.Chandrakumar
for
M/s.B.Sundarapandiyan
For Respondents : M/s. Kanimozhi
https://www.mhc.tn.gov.in/judis/
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CMA.No.1592 of 2021
JUDGMENT
This appeal has been filed under Section 37 of the Arbitration and Conciliation Act challenging the order dated 26.02.2020 passed by the Arbitral Tribunal under which the Appellant has been impleaded as a party respondent in the Arbitration.
2. There arose disputes between the partners of M/s.JRS Crusher, a registered Partnership firm and the dispute was referred to Arbitration in accordance with the Arbitration clause contained in the Partnership Deed at the instance of respondents Nos.1 to 4 against the respondents 5 & 6. All the respondents are partners of M/s.JRS Crusher. The respondents 1 to 4 who are the claimants in the Arbitration filed MP No.10 of 2018 in OP No.347 of 2016 which is the Arbitration claim seeking to implead the Appellant / proposed party as the 3rd respondent in the Arbitral proceedings.
3. According to the respondents Nos.1 to 4, who are the claimants in the Arbitration, the 5th respondent in this appeal, who is the first respondent in the Arbitration sold the property belonging to the partnership Firm illegally on 16.06.2017 during the pendency of the https://www.mhc.tn.gov.in/judis/ 2/10 CMA.No.1592 of 2021 Arbitration to the Appellant. In such circumstances, MP No.10 of 2018 was filed by the respondents Nos. 1 to 4 before the Arbitral Tribunal seeking to implead the Appellant as the 3rd respondent in the Arbitration.
4. A counter statement was also filed by the Appellant in MP No.10 of 2018 before the Arbitral Tribunal denying the allegations of the respondents Nos.1 to 4 and also questioning the jurisdiction of the Arbitral Tribunal to implead him as a party to the Arbitration on the ground that he is not a party to the Arbitration agreement. He has also categorically stated that he was a bonafide purchaser, having purchased the property from the 5th respondent in his individual capacity and the property does not belong to the Partnership firm. Under the impugned order dated 26.02.2020, the Arbitral Tribunal has allowed MP No.10 of 2018 filed by the respondents Nos.1 to 4, who are the claimants in the Arbitration and by the said order, the Appellant was impleaded as a party respondent in the Arbitration.
5. The impugned order dated 26.02.2020 reads as follows :
This instant application in M.P. No.10/2018 came to be filed by the petitioners / claimants for seeking directions to the first and second https://www.mhc.tn.gov.in/judis/ 3/10 CMA.No.1592 of 2021 respondent to implead the proposed party as 3rd respondent in O.P.347/16 on the file of this court.
It is not in dispute between the parties on either side that the first respondent sold the property to a third party to one Mr.T.Jaganathan while the matter is subjudice before this Court and before Hon'ble High Court also.
Under these circumstances I do not have any hestitation to pass an order to direct the proposed parties to implead in the main O.P. for the proper adjudication of the main case.
In the result this application is allowed without any cost.
6. Aggrieved by the aforesaid order, this appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996.
7. Heard Mr.L.Chandrakumar, learned counsel for the Appellant and M/s. Kanimozhi, learned counsel for the respondents. Discussion:
8. The following are undisputed facts :
a) the Appellant is not a party to the Partnership Deed dated 27.07.2013 entered into between the partners viz., the respondents.
b) the Appellant is not a Partner of the Partnership firm M/s. JRS Crusher
c) the appellant is only a purchaser of a property from the 5 th https://www.mhc.tn.gov.in/judis/ 4/10 CMA.No.1592 of 2021 respondent in his individual capacity under the Sale Deed, dated 16.06.2017 registered as Document No.2139 of 2017.
d) Under the Sale Deed dated 16.06.2017, the 5th respondent traces his title to a gift settlement deed, registered as document No.855 of 2013 standing in the name of the 5th respondent.
e) Patta at the time of the purchase of the property by the Appellant stood in the name of the 5th respondent in his individual capacity and the Patta number was 873.
9. The law with regard to non signatories to the Arbitration agreement becoming parties to the Arbitration is now well settled by the following decisions of the Hon'ble Supreme Court:
a) Chloro Control (I) Pvt., Ltd., vs. Severn Trent Water Purification Inc. & Others reported in (2013) 1 SCC 641
b) Mahanagar Telephone Nigam Limited vs. Canara bank reported in 2019 SCC Online SC 995.
c) Reckitt Benckiser (India) Private Limited vs. Reynders Label Printing (India) Private Limited and another reported in (2019) 7 SCC 62
d) M.R.Engineers & Contractors vs. Som Datt Builders Ltd. reported in 2009 (7) SCC 696.
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e) Cheran Properties Limited vs. Kasturi and Sons Limited and others reported in (2018) 16 SCC 413
10. This Court has also followed the aforesaid decisions in its judgment dated 05.10.2021 passed in CMA No.2049 of 2021 in the case of S.Sivagurunathan vs. R. Mennan and another.
11. From the aforesaid decisions it is clear that only under the following circumstances, a non-signatory can be roped into the arbitration :
(a) The non-signatory party's contract must be intrinsically connected to the contract which contains an arbitration clause;
(b) The non-signatory on the date of the arbitration agreement must have an intention to agree for arbitration in accordance with the arbitration agreement;
(c) On the date when the contract which contains the arbitration clause came into existence, the non-signatory must be connected with that contract;
(d) A non-signatory is bound by the arbitration clause, if the arbitration clause contained in the main contract is incorporated by reference into the non-signatory party's contract;
(e) The parties to the ancillary contract which does not contain an arbitration clause is bound by the arbitration agreement under the main https://www.mhc.tn.gov.in/judis/ 6/10 CMA.No.1592 of 2021 contract. An ancillary contract is a contract which always provides support to the main contract and is always dependent on the main contract.
(f) There must be consensus ad idem between the non-signatory to the arbitration agreement and the parties to the arbitration agreement about the arbitration agreement.
12. None of the aforementioned circumstances are applicable to the Appellant as he was no way involved in the Partnership business and was not a party to the Partnership Deed, dated 27.07.2013. Further, he has purchased the subject property only from the 5 th respondent in his individual capacity under a Sale Deed dated 16.06.2017 registered as Document No.2139 of 2017. The application has also been filed before the Arbitral Tribunal by the respondents Nos.1 to 4, who are the claimants under Order I Rule 10 CPC which is not applicable before the Arbitral Tribunal. The Arbitration and Conciliation Act is a special enactment and any application can be filed seeking for any relief only if the Act permits such a relief to be granted.
13. It is also noticed from the impugned order that the Arbitral Tribunal has not given any reasons for allowing the impleading application filed by the respondents Nos.1 to 4 and it is a non speaking https://www.mhc.tn.gov.in/judis/ 7/10 CMA.No.1592 of 2021 order. The provision of law under which the impugned order has been passed has also not been mentioned by the Arbitrator. When the respondents Nos.1 to 4 have not satisfied the requirements for impleading a non signatory to the Arbitration agreement, the Arbitral Tribunal has by total non application of mind to the provisions of the Arbitration and Conciliation Act as well as to the settled position of law as indicated supra has erroneously allowed the impleading application that too by a non speaking order. Hence the impugned order has to be necessarily set aside by this Court.
14. In the result, the impugned order dated 26.02.2020 passed by the Arbitral Tribunal in MP No. 10 of 2018 in O.P. No.347/2016 is set aside and the Civil Miscellaneous Appeal is allowed. No costs. Consequently, connected miscellaneous petition is closed.
20.10.2021 (2/2) Index: Yes/No Internet: Yes/No Speaking Order/Non-Speaking Order ab/vsi2 https://www.mhc.tn.gov.in/judis/ 8/10 CMA.No.1592 of 2021 To The Sole Arbitrator, District Judge (Retired) Madras High Court Arbitration Centre.
https://www.mhc.tn.gov.in/judis/ 9/10 CMA.No.1592 of 2021 ABDUL QUDDHOSE, J.
vsi2 Pre-delivery judgment in CMA.No.1592 of 2021 and C.M.P. No.8270 of 2021 20.10.2021 (2/2) https://www.mhc.tn.gov.in/judis/ 10/10