Mohammadali Mohammadhusain Gandhi vs M/S Universal Icon Builders on 31 January, 2020

[Cites 54, Cited by 0]

Gujarat High Court

Mohammadali Mohammadhusain Gandhi vs M/S Universal Icon Builders on 31 January, 2020

Bench: Bhargav D. Karia

       C/SCA/16123/2017                                        CAV JUDGMENT




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 16123 of 2017


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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1     Whether Reporters of Local Papers may be allowed to
      see the judgment ?

2     To be referred to the Reporter or not ?

3     Whether their Lordships wish to see the fair copy of the
      judgment ?

4     Whether this case involves a substantial question of law
      as to the interpretation of the Constitution of India or any
      order made thereunder ?

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                MOHAMMADALI MOHAMMADHUSAIN GANDHI
                                Versus
                M/S UNIVERSAL ICON BUILDERS & 17 other(s)
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Appearance:
VASIM MANSURI(8824) for the Petitioner(s) No. 1
KEWAL J SHAH(9579) for the Respondent(s) No. 10,11,12,13
MR HAMESH C NAIDU(5335) for the Respondent(s) No. 4
MR SAURABH G AMIN(2168) for the Respondent(s) No. 2,3
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 6,7,8,9
NOTICE SERVED BY DS(5) for the Respondent(s) No. 1,14,15,16,17,18,5
==========================================================

    CORAM: HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                               Date : 31/01/2020

                                CAV JUDGMENT

1. Rule. Learned advocate Mr. Saurabh Amin waives service Page 1 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT of rule on behalf of respondents no. 2 and 3, learned advocate Mr. Hamesh Naidu wavies service of rule on behalf of respondent no. 4, learned advocate Mr. Varun Patel waives service of rule on behalf of respondents no. 6 to 9 and learned advocate Mr. Kewal Shah waives service of rule on behalf of respondents no.10 to 13. None appears for the rest of the respondents.

2. Having regard to the controversy involved in the present case which lies in a very narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for final hearing.

3. By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has challenged order dated 25th July, 2017 passed by learned 8th Additional Civil Judge and JMFC, Ahmedabad (Rural) in Regular Civil Suit No.130/2017 under section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"). The petitioner has also prayed to restrain respondents no. 10 to 18 from transferring or alienating or to do any other acts and deeds in relation to flats purported to be conveyed to them by sale deeds to any third party during the pendency of the petition. It is also prayed to appoint Court Commissioner to take inventory of books of accounts of respondent no.1 firm and assets of the partnership firm.

4. Brief facts of the case are that respondent no.1 is a partnership firm constituted under the provisions of the Partnership Act, 1932. Petitioner no.1 and respondent no.2 Page 2 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT in his capacity as administrator and partner of M/s. Universal Icon Builders entered into a partnership with effect from 18th January, 2011 to carry out business of purchase and sale of land and to launch the scheme and carry out construction on land bearing survey no. 726+ 929/3/1 admeasuring 1871 sq meters and land bearing survey no.726+729/2 admeasuring 1871 sq. meters., totaling to 3602 sq. meters of village Vejalpur.

4.1) It is the case of the petitioner that constitution of partnership deed dated 18th January, 2011 underwent change and respondent no. 3 to 9 joined as partners with effect from 14th October, 2012.

4.2) It is the case of the petitioner that land bearing survey no.726+929/3/1 admeasuring 1871 sq. meters was purchased in the name of respondent no.1 firm by a registered sale deed dated 23rd February, 2011. The land bearing survey no. 726+729/2 admeasuring 1871 sq. meters was purchased in the name of respondent no.1 by a registered sale deed dated 23rd February, 2011.

4.3) A scheme of residential flats in the name of "Gandhi Residency" was launched on the aforesaid lands. It is the case of the petitioner that petitioner went to USA and handed over the business to respondents no. 2 and 3 by giving power of attorney and blank cheques to respondent no.3.

4.4) It is the case of the petitioner that after completion of construction work, 20 flats were distributed amongst the Page 3 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT partners towards their capital investment. The petitioner was requested to give power of attorney to respondent no.6 for the purpose of sale deed/deed of conveyance to be executed in favour of members and accordingly power of attorney was executed by the petitioner in favour of respondent no.6 on 15th January, 2013.

4.5) It is the case of the petitioner that respondents no. 2, 3 and 6 were found colluding and misappropriating assets of the partnership firm which were not sold. The petitioner therefore, cancelled the power of attorney dated 15th January, 2013. The petitioner thereafter, filed Civil Suit No. 130/2017 before the Ahmedabad(Rural) Court along with application for interim relief.

4.6) Respondent no.3 submitted an application at Exh.17 under section 8 of the Act and respondent no.6 submitted an application at Exh.27 under section 8 of the Act in which prayer was made to reject the plaint and refer the parties to arbitration. Respondents no. 7 to 9 submitted statement in support of the application Exh.27 filed by respondent no.6. The petitioner filed reply to both the applications.

4.7) Learned 8th Additional Civil Jude and JMFC, Ahmedabad (Rural) vide order dated 25th July, 2017 allowed the applications Exh.17 and Exh.27 and directed the parties to appoint arbitrator and refer the dispute to arbitration.

5. Heard learned advocate Mr. Wasim Mansuri for the Page 4 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT petitioner, learned advocate Mr. Saurabh Amin for respondents no. 2 and 3, learned advocate Mr. Hamesh Naidu for respondent no. 4, learned advocate Mr. Varun Patel for respondents no. 6 to 9 and learned advocate Mr. Kewal Shah for respondents no.10 to 13.

6. Learned advocate for the petitioner submitted that the petitioner has filed Regular Civil Suit No.130/2017 before the City Civil Court, Ahmedabad praying for dissolution of the partnership firm and accounts and for cancellation of documents executed in favour of respondents no. 10 to 12 and 14 to 18 and other partners. He further submitted that respondents no. 2, 4, 5, 10 and 18 have not given any application for referring the parties to arbitration. He further submitted that respondents no. 10 to 18 have chosen not to refer the disputes relating to the flats in respect of which the sale deeds are executed in their favour.

6.1) Relying upon section 8 of the Act, he submitted that arbitration can be sought for by "party to the arbitration or person claiming through or under him". He submitted that the requirement for referring the parties to the arbitration is that parties seeking reference to arbitration must apply to the authority. In support of his contention he relied upon the judgments of Apex Court in case of Ameet Lalchand Shah v. Rishabh Enterprises reported in (2018) 15 SCC 678 and in case of State of Goa v. Praveen Enterprises reported in (2012) 12 SCC 581. He submitted that once the order is passed directing the parties to refer to arbitration, the parties may agree for common name or Page 5 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT application is required to be filed under section 11 of the Act. He submitted that there is no amendment in section 11 to incorporate the words "person claiming through or under him". He placed reliance on section 11 of the Act and definition of word 'party' as defined in section 2(h) of the Act as well as word "Arbitration Agreement" as defined in section 7 of the Act. He submitted that unless respondents no. 10 to 18 apply for referring the dispute with respect to acquisition of flats under section 8 of the Act, application under section 11 against them will not be maintainable since the word 'party' is defined to mean parties to the agreement but does not include "person claiming through or under him".

6.2) He further submitted that if a person claiming through or under him desires to have arbitration, they must move an application under section 8 of the Act. He submitted that the parties may agree for arbitration before dispute has arisen, however, if party to the agreement has transferred or assigned his interest in favour of third party, in that case, person claiming through or under such person may agree for arbitration for disputes concerning them. He submitted that to cover the second situation the words "claiming through or under him'" are added in section 8 but not in section 11 of the Act. He submitted that words "certain disputes" appearing in the definition of the term Arbitration Agreement would be applicable in facts of the case. He submitted that respondents no. 10 to 18 are not concerned with the dispute relating to dissolution and accounts and their concern is with respect to disputes relating to execution of sale deeds in their Page 6 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT favour and therefore, they have to apply under section 8 for referring the said dispute to arbitration. He further submitted that respondents no. 3, 6 to 9 do not have any authority to agree for referring disputes on behalf of respondents no. 10 to 18.

6.3 ) In support of his contentions, learned advocate for the petitioner placed reliance on decisions of Apex Court in case of Booz Allen & Hamilton Inc. v. SBI Home Finance Limited and others reported in 2011(5) SCC 532 and in case of A. Ayayasamy v. A. Paramasivam reported in (2016) 10 SCC 386. He therefore, submitted that in view of the above facts, the impugned order deserves to be quashed and set aside.

7. Learned advocate for respondents no. 2 and 3 submitted that petitioner and respondents no. 2 to 9 are partners of respondent no.1 partnership firm by the name M/s Universal Icon builders. The original deed was executed on 24th January, 2011 which was later on amended to include new partners on 4th October, 2012 keeping the original terms intact. He submitted that primary business of the partnership firm was to purchase land, construct flats and sell the flats to constructed. He further submitted that the building was constructed and were sold by the partnership firm and accounts were settled between the parties whereby 20 flats were distributed amongst the partners and 10 flats were distributed towards the profit of the partnership firm. He submitted that the petitioner herein received his share of flat and thereafter preferred Civil Suit No. 130/2017 seeking dissolution of firm but no relief is Page 7 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT sought to cancel the sale deed. He submitted that 11 flats are sold by the partnership firm to the respondent no. 10 to 18 by registered sale deed executed by respondent no.3 and respondent no.6 who were authorised by the partnership firm to execute the sale deeds. He submitted that most of the flats objected to be sold are the one which have come to the shares of the partners towards capital and profit.

7.1) He relied upon clause 15 of the partnership deed containing arbitration clause wherein it is stated that in case of any dispute between the partners, the same shall be resolved by arbitration and the order of the arbitrator will be binding on all the partners. He further submitted that respondents no.3 and 6 preferred two separate applications under section 8 of the Act to refer the dispute to arbitration and respondents no. 7 to 9 filed pursis supporting the said applications. He further submitted that none of the respondents opposed the application.

7.2) He submitted that applications came to be allowed by judgment and order dated 25th July, 2017 and the suit was dismissed. He submitted that the impugned order is challenged only on the ground that respondents no. 9 to 18 are not signatories to the arbitration agreement and they have not preferred application under section 8 of the Act and therefore, dispute cannot be referred to arbitration and further the petitioner has alleged fraud in accounts and sale of flats. He submitted that respondents no. 9 to 18 have not challenged the order and have accepted the same whereas respondent No. 10 to 13 have made a statement Page 8 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT before this Court supporting the order.

7.3) He further submitted that the petitioner has relied upon the judgment of the Apex Court rendered prior to 2016 whereas section 8 of the At was amended by Amendment Act no. 3 of 2016. He relied upon the judgment in case of Ameet Lalchand Shah (supra) and submitted that the Supreme Court has interpreted the amended section 8 of the Act and relegated the parties including the parties who were not signatories to the arbitration agreement to arbitration.

7.4) He submitted that sole purpose and function of the partnership firm was to construct and sell the flats. The flats have been sold to respondents no. 10 to 18 by registered sale deed by the partnership firm. The said transaction is objected by only 1 out of 9 partners on the ground that the sale of land is without consideration. The same is therefore, matter of accounts. He submitted that most of the sale transaction objected to pertain to the flats which have been given to the partners towards capital and profit. Thus there is direct commonality of subject matter and a direct relationship between the third parties and the party signatory to the arbitration agreement contained in the partnership deed. He submitted that the flat purchasers claim their title through and under the partnership and its partners who are signatories to the partnership deed. He further submitted that the partnership deed contains arbitration clause which is signed by all the partners including the petitioner and respondents no. 2 to 9. Thus no interference is required to Page 9 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT be made in the impugned judgment and order.

7.5) He relied upon the following judgments of the Apex Court in support of his contentions :

i) Cheran Properties Limited v. Kasturi and Sons Limited and others reported in (2018) 16 Supreme Court Cases 413

ii) RV Solutions Pvt. Ltd. v. Ajay Kumar Dixit and others reported in 2019 SCC OnLine Del 6531

iii) A. Ayayasamy v. A. Paramasivam reported in (2016) 10 SCC 386.

iv) Mayavati Trading Private Limited v. Pradyuat Deb Burman reported in (2019) 8 Supreme Court Cases 714

v) Rashid Raza v. Sadaf Akhtar reported in (2019) 8 Supreme Court Cases 710.

8. Learned advocate for the petitioner submitted his written arguments to above reply of the respondents no.2 and 3. wherein it is stated that statement in writing has been given by respondents no. 10 to 18 but there is no statement made that they are supporting the order of the trial Court. He submitted that no such statement is made either in the present proceeding or before the trial Court. He submitted that respondents no. 10 to 18 have not filed any application under section 8 of the Act for referring the disputes under arbitration. He placed reliance on judgment Page 10 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT in case of The Installment Supply Ltd. v. S.T.O. AhmedabadI and others reported in (1974) 4 SCC 739. Referring to the judgments cited on behalf of the respondents no. 2 and 3, he submitted that facts in all cases were different than in the present case and hence they are not applicable to the facts of the present case.

9. Having heard learned advocates for the respective parties and having considered the documents produced on record, short question which arises for consideration is as to whether the order passed by the Court below to refer the matter to arbitration under section 8 of the Act is in accordance with law or not ?

10. It would therefore be germane to refer to Section 8 of the Act which is amended by the Amending Act 3 of 2016. Provision of section 8 of the Act as prevailing prior to and subsequent to amendment made in the year 2016 is reproduced herenbelow :

8. Power to refer parties to 8. Power to refer parties to arbitration where there is arbitration where there is an an arbitration agreement arbitration agreement.

(1) A judicial authority (1) A judicial authority, before which an action is before which an action is brought in a matter, which brought in a matter which is is the subject of an the is the subject of an arbitration agreement, arbitration agreement, shall, shall, if a party so applies if a party to the arbitration not later than when agreement or any person submitting his first claiming through or under statement on the substance him, so applies not later of the dispute, refer the than the date of submitting parties to arbitration his first statement on the substance of the dispute, Page 11 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT then notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

11. The aforesaid amendment is dealt with by Supreme Court in case of Ameet Lalchand Shah (supra) as under :

"29. Amendment to Section 8 by the Act, 2015 are to be seen in the background of the recommendations set out in the 246 th Law Commission Report. In its 246th Report, Law Commission, while recommending the amendment to Section 8, made the following observation/comment: LC Comment "The words "such of the parties.... to the arbitration agreement" and proviso (i) of the amendment have been proposed in the context of the decision of the Supreme Court in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya and Anr. (2003) 5 SCC 531, in cases where all the parties to the dispute are not parties to the arbitration agreement, the reference is to be rejected only where such parties are necessary parties to the action - and not if they are only proper parties, or are otherwise legal strangers to the action and have been added only to circumvent the arbitration agreement. Proviso (ii) of the amendment contemplates a twostep process to be adopted by a judicial authority when considering an application seeking the reference of a pending action to arbitration. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority Page 12 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT concludes that the agreement does not exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void.

(2) The application referred to in subsection (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof or a copy accompanied by an affidavit calling upon the other party to produce the original arbitration agreement or duly certified thereof in circumstances where the original arbitration agreement or duly certified copy is retained only by the other party.

LC Comment:

In many transactions involving Government bodies and smaller market players, the original/duly certified copy of the arbitration agreement is only retained by the former. This amendment would ensure that the latter class is not prejudiced in any manner by virtue of the same" (Ref:

246th Law Commission Report, Government of India)

30. The language of amendment to Section 8 of the Act is clear that the amendment to Section 8(1) of the Act would apply notwithstanding any prayer, judgment, decree or order of the Supreme Court or any other Court. The High Court laid emphasis upon the word ".....unless it finds that primafacie no valid agreement exists". The High Court observed that there is no arbitration agreement between Astonfield and Rishabh. After referring to Sukanya Holdings and the amended Section 8 and Section 45 of the Act, the High Court pointed out the difference in language of Section 8 and Section 45 of the Act. The High Court distinguished between Sukanya Holdings and Chloro Controls, and observed that Sukanya Holdings was not overruled by Chloro Controls. In para (23) of the impugned judgment, it was held as under: (Ameet Lalchand case, SCC OnLine Del) "29. ......The change in Section 8 is that the Court is to in cases where arbitration agreements are relied on to refer the disputes in the suit, to arbitration, "notwithstanding any judgment, decree or 25 order of the Supreme Court or Page 13 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists". The Court is of opinion that Sukanya is not per se overruled, because the exercise of whether an arbitration agreement exists between the parties, in relation to the disputes that are the subject matter of the suit, has to be carried out. If there are causes of action that cannot be subjected to arbitration, or the suit involves adjudication of the role played by parties who are not signatories to the arbitration agreement, it has to continue because "prima facie no valid arbitration agreement exists" between such non parties and others, who are parties."

12. This Court (Coram : Biren Vaishnav,J.) in case of Shantilal Shivabhai Jadav v. Kaushikbhai Hiralal Siddhiwala reported in 2018(3) GLH 1 in similar facts has held as under :

"2. The facts in brief are as under:

2.1 The respondent no. 1 was the original plaintiff who had filed Regular Civil Suit No. 152 of 2015 (Special Civil Suit No. 113 of 2013) before the learned Senior Civil Judge, Bharuch. It was the case of the plaintiff (respondent no. 1 herein) that he and the petitioners were partners. They were carrying out an enterprise in the name of M/s.

Gajanand Enterprise. The partnership was entered into by a partnership deed dated 01.08.1997. The partnership was mainly carrying out the business of dealing in purchase of lands, plotting of such lands, carrying out construction on such plots and selling and/or leasing such constructions. The dispute was regarding a plot of land at Zadeshwar. It was the case of the plaintiff that the partners had purchased the land in the name of the plaintiff and had built "Gajanand Complex" which had shops and godowns. The partners were dealing in selling such shops and godowns as a part of their partnership business.

2.2 It was the case of the plaintiff that he would execute the agreement to sell and the sale deed on behalf of the partnership firm and that the partners - the defendants no.

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1 and 2 (petitioners herein ) had no independent right of sale. It was the case of the plaintiff that the defendant no. 4 who was the motherinlaw of the defendant no. 3 and the mother of defendant no. 2, and therefore being related, had entered into a transaction of sale by a sale deed dated 19.12.2009. The shops of the Gajanand Complex were fraudulently and without the knowledge of the plaintiff sold by the defendants no. 2 and 3 - the partners to the defendant no. 4. Such bogus transaction of sale were entered into by the partners - defendants no. 2 and 3 because it was they who maintained the accounts of the partnership and had custody of all the documents.

2.3 Since from the year 2010 there was a difference/dispute between the partners with regard to maintenance of accounts, notice was issued by the plaintiff to dissolve the partnership which was a partnership at will. The plaintiff therefore alleged that the sale deed entered into by and between the defendants no. 2 and 3 in favour of defendant no. 4 was entered into by the defendants no. 2 and 3 by virtue of a fraudulent transaction of which the plaintiff was unaware of. Such sale deeds were entered into without his consent. The plaint therefore apart from claiming a right to accounts of the partnership also categorically stated that though the defendant no. 4 was not a partner, he was a necessary party and was joined as it was found that the defendants no. 2 and 3 with a fraudulent intention had alienated the properties in favour of the defendant no. 4. The cause of action had therefore arisen when the plaintiff issued a notice dated 14.09.2010 for dissolution of the partnership which was, according to the plaintiff, a partnership at will.

2.4 The reliefs therefore that the plaintiffs sought were three main reliefs (I) That the partnership namely M/s. Gajanand Enterprise be dissolved after taking accounts and distributing the profit share in favour of the plaintiff and a decree of dissolution be so passed (II) That the property at Zadeshwar namely Gajanand Complex which had shops and godowns may not be dealt with by the defendants by way of sale, mortgage or rent and that since it was a property of the partnership the defendants be restrained from interfering with the possession of such property and further be restrained from transferring such Page 15 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT properties (III) That the sale deed entered into by the defendants no. 2 and 3 in favour of the defendant no. 4 on 17.12.2009 be declared as null and void, illegal, unenforceable and a further declaration that such a sale is not binding on the partnership. Further declaration was prayed that the defendant no. 5 i.e. the SubRegistrar of the revenue office be restrained from registering the sale deed in any manner whatsoever.

2.5 This accordingly was the suit that was filed by the respondent no. 1 before the Court. The present petitioners filed an application under Section 8(2) of the Arbitration Act at Ex. 23. In such application, it was the case of the petitioners - defendants no. 1, 2 and 3 that the partnership was at will; that one of the clauses of the partnership deed contained an arbitration clause that in the event if there was a dispute with regard to the accounts of the partnership, such dispute could be resolved by appointing arbitrators. Based on this clause, it was the case of the petitioners that the dispute which was the part of the present suit between the parties should be referred to arbitration.

2.6 It was under this application that the impugned order was passed by the learned Judge on 05.05.2016, dismissing the application of the petitioners. The learned trial Court dismissed the application essentially on three counts (i) That the applicants had filed the application under Section 8(2) of the Arbitration Act without producing the original arbitration agreement or a certified copy thereof. The original partnership deed was not filed which contained the arbitration agreement nor was a duly certified copy thereof produced. Considering the mandate of Section 8(2) of the Act, the application deserved to be dismissed on failure to comply with such provision. (ii) That the partnership was a partnership at will. That it was dissolved by a notice dated 14.09.2010 and therefore once the partnership is dissolved, on the receipt of such notice, the agreement of partnership deed is no longer in existence and therefore the application to appoint an arbitrator, the agreement under which he was sought to be appointed being dissolved, the application deserved to be rejected.

(iii) The third ground which is a major bone of contention between the parties in the present proceedings was that Page 16 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT the trial Court held that the matter involved in the suit was a suit for a relief of declaration and perpetual injunction. Looking to the reliefs prayed for by the plaintiff, it could not be said that the suit was plainly relating to one of furnishing accounts but also was against the defendants no. 4 and 5 who were parties to the partnership agreement and a relief was prayed for cancellation of sale deeds/registered documents. This dispute was not within the domain of the arbitrator as it was beyond the matter of arbitration and therefore the application under Section 8(2) of the Act was not maintainable.

xxx

6. Keeping in view the averments in the plaint and the reliefs sought, it was a relief akin to the relief or the prayer claimed under Section 31 of the Specific Relief Act. Clearly, it was not a matter within the domain of the arbitrator. It is in this context that the judgement in the case of Booz Allen (supra) needs to be considered. In a suit filed by one of the parties to the arbitration agreement, if the defendant like the present petitioner, files an application for arbitration, the Court will have to decide whether all the parties to the suit are parties to the arbitration agreement. That whether the disputes are the subject matter of the suits and whether such subject matter falls within the scope of arbitration and whether the reliefs sought are those which are possible of arbitration. It is a well recognised principle that non arbitrable disputes are disputes relating to rights and liabilities which give rise to or arise out of criminal offences. Not all matters are capable of being referred to arbitration. Reading the averments in the plaint and even the notice that the plaintiff issued for dissolution of partnership, it was a specific averment made in the notice dated 14.09.2010 that the defendants had entered into transactions and executed bogus sale deeds giving rights in favour of third parties which was an act revealing criminal complicity for which they were liable to be punished under the penal laws. Therefore, right from the beginning it was the case of the plaintiff that the dispute which are relating to the rights and liabilities of the parties could result into criminal liabilities.

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7. It is in this context that the decision of the Supreme Court in the case of Sukanya Holdings (supra) needs to be considered. A suit in order to be arbitrable should be a suit in respect of a matter which the parties have agreed to refer and which comes within the ambit of arbitration agreement. In a suit as to a matter which lies outside the arbitration agreement and is also between some of the parties who are not parties to the agreement, there is no question of application of Section 8 of the Act. In my opinion, therefore, when the facts as averred in the plaint are seen in context of the reliefs claimed against the defendants no. 4 and 5 the suit is clearly not in respect of a matter which can be referred to arbitration as the defendant no. 4 and 5 are not parties to the arbitration agreement.

7.1 Though Mr. Maulik Shah has relied on a decision of the Supreme Court in the case of Ameet Lalchand Shah (supra), which according to him, distinguishes the judgment rendered in Sukanya Holdings (supra), appreciation of facts in the case of Ameet Lalchand Shah (supra) would suggest that all the contracting parties though had separate agreements, they were connected to a main agreement which interconnection obliged them to be amenable to an arbitration clause. The question therefore was answered by the Supreme Court in the context of the interconnected dispute between the parties arising out of a contract though not between the signatories to the arbitration agreement but which was integrally connected with the commissioning of land which was the focus of the contract. Mr. Anshul Shah, learned advocate appearing on behalf of the respondent therefore is right in contending that Sukanya Holdings (supra) still holds the field and the amendment to the Arbitration Act as contended to apply to the other party which is discussed in Ameet Lalchand (supra), would not apply in the context of the facts on hand. Secondly, apparent and serious allegations of fraud have been made which is a virtual case of criminal offence revealing complicated allegations of fraud which can only be decided by a Civil Court. It is in this context that Mr. Anshul Shah relied on paragraph 31 of the decision in Ameet Lalchand (supra).

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7.2 That Sukanya Holdings (supra) still holds the field is evident from the discussion in the case of Amin Associates (supra) rendered by the Division Bench of this Court. This Court while discussing the judgement in the case of Sukanya Holdings (supra) has categorically held that once an application is filed under Section 8 of the Act, the approach of the Civil Court should be not to see whether the Court has jurisdiction. It should see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. Once it is brought to the notice of the Court that its jurisdiction has been taken away in terms of the provisions prescribed under a special statute, the Civil Court should first see whether there is ouster of jurisdiction in terms. When there are serious allegations of fraud, the Division Bench has held that they are to be treated as non arbitrable and it is only the Civil Court which should decide such matters.

xxx

9. Looking to the aforesaid clear and unequivocal proposition of law, when applied to the facts of the case, what emerges is that the plaintiff has approached this Court for a relief not only based on the partnership deed against the defendants no. 1 to 3 but also against the defendants no. 4 and 5 who are not partners. A declaration and a direction is sought to cancel the sale deed on the ground of the allegations of fraud. A relief that is sought is one under Section 31(2) of the Specific Relief Act. The dispute, therefore, is evidently not a one which is a matter which falls within Arbitration Act and it is therefore best left for the civil Court to decide.

xxx

11. With regard to the question of the applicability of an arbitration clause to a partnership which is dissolved and whether such an arbitration clause ceases to exist on such resolution need to be answered because the dispute involved in the suit is a matter not within the domain of the arbitrator but the parties involved, namely the defendants no. 4 and 5 who are not parties to the agreement and therefore even otherwise the arbitration clause would not Page 19 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT apply to them because they are not parties bound by the agreement. An independent relief of declaration under Section 31(2) of Specific Relief Act is sought by the plaintiff against them which is not arbitrable. Particularly in view of the serious allegations of fraud made, the only remedy is that of a civil suit. So the question therefore whether dissolution of the deed would make the arbitration clause non existent is not a question which needs to be answered on the facts of the case."

13. It is contended on part of the petitioner that a person claiming through or under him desire to have arbitration they must move an application under section 8 of the Act. However, if the party to the agreement has transferred or assigned his interest in favour of third party, in that case, person claiming through or under such person may agree for arbitration for disputes concerning them. It was therefore submitted that respondents no. 10 to 18 are not concerned with disputes relating to the firm and the accounts as their concern is only with regard to dispute relating to sale deed in their favour and therefore, they did not apply for arbitration under section 8 for referring the disputes to arbitration. It was therefore, submitted that respondent no.3 and 6 to 9 do not have authority to agree for referring the dispute on behalf of respondents no. 10 to

18. Reliance was placed on the decision of Apex Court in case of Booz Allen & Hamilton Inc (supra) wherein the Apex Court with regard to question whether the subject matter of the suit is "arbitrable" i.e. capable of being adjudicated by a private forum (Arbitration Tribunal) and whether the High Court ought to have referred the parties to arbitration under section 8 of the Act held as under :

"32. The nature and scope of issues arising for consideration in an application under section 11 of the Act Page 20 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT for appointment of arbitrators, are far narrower than those arising in an application under section 8 of the Act, seeking reference of the parties to a suit to arbitration. While considering an application under section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of `arbitrability' or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under section 34 of the Act, relying upon subsection 2(b)(i) of that section.

But where the issue of `arbitrability' arises in the context of an application under section 8 of the Act in a pending suit, all aspects of arbitrability have to be decided by the court seized of the suit, and cannot be left to the decision of the Arbitrator. Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application under Section 8 of the Act, to refer the parties to arbitration, if the subject matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or Tribunal.

34, . The term `arbitrability' has different meanings in different contexts. The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under :

(i) whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts).

(ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated Page 21 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the `excepted matters' excluded from the purview of the arbitration agreement.

(iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the arbitral tribunal, or whether they do not arise out of the statement of claim and the counter claim filed before the arbitral tribunal. A dispute, even if it is capable of being decided by arbitration and falling within the scope of arbitration agreement, will not be `arbitrable' if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such joint list of disputes, does not form part of the disputes raised in the pleadings before the Arbitral Tribunal.

35. Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or noncontractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of arbitral tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the Legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by a public fora (courts and Tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.

36. The well recognized examples of nonarbitrable disputes are : (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial Page 22 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.

37. It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and Judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide : Black's Law Dictionary).

38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.

39. The Act does not specifically exclude any category of disputes as being not arbitrable. Sections 34(2)(b) and 48(2) of the Act however make it clear that an arbitral award will be set aside if the court finds that "the subjectmatter of the dispute is not capable of settlement by arbitration under the law for the time being in force."

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40. Russell on Arbitration [22nd Edition] observed thus [page 28, para 2.007] :

"Not all matter are capable of being referred to arbitration. As a matter of English law certain matters are reserved for the court alone and if a tribunal purports to deal with them the resulting award will be unenforceable. These include matters where the type of remedy required is not one which an arbitral tribunal is empowered to give."

The subsequent edition of Russell [23rd Edition, page 470, para 8.043] ] merely observes that English law does recognize that there are matters which cannot be decided by means of arbitration.

41. Mustill and Boyd in their Law and Practice of Commercial Arbitration in England [2nd 1989 Edition], have observed thus :

"In practice therefore, the question has not been whether a particular dispute is capable of settlement by arbitration, but whether it ought to be referred to arbitration or whether it has given rise to an enforceable award. No doubt for this reason, English law has never arrived at a general theory for distinguishing those disputes which may be settled by arbitration from those which may not. .......

Second, the types of remedies which the arbitrator can award are limited by considerations of public policy and by the fact that he is appointed by the parties and not by the state. For example, he cannot impose a fine or a term of imprisonment, commit a person for contempt or issue a writ of subpoena; nor can he make an award which is binding on third parties or affects the public at large, such as a judgment in rem against a ship, an assessment of the rateable value of land, a divorce decree, a windingup order...." [emphasis supplied] Mustill and Boyd in their 2001 Companion Volume to the 2nd Edition of commercial Arbitration, observe thus (page

73) :

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"Many commentaries treat it as axiomatic that `real' rights, that is rights which are valid as against the whole world, cannot be the subject of private arbitration, although some acknowledge that subordinate rights in personam derived from the real rights may be ruled upon by arbitrators. The conventional view is thus that, for example, rights under a patent licence may be arbitrated, but the validity of the underlying patent may not.....An arbitrator whose powers are derived from a private agreement between A and B plainly has no jurisdiction to bind anyone else by a decision on whether a patent is valid, for noone else has mandated him to make such a decision, and a decision which attempted to do so would be useless."

(Emphasis supplied)

42. The distinction between disputes which are capable of being decided by arbitration, and those which are not, is brought out in three decisions of this Court. In Haryana Telecom Limited vs. Sterlite Industries India Ltd 1999 (5) SCC 688, this Court held :

"4. Subsection (1) of Section 8 provides that the judicial authority before whom an action is brought in a matter, will refer the parties to arbitration the said matter in accordance with the arbitration agreement. This, however, postulates, in our opinion, that what can be referred to the arbitrator is only that dispute or matter which the arbitrator is competent or empowered to decide.

5. The claim in a petition for winding up is not for money. The petition filed under the Companies Act would be to the effect, in a matter like this, that the company has become commercially insolvent and, therefore, should be wound up. The power to order winding up of a company is contained under the Companies Act and is conferred on the court. An arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company. The matter which is pending before the High Court in which the application was filed by the petition herein was relating to winding up of the Company. That could obviously not be referred to arbitration and, therefore, the High Court, in our opinion was right in rejecting the application." (Emphasis supplied) Page 25 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT

43. A different perspective on the issue is found in Olympus Superstructures Pvt Ltd vs. Meena Vijay Khetan and others 1999 (5) SCC 651, where this Court considered whether an arbitrator has the power and jurisdiction to grant specific performance of contracts relating to immovable property. This Court held :

"34. We are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree with a view to shorten litigation in regular courts to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immovable property."

44. Approving the decision of the Calcutta High Court in Keventer Agro Ltd vs. Seegram Comp. Ltd (Apo 498 of 1997 etc. dated 27.1.1998), this Court held that disputes relating to specific performance of a contract can be referred to arbitration and Section 34(2)(b)(i) will not be attracted. This Court held :

"36. Further, as pointed in the Calcutta case, merely because there is need for exercise of discretion in case of specific performance, it cannot be said that only the civil court can exercise such a discretion. In the above case, Ms. Ruma Pal, J. observed:

"...merely because the sections of the Specific Relief Act confer discretion on courts to grant specific performance of a contract does not means that parties cannot agree that the discretion will be exercised by a forum of their choice. If the converse were true, then whenever a relief is dependent upon the exercise of discretion of a court by statute e.g. the grant of interest or costs, parties should be precluded from referring the dispute to arbitration."

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This Court further clarified that while matters like criminal offences and matrimonial disputes may not be subject matter of resolution by arbitration, matters incidental thereto may be referred to arbitration :(Meena Vijay Khetan case SCC p. 669, para35) "35. Reference is made there to certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to arbitration. It has, however, been held that if in respect of facts relating to a criminal matter, (say) physical injury, if there is a right to damages for personal injury, then such a dispute can be referred to arbitration (Keir v. Leeman) (1846) 9 Q.B, 371. Similarly, it has been held that a husband and wife may, refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter ...."

45. In Chiranjilal Shrilal Goenka vs. Jasjit Singh and Ors. 1993 (2) SCC 507 this court held that grant of probate is a judgment in rem and is conclusive and binding not only the parties but also the entire world; and therefore, courts alone will have exclusive jurisdiction to grant probate and an arbitral tribunal will not have jurisdiction even if consented concluded to by the parties to adjudicate upon the proof or validity of the will."

14. Reliance was placed by the petitioner on the decision of the Supreme Court in case of The Installment Supply Ltd. (supra) to contend that dispute as to "right in rem" cannot be subject matter of arbitration. It was submitted that in facts of the case there is no statement in writing by respondents no. 10 to 18 that they are supporting the order of the trial Court and they are agreeable for arbitration and by not challenging the order, does not mean that they have accepted the arbitration and in absence of any application filed by all the respondents Page 27 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT under section 8 of the Act, the Court below could not have referred the matter to arbitration under section 8 of the Act.

15. Reliance was placed by the petitioner on the decision of the Apex Court in case of State of Goa v. Praveen Enterprises (supra), wherein the Apex Court has under as under :

"41. The position emerging from above discussion may be summed up as follows:

(a) Section 11 of the Act requires the Chief Justice or his designate to either appoint the arbitrator/s or take necessary measures in accordance with the appointment procedure contained in the arbitration agreement. The Chief Justice or the designate is not required to draw up the list of disputes and refer them to arbitration. The appointment of Arbitral Tribunal is an implied reference in terms of the arbitration agreement.

(b) Where the arbitration agreement provides for referring all disputes between the parties (whether without any exceptions or subject to exceptions), the arbitrator will have jurisdiction to entertain any counter claim, even though it was not raised at a stage earlier to the stage of pleadings before the Arbitrator.

(c) Where however the arbitration agreement requires specific disputes to be referred to arbitration and provides that the arbitrator will have the jurisdiction to decide only the disputes so referred, the arbitrator's jurisdiction is controlled by the specific reference and he cannot travel beyond the reference, nor entertain any additional claims or counter claims which are not part of the disputes specifically referred to arbitration.

The position in this case

42. The arbitration clause in this case contemplates all disputes being referred to arbitration by a sole arbitrator. It refers to an Appointing Authority (Chief Engineer, CPWD), whose role is only to appoint the arbitrator. Though the Page 28 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT arbitration clause requires the party invoking the arbitration to specify the dispute/s to be referred to arbitration, it does not require the appointing authority to specify the disputes or refer any specific disputes to arbitration nor requires the Arbitrator to decide only the referred disputes. It does not bar the arbitrator deciding any counter claims. In the absence of agreement to the contrary, it has to be held that the counter claims by the appellant were maintainable and arbitrable having regard to section 23 read with section 2(9) of the Act."

16. In view of the aforesaid position of law, it would be necessary to refer to the decision of Apex Court in case of Mayavati Trading Private Limited (supra), wherein it is held as under :

"6. Thus, it can be seen that after the amendment Act of 2019, Section 11(6A) has been omitted because appointment of arbitrators is to be done institutionally, in which case the Supreme Court or the High Court under the old statutory regime are no longer required to appoint arbitrators and consequently to determine whether an arbitration agreement exists.

7. Prior to Section 11(6A), this Court in several judgments beginning with SBP & Co. vs. Patel Engineering Ltd. and Anr. (2005) 8 SCC 618 has held that at the stage of a Section 11(6) application being filed, the Court need not merely confine itself to the examination of the existence of an arbitration agreement but could also go into certain preliminary questions such as stale claims, accord and satisfaction having been reached etc.

8. In ONGC Mangalore Petrochemicals Limited vs. ANS Constructions Limited and another, (2018) 3 SCC 373, this Court in a case which arose before the insertion of Section 11(6A) dismissed a Section 11 petition on the ground that accord and satisfaction had taken place in the following terms: Page 29 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT "31. Admittedly, nodues certificate was submitted by the contractee company on 2192012 and on their request completion certificate was issued by the appellant contractor. The contractee, after a gap of one month, that is, on 24102012, withdrew the no dues certificate on the grounds of coercion and duress and the claim for losses incurred during execution of the contract site was made vide letter dated 121 2013, i.e. after a gap of 3 ½ (three andahalf) months whereas the final bill was settled on 10102012.When the contractee accepted the final payment in full and final satisfaction of all its claims, there is no point in raising the claim for losses incurred during the execution of the contract at a belated stage which creates an iota of doubt as to why such claim was not settled at the time of submitting final bills that too in the absence of exercising duress or coercion on the contractee by the appellant contractor. In our considered view, the plea raised by the contractee company is bereft of any details and particulars, and cannot be anything but a bald assertion. In the circumstances, there was full and final settlement of the claim and there was really accord and satisfaction and in our view no arbitrable dispute existed so as to exercise power under Section 11 of the Act. The High Court was not, therefore, justified in exercising power under Section 11 of the Act."

9. The 246th Law Commission Report dealt with some of these judgments and felt that at the stage of a Section 11(6) application, only "existence" of an arbitration agreement ought to be looked at and not other preliminary issues. In a recent judgment of this Court, namely, Garware Wall Ropes Ltd. vs. Coastal Marine Constructions & Engineering Ltd., (2019 SCC OnLine SC 515), this Court adverted to the said Law Commission Report and held: "8. The case law under Section 11(6) of the Arbitration Act, as it stood prior to the Amendment Act, 2015, has had a chequered history.

9. In Konkan Railway Corporation Ltd. v. Mehul Construction Co., (2000) 7 SCC 201 ["Konkan Railway I"], it was held that the powers of the Chief Justice under Section 11(6) of the 1996 Act are administrative in nature, and that the Chief Justice or his designate does not act as a judicial authority while appointing an arbitrator. The Page 30 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT same view was reiterated in Konkan Railway Corporation Ltd. v. Rani Construction (P) Ltd., (2002) 2 SCC 388 ["Konkan Railway 2"].

10. However, in SBP & Co. (supra), a sevenJudge Bench overruled this view and held that the power to appoint an arbitrator under Section is judicial and not administrative. The conclusions of the sevenJudge Bench were summarised in paragraph 47 of the aforesaid judgment. We are concerned directly with subparagraphs (i), (iv), and

(xii), which read as follows:

"(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.

(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the designated Judge would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the designated Judge.

(xii) The decision in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. [(2002) 2 SCC 388] is overruled."

11. This position was further clarified in Boghara Polyfab (supra) as follows:

"22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. [(2005) 8 SCC 618]. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Page 31 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.

22.1. The issues (first category) which the Chief Justice/his designate will have to decide are:

(a) Whether the party making the application has approached the appropriate High Court.

(b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement.

22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:

(a) Whether the claim is a dead (longbarred) claim or a live claim.

(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mu tual rights and obligation or by receiving the final payment without objection.

22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:

(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).

(ii) Merits or any claim involved in the arbitration."

12. As a result of these judgments, the door was wide open for the Chief Justice or his designate to decide a large number of preliminary aspects which could otherwise have been left to be decided by the arbitrator under Section 16 of the 1996 Act. As a result, the Law Commission of India, by its Report No. 246 submitted in August 2014, suggested that various sweeping changes be made in the 1996 Act. Insofar as SBP & Co. (supra) and Boghara Polyfab (supra) are concerned, the Law Commission Page 32 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT examined the matter and recommended the addition of a new subsection, namely, subsection (6A) in Section 11. In so doing, the Law Commission recommendations which are relevant and which led to the introduction of Section 11(6A) are as follows:

"28. The Act recognizes situations where the intervention of the Court is envisaged at the prearbitral stage, i.e. prior to the constitution of the arbitral tribunal, which includes sections 8, 9, 11 in the case of Part I arbitrations and section 45 in the case of Part II arbitrations. Sections 8, 45 and also section 11 relating to "reference to arbitration"

and "appointment of the tribunal", directly affect the constitution of the tribunal and functioning of the arbitral proceedings. Therefore, their operation has a direct and significant impact on the "conduct" of arbitrations. Section 9, being solely for the purpose of securing interim relief, although having the potential to affect the rights of parties, does not affect the "conduct" of the arbitration in the same way as these other provisions. It is in this context the Commission has examined and deliberated the working of these provisions and proposed certain amendments.

29. The Supreme Court has had occasion to deliberate upon the scope and nature of permissible prearbitral judicial intervention, especially in the context of section 11 of the Act. Unfortunately, however, the question before the Supreme Court was framed in terms of whether such a power is a "judicial" or an "administrative" power which obfuscates the real issue underlying such nomenclature/description as to the scope of such powers i.e. the scope of arguments which a Court (Chief Justice) will consider while deciding whether to appoint an arbitrator or not i.e. whether the arbitration agreement exists, whether it is null and void, whether it is voidable etc.; and which of these it should leave for decision of the arbitral tribunal. the nature of such intervention i.e. would the Court (Chief Justice) consider the issues upon a detailed trial and whether the same would be decided finally or be left for determination of the arbitral tribunal.

30. After a series of cases culminating in the decision in SBP v. Patel Engineering, (2005) 8 SCC 618, the Supreme Page 33 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT Court held that the power to appoint an arbitrator under section 11 is a "judicial" power. The underlying issues in this judgment, relating to the scope of intervention, were subsequently clarified by RAVEENDRAN J in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd., (2009) 1 SCC 267, where the Supreme Court laid down as follows "22.1. The issues (first category) which Chief Justice/his designate will have to decide are:

(a) Whether the party making the application has approached the appropriate High Court?

(b) Whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to such an agreement?

22.2. The issues (second category) which the Chief Justice/his designate may choose to decide are:

(a) Whether the claim is a dead (long barred) claim or a live claim?

(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection?

22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral tribunal are:

(a) Whether a claim falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration)?

(b) Merits of any claim involved in the arbitration."

31. The Commission is of the view that, in this context, the same test regarding scope and nature of judicial intervention, as applicable in the context of section 11, should also apply to sections 8 and 45 of the Act since the scope and nature of judicial intervention should not change upon whether a party (intending to defeat the arbitration agreement) refuses to appoint an arbitrator in terms of the arbitration agreement, or moves a proceeding Page 34 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT before a judicial authority in the face of such an arbitration agreement.

32. In relation to the nature of intervention, the exposition of the law is to be found in the decision of the Supreme Court in Shin Etsu Chemicals Co. Ltd. v. Aksh Optifibre, (2005) 7 SCC 234, (in the context of section 45 of the Act), where the Supreme Court has ruled in favour of looking at the issues/controversy only prima facie.

33. It is in this context, the Commission has recommended amendments to sections 8 and 11 of the Arbitration and Conciliation Act, 1996. The scope of the judicial intervention is only restricted to situations where the Court/Judicial Authority finds that the arbitration agreement does not exist or is null and void. In so far as the nature of intervention is concerned, it is recommended that in the event the Court/Judicial Authority is prima facie satisfied against the argument challenging the arbit ration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void. In the event that the judicial authority refers the dispute to arbitration and/or appoints an arbitrator, under sections 8 and 11 respectively, such a decision will be final and nonappealable. An appeal can be maintained under section 37 only in the event of refusal to refer parties to arbitration, or refusal to appoint an arbitrator."

13. Pursuant to the Law Commission recommendations, Section 11(6A) was introduced first by Ordinance and then by the Amendment Act, 2015. The Statement of Objects and Reasons which were appended to the Arbitration and Page 35 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT Conciliation (Amendment) Bill, 2015 which introduced the Amendment Act, 2015 read as follows:

"STATEMENT OF OBJECTS AND REASONS

6. It is proposed to introduce the Arbitration and Conciliation (Amendment) Bill, 2015, to replace the Arbitration and Conciliation (Amendment) Ordinance, 2015, which inter alia, provides for the following, namely:

(i) to amend the definition of "Court" to provide that in the case of international commercial arbitrations, the Court should be the High Court;

(ii) to ensure that an Indian Court can exercise jurisdiction to grant interim measures, etc., even where the seat of the arbitration is outside India;

(iii) an application for appointment of an arbitrator shall be disposed of by the High Court or Supreme Court, as the case may be, as expeditiously as possible and an endeavour should be made to dispose of the matter within a period of sixty days;

(iv) to provide that while considering any application for appointment of arbitrator, the High Court or the Supreme Court shall examine the existence of a prima facie arbitration agreement and not other issues;

(v) to provide that the arbitral tribunal shall make its award within a period of twelve months from the date it enters upon the reference and that the parties may, however, extend such period up to six months, beyond which period any extension can only be granted by the Court, on sufficient cause;

(vi) to provide that a model fee Schedule on the basis of which High Courts may frame rules for the purpose of determination of fees of arbitral tribunal, where a High Court appoints arbitrator in terms of section 11 of the Act;

(vii) to provide that the parties to dispute may at any stage agree in writing that their dispute be resolved through fast track procedure and the award in such cases shall be made within a period of six months;

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(viii) to provide for neutrality of arbitrators, when a person is approached in connection with possible appointment as an arbitrator;

(ix) to provide that application to challenge the award is to be disposed of by the Court within one year.

7. The amendments proposed in the Bill will ensure that arbitration process becomes more userfriendly, cost effective and lead to expeditious disposal of cases.

14. A reading of the Law Commission Report, together with the Statement of Objects and Reasons, shows that the Law Commission felt that the judgments in SBP & Co. (supra) and Boghara Polyfab (supra) required a relook, as a result of which, so far as Section 11 is concerned, the Supreme Court or, as the case may be, the High Court, while con sidering any application under Section 11(4) to 11(6) is to confine itself to the examination of the existence of an arbitration agreement and leave all other preliminary issues to be decided by the arbitrator."

10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgment as Section 11(6A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment Duro Felguera, S.A. (supra))

17. Delhi High Court in case of RV Solutions Pvt. Ltd.(supra) has held as under :

"8. Hence, the Court before whom an action is brought may refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. The Supreme Court in A.Ayyasamy vs. A.Paramasivam and Ors., AIR 2016 SC 4675 has held that the above provision con tains a positive mandate that obligates the judicial au Page 37 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT thority to refer the parties to arbitration in terms of the ar bitration agreement. The Supreme Court held as follows: "26. The Arbitration and Conciliation Act, 1996 does not in specific terms exclude any category of disputescivil or commercialfrom arbitrability. Intrinsic legislative material is in fact to the contrary. Section 8 contains a mandate that where an action is brought before a judicial authority in a matter which is the subject of an arbitration agreement, the parties shall be referred by it to arbitration, if a party to or a person claiming through a party to the arbitration agreement applies not later than the date of submitting the first statement on the substance of the dispute. The only exception is where the authority finds prima facie that there is no valid arbitration agreement. Section 8 contains a positive mandate and obligates the judicial authority to refer parties to arbitration in terms of the arbitration agreement. While dispensing with the element of judicial discretion, the statute imposes an affirmative obligation on every judicial authority to hold down parties to the terms of the agreement entered into between them to refer disputes to arbitration. Article 8 of the Uncitral Model Law enabled a court to decline to refer parties to arbitration if it is found that the arbitration agreement is null and void, inoperative or incapable of being performed. Section 8 of the 1996 Act has made a departure which is indicative of the wide reach and ambit of the statutory mandate. Section 8 uses the expansive expression "judicial authority" rather than "court" and the words "unless it finds that the agreement is null and void, inoperative and incapable of being performed" do not find place in Section

8."

10. Over passage of time the law regarding reference to arbitraton has evolved. Even non signatories have now been referred to arbitration. In this context reference may be had to some of the recent judgments of the Supreme Court. In Chloro Controls India Private Limited vs. Severn Trent Water Purification Inc.& Ors., (2013) 1 SCC 641 the Supreme Court held as follows: "70. Normally, arbitration takes place between the persons who have, from the outset, been parties to both the Page 38 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT arbitration agreement as well as the substantive contract underlining (sic underlying) that agreement. But, it does occasionally happen that the claim is made against or by someone who is not originally named as a party. These may create some difficult situations, but certainly, they are not absolute obstructions to law/the arbitration agreement. Arbitration, thus, could be possible between a signatory to an arbitration agreement and a third party. Of course, heavy onus lies on that party to show that, in fact and in law, it is claiming "through" or "under" the signatory party as contemplated under Section 45 of the 1996 Act. Just to deal with such situations illustratively, reference can be made to the following examples in Law and Practice of Commercial Arbitration in England (2nd Edn.) by Sir Michael J. Mustill:

"1. The claimant was in reality always a party to the contract, although not named in it.

2. The claimant has succeeded by operation of law to the rights of the named party.

3. The claimant has become a party to the contract in substitution for the named party by virtue of a statutory or consensual novation.

4. The original party has assigned to the claimant either the underlying contract, together with the agreement to arbitrate which it incorporates, or the benefit of a claim which has already come into existence."

......

73. A nonsignatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subjectmatter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and Page 39 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT the court answers the same in the affirmative, the reference of even nonsignatory parties would fall within the exception aforediscussed.

.....

102. Joinder of nonsignatory parties to arbitration is not unknown to the arbitration jurisprudence. Even the ICCA's Guide to the Interpretation of the 1958 New York Convention also provides for such situation, stating that when the question arises as to whether binding a nonsignatory to an arbitration agreement could be read as being in conflict with the requirement of written agreement under Article I of the Convention, the most compelling answer is "no" and the same is supported by a number of reasons.

103. Various legal bases may be applied to bind a non signatory to an arbitration agreement:

103.1 The first theory is that of implied consent, third party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities.

103.2 The second theory includes the legal doctrines of agent principal relations, apparent authority, piercing of veil (also called "the alter ego"), joint venture relations, succession and estoppel. They do not rely on the parties' intention but rather on the force of the applicable law."

11. Similarly, in Cheran Properties Limited vs. Kasturi & Sons Limited and Ors., 2018 SCC Online SC 431 the Supreme Court held as follows: "26. The Court held that it would examine the facts of the case on the touchstone of the existence of a direct relationship with a party which is a signatory to the arbitration agreement, a „direct commonality‟ of the subject matter and on whether the agreement between the parties is a part of a composite transaction:

"A nonsignatory or third party could be subjected to Page 40 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT arbitration without their prior consent, but this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subjectmatter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court answers the same in the affirmative, the reference of even no signatory parties would fall within the exception aforediscussed."

27. Explaining the legal basis that may be applied to bind a non signatory to an arbitration agreement, this Court held thus:

"The first theory is that of implied consent, thirdparty beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities.

The second theory includes the legal doctrines of agent principal relations, apparent authority, piercing of veil (also called "the alter ego"), joint venture relations, succession and estoppel. They do not rely on the parties' intention but rather on the force of the applicable law. ..

We have already discussed that under the group of companies doctrine, an arbitration agreement entered into by a company within a group of companies can bind its nonsignatory affiliates, if the circumstances demonstrate that the mutual intention of the parties was to bind both the signatory as well as the nonsignatory parties." .....

31. Does the requirement, as in Section 7, that an arbitration agreement be in writing exclude the possibility of binding third parties who may not be signatories to an Page 41 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT agreement between two contracting entities? The evolving body of academic literature as well as adjudicatory trends indicate that in certain situations, an arbitration agreement between two or more parties may operate to bind other parties as well. Redfern and Hunter explain the theoretical foundation of this principle:

"..The requirement of a signed agreement in writing, however, does not altogether exclude the possibility of an arbitration agreement concluded in proper form between two or more parties also binding other parties. Third parties to an arbitration agreement have been held to be bound by (or entitled to rely on) such an agreement in a variety of ways: first, by operation of the „group of companies‟ doctrine pursuant to which the benefits and duties arising from an arbitration agreement may in certain circumstances be extended to other members of the same group of companies; and, secondly, by operation of general rules of private law, principally on assignment, agency, and succession."

12. Similarly, in Ameet Lalchand Shah & Ors. vs. Rishabh Enterprises & Another, 2018, SCCOnline SC 487 the Supreme Court held as follows: "35. Under the Act, an arbitration agreement means an agreement which is enforceable in law and the jurisdiction of the arbitrator is on the basis of an arbitration clause contained in the arbitration agreement. However, in a case where the parties alleged that the arbitration agreement is vitiated on account of fraud, the Court may refuse to refer the parties to arbitration. In Ayyasamy case, this Court held that mere allegation of fraud is not a ground to nullify the effect of arbitration agreement between the parties and arbitration clause need not be avoided and parties can be relegated to arbitration where merely simple allegations of fraud touched upon internal affairs of parties is levelled. Justice A.K. Sikri observed that it is only in those cases where the Court finds that there are serious allegations of fraud which make a virtual case of criminal offence and where there are complicated allegations of fraud then it becomes necessary that such complex issues can be decided only by the civil court on the appreciation of evidence that needs to be produced. In Page 42 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT para (25) of Ayyasamy case, Justice Sikri held as under: "25.....Therefore, the inquiry of the Court, while dealing with an application under Section 8 of the Act, should be on the aforesaid aspect viz. whether the nature of dispute is such that it cannot be referred to arbitration, even if there is an arbitration agreement between the parties. When the case of fraud is set up by one of the parties and on that basis that party wants to wriggle out of that arbitration agreement, a strict and meticulous inquiry into the allegations of fraud is needed and only when the Court is satisfied that the allegations are of serious and complicated nature that it would be more appropriate for the Court to deal with the subjectmatter rather than relegating the parties to arbitration, then alone such an application under Section 8 should be rejected."

36. While concurring with Justice Sikri, Justice D.Y. Chandrachud pointed out that the duty of the Court is to impart "sense of business efficacy" to the commercial transactions pointing out that mere allegations of fraud were not sufficient to decline to refer the parties to arbitration. In para (48) of Ayyasamy case, Justice D.Y. Chandrachud held as under: "48. The basic principle which must guide judicial decisionmaking is that arbitration is essentially a voluntary assumption of an obligation by contracting parties to resolve their disputes through a private tribunal. The intent of the parties is expressed in the terms of their agreement. Where commercial entities and persons of business enter into such dealings, they do so with a knowledge of the efficacy of the arbitral process. The commercial understanding is reflected in the terms of the agreement between the parties. The duty of the court is to impart to that commercial understanding a sense of business efficacy."

(Underlining added)

13. As held by the Supreme Court in Cheran Properties Limited vs. Kasturi & Sons Limited and Ors.(surpa), the existence of a relationship between the parties, commonality of the subject matter and whether the agreement between the parties is a part of a composite Page 43 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT transaction have to be seen. A third party or a non signatory could be subjected to arbitration without his prior consent, though this would only be in exceptional cases. This would happen only when there is a direct relationship to the party signatory to the arbitration agreement, commonality of the subjectmatter and the agreement between the parties being a composite transaction.

14. In the present case, there is clearly commonality of facts which bind the defendants together. It is the own case of the plaintiff that the defendants have in collusion with each other in a mala fide and unlawful manner acted to cause loss and damages to the plaintiff. Defendants No. 1 to 4 are said to be the exemployees of the plaintiff. The said five defendants are said to have together caused loss and damages to the plaintiff. It is manifest that there is commonality of parties, commonalities of interest which would warrant that the matter be referred to arbitration. The objection of the plaintiff is without merit.

18. With regard to the allegations of fraud made by the petitioner is concerned, the same is dealt with by the Supreme Court in case of Rashid Raza (supra) as under :

"3. Having heard learned counsel for both the sides, it is clear that the law laid down in A. Ayyasamy's case is in paragraph 25 and not in paragraph 26. Paragraph 25 of the said judgment states as follows:

"25. In view of our aforesaid discussions, we are of the opinion that mere allegation of fraud simplicitor may not be a ground to nullify the effect of arbitration agreement between the parties. It is only in those cases where the Court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by civil court on the appreciation of the voluminous evidence that needs to be produced, the Court can sidetrack the agreement by dismissing application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication Page 44 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself. Reverse position thereof would be that where there are simple allegations of fraud touching upon the internal affairs of the party inter se and it has no implication in the public domain, the arbitration clause need not be avoided and the parties can be relegated to arbitration. While dealing with such an issue in an application under Section 8 of the Act, the focus of the Court has to be on the question as to whether jurisdiction of the Court has been ousted instead of focusing on the issue as to whether the Court has jurisdiction or not. It has to be kept in mind that insofar as the statutory scheme of the Act is concerned, it does not specifically exclude any category of cases as non arbitrable. Such categories of nonarbitrable subjects are carved out by the Courts, keeping in mind the principle of common law that certain disputes which are of public nature, etc. are not capable of adjudication and settlement by arbitration and for resolution of such disputes, Courts, i.e. public fora, are better suited than a private forum of arbitration. Therefore, the inquiry of the Court, while dealing with an application under Section 8 of the Act, should be on the aforesaid aspect, viz. whether the nature of dispute is such that it cannot be referred to arbitration, even if there is an arbitration agreement between the parties. When the case of fraud is set up by one of the parties and on that basis that party wants to wriggle out of that arbitration agreement, a strict and meticulous inquiry into the allegations of fraud is needed and only when the Court is satisfied that the allegations are of serious and complicated nature that it would be more appropriate for the Court to deal with the subject matter rather than relegating the parties to arbitration, then alone such an application under Section 8 should be rejected."

4. The principles of law laid down in this appeal make a dis tinction between serious allegations of forgery/fabrication in support of the plea of fraud as opposed to "simple allegations". Two working tests laid down in paragraph 25 are : (1) does this plea permeate the entire contract and above all, the agreement of arbitration, rendering it void, or (2) whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain.

Page 45 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT

5. Judged by these two tests, it is clear that this is a case which falls on the side of "simple allegations" as there is no allegation of fraud which would vitiate the partnership deed as a whole or, in particular, the arbitration clause concerned in the said deed. Secondly, all the allegations made which have been relied upon by the learned counsel appearing on behalf of the respondent, pertain to the affairs of the partnership and siphoning of funds therefrom and not to any matter in the public domain.

6. This being the case, we are of the view that the disputes raised between the parties are arbitrable and, hence, a Section 11 application under the Arbitration Act would be maintain able."

19. In facts of this case, there is no dispute that sole purpose and function of the partnership firm was to construct and sale the flat. Flats have been sold to respondents no. 10 to 18 by registered sale deed by the partnership firm through its authorised person. Said transactions are objected only by the petitioner on the ground that sale of flat is without consideration. Accordingly, the matter is of accounts of the partnership and therefore, the same is arbitrable in view of disputes raised by the petitioner by filing the Civil Suit and trial Court having referred the matter for arbitration under section 8 of the Act. Allegation of fraud are only made in the plaint to come out of the arbitration clause. However, in view of the aforesaid settled legal position, allegation of fraud do not permeate and do not relate to arbitration agreement rendering it void.

20. In view of aforesaid facts emerging from the record as well as the legal pronouncements made by various High Courts and the Apex Court, when there is an arbitration clause in the agreement dated 24th January, 2011, learned Judge was justified in referring the matter to the arbitration Page 46 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT under section 8 of the Act. The main argument of the petitioner is that as the respondents no. 10 to 18 are not the signatories to the partnership deed and have not preferred an application under section 8 of the Act, matter could not have been referred to arbitration. Such argument is without any basis in view of the fact that prayer clause of the suit filed by the petitioner as plaintiff would clearly affect the rights of respondents no. 10 to 18. Therefore, it cannot be said that respondents no. 10 to 18 are not at all concerned with the disputes raised by the petitioner. In view of the amendment of section 8 of the Act, respondents no. 10 to 18 would squarely be covered by term 'parties' as they were claiming through the partners of the partnership firm.

21. With regard to the plea that the case involves serious fraud made by the defendants and therefore, same cannot be referred to arbitration is concerned, the allegations of fraud levelled by the petitioner is not supported by any pleadings in the plaint to ascertain that the acts of the original defendants in the suit were such to affect the rights of the petitionerplaintiff and whether the acts were unauthorised or fraudulent as the petitioner plaintiff has not raised any objection with regard to power of attorney in favour of one of the partners in respect of matter which the parties have agreed to refer and which comes within the arbitration agreement and therefore, the same is required to be referred to arbitration. In view of decision of Apex Court in case of Ameet Lalchand Shah (supra) and in case of A. Ayayasamy (supra), which is later on interpreted in case of Rashid Raza (supra), mere allegation of fraud which do not Page 47 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020 C/SCA/16123/2017 CAV JUDGMENT relate to execution of the arbitration agreement would not render the arbitration agreement between the parties as void. In facts of the case, it cannot be said that the case of fraud set up by the petitioner, the Court is able to satisfy that the allegations are serious and complicated in nature that it would be more appropriate for the Court to deal with such matter rather than relegating the parties to arbitration. Therefore, the application filed for referring the matter for arbitration is rightly not rejected by the Court.

22. In view of above proposition of law laid down by the Apex Court as well as this Court, in the facts of the present case as the Civil Court has passed the impugned order for referring the matter to arbitration under section 8 of the Act is in accordance with law and there is no infirmity in the impugned order and therefore, it does not require any interference while exercising powers under Articles 226 and 227 of the Constitution of India.

23. In view of the foregoing reasons, petition being devoid of merits, same is accordingly dismissed. Rule is discharged. No order as to cost.

(BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 48 of 48 Downloaded on : Mon Jun 15 20:22:24 IST 2020

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