Gujarat High Court
Shantilal Shivabhai Jadav vs Kaushikbhai Hiralal Siddhiwala on 4 July, 2018
Equivalent citations: AIRONLINE 2018 GUJ 99
Author: Biren Vaishnav
Bench: Biren Vaishnav
C/SCA/9929/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 9929 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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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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SHANTILAL SHIVABHAI JADAV
Versus
KAUSHIKBHAI HIRALAL SIDDHIWALA
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Appearance:
MR MAULIK R SHAH(6385) for the PETITIONER(s) No. 1,2,3
AAYOG Y DOSHI(8519) for the RESPONDENT(s) No. 1
MR PRATIK P THAKKAR(6097) for the RESPONDENT(s) No. 2
MR ANSHUL SHAH, ADVOCATE FOR MR SP MAJMUDAR(3456) for the
RESPONDENT(s) No. 1
RULE SERVED(64) for the RESPONDENT(s) No. 3
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CORAM: HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 04/07/2018
ORAL JUDGMENT
1. The present petition, under Article 227 of the Constitution of India, has been filed by the original Page 1 of 27 C/SCA/9929/2016 JUDGMENT defendants no. 1 to 3 - petitioners herein. The petitioners have challenged the order below Ex. 23 dated 05.05.2016 passed by the learned Principal Civil Judge, Bharuch in Regular Civil Suit No. 152 of 2015. By the aforesaid order, the application of the petitioners filed under Section 8(2) of the Arbitration and Conciliation Act, 1996 (for short "the Act") praying that the subject matter of the suit be referred to the Arbitrator was rejected.
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. 1 Page 2 of 27 C/SCA/9929/2016 JUDGMENT 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 mother-in-law 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.
Page 3 of 27C/SCA/9929/2016 JUDGMENT 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 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 Sub-Registrar 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 Page 4 of 27 C/SCA/9929/2016 JUDGMENT 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 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 Page 5 of 27 C/SCA/9929/2016 JUDGMENT arbitration and therefore the application under Section 8(2) of the Act was not maintainable.
3. Shri Maulik R Shah, learned advocate appearing on behalf of the petitioner has appeared for the petitioners and has assailed the findings of the trial Court as under:
(a) According to Mr. Shah, when the plaint is read it is apparent that the cause of action to file such suit arises out of a dispute which has a genesis in the partnership deed. That from the notice that the plaintiff issued on 14.09.2010, it is evident that the dispute arose for settling of books of accounts of the firm between the parties. This gave rise to the plaintiff to approach the Court for dissolution of the firm after settlement of books of accounts and claiming his share from the partnership firm. Essentially, therefore, it was a dispute which centered around the partnership deed. The deed contained an arbitration clause and looking to the nature of the suit therefore it was incumbent for the trial Court to refer the dispute to arbitration rather than entail the parties to a civil litigation.
(b) That the learned trial Court committed an error in holding that the mandate of Section 8(2) of the Act was not complied with. Though the defendant applicant before the trial Court may not have annexed a copy of the partnership deed, original or certified, that the partnership deed was on record at Mark 3/1 and produced by the plaintiff was sufficient enough compliance of the mandate of Section 8(2) of the Act.
Page 6 of 27C/SCA/9929/2016 JUDGMENT
(c) The learned trial Court was wrong in assuming that once the partnership at will is dissolved, the arbitration clause under such deed ceases to exist and therefore the dispute is not referrable to arbitration.
(d) That the learned trial Court ought to have referred the dispute to arbitration. Merely because a prayer was made for cancellation of sale deeds entered into by the defendants no. 1 to 3 in favour of defendant no. 4, it could not be said that the matter did not fall within the domain of arbitration. Drawing my attention to the reliefs claimed in the plaint, Shri Shah contended that a close reading of prayer no. (3) of the plaint would suggest that the prayer was not for cancellation of the deeds but in essence was for a declaration that such deeds are not binding to the partnership. In other words, it was Mr. Shah's submission that the reliefs centered around a dispute of the partnership firm and therefore even if the defendant no. 4 and 5 were not parties to the agreement, the dispute essentially was in respect of the partnership and therefore arbitrable. In addition to this, Shri Shah submitted that reading of the plaint would suggest that mere vague averments regarding fraud was made which would not require a detailed examination so as to be a matter of evidence and therefore the dispute ought to have been referred to the arbitrator.
3.1 In support of the aforesaid submissions, Mr. Maulik Shah has relied on the following decisions:
Page 7 of 27C/SCA/9929/2016 JUDGMENT (I) Relying on the decision of the Apex Court in the case of Ananthesh Bhakta Represented by Mother Usha A. Bhakta & Others reported in 2016(12) Scale 8, Mr. Shah contended that the filing of an application without the original or a certified copy will not entail rejection of application under Section 8(2) of the Act. Relying on the facts of this decision where it was the case of the plaintiffs therein seeking prohibitory injunction regarding possession of property, Shri Shah submitted that the Court had held that when the plaintiffs themselves had filed a photocopy of the deed of retirement, it was not open for the trial Court to reject the application for failing to comply with the mandate of Section 8(2) of the Act. He submitted that in the facts of the present case, the partnership deed was brought on record at Mark 3/1 and therefore the mandate of Section 8(2) of the Act was complied with.
(II) Relying on the decision in the case of Rupal Textile and Partners of Partnership Firm Madhubhai G. & Another vs. Partners of
Partnership Firm M/s. Rupal Textile Mahendra H. & Another reported in 2012 (2) GLH 86, Shri Shah reiterated his submission with regard to the mandate of Section 8(2) of the Act and said that though the application did not have the original agreement it was brought on record by the plaintiff and therefore there was no dispute with regard to the existence of such arbitration clause.
(III) Relying on the decision in the case of Ashapura
Page 8 of 27
C/SCA/9929/2016 JUDGMENT
Mine-Chem Limited vs. Gujarat Mineral
Development Corporation reported in (2015) 8 SCC 193, Mr. Shah contended that it was not open for the trial Court to hold that once the partnership was dissolved, it was not open for the parties to seek arbitration under a dissolved deed. Drawing my attention to relevant paragraphs of the judgement, Mr. Shah contended that the arbitration clause formed a part of the contract and therefore even if the deed of partnership was dissolved, it was not possible to accept the submission that the arbitration clause would cease to exist. In support of this submission, Mr. Shah has also relied on a decision of this Court rendered in Special Civil Application No. 5158 of 2011 dated 18.12.2012. Drawing my attention to paragraph no. 7 of the jdugement, Mr. Shah submitted that whenever there is a partnership at will and though such partnership has been dissolved, once the intention is already declared, that there was an arbitration clause, it cannot be said that by such dissolution of the partnership, the arbitration clause would not operate. According to Mr. Shah, this judgement has been passed relying on the decision of the Supreme Court in the case of M/s. Reva Electric Car Co. Pvt. Ltd. vs. M/s. Green Mobil reported in 2011 (13) SCALE 169.
(IV) Relying on the decision in the case of Ameet Lalchand Shah and Others vs. Rishabh Enterprises and Another reported in 2018 (6) SCALE 621, Mr. Shah contended that it was wrong on the part of the learned trial Court to observe that since the dispute Page 9 of 27 C/SCA/9929/2016 JUDGMENT regarding cancellation of the sale deeds was not within the domain of arbitration, the dispute could not be referred to arbitration. Pointing out the facts of the judgement, Mr. Shah contended that before the Supreme Court in the case of Ameet Lalchand Shah (supra), was a question where between the parties to the contract there were four different agreements, that it was only the main agreement which had the arbitration clause whereas the other three which were executed between the parties of which some were not parties to the main agreement did not have an arbitration clause. Even though there were serious allegations of fraud, the Court held that the dispute could be referred to arbitration when the entire subject matter of the suit had its genesis in the arbitration clause. According to Mr. Shah, the judgement in the case of Sukanya Holdings (P) Ltd. vs. Jayesh H. Pandya and Another reported in (2003) 5 SCC 531 of the Supreme Court was distinguished and according to the Supreme Court, even though there are different agreements even involving separate parties, it is a single commercial project and therefore even if between two of the parties there was no arbitration clause, the subject at issue was integrally connected and though even if one of the parties was not a party to the suit it was a commercial transaction and the dispute therefore was arbitrable.
(V) Mr. Shah has further relied on Swiss Timing Limited vs. Commonwealth Games 2010 Organising Committee reported in (2014) 6 SCC 677 to contend that once an objection is raised with regard to the Page 10 of 27 C/SCA/9929/2016 JUDGMENT dispute being arbitrable, it is the mandate that the trial Court ought to have followed and the dispute should have been referred to the arbitrator.
4. Mr. Anshul Shah, learned advocate has appeared for Mr. Majmudar, learned advocate on behalf of the respondent no. 1
- original plaintiff. In supporting the decision that the learned trial Court has taken, Mr. Anshul Shah has submitted as under:
(I ) Taking me to the title of the plaint, he has pointed out that the plaintiff and the present petitioners who are defendants no. 1 to 3 were partners governed by the partnership deed. The defendant no. 4 was a subsequent purchaser by virtue of a sale deed; that she was an outsider to the partnership agreement and therefore it was outside the domain of an arbitrable dispute. Reading the relief of the plaint at relief no. 3, Shri Anshul Shah emphasised that the plaintiff had prayed for a declaration and a direction that the sale deed dated 17.12.2009 entered into in favour of the defendant no. 4 be cancelled, declared null and void, illegal and unenforceable. A further declaration was sought that the defendant no. 5 the Sub - Registrar be restrained from registering such document. The relief, therefore, was not a matter within arbitration as it did not govern the dispute pertaining to partnership but was essentially an independent prayer of declaring the sale deed illegal and therefore the learned trial Court was right in observing that the civil suit was the only remedy.Page 11 of 27
C/SCA/9929/2016 JUDGMENT (II) Mr. Anshul Shah also invited my attention in the
context of this relief to the provisions of Section 31 of The Specific Relief Act, 1963. According to Mr. Anshul Shah, Section 31 of the Specific Relief Act, envisages a situation where any person against whom a written instrument is void or voidable and if such instrument according to his apprehension if left outstanding may cause him serious injury, he may sue to have it adjudged void or voidable and the Court may in its discretion adjudge it and order it to be delivered up and cancel.
Mr. Shah therefore submitted that the relief no. 3 of the plaint was essentially one under the Specific Relief Act and beyond the matter of arbitration. Drawing my attention to the averments in the plaint, it was Shri Shah's contention that a serious fraud in the transactions inter se between the defendants was alleged which amounted to exposure of criminal liability and therefore it was not proper for the Court to refer such a dispute to arbitration. In this context, Mr. Shah invited my attention to paragraphs no. 7 and 10 of the plaint wherein it was the case of the plaintiffs that there was fraud. Mr. Shah further contended that the sale deeds were executed in 2009, prior to the dissolution notice and were sold during the subsistence of the partnership agreement to the defendant no. 4 and therefore it was an independent transaction not tied by the disputes relating to the partnership agreement. (III) Mr. Shah further submitted that section 8(2) of the Act was mandatory and in absence of any partnership agreement or a certified copy thereof being on record with the application the trial Court was right in rejecting Page 12 of 27 C/SCA/9929/2016 JUDGMENT the same. Moreover, once the partnership was dissolved, the clause of arbitration itself ceased to exist and therefore the learned trial Court did not commit any error in rejecting the application on these grounds.
4.1 In support of his submission, Mr. Shah relied on the following judgements :
(a) Relying on the decision in the case of Manibhai Shankerbhai Patel vs. Swashray Construction Co.
and Others reported in 1982 GLH 391, he submitted that an arbitration clause in the partnership deed has application only during the subsistence of a partnership. Such clause cannot affect the right of the partner to dissolve the partnership at will. He also relied on a judgement in the case of Mohanlal Sajandas vs. Hareshkumar Narandas And Others reported in 2001(3) GLH 532 that no petition under the Arbitration Act is maintainable when the partnership at will is dissolved. An arbitration clause cannot be invoked when the partners have put an end to the partnership at will. He also relied on a judgement in the case of Hemendra Babulal Shah HUF Through Manager and Karta and Another vs. Dilipkumar Babulal Shah and Another reported in 2006(2) GLH 498 to contend that once the partnership is dissolved, on such dissolution, the partnership firm cannot be a subject matter of arbitration.
(b) Mr. Shah submitted that as is evident from the array Page 13 of 27 C/SCA/9929/2016 JUDGMENT of parties to the plaint, the defendants no. 4 and 5 are parties outside the arbitration agreement. That the relief no. 3 being a relief under the Specific Relief Act, the same cannot be a matter which falls even partly within the arbitration agreement and partly outside the arbitration agreement. There can be no bifurcation of the suit and therefore it is not open for the parties to resort to arbitration. In support of his stand, Mr. Anshul Shah relied on the decision in the case of Sukanya Holding (supra). In that case, before the Supreme Court apart from the suit being one for dissolution of partnership and accounts, it was a suit challenging the conveyance deed executed by the firm in favour of one Westend Gymkhana Limited who was not a party to the arbitration. The appellant's application filed under Section 8 of the Arbitration Act was rejected. It was rejected on the ground that the subject matter of the suit for which an arbitration was sought was not between the contracting parties and the reliefs claimed were between parties who were not parties to the contract. In context of this, extensively referring to the provisions of Section 8 of the Act, the Court held as under:
"12. For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part-I of the Act, Judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Further, the matter is not required to be referred to the arbitral Tribunal, if (1) the parties to the arbitration agreement have not filed any such application for referring the Page 14 of 27 C/SCA/9929/2016 JUDGMENT dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that Arbitration Act does not oust the jurisdiction of the Civil Court to decide the dispute in a case where parties to the Arbitration Agreement do not take appropriate steps as contemplated under sub- sections (1) & (2) of Section 8 of the Act.
13. Secondly, there is no provision in the Act that when the subject matter of the suit includes subject matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitrators.
14. Thirdly, there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the arbitration agreement. As against this, under Section 24 of the Arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the Court may refer the same to arbitration provided that the same can be separated from the rest of the subject matter of the suit. Section also provided that the suit would continue so far as it related to parties who have not joined in such application.
15. The relevant language used in Section 8 is "in a matter which is the subject matter of an arbitration agreement", Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of 'a matter' which the parties have agreed to refer and Page 15 of 27 C/SCA/9929/2016 JUDGMENT which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words 'a matter' indicates entire subject matter of the suit should be subject to arbitration agreement.
16. The next question which requires consideration is even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act? In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject matter of an action brought before a judicial authority is not allowed.
17. Secondly, such bifurcation of suit in two parts, one to be decided by the arbitral tribunal and other to be decided by the civil court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums.Page 16 of 27
C/SCA/9929/2016 JUDGMENT According to the Supreme Court, under Section 8 of the Act, what is arbitrable is a matter which is the subject matter of arbitration agreement. In a suit which is commenced 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, it cannot be said that the dispute is arbitrable because it is difficult to bifurcate the cause of action and the subject matter of the suit.
(c) Relying on a decision in the case of Booz Allen And Hamilton Inc. vs. SBI Home Finance Limited and Others reported in (2011) 5 SCC 532, Mr. Shah drew my attention to paragraph 19 of the judgement which reads as under:
"19. Where a suit is filed by one of the parties to an arbitration agreement against the other parties to the arbitration agreement, and if the defendants file an application under Section 8 stating that the parties should be referred to arbitration, the court (judicial authority) will have to decide:
(i) whether there is an arbitration agreement among the parties;
(ii) whether all the parties to the suit are parties to the arbitration agreement;
(iii) whether the disputes which are the subject-matter of the suit fall within the scope of arbitration agreement;
(iv) whether the defendant had applied under Section 8 of the Act before submitting his first statement on the substance of the dispute; and Page 17 of 27 C/SCA/9929/2016 JUDGMENT
(v) whether the reliefs sought in the suit are those that can be adjudicated and granted in an arbitration. "
(d) Shri Shah submitted that when a suit is filed by one of the parties against the other parties, in an application under Section 8 of the Act, the Court will have to decide whether all the parties to the suit are parties to the agreement, that whether the reliefs sought in the suit are those that can be adjudicated in arbitration.
Apparently, when the plaint and the reliefs in question are seen, defendants no. 4 and 5 are not parties to the arbitration agreement and cancellation of the sale deed is not a dispute under the arbitration clause and therefore cannot be referred to arbitration. In support of this submission, Mr. Shah has also relied on a decision of this Court reported in Kantilal Ambalal Patel & Another vs. Jalaram Land Developers Prop. Of Kamleshkumar Shankarbhai & Others reported in 2014 (1) GLR 331. Here also it was a case where an application for arbitration was rejected on the ground that the matter which was a subject matter was not within the domain of arbitration. This Court referring to the judgement of Sukanya Holdings (supra) held that when the Court finds that the matter brought before the Court is not subject of an arbitration agreement, the question to refer the non parties to the agreement to arbitration does not arise. Reliance is placed on paragraphs no. 26 and 27 of the judgement which read as under:
"26. As stated above, respondent no.1 plaintiff has not simply asked for specific Page 18 of 27 C/SCA/9929/2016 JUDGMENT performance of development agreement between him and the petitioners but has also prayed for passing of decree against the defendants for execution of sale deed in its favour. Under the development agreement, the respondent NO.1 had got rights to develop the suit property subject to the other terms and conditions of the said development agreement. But before the said development agreement could be acted upon, petitioner no.2-defendant no.2 could get the sale deed executed in his favour based on the agreement to sell and consent decree alleged to have been passed between him and other societies. Respondent No.1 has made averments in respect of such agreement to sell and execution of the sale deed in favour of petitioner no.2 and has made prayer for passing of decree of execution of sale deed in its favour by petitioners and other societies. Therefore, such prayer could not be said to be connected in any manner with the development agreement i.e. subject matter of arbitration agreement. The respondent no.1 has also made one more prayer in the suit for cancellation of the sale deed executed in favour of petitioner no.2-defendant no.2. Such execution of sale deed in favour of petitioner no.2 defendant no.2 was also not in connection with the development agreement or any other agreement between respondent no.1 and other parties. Therefore, such sale deed executed in favour of petitioner no.2 could not be said to be in any way the subject matter of development agreement. Therefore, it would be beyond the purview of the arbitration to adjudicate upon the disputes concerning the above other matters involved in the suit.
27. Thus, in the case on hand, this court finds that the matter brought before the Court is not the subject of arbitration agreement. Even otherwise, when reference sought under section 8 of the Act is based on the development agreement dated 16.8.2003, the Page 19 of 27 C/SCA/9929/2016 JUDGMENT question to refer the non-parties to the agreement to arbitration does not arise."
(e) In support of the above submission and in support of his submission that when fraud is alleged, the dispute cannot be referred to arbitration, Mr. Shah has relied on a judgment of a Division Bench of this Court in the case of Amin Associates - A Partnership Firm vs. Bharatbhai Purshottambhai Patel and Others rendered in Special Civil Application No. 18399 of 2016 and invited my attention to paragraphs no. 6, 6.1- 6.3, 6.9, 65.10 to support the submission that when there are parties and non parties to the arbitration agreement, the judgement of Sukanya Holdings (supra) would hold the field and it is not possible to bifurcate the dispute nor is it arbitrable, particularly, when there are serious allegations of fraud as is the case in the present. He has drawn further support in his submission by relying on a decision of the Bombay High Court in the case of Ramdeobaba Padmavati Developers and Builders, Nagpur vs. Ganesh Vitthaldas Chandak and Others reported in 2017 (5) Mh.L.J. Drawing my attention to paragraph 6, 8 and 9 of the judgement, Mr. Shah contended that once the defendant no. 4 and 5 are not parties to the agreement and the relief sought for was cancellation of sale deeds who are not partners or signatories to the sale deed, the dispute clearly was not arbitrable.
(f) Reliance is also placed on a Division Bench decision of the High Court of Telangana And Andhra Pradesh in Page 20 of 27 C/SCA/9929/2016 JUDGMENT the case of Aliens Developers Pvt. Ltd. vs. M. Janardhan Reddy & Others reported in 2015 LawSuit(Hyd) 610. This decision is relied with regard to the submission in respect of Section 31 of the Specific Relief Act. When a contention was raised regarding relief sought under the Specific Relief Act, the High Court held that in cases where relief is sought under Section 31(2), the only competent Court that is empowered to cancel the decree is the civil Court.
5. Having considered the submissions of learned advocates appearing on behalf of the respective parties, what is evident from reading the plaint and the dispute involved in the matter which is though essentially arising out of the partnership deed, what needs to be seen is the reliefs that the plaintiff has sought in context of the averments made in the plaint.
5.1 It is the case of the plaintiff that he and the defendants no. 1 to 3 were partners pursuant to a partnership deed of 1997. The business was of dealing in lands, purchasing them, plotting on such lands, making constructions on such lands and then selling the properties so constructed. The plaintiff contends that in such pursuit of business, he was the sole signatory to the sale deeds executed in such transactions of sale. The accounts were maintained by the defendants no. 1 to 3. Due to the proximity and the relationship that the defendants no. 2 and 3 had with the defendant no. 4, a fraudulent transaction of sale keeping the plaintiff in dark was entered into by the defendants no .1 to 3 who were partners in favour of the defendant no. 4 - an outsider to the agreement. Averments in paragraphs no. 7 and 10 of the Page 21 of 27 C/SCA/9929/2016 JUDGMENT plaint suggest criminal complicity of the defendants. It is in this context that relief no. 3 of the plaint has to be read. It was a relief for a declaration/cancellation of the sale deed as the same according to the plaintiff was illegal. The transaction of sale entered into by the partners - defendants no. 1 to 3 was in favour of the defendant no. 4 who was not a party to the partnership agreement. Further relief was prayed that the defendant no. 5 Sub-Registrar should not register such a document.
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 Page 22 of 27 C/SCA/9929/2016 JUDGMENT 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.
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 Page 23 of 27 C/SCA/9929/2016 JUDGMENT 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).
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 Page 24 of 27 C/SCA/9929/2016 JUDGMENT 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.
8. The trial Court while deciding the application against the petitioner has relied on a judgement in the case of N. Radhakrishnan vs. Maestro Engineers and Others reported in (2010) 1 SCC 72. In the said case also, the Supreme Court held that where a case pertains to allegations of fraud and serious malpractices, the dispute can only be settled in a Civil Court.
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.
10. Though the learned advocates for the respective parties have argued on non compliance of Section 8(2) of the Act, it is evident that the mandate of section 8(2) requires the applicant of an application under such section to produce a certified copy or the original of the arbitration agreement. Having failed to so produce the same, there was a breach of Page 25 of 27 C/SCA/9929/2016 JUDGMENT the mandate and therefore even though a copy Mark 3/1 was on record, the Section is unequivocal that it is the applicant of such application who needs to produce such agreement. The trial court has held against the applicant on a subjective satisfaction and there is no reason to overturn the same in view of the mandate so involved.
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 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.
12. In view of the foregoing discussion, present petition, being devoid of merits deserves to be dismissed and is accordingly dismissed. Rule is discharged. Interim relief, if any, stands vacated. No costs.
13. Mr. Maulik Shah, learned advocate on behalf of the petitioners requests that the interim relief granted by this Page 26 of 27 C/SCA/9929/2016 JUDGMENT Court may be extended for a period of two weeks so that the petitioners can approach the higher forum. I do not think it fit to accede to the request for extending the interim relief as prayed for. Such a request is, therefore, rejected.
(BIREN VAISHNAV, J) DIVYA Page 27 of 27