Gujarat High Court
M/S Jai Bharat Steel Company vs Mountain Shipping Ltd on 26 August, 2025
NEUTRAL CITATION
C/AS/20/2022 JUDGMENT DATED: 26/08/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/ADMIRALTY SUIT NO. 20 of 2022
With
CIVIL APPLICATION (FOR ORDERS) NO. 1 of 2022
In R/ADMIRALTY SUIT NO. 20 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE MAUNA M. BHATT
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Approved for Reporting Yes No
Yes
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M/S JAI BHARAT STEEL COMPANY
Versus
MOUNTAIN SHIPPING LTD & ANR.
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Appearance:
MR C B UPADHYAYA(3508) for the Defendant(s) No. 2
MR DHRUV TOLIYA(9249) for the Plaintiff(s) No. 1
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CORAM:HONOURABLE MRS. JUSTICE MAUNA M. BHATT
Date : 26/08/2025
ORAL JUDGMENT
1. Rule returnable forthwith. Learned advocate Mr. C.B.Upadhyaya waives service of rule on behalf of respondent No.2 (Defendant).
2. This Admiralty Suit is filed raising claim of Page 1 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined Rs.1,20,00,000 (Rupees one crore twenty lac) towards damages, with interest @ 18%, from the date of institution of suit till actual payment. The plaintiff had filed Civil Suit No.36 of 1999 before learned Civil Court, Bhavnagar seeking damages for default in sale of vessel known as M.V.Irene. [prayers in Civil Suit No.36 of 1999- Page No.211]. It is case of the plaintiff in the Civil Suit that on account of breach of memorandum of agreement dated 18.09.1998, in relation to sale of vessel M.V.Irene, between the plaintiff and the defendant No.1, the suit was instituted (page No.241). It was case of the plaintiff that on 18.09.1998, the plaintiff had executed an agreement with defendant No.1 to purchase vessel M.V.Irene. Accordingly, consideration as agreed in MOA was paid, despite that possession of the vessel, free from all encumbrances was not handed over to the plaintiff. Thus, there is breach of agreement dated 18.09.1998 and therefore the claim lies against defendant No.1.
3. Thus, on the basis of MOA dated 18.09.1998 executed between plaintiff and defendant No.1; the Plaintiff initiated the present proceedings in light of the order dated 31.03.1999 passed by High Court of Bombay (in Admiralty Jurisdiction). It is true that the MOA dated 18.09.1998, at clause 18 contains an arbitration clause.
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4. It is case of plaintiff that Defendant No.2 - Anslem Shipping Limited is an independent entity owned and operated by the very same management which was owning and operating defendant No.1 - Company. Therefore, the plaintiff preferred an application below Exhibit 14, to implead Defendant No.2 as necessary party. The said application was filed on the ground that ownership of Defendant Nos.1 and 2 is stemmed from the same root. However, there was no privity of contract between the plaintiff and defendant No.2. It is case of the plaintiff that party necessary for adjudication of a dispute, by no stretch of imagination creates any privity of contract between plaintiff and Defendant No.2.
5. After joining defendant No.2 as party, an application below Exh.5 was filed by plaintiff, seeking continuation of arrest of vessel (continuation of injunction). Exhibit -5 was an application by the plaintiff, seeking to restrain Defendant from selling, transferring or beaching the vessel. Ex. 5 came to be rejected under order dated 25.02.1999.
6. Aggrieved by the order dated 25.02.1999, the plaintiff approached this Court by way of Appeal from Order No.109 of 1999 and allied matters wherein, this Court by order dated 08/09.03.1999, by invoking the doctrine of lifting of corporate Page 3 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined veil, allowed the appeal and granted injunction in favour of plaintiff. (The order dated 08/09.03.1999 is at page 1253, relevant paragraphs Nos.5, 8, 10, 12, 14, 15, 17.2, 17.3, 18 and 20). It would be apposite to refer to paras 18 to 20 of order dated 08/09.03.1999, which reads as under:
"18. In view of the aforesaid situation, and the state of the evidentiary material on record, I am satisfied that the doctrine of "lifting the corporate veil" can be justifiably invoked and once this is done, there is sufficient material on record to hold at least on a prima facie basis that the two defendants share a community of interest, even if they do not share a common management, common finances and/or a common corporate umbrella under Symco Shipping Limited.
19. In the premises aforesaid, the two Appeals from Order are admitted and directed to be heard together.
20. So far as the Civil Applications are concerned, the same are disposed of by directing that the ad interim status quo in respect of the ship M.V. ORIEINT STRIDE granted by the trial court (which is in operation till today) shall continue to operate till the final disposal of the present appeals. However, this order shall stand revoked ipso facto if the defendants or anyone of them furnishes security to the satisfaction of the trial court and/or furnishes unconditional irrevocable bank guarantee in favour of the plaintiff of a Nationalised or Scheduled bank in the sum of Rs.170 lacs (Rupees one hundred seventy lacs). It is clarified that the suit is not stayed and the defendants shall be at liberty to pursue their application for referring the entire dispute to arbitration under the provisions of the Arbitration and Conciliation Page 4 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined Act, 1996. The trial court will hear the parties on the said application and shall pass appropriate orders thereon in accordance with law."
7. Pursuant to the order dated 08/09.03.1999 in Appeal from Order Nos.109 of 1999 and 110 of 1999, Defendant No.2 preferred Civil Application No.3679 of 1999 and this Court by order dated 07.05.1999 had modified the order and released the vessel on condition to deposit sum of Rs.25,00,000/- before Civil Court, Bhavnagar, by Defendant No.2. The order dated 07.05.1999 is at Page No.1333 and order of deposit of amount of Rs.25,00,000/- is at page Nos. 1347, 1355 and 1359.
8. After the order dated 07.05.1999 of release of vessel and after having deposited the amount of Rs. 25,00,000/-; Defendant-No-2 filed applications involving arbitration clause which are at Exh.21 Page No.481, Exh.46 Page No.939, Exh.121 Page No.1483. The said applications were filed under Section 45 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as A&C Act) with the prayer to refer the dispute to arbitration seated in London, United Kingdom. It was case of the defendants that the Court at Bhavnagar is not competent to decide the controversy in its civil jurisdiction. However, the said applications were rejected vide order below Exh. 125 dated 30.01.2012 (page 1867) in Special Civil Suit Page 5 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined No.20 of 2001.
9. After rejection of the applications preferred by defendant No.2 under Section 45 of A & C Act, an order dated 30.10.2018 was passed by Commercial Court, Rajkot to transfer the captioned Admiralty Suit before this Court and the same is numbered as Admiralty Suit No.20 of 2022.
9.1. After the suit having been transferred, issues were framed below Exh.130 whereby issue No.5 was framed as "whether the suit is maintainable at law in the present form?"
10. In response to the said issue, Defendant no.2 had preferred Civil Application No.1 of 2022 under Order VII Rule 11 of Code of Civil Procedure, 1908 ("CPC" for short) which is pending and has also preferred another application under Order XIV Rule 2 of CPC, for treating the issue No.5 as preliminary issue (issues at page 1891 dated 06.01.2015). On an application preferred by Defendant No.2, the plaintiff had filed its detailed reply. It is case of the Defendant No.2 that this Court vide order dated 15.06.2023 after hearing the parties at length had opined that as per Order XIV Rule 2 of the CPC, 1908, issue No.5 as referred herein above, is to be adjudicated and disposed as preliminary issue. Whereas, it is case of the Page 6 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined plaintiff that though the order dated 15.06.2023 is in detail and after by-parte hearing, this Court has neither opined nor had adjudicated upon issue No.5.
11. Referring to the order dated 15.06.2023, learned advocate Mr. Tolia for the plaintiff submitted that though plaintiff had executed the agreement with defendant No.1 there exists no privity of contract with defendant No.2 and therefore, there is no Arbitration agreement between plaintiff and defendant No.2. Defendant No.2 though being a necessary party in these proceedings herein, however, in absence of any arbitration agreement between the plaintiff and defendant No.2, the plaintiff cannot be subjected to any private forum such as arbitration. Learned advocate further submitted that merely by taking over ownership of defendant No.1 by defendant No.2, by no stretch of imagination or by interpretation of any law, it assigned the arbitration agreement prescribed under Clause 18 of agreement dated 18.09.1998 between plaintiff and defendant No.2. Learned advocate submitted that arbitration agreement is separate from the underlying contract and by mere taking over ownership of defendant No.1 by defendant No.2, it would not extend the privity of contract between the plaintiff and defendant No.1 to defendant no.2.
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12. Learned advocate Mr. Tolia submitted that the law of assigning of arbitration agreement is clear and necessitates the unequivocal and explicit consent of a party to agree to the assignment of Arbitration agreement. Therefore, in present case, no deed of assignment is placed on record revealing assigning of Clause 18 of the agreement dated 18.09.1998, wherein the confirmation and the consent of the plaintiff is sought supporting such assignment before taking over of defendant No.1 by defendant No.2. Learned advocate therefore, submitted that in absence of any lawful assignment, the privity of contract or existence of arbitration agreement between the plaintiff and defendant No.2, do not satisfy the necessary ingredient of "in pursuance of an agreement in writing of arbitration" as provided under Section 44 of A&C Act and hence the present dispute cannot be referred to arbitration under Section 45 of the A&C Act.
13. In support, learned advocate Mr. Tolia has relied on the decision of Delhi High Court in the case of Delhi Iron and Steel Company Limited v. U.P. Electricity Board reported in 2001 SCC Online Del 491 to submit that so far as arbitration clause is concerned, the contract is personal in character and incapable of assignment. Similar issue has been reiterated in the judgment in the case of Vishranti CHSL v.Tattva Mittal Page 8 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined Corporation Pvt. Ltd. reported in 2020 SCC Online Bom 7618. Learned advocate therefore, submitted that the application preferred by defendant No.2 under Order 14 Rule 2 of the CPC is required to be rejected and the captioned suit is required to be heard on merits.
14. Opposing the submissions, learned advocate Mr. Upadhyaya for the deponent - Defendant No2 submitted that the order dated 15.06.2023 passed by this Court is exhaustive and speaks for itself. The said order was passed after bi-parte hearing between the parties. The matter was adjourned, at the behest of the plaintiff on one ground or other and therefore, it has led the plaintiff to raise a fresh ground which was never raised till the hearing took place and an order dated 15.06.2023 was passed.
15. Learned advocate Mr.Upadhyaya further submitted that nowhere in the entire suit or either before this Court, the plaintiff had raised a plea that the plaintiff was not signatory to the MOA dated 18.09.1998. However, the said argument at this juncture is erroneous because the very document is endorsed by the plaintiff which is visible at page page 253. If page 253 is perused, then it refers to the signature of plaintiff. Admittedly defendant no.1, herein is signatory to the said Page 9 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined agreement, and, the issue of defendant no.1 and defendant no.2 are to be one entity has been decided by this Court vide order dated 08/09.03.1999 and upheld by Hon'ble Apex Court by virtue of order dated 08.04.1999 (page No.1351) by holding that defendant Nos.1 and 2 are the same entity under the same corporate umbrella. Therefore, the issue raised by the plaintiff of non-signature on the agreement dated 18.09.1999 is contrary to the facts on record as also beyond the order of Hon'ble Supreme Court dated 08.04.1999. Moreover, even otherwise also the Hon'ble Apex Court in the judgment in the case of Cox and Kings Limited v. SAP India Pvt. Ltd reported in (2024) 4 SCC 1 has dealt with the said issue and held that all such aspects are to be considered by the Arbitrator after referring the dispute to the learned Arbitral Tribunal after examining the concept of group of companies. Therefore, the issue in this Admiralty Suit is required to be referred to Arbitration under Clause 18 of the MOA dated 18.09.1998. Once the parties are referred to arbitration, whether Clause 18 of MOA dated 18.09.1998 is binding to the signatory or otherwise, may be decided by learned Arbitral Tribunal.
Consideration
16. Facts recorded herein above are not in dispute and therefore not repeated herein. It is noticed that the suit was Page 10 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined filed by the plaintiff on account of alleged breach of MOA dated 18.09.1998. It is case of the plaintiff that despite having paid the full consideration as agreed between the parties, in terms of MOA dated 18.09.1998, Defendant No.1 failed in giving possession of vessel free from all encumbrances, which resulted in to loss to the plaintiff, for which present suit has been instituted.
17. Further, it is an admitted fact that issues were framed vide order dated 06.01.2015 (issues at page 1891 dated 06.01.2015), wherein issue No.5 reads as under "whether the suit is maintainable at law in the present form?". In response to framing of issue No.5, Defendant no.2 preferred Civil Application No.1 of 2022 under Order VII Rule 11 of Code of Civil Procedure, 1908 ("CPC" for short) which is pending and has also preferred another application under Order XIV Rule 2 of CPC, seeking to treat the issue No.5 as preliminary issue. To the application filed by Defendant No.2, the plaintiff had filed its detailed reply. It appears that on an application of Defendant No.2 under Order XIV Rule 2 of CPC, hearing took place and an order dated 15.06.2023 was passed. Operative portion of order dated 15.06.2023 reads as under: -
"4. Heard learned Advocates for the parties who have not Page 11 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined submitted anything further.
5. At the outset, in the considered opinion of this Court, since the issue raised in the present application revolves around Order 14 Rule 2 of the CPC, the same is reproduced hereinbelow for benefit.
"2. Court to pronounce judgment on all issues.-(1) Notwithstanding that a case may be disposed of on a preliminary issue, the Court shall, subject to the provisions of sub-rule (2), pronounce judgment on all issues.
(2) Where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to-
(a) the jurisdiction of the Court, or
(b) a bar to the suit created by any law for the time being in force, and for that purpose may, if it thinks fit, postpone the settlement of the other issues until after that issue has been determined, and may deal with the suit in accordance with the decision on that issue."
6. In a recent decision relied upon by the learned Advocate for the defendant in case of Sathyanath and Anr. Vs. Sarojamani (supra), the Hon'ble Supreme Court has observed in Paragraph Nos. 5, 6, 7, 15, 16, 20 and 21 as thus :
"5. The learned counsel for the appellants relied upon provisions of Order 14 Rule 2 of the Code to contend such Order 14 Rule 2 has been substituted by Central Act 104 of 1976, whereby the Court is mandated to pronounce judgment on all issues, even though the suit can be disposed of on a preliminary issue. It was argued that such amendment was necessitated to avoid delay in the disposal of the proceedings inasmuch as if Page 12 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined only a preliminary issue is decided, the further appeal and revision would be preferred only against the preliminary issue and after the preliminary issue is decided in favour of the plaintiffs, the evidence has to be led on the remaining issues. Therefore, to ensure expeditious disposal of the proceedings and to avoid possibility of remand by the appellate or revisional jurisdiction, it was made mandatory for the court to record reasons on all the issues. Such finding would obliviate the possibility of remand at appellate or revisional stage, even if the finding on preliminary or other issues are to be reversed.
6. Order 14 Rule 2 before amendment by the Act 104 of 1976 reads thus:
"2. Issues of law and fact.-Where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and for that purpose may, if it thinks fit, postpone the settlement of the issues of fact until after the issues of law have been determined."
7. The said provision came up for consideration before this Court in a judgment reported as S. S. Khanna v. F. J. Dillon. It was held that under Order 14 Rule 2 of the Code where issues both of law and of fact arise in the same suit and the Court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and postpone the settlement of the issues of fact until other issues of law have been determined. It was held as under: (AIR pp. 502-03, para 18) "18. ... Under Order 14 Rule 2 Code of Civil Procedure, where issues both of law and of fact arise in the same suit, and the Court is of opinion Page 13 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and for that purpose may, if it thinks fit, postpone the settlement of the issues of fact until after the issues of law have been determined. The jurisdiction to try issues of law apart from the issues of fact may be exercised only where in the opinion of the Court the whole suit may be disposed of on the issues of law alone, but the Code confers no jurisdiction upon the Court to try a suit on mixed issues of law and fact as preliminary issues. Normally all the issues in a suit should be tried by the Court: not to do so, especially when the decision on issues even of law depend upon the decision of issues of fact, would result in a lopsided trial of the suit."
XXX XXX XXX
15. A Single Bench of Jammu and Kashmir High Court in a judgment reported as Aruna Kumari v. Ajay Kumar held as under:
"4. ...Admittedly both the parties have to lead evidence regarding both the issues. In case Issue 2 is allowed to be treated as preliminary the parties will certainly lead evidence in the case and instead of disposing of the case expeditiously it will prolong the matter and frustrate the very basis of law contained in Order 14 Rule 2, Civil Procedure Code. The evidence to be led by both the parties will almost cover both the issues and it cannot, therefore, be said that by allowing Issue 2 to be treated as preliminary the trial of the case would be expedited. When we review the whole law on the point it becomes clear that where issue of jurisdiction is a mixed question of law and fact requiring evidence to be recorded by Page 14 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined both the sides same cannot be treated as a preliminary issue."
16. The matter has also been examined by this Court in a judgment reported as Ramesh B. Desai and v. Bipin Vadilal Mehta wherein it was held as under:
"13. Sub-rule (2) of Order 14 Rule 2 CPC lays down that where issues both of law and of fact arise in the same suit, and the court is of the opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to (a) the jurisdiction of the court, or (b) a bar to the suit created by any law for the time being in force. The provisions of this Rule came up for consideration before this Court in S.S. Khanna v. F.J. Dillon and it was held as under:
"* * *"
Though there has been a slight amendment in the language of Order 14 Rule 2 CPC by the amending Act, 1976 but the principle enunciated in the abovequoted decision still holds good and there can be no departure from the principle that the Code confers no jurisdiction upon the court to try a suit on mixed issues of law and fact as a preliminary issue and where the decision on issue of law depends upon decision of fact, it cannot be tried as a preliminary issue."
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20. This Court in Sugandhi v. P. Rajkumar held that if the procedural violation does not seriously cause prejudice to the adversary party, the courts must lean towards doing substantial justice rather than relying upon procedural and technical violations. It is not to be Page 15 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined forgotten that litigation is nothing but a journey towards truth which is the foundation of justice and the Court is required to take appropriate steps to thrash out the underlying truth in every dispute. It was held as under:
"9. It is often said that procedure is the handmaid of justice. Procedural and technical hurdles shall not be allowed to come in the way of the court while doing substantial justice. If the procedural violation does not seriously cause prejudice to the adversary party, courts must lean towards doing substantial justice rather than relying upon procedural and technical violation. We should not forget the fact that litigation is nothing but a journey towards truth which is the foundation of justice and the court is required to take appropriate steps to thrash out the underlying truth in every dispute. Therefore, the court should take a lenient view when an application is made for production of the documents under sub-rule (3)."
21. The provisions of Order 14 Rule 2 are part of the procedural law, but the fact remains that such procedural law had been enacted to ensure expeditious disposal of the lis and in the event of setting aside of findings on preliminary issue, the possibility of remand can be avoided, as was the language prior to the unamended Order 14 Rule 2. If the issue is a mixed issue of law and fact, or issue of law depends upon the decision of fact, such issue cannot be tried as a preliminary issue. In other words, preliminary issues can be those where no evidence is required and on the basis of reading of the plaint or the applicable law, if the jurisdiction of the Court or the bar to the suit is made Page 16 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined out, the Court may decide such issues with the sole objective for the expeditious decision. Thus, if the Court lacks jurisdiction or there is a statutory bar, such issue is required to be decided in the first instance so that the process of civil court is not abused by the litigants, who may approach the civil court to delay the proceedings on false pretext."
[Emphasis Supplied] 6.1 From the observations of the Hon'ble Apex Court, whereby the Hon'ble Apex Court has reiterated the law with regard to exercise of power under Order 14 Rule 2 of the CPC, it could thus be stated that while Order 14 Rule 2(1) of the CPC inter alia requisites that even if a suit that could be deposed of on preliminary issue, yet, the Court is mandated to pronounce judgment on all the issues. This mandate is subject to the exception carved out in Sub-rule (2) which inter alia gives discretion to the Court to dispose of the suit on an issue of law only, which relates either to the jurisdiction of the Court to try the suit or a bar to the suit as found in some law. The Hon'ble Apex Court in the decision quoted hereinabove has inter alia laid down the law that the intention of Sub-rule (2) after amendment is to ensure speedy disposal of the suit on a question which is with regard to jurisdiction or bar to suit where no evidence is required and where the issue could be decided on plain reading of the plaint or the applicable law. The Hon'ble Apex Court has further observed that an issue which could be decided under Sub-rule (2) of Order 14 Rule 2 of the CPC, is required to be decided at the first instance so that the process of the Civil Court is not abused by the litigants. The emphasized portion of Para 21 quoted hereinabove clearly reflects the dictum of the Hon'ble Apex Court in this regard.
7. Now keeping the law laid down by the Hon'ble Apex Court explaining Order 14 Rule 2 of the CPC, this Court will now proceed to decide the issue on merits.
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8. Learned Advocate for the plaintiff had raised an objection that the request of the defendant to decide the present suit by considering the issue No.5 framed in the array of issues as a preliminary issue and whereas it has been contended by the learned Advocate for the plaintiff that since such type of application had been moved twice hereinbefore, therefore consideration of the said request would amount to the Court reviewing the orders of the Civil Court, which orders have now acquired the status of orders passed by a learned Co-ordinate Bench after transfer of the Admiralty Suit to this Court and whereas such review ought not to be done in absence of any application.
9. In this regard, it requires to be noted that the plaintiff had moved two applications namely the first application at Exh. 21 and the second set of applications at Exh. 46 and Exh.121. It would be further pertinent to note that in application Exh.21, the defendant had requested the Court to frame a preliminary issue with regard to the suit not being maintainable under Section 20 of the CPC and under the provisions of the Arbitration and Conciliation Act. It appears that such application had been rejected by the learned Civil Court vide order dated 02.08.2002 inter alia observing that the issue of maintainability is a mixed question of facts and law, more particularly since the plaintiff"
10. It appears that thereafter the defendant had moved application at Exh. 46 inter alia submitting to the learned Civil Court that since there was an arbitration clause in the agreement between the parties which contemplated arbitration in the City of London, United Kingdom, therefore in view of Section 45 of the Arbitration and Conciliation Act, 1996, the Court did not have jurisdiction to try the dispute and whereas the parties may be directed to refer the matter to the arbitration.
11. As far as the application Exh. 121 is concerned, the Page 18 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined defendant had moved the same contending that the plaintiff firm was not registered under Section 69 of the Indian Partnership Act and that under Section 2(e) of the Arbitration and Conciliation Act, the learned Civil Court which was taking up the matter at the relevant point of time i.e. Special Judge, Alang, Bhavnagar, would not be the competent Court to take up the issue, rather it would be the District Court which would be competent to decide the issue as presented in the suit. It would also be pertinent to state here that the defendant in the subject matter of the application had referred to Order 14 Rule 2 of the CPC and whereas no averments with regard to the said provisions is found in the application. It appears that vide common order dated 30.11.2010, the learned Civil Court had rejected the application Exh.46 and the application Exh.121.
12. From a perusal of the above discussion, it would appear that the defendant had requested for framing of a preliminary issue with regard to the jurisdiction of the Court on account of requirement of referring the dispute to an arbitration, more particularly in view of the arbitration clause being in existence in the agreement between the parties. It also appears that the learned Civil Court had rejected the request for framing of preliminary issue on this aspect and whereas the Court also did not accede to the request of the defendant that the Court did not have any jurisdiction to try the suit in question.
12.1 In the considered opinion of this Court, if the defendant had approached this Court with an application seeking for framing of a preliminary issue with regard to jurisdiction or seeking for a direction to refer the dispute to arbitration, possibly, the orders referred to hereinabove of the year 2002 and the year 2010, may have created an estoppel against the defendant from seeking the selfsame prayer. As against the same, what appears here is that the learned Civil Court concerned, had framed 08 issues vide order dated 06.01.2015 and whereas an additional issue being issue No.1A had been Page 19 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined framed vide order dated 27.10.2015. The issue No.5 is that "Whether the suit is maintainable at law in its present form?"
12.2 In the considered opinion of this Court, the issues having been framed, in normal course, after leading of evidence, the Court would be required to give its answer to all the issues including the issue No.5. Even if the Court in an interim order has observed that whether the dispute is required to be referred to an arbitration is a mixed question of law and fact, yet the same would preclude the Court trying the suit finally to decide issue No.5 as a pure question of law. Again, while though the Civil Court does not appear to have out-rightly rejected the request of the defendant vide Exh. 46 to refer the dispute to an arbitrator as per Section 45 of the Arbitration and Conciliation Act, yet, since the said application has been rejected, even the same in the considered opinion of this Court would not preclude the Court taking up final hearing of the suit to decide if deemed appropriate to refer the dispute to an arbitrator. This Court arrives at the above conclusion on account of the settled proposition that interim orders would not be binding on a Court while hearing the proceedings finally.
12.3 It would also require to be mentioned here that the defendant in application Exh. 121 has mentioned, more particularly in the subject column of the said application, that the application is under Order 14 Rule 2 of the CPC, yet it appears that there is no averment in the said application with regard to Order 14 Rule 2 of the CPC. Furthermore, it also does not appear that the learned Court while rejecting the said application had either referred to Order 14 Rule 2 of the CPC or had made any observations which could even be remotely corelatable as being observations made under Order 14 Rule 2 of the CPC, therefore, in the considered opinion of this Court, mere mention of Order 14 Rule 2 in the subject matter of an application and such application being rejected by the learned Civil Court even before the issues were framed, would not preclude the Court at the stage of final Page 20 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined hearing of the suit to decide an issue which is part of the issue framed, as a preliminary issue under Order 14 Rule 2(2).
13. Having regard to the discussion hereinabove, in the considered opinion of this Court, as per the law laid down by the Hon'ble Apex Court in case of Sathyanath and Anr. Vs. Sarojamani (supra) that under Order 14 Rule 2(2) of the CPC, the Court could dispose of an issue of law only without pronouncing judgment on all the issues, if such issue relates to jurisdiction of the Court or relates to a bar to the suit created by a law which is in force. Furthermore, as per the dictum of the Hon'ble Apex Court for ensuring speedy disposal of a lis and also to ensure that the process of Civil Court is not abused by litigants, the Court is obligated to decide issue as per Order 14 Rule 2(2) of the CPC at the first instance and further considering the fact that the previous orders would not preclude this Court from deciding an issue which is framed though the said aspect may have been touched upon in the interim orders, therefore, in the considered opinion of this Court, neither the interim orders would act as a bar to this Court nor the fact of any particular observations made in such interlocutory orders bind this Court at the stage of finally deciding the issue already framed.
14. Furthermore, as far as the issue No.5 is concerned, since it appears that the said issue is an issue of law more particularly with regard to jurisdiction of this Court and could be decided as such, more particularly without delving into the facts, this Court deems it appropriate to take up the issue as an issue of law under Order 14 Rule 2(2)(a) of the CPC. Furthermore, since it appears that the defendant has not preferred a specific application for taking up the issue No.5 as an issue under Order 14 Rule 2(2) of the CPC and whereas though in the considered opinion of this Court, in view of the dictum of the Hon'ble Apex Court in case of Abdul Rahman Vs. Parsonyn Bai, reported in (2003) 1 SCC 488 that "For the purpose of disposal of the suit on the admitted facts, Page 21 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined particularly when the suit can be disposed of on preliminary issues, no particular procedure was required to be followed by the High Court....", yet to ensure that appropriate opportunity is afforded to the plaintiff to make his submissions on the aspect as to why the issue No.5 should not be taken up as a preliminary issue under Order 14 Rule 2(2)(a) of the CPC and the suit be decided on the said preliminary issue and also to make submissions on the aspect as to why this Court ought not to refer the dispute to be decided by arbitration as per Clause 18 of the memorandum of agreement between the parties dated 18.09.1998, list these matters on 07.07.2023 for further submissions."
18. Therefore, the contention of Defendant No.2 that this Court vide order dated 15.06.2023, has held to decide the issue as per Order 14 Rule 2(2) of CPC, as preliminary issue merits acceptance. It is also noticed that joining defendant No.2 was at the instance of plaintiff. Further, the contention of Defendant No.2 that it (defendant no.2) and Defendant No.1 are the same entity because of their existence under the same corporate umbrella appears to be correct in view of order dated 08/09.03.1999. SLP filed against the said order came to be disposed of under order dated 08.04.1999 by Hon'ble Apex Court by granting liberty to the Defendant to approach high court for modification (page No.1351). Significantly the finding with regard to lifting of corporate veil has not been disturbed.
19. Further, as per the order dated 15.06.2023 of this court as Page 22 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined referred to above, the issue No.5 as per Order 14 Rule 2(2) is required to be decided as preliminary issue.
20. Moreover, issue no.5 that 'whether the suit is maintainable in law in the present form', if considered in view of clause 18 of MOA dated 18.09.1998 which provides for arbitration clause, in the opinion of this Court, it would be apposite to refer to the decision of Hon'ble Supreme Court in the case of Cox and Kings Limited (supra) wherein it is held as under:
"166. The above position of law leads us to the inevitable conclusion that at the referral stage, the court only has to determine the prima facie existence of an arbitration agreement. If the referral court cannot decide the issue, it should leave it to be decided by the arbitration tribunal. The referral court should not unnecessarily interfere with arbitration proceedings, and rather allow the arbitral tribunal to exercise its primary jurisdiction. In Shin-Etsu Chemical Co Ltd v. Aksh Optifibre Ltd,125 this Court observed that there are distinct advantages to leaving the final determination on matters pertaining to the validity of an arbitration agreement to the tribunal:
74. [...] Even if the Court takes the view that the Page 23 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined arbitral agreement is not vitiated or that it is not valid, inoperative or unenforceable, based upon purely a prima facie view, nothing prevents the arbitrator from trying the issue fully rendering a final decision thereupon. If the arbitrator finds the agreement valid, there is no problem as the arbitration will proceed and the award will be made. However, if the arbitrator finds the agreement invalid, inoperative or void, this means that the party who wanted to proceed for arbitration was given an opportunity of proceedings to arbitration, and the arbitrator after fully trying the issue has found that there is no scope for arbitration."
167. In Chloro Controls (supra), this Court held that it is the legislative intent of Section 45 of the Arbitration Act to give a finding on whether an arbitration agreement is "null and void, inoperative and incapable of being performed" before referring the parties to arbitration. In 2019, the expression "unless it prima facie finds" was inserted in Section 45. In view of the legislative amendment, the basis of the above holding of Chloro Controls (supra) has been expressly taken away. The present position of law is that the referral court only Page 24 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined needs to give a prima facie finding on the validity or existence of an arbitration agreement.
168. In Deutsche Post Bank Home Finance Ltd v. Taduri Sridhar,126 a two- Judge Bench of this Court held that when a third party is impleaded in a petition under Section 11(6) of the Arbitration Act, the referral court should delete or exclude such third party from the array of parties before referring the matter to the tribunal. This observation was made prior to the decision of this Court in Chloro Controls (supra) and is no longer relevant in light of the current position of law. Thus, when a non- signatory person or entity is arrayed as a party at Section 8 or Section 11 stage, the referral court should prima facie determine the validity or existence of the arbitration agreement, as the case may be, and leave it for the arbitral tribunal to decide whether the non- signatory is bound by the arbitration agreement.
169. In case of joinder of non-signatory parties to an arbitration agreement, the following two scenarios will prominently emerge: first, where a signatory party to an arbitration agreement seeks joinder of a non-signatory party to the arbitration agreement; and second, where a non-signatory party itself seeks invocation of an Page 25 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined arbitration agreement. In both the scenarios, the referral court will be required to prima facie rule on the existence of the arbitration agreement and whether the non-signatory is a veritable party to the arbitration agreement. In view of the complexity of such a determination, the referral court should leave it for the arbitral tribunal to decide whether the non- signatory party is indeed a party to the arbitration agreement on the basis of the factual evidence and application of legal doctrine. The tribunal can delve into the factual, circumstantial, and legal aspects of the matter to decide whether its jurisdiction extends to the non-signatory party. In the process, the tribunal should comply with the requirements of principles of natural justice such as giving opportunity to the non-signatory to raise objections with regard to the jurisdiction of the arbitral tribunal. This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of determination of true parties to an arbitration agreement to be decided by arbitral tribunal under Section 16.
H. Conclusions
170. In view of the discussion above, we arrive at the following conclusions:
Page 26 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined 170.1. xxxx 170.2. xxxx 170.3. The requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding non-signatory parties;
170.4. Under the Arbitration Act, the concept of a "party" is distinct and different from the concept of "persons claiming through or under" a party to the arbitration agreement;
170.5. The underlying basis for the application of the group of companies doctrine rests on maintaining the corporate separateness of the group companies while determining the common intention of the parties to bind the non- signatory party to the arbitration agreement;
170.6. xxxx 170.7. xxxx 170.8. xxxx 170.9. xxxx 170.10. xxxxx 170.11. xxxxx Page 27 of 29 Uploaded by NAIR SMITA V.(HC00186) on Tue Aug 26 2025 Downloaded on : Tue Aug 26 22:26:03 IST 2025 NEUTRAL CITATION C/AS/20/2022 JUDGMENT DATED: 26/08/2025 undefined 170.12. At the referral stage, the referral court should leave it for the arbitral tribunal to decide whether the non-signatory is bound by the arbitration agreement; and 170.13. In the course of this judgment, any authoritative determination given by this Court pertaining to the group of companies doctrine should not be interpreted to exclude the application of other doctrines and principles for binding non-signatories to the arbitration agreement."
21. Thus, as held by the Hon'ble Supreme Court all such aspects including the issue of privity of contract between plaintiff and defendant no.2, signatory- non signatory to the MOA, and the group of companies are to be considered by Learned Arbitral Tribunal once the dispute is referred.
Therefore, in the opinion of this court, in view of the order of this Court dated 15.06.2023 and in view of the latest decision of Hon'ble Supreme Court, in the case of Cox and Kings Limited (supra) this Admiralty Suit No.20 of 2022, is disposed of by relegating the parties to the remedy of Arbitration. All available contentions are kept open.
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22. In view of disposal of Suit, the amount deposited by defendant No. 2 of the sum of Rs.25,00,000/-, before City Civil Court Bhavnagar with accrued interest thereon, is directed to be paid over to defendant No.2 after due verification.
23. With this, the present Suit is disposed of. Rule is discharged. No costs.
24. Consequentially, Civil Application(s) stands disposed of.
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