Defendant Removed from Suit; Arbitration Ordered Due to Interconnected Agreements and Applicable Arbitration Clause.

The HC allowed the Chamber Appeal, deleting Defendant No.1 from the suit, as it was not a necessary party, given the Master Dealer Agreement was solely between Plaintiff No.2 and Defendant No.2. Additionally, the court referred the matter to arbitration under the Arbitration and Conciliation Act, as the agreements were interconnected, and the arbitration clause applied. The suit was disposed of accordingly.

---

---

Issues Involved:
1. Deletion of Defendant No.1 from the array of defendants.
2. Reference to arbitration under the Arbitration and Conciliation Act.

Issue-wise Detailed Analysis:

1. Deletion of Defendant No.1 from the Array of Defendants:

The defendant no.1 filed a Chamber Appeal against the order dated 21st May 2018, which dismissed IA No.848/2017 under Order I Rule 10 (2) CPC, seeking deletion from the array of defendants. The Senior Counsel for the defendants argued that the suit was initially filed against defendant no.1 only, but later defendant no.2 was impleaded after defendant no.1 pointed out that the agreement was between plaintiff no.2 and defendant no.2. The Joint Registrar dismissed the deletion application on the grounds that defendant no.1, being the holding company of defendant no.2, was a necessary and proper party.

The plaintiffs' counsel contended that defendant no.2 was a shell company and that a case for piercing the corporate veil was made out. However, the court noted that no such plea was made in the plaint, and the plaintiffs had not taken any steps to amend the plaint to include such a plea. The court emphasized that contentions must support pleadings, and the procedure prescribed by law should not be turned on its head.

The court concluded that, based on the existing pleadings, defendant no.1 was neither a necessary nor a proper party. The Master Dealer Agreement was solely between plaintiff no.2 and defendant no.2, and any claim for recovery of damages could only be against defendant no.2. The argument that a money decree against defendant no.2 would be unexecutable did not entitle the plaintiffs to sue defendant no.1 without a plea for piercing the corporate veil. Consequently, the court allowed the Chamber Appeal, set aside the Joint Registrar's order, and deleted defendant no.1 from the array of defendants.

2. Reference to Arbitration under the Arbitration and Conciliation Act:

The court addressed IA No.9976/2018 filed by defendant no.2 under Section 8 of the Arbitration and Conciliation Act and IA No.11659/2018 for condonation of delay in filing the reply. The plaintiffs argued that the application should be dismissed due to non-compliance with Section 8(2) of the Act, as the defendant had not filed the agreement containing the arbitration clause. However, the court noted that the plaintiffs had already produced the Master Dealer Agreement, and there was no need for the defendant to file another copy.

The court referred to various judgments, including AEZ Infratech Pvt. Ltd. Vs. SNG Developers Ltd., which held that the objective of filing a certified copy is to ensure no dispute regarding the existence of the arbitration clause. The court also noted that Section 45 of the Arbitration Act, applicable in this case, does not have the same requirement as Section 8(2).

The court further examined the plaintiffs' claim, which included references to both the Master Dealer Agreement and a subsequent Dealer Agreement. However, the plaintiffs had not filed the Dealer Agreement and had made a lumpsum claim for damages without specifying the loss suffered by each plaintiff. The court concluded that the entire transaction, including the Dealer Agreement, emanated from the Master Dealer Agreement containing the arbitration clause.

Citing Ameet Lalchand Shah Vs. Rishabh Enterprises, the court held that when multiple agreements are interconnected, the arbitration clause in the principal agreement would cover ancillary agreements and parties thereto. The court also referred to other judgments supporting the view that interconnected agreements with a common purpose should be referred to arbitration.

The court was satisfied that the subject matter of the suit was subject to an arbitration agreement and referred the parties to arbitration, disposing of the suit accordingly.

---