2010 (6) TMI 886 - HC - Indian Laws

Dismissal of Revision for Non-Referable Arbitration Dispute

The court upheld the trial court's decision, dismissing the revision. The dispute was deemed not referable to arbitration due to Messrs. Shruti Finsec ... - Issues Involved:1. Whether the dispute should be referred to arbitration under Clause 17 of the Shareholders' Agreement dated 10.11.1992.2. Whether Messrs. Shruti Finsec Private Limited, not being a party to the original agreement, can be bound by the arbitration clause.3. Whether the application under Section 8 of the Arbitration and Conciliation Act, 1996, was procedurally compliant.4. Whether the dispute is wholly covered by the arbitration agreement.5. Whether the revisionist-company has waived/abandoned the arbitration clause by filing a petition before the Company Law Board.Issue-wise Detailed Analysis:1. Referral to Arbitration:The revisionist argued that Clause 17 of the Shareholders' Agreement mandated arbitration for any disputes. The clause specified that disputes should be referred to arbitration under the rules of the International Chamber of Commerce, Paris, with New Delhi as the venue. The revisionist contended that the trial court erred in not referring the matter to arbitration despite the clear arbitration clause.2. Binding Nature of Arbitration Clause on Messrs. Shruti Finsec Private Limited:The respondents argued that Messrs. Shruti Finsec Private Limited was not a party to the original Shareholders' Agreement and thus could not be bound by its arbitration clause. The court noted that the Shareholders' Agreement was between Starlinger & Company and the Lohia Family, represented by Raj Kumar Lohia, and that Messrs. Shruti Finsec Private Limited was not a signatory. The court cited precedents, including Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya, which held that unless all parties to the suit are parties to the arbitration agreement, the dispute cannot be referred to arbitration.3. Procedural Compliance of Section 8 Application:The trial court found that the application under Section 8 of the Arbitration and Conciliation Act was not procedurally compliant as it was not accompanied by the original arbitration agreement or a duly certified copy thereof. The revisionist had filed a self-attested copy, which did not meet the statutory requirement. The court acknowledged this procedural lapse but chose to scrutinize the matter on other substantive points.4. Coverage of Dispute by Arbitration Agreement:The court examined whether the dispute was wholly covered by the arbitration agreement. The reliefs sought in the civil suit included specific performance of a subsequent contract, which did not contain an arbitration clause. The court noted that the subsequent contract, arising from letters dated 11.5.2001, 7.5.2001, and 3.11.2001, was independent of the original Shareholders' Agreement. Therefore, the dispute was not wholly covered by the arbitration agreement, and the civil court was the appropriate forum for resolving the dispute.5. Waiver/Abandonment of Arbitration Clause:The court observed that the revisionist had filed a petition before the Company Law Board, which indicated a waiver or abandonment of the arbitration clause. The trial court had noted this fact and concluded that the revisionist could not avail two statutory remedies simultaneously. The court found substance in the trial court's finding that the revisionist had waived/abandoned the arbitration clause.Conclusion:The court upheld the trial court's decision, finding no error of law or infirmity. It dismissed the revision, concluding that the dispute was not referable to arbitration due to the non-party status of Messrs. Shruti Finsec Private Limited, the procedural non-compliance of the Section 8 application, the partial coverage of the dispute by the arbitration agreement, and the waiver/abandonment of the arbitration clause by the revisionist.