2016 (11) TMI 544 - SC - Indian Laws

Arbitration application under Section 8 cannot be rejected if original agreement filed before consideration

The SC held that an arbitration application under Section 8 should not be rejected if the original arbitration agreement is filed before the court ... Reference to arbitration - Non-filing of either original or certified copy of retirement deed and partnership deed along with application entailed dismissal of the application as per section 8(2) of 1996 Act - Meaning of word 'entertain' - entitlement to make the reference relying on arbitration agreement - Whether dispute pertaining to unregistered partnership deed cannot be referred to an arbitration despite there being arbitration agreement in the deed of retirement/partnership deed - Held that:- The original Retirement Deed and Partnership Deed were filed by the defendants on 12th May and it is only after filing of original deeds that Court proceeded to decide the application I.A.No. IV. Section 8(2) has to be interpreted to mean that the court shall not consider any application filed by the party under Section 8(1) unless it is accompanied by original arbitration agreement or duly certified copy thereof. The filing of the application without such original or certified copy, but bringing original arbitration agreement on record at the time when the Court is considering the application shall not entail rejection of the application under Section 8(2). In the present case it is relevant to note the Retirement Deed and Partnership Deed have also been relied by the plaintiffs. Hence, the argument of plaintiffs that defendants' application I.A.No. IV was not accompanied by original deeds, hence, liable to be rejected, cannot be accepted. We are thus of the view that the appellants submission that the application of defendants under Section 8 was liable to be rejected, cannot be accepted. In the facts of the present case, it cannot be said that merely because one of the defendants i.e. defendant no. 6 was not party to the arbitration agreement, the dispute between the parties which essentially relates to the benefits arising out of Retirement Deed and Partnership deed cannot be referred. When the partners and those who claim through partners agreed to get the dispute settled by arbitration, it is not open for the appellants to contend that partnership being unregistered partnership, the dispute cannot be referred. The petitioners have not been able to show any statutory provision either in 1996 Act or in any other statute from which it can be said that dispute concerning unregistered partnership deed cannot be referred to arbitration. We thus do not find any substance in the third submission of the appellant. Issues Involved:1. Non-filing of original or certified copy of the retirement deed and partnership deed.2. All parties to the suit not being parties to the arbitration agreement.3. Dispute pertaining to an unregistered partnership firm.Issue-wise Detailed Analysis:Issue No. 1: Non-filing of Original or Certified Copy of the Retirement Deed and Partnership DeedThe appellants argued that the application I.A.No. IV, which sought to refer the matter to arbitration, was not accompanied by the original retirement deed and partnership deed, as mandated by Section 8(2) of the Arbitration and Conciliation Act, 1996. The court noted that the plaintiffs had already referred to and admitted these deeds in their plaint and had filed photocopies of these documents. Furthermore, the defendants filed the original deeds on 12.05.2014, before the court considered the application. The court emphasized that Section 8(2) prohibits the court from entertaining an application unless accompanied by the original or certified copy of the arbitration agreement. However, since the original deeds were on record when the court considered the application, the application was not liable to be rejected. The court concluded that the appellants' submission on this ground could not be accepted.Issue No. 2: All Parties to the Suit Not Being Parties to the Arbitration AgreementThe trial court found that the plaintiffs were parties to the retirement deed, either directly or through their representatives. Defendant No. 6 was the only party not part of the retirement or partnership deed. The court held that the plaintiffs, being parties to the arbitration agreement, could not argue against the reference to arbitration merely because one defendant was not a party to the agreement. The court also noted that Defendant No. 6 had not inherited any share in the partnership or the property in question, and thus, there was no need to bifurcate the cause of action or parties. The court endorsed the trial court's view that the presence of Defendant No. 6 did not preclude the implementation of the arbitration agreement.Issue No. 3: Dispute Pertaining to an Unregistered Partnership FirmThe appellants contended that the partnership being unregistered, the dispute could not be referred to arbitration. The court observed that both the retirement deed and partnership deed contained arbitration clauses, which the partners and their representatives had agreed to. The court found no statutory provision in the Arbitration and Conciliation Act, 1996, or any other statute, prohibiting the arbitration of disputes concerning an unregistered partnership deed. Therefore, the court dismissed this submission as well.Conclusion:The appeal was dismissed on all grounds. The court upheld the trial court's decision to refer the parties to arbitration, emphasizing the validity of the arbitration agreements in the retirement and partnership deeds, and the absence of any statutory prohibition against referring disputes involving an unregistered partnership to arbitration.