Supreme Court upholds arbitration clause, refers disputes to arbitrator.

The Supreme Court allowed the appeal, setting aside the High Court's orders. The Court referred the disputes to the sole arbitrator, emphasizing the binding nature of arbitration clauses and the limited jurisdiction of civil courts in their presence. The judgment highlighted that the misjoinder of parties and causes of action did not invalidate the suit, and the arbitration clause remained applicable despite the termination of the original agreement. The Court directed the arbitrator to resolve the disputes promptly in accordance with the law.

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Issues Involved:
1. Misjoinder of parties and causes of action.
2. Validity and applicability of the arbitration clause.
3. Jurisdiction of the civil court in the presence of an arbitration agreement.

Issue-wise Detailed Analysis:

1. Misjoinder of Parties and Causes of Action:
The appellants filed a suit for declarations, permanent injunction, and recovery of money, claiming the agreement dated 06.06.2009 was terminated by mutual consent and replaced by an oral agreement. The respondent argued that the suit was bad for misjoinder of parties and causes of action, as the claims were based on separate agreements involving different parties. The High Court's single judge found the suit bad for misjoinder and gave the appellants an option to amend the plaint. The Division Bench upheld this decision. However, the Supreme Court held that the causes of action were a continuity of the original agreement and the subsequent oral agreement, thus allowing both appellants to join as plaintiffs in the suit. The Court concluded that the suit was not bad for misjoinder of parties or causes of action.

2. Validity and Applicability of the Arbitration Clause:
The agreement dated 06.06.2009 contained an arbitration clause, which the respondent invoked by appointing a sole arbitrator. The appellants contended that the arbitration clause was superseded by the oral agreement. The Supreme Court found that the oral agreement, evidenced by a transcript of conversation, substituted the written agreement but did not nullify the arbitration clause. The Court emphasized that the arbitration clause remained operative even after the agreement's termination by mutual consent. Consequently, the arbitration clause applied to disputes arising from both the written and oral agreements.

3. Jurisdiction of the Civil Court in the Presence of an Arbitration Agreement:
The respondent filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking to refer the matter to arbitration, claiming the subject matter of the dispute was already pending before the Arbitral Tribunal. The Supreme Court reiterated that Section 8 of the Act mandates the civil court to refer parties to arbitration if an arbitration agreement exists and the subject matter of the suit is covered by the agreement. The Court held that the civil court had no jurisdiction to entertain the suit once an application under Section 8 was made. The Supreme Court concluded that the prerequisites for an application under Section 8 were fulfilled, and the dispute should be referred to arbitration.

Conclusion:
The Supreme Court allowed the appeal, setting aside the orders of the High Court. The Court referred the disputes raised in CS(OS) 1532 of 2012 to the sole arbitrator already appointed, requesting the arbitrator to decide the disputes expeditiously in accordance with the law. The judgment emphasized the binding nature of arbitration clauses and the limited jurisdiction of civil courts in the presence of such agreements.

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