SUPREME COURT OF INDIA
Sandeep Kumar and Others
Vs
Master Ritesh and Others
Appeal (Civil) 4610 of 2006 [Arising Out of S.L.P. (Civil) No.19125-33 of 2003]
(S. B. Sinha and Dalveer Bhandari, JJ)
31.10.2006
S. B. SINHA, J.
Leave granted.
Dev Papers (P) Ltd., Meham, is a company incorporated under the Companies Act, 1956. Appellants herein as also Respondent
Nos.2 to 7 were its shareholders. One R.P. Gupta was representing the
appellants whereas Satyadev Gupta was representing the defendants-respondents
in the Board of Directors. Disputes and differences having arisen between the
parties, a suit came to be filed by Appellants. Admittedly, an arbitration
agreement had been entered into by and between Plaintiffs-Appellants and some
of the Defendants. However, some of the Defendants were not parties to the said
agreement. In view of the existence of the said arbitration agreement, an order
was passed by the learned trial Judge in terms of the Arbitration
Act 1940. The matter came up to this Court on an earlier occasion.
Plaintiffs-Appellants herein made a representation before this Court that they
would amend the plaint by deleting the names of Respondents who were parties to
the arbitration agreement and continue with the suit as against those who were
not parties thereto. The said statements were recorded in the order of this
Court in the following terms:
"Mr. K.N. Balgopal, learned counsel representing the respondents in these
9 SLPs, states that the plaintiff(s) in each of the 9 suits which have been
ordered, shall confine his/their suit against the principal debtor in each case
and shall drop him from the array of defendants all such defendants other than
principal defendant. Prima facie, on such stance being adopted by the petitioners'
learned counsel, the grievance of the special leave petitioners, apparently,
vanishes. Learned counsel for the parties need and are granted time to check up
on this aspect of the matter."
By an order dated 04.04.1997, the said special leave petition was disposed of.
The matter in regard to the stay of the suit thereafter again came up for
hearing. By reason of a judgment and order dated 13.08.1999, it was, inter
alia, held :
"The legal proceedings in this case have been started after the agreement
by persons claiming under parties to the agreements. The plaintiffs in all the
nine cases are claiming under Rajender Parshad Gupta and the defendant is
claiming through Satyadev Gupta, both of whom are signatories/executants of the
arbitration agreement. Moreover, the plaintiffs in their plaints have admitted
that they were bound by the agreement dated 6.8.88, so that they cannot now
contend that they were not signatories of the agreement. The third contention
is that the proceeding must be with respect of the matter agreed to be referred
to arbitration. This condition has already been dealt within the preceding
paragraphs and need not be reproduced. Further, the application for stay has
been made by the defendant, who is party to the legal proceeding and was filed
before filing the written statement or taking any step in the proceedings. I
have already held that the applicant is ready and willing to do all things
necessary for the proper conduct of arbitration. The conditions set out in the
authorities cited above, have been fulfilled and the suits are liable to be
stayed."
In terms of the said findings the suit was again directed to be stayed. The
appeals preferred thereagainst by Appellants herein were also dismissed. The
High Court by reason of its impugned judgment passed in C.R. No. 3045 of 2000
upheld the said findings.
Mr. K.N. Balgopal, the learned counsel appearing on behalf of Appellants, would
submit that the courts below committed a serious error in passing the impugned
judgment insofar as it failed to take into consideration the effect of deleting
the names of those defendants by amending the plaint. According to the learned
counsel although there might exist an arbitration agreement between Appellants
and some of the Defendants, but in view of the fact that the amendments had
been carried out in the plaint the arbitration agreement could not have been
enforced as against Respondents who were not parties thereto.
Mr. Balbir Singh, the learned counsel appearing on behalf of Respondents, on the
other hand, would submit that the matter being governed by the provisions of
Section 8 of the Arbitration and Conciliation Act, 1996,
the parties could raise the question of jurisdiction of the arbitral tribunal
in terms of section 16 thereof.
It appears that the counter affidavit has been filed by one Shri Ramesh Kumar
Gupta. He had been representing a group in the suit. His name had been deleted
from the array of the parties by amending the plaint. In his counter affidavit
he does not state that he has any authority to represent other Respondents or
any authority to file a counter affidavit on their behalf. Paragraph 7 of the
plaint whereupon reliance has been placed reads as under:-
"7. That the plaintiff as well as defendant No. 2 to 7 including defendant
No. 5 are bound by the agreement dated 6.8.88 and that defendant No. 2 to 4
have repaid Rs.26, 51, 000/- and have to repay Rs. 2.95 lac including amount of
the plaintiff for which the plaintiff is filing the suit against defendant No.
5 as well as defendant No. 2 to 4. Defendant No.1 and defendants No. 6 to 7
have been joined as proforma defendants."
It may be true that Plaintiffs-Appellants had been representing a group, but
admittedly all the parties to the suit were not parties to the arbitration agreement.
If some of the Defendants were not parties to the arbitration agreement, the
question of invoking the arbitration clause as against those Defendants would
not arise. As noticed hereinbefore, in the earlier round of litigation,
Appellants categorically stated that the suit would be confined only as against
those who were not parties to the arbitration agreement.
There were three parties to the said arbitration agreement. Party No. 1 was
represented by (1) Satya Dev Gupta; (2) Ramesh Kumar Gupta; and (3) Jai Dev
Gupta. Party No.2 was represented by (1) Rajender Parshad Gupta; (2) Sham Lal
Gupta; and (3) Sushil Gupta. The third party to the said agreement was the
company itself. If the names of those who were in the Party No. 1 and Party
No.2 in the said agreement had been deleted from the array of
Defendants-Appellants and the claims against them have been given up, we fail
to see as to how the arbitration agreement can still be invoked under Section
34 of the Arbitration Act, 1940 or Section 8 of the Arbitration and Conciliation Act, 1996.
For the reasons aforementioned, the impugned judgment cannot be sustained which
is set aside accordingly. The Appeal is allowed. No costs.