| CITATION | Civil Appeal nos 4656-4657 of 2033 |
| DATE OF JUDGEMENT | 25/07/2023 |
| COURT | Supreme Court of India |
| CASE TYPE | Civil |
| APPELLANT | Vinod Kumar Sachdeva |
| RESPONDENT | Ashok Kumar Sachdeva & Ors |
| BENCH | Chief justice of India Mr.Dhananjaya Y Chandrachud Justice Mr. J.B. PardiwalaJustice Mr.Manoj Misra |
Facts of the Case
In the present case, Vinod Kumar Sachdeva, the Appellant herein, and Ashok Kumar Sachdeva the Respondent herein, are real brothers and are running a Partnership Business under the name and style of Sachdeva & Sons. They entered into a Memorandum of Understanding (MOU) on 14.09.2010 with the terms that the joint family properties should be liquidated to repay the liabilities of the business that had arisen over a period of time in the course of the business.
The MOU contained an arbitration agreement in Clause 15 in the following terms:
That in the event that clarification is required or a dispute arises, it will be brought to the attention of Revered Maa Deva Ji, Sh. Surinder Kumar, also known as Chhindi Ji, of Ghaziabad, or, if necessary, another mutually agreed-upon arbitrator(s). The arbitrator(s)’ ruling will be final and binding on both parties. However, the Arbitration and Conciliation Act, 1996, as revised from time to time, shall always govern the arbitration.
Unfortunate circumstances led to a legal disagreement between the Respondent and the Appellant. Under Case No. 64/2438/2014, the appellant filed a civil lawsuit before the Civil Judge (Junior Division), Amritsar (Trial Court), against Respondent Nos. 1 Ashok Kumar Sachdeva and Respondent No. 2 Sachdeva and Sons Industries Private Limited. The appellant sought a permanent injunction that forbade the defendants, through their officials, agents, privy, and representatives, from selling or otherwise alienating land measuring 10 ½ qillas.
Following that, the Appellant filed a second civil suit, with the case number 28/53/2015, against the Respondents 1 and 2, adding Canara Bank as Respondent No. 3 (Defendant Bank), and requesting a permanent injunction to prevent the Defendants 1 and 2 from taking out any loans from other banks against the business properties related to their loan accounts, as well as instructions to the Defendant Bank to recall any financing or loans that it had previously released to the Defendants No. 1 and 2, along with all associated costs before the Trial Court
Subsequently, Respondent No. 1 submitted an application for a reference to arbitration in both actions under Section 8 of the Arbitration and Conciliation Act, 1996 (which grants the authority to refer parties to arbitration in cases where an arbitration agreement exists). In relation to the suits, the trial court dismissed the applications through separate orders dated March 27, 2017.
Disappointed with the Ld. Trial Court’s Order dated 27.03.2017, Respondent No. 1 filed a Writ under Article 227 (High Court’s power of superintendence over all courts) in order to have the Ld. Trial Court’s judgment set aside. The case was filed before the High Court of Punjab and Haryana (High Court), with Case Nos. CRN 2819 and 2820 of 2017
The Ld. Trial Court’s judgment was overturned by the High Court in an order dated August 1, 2017, which also instructed the Ld. Trial Court to issue consequential orders and directed that the disputes in both suits be submitted to arbitration in accordance with Section 8 of the 1996 Act.
Issue
- Is it appropriate for the parties’ disagreements to be brought before arbitration in accordance with the MoU’s arbitration clause?
- Is it possible for parties who did not sign the Memorandum of Understanding to be forced to arbitrate under its terms?
Arguments
Respondent:
- The first respondent argued that the disputes raised in the lawsuits ought to be submitted to arbitration under Section 8 of the Arbitration and Conciliation Act of 1996, the primary focus was on the MoU’s arbitration clause, which mandated that any disputes arising from the agreement be resolved through arbitration.
- Respondents insisted that the disputes be resolved solely through arbitration in line with the terms of the agreement.
- They contended that the court ought to refer the disputes to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996, rather than having the disputes resolved in court.
Appellant:
- The MoU was not signed by the bank or the corporation, two parties that wanted to be bound by arbitration. The appellant contended that the MoU was not signed by companies such as “Sachdeva and Sons Industries Private Limited” and “Canara Bank,” which desired to be subject to arbitration. Consequently, under the terms of the arbitration agreement, these non-signatory entities could not be forced to arbitrate disputes
- The arbitration agreement was not signed by the shareholders of the businesses who were not related. The appeal argued that the companies listed in the Memorandum of Understanding’s non-family shareholders were not parties to the arbitration agreement. Therefore, they could not be sent to arbitration in accordance with the agreement that was only signed by the appellant and the first respondent.
Judgement
The apex court observed the following:
- According to the Memorandum of Understanding signed by the Appellant and Respondent No. 1, the Sachdeva family was jointly owning and operating a number of companies, partnership firms, and sole proprietorships.
- That the MOU details the concerns and characteristics of the individual family units
- The MOU states that certain non-family shareholdings exist.
- The fact that multiple parties to the lawsuit are not signatories to the arbitration clause.
- The Apex Court noted that Canara Bank and the Company are not parties to the arbitration agreement, and the MOU was signed solely between the Appellant and Respondent No. 1. Since they are not parties to the MOU, the non-family shareholdings cannot be bound by its provisions.
References
https://www.casemine.com/judgement/in/5b78134c9eff430e1391b81b/amp
This case analysis is prepared by Yashika sain of LC-1,faculty of law ,Delhi university
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