Nirmal Arvind Mody vs Neha H. Trivedi on 22 June, 2026

    0
    8
    ADVERTISEMENT

    Gujarat High Court

    Nirmal Arvind Mody vs Neha H. Trivedi on 22 June, 2026

    Author: Sunita Agarwal

    Bench: Sunita Agarwal

                                                                                                                     NEUTRAL CITATION
    
    
    
    
                                  C/FA/2665/2026                                   JUDGMENT DATED: 22/06/2026
    
                                                                                                                      undefined
    
    
    
    
                                          IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
                                                         R/FIRST APPEAL NO. 2665 of 2026
                                                                       With
                                                   CIVIL APPLICATION (FOR STAY) NO. 1 of 2026
                                                        In R/FIRST APPEAL NO. 2665 of 2026
    
                            FOR APPROVAL AND SIGNATURE:
                            HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL
                            and
                            HONOURABLE MR.JUSTICE D.N.RAY
    
                            ==========================================================
                                       Approved for Reporting                Yes   No
                                                                                 ✔
                            ==========================================================
                                                      NIRMAL ARVIND MODY
                                                               Versus
                                                     NEHA H. TRIVEDI & ORS.
                            ==========================================================
                            Appearance:
                            MR. UNMESH SHUKLA, SR. ADV. WITH MR. SHASHVATA U SHUKLA(8069)
                            WITH MR. VINIT GAJJAR for the Appellant(s) No. 1
                            ==========================================================
                               CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA
                                      AGARWAL
                                      and
                                      HONOURABLE MR.JUSTICE D.N.RAY
                                                          Date : 22/06/2026
                                                  REASONED ORAL JUDGMENT

    (PER : HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL)

    Heard the learned counsels for the parties and perused the
    record.

    SPONSORED

    2. The present appeal has been filed under Section 37 of the
    Arbitration and Conciliation Act, 1996 (in short as ‘the Act, 1996’)
    against the judgment and order dated 10.07.2025 passed by the
    Commercial Court, City Civil Court, Ahmedabad, refusing to refer
    the parties to Arbitration under Section 8 of the Act, 1996, by
    rejecting Section 8 application moved by the appellant herein by
    the Commercial Court in Commercial Civil Suit no. 638 of 2024.

    Page 1 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026

    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    3. It is categorically recorded in the judgment impugned that
    multiple reliefs have been sought in the suit and one of them is for
    recovery of loan given by the plaintiffs to the partnership firm.
    Admittedly, the said dispute is not imbibed in the agreement under
    the partnership deed and as such, cannot be adjudicated by the
    Arbitrator. Reliance placed by the learned counsel for the
    defendant on the decision of the Apex Court in Mrs. Hema
    Khattar & Anr. V/s. Shiv Khera [2017 0 Supreme Court (SC)
    325] was, thus, of no help.

    4. Mr. Unmesh Shukla, the learned senior advocate for the
    appellant would submit that the plaintiffs are the heirs and legal
    representatives of late Hitesh Hasmukhbhai Trivedi, who was 45%
    partner in the partnership firm. The defendant Nos. 1 and 2 are
    the partners and the reliefs sought in the suit is to dissolve and
    wind up the affairs and business of the partnership firm, M/s. Team
    Engineers, and to give assets, goodwill, receivable and profit of the
    partnership firm available as on the date of death of late Hitesh
    Hasmukhbhai Trivedi, as per his share.

    5. The submission is that the reliefs of dissolution/winding up
    and accounting of the assets of the partnership firm are directly
    and substantially covered by the arbitration clause contained in the
    partnership deed signed by the predecessor-in-interest of the
    respondents herein/original plaintiffs. The result is that on filling of
    the application under Section 8, there was no option before the
    Civil Court but to refer the parties to arbitration in view of the
    mandate of the said provision. It was argued that the language of
    Section 8 is peremptory, where the arbitration clause exists, it is
    mandatory for the Court to refer the parties to arbitration. Once
    pre-requisite conditions of Section 8 are fulfilled, no option is left to

    Page 2 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    the Court, but to refer the dispute for arbitration.

    6. The submission is that the approach of the Civil Court upon
    filling of Section 8 application should be to see whether its
    jurisdiction has been ousted or not. Once it is brought to the notice
    of the Court that its jurisdiction has been taken away in terms of
    the special statute, it must examine whether there is ouster or it
    has jurisdiction therein. General law must give way to the special
    law and the Civil Court shall ensure that the provisions of the
    special statute are given due weightage as against the general
    provisions of the CPC.

    7. Relying upon the decision of the Bombay High Court in Taru
    Meghani, through his Constituted Attorney M/s. Shraddha
    Khandhadia and Others v/s. Shree Tirupati Greenfield (Shree
    Tirupati Greenfield Developers) and Others [2020 SCC
    OnLine Bom 110], it was argued that in a suit for specific
    performance of agreement therein, the Bombay High Court has
    held that all claims including those outside the arbitration
    agreement, were to be referred to the arbitration. The issues
    which arose therein were :- can the salutatory object of Section 8 of
    the Act, 1996 be defeated by adding a claim over and above the
    claim in respect of which the matter is squarely covered by the
    arbitration agreement ?; and whether splitting of cause of action in
    the event arbitration agreement in the MOU was given effect to, is
    permissible.

    8. Noticing therein that though the plaintiff has a right to join
    multiple cause of action against the defendant in the same suit,
    however, under Rule 6 of Order II, CPC, the Court is empowered
    to order separate trials, when it finds that joinder of cause of action
    would embarrass or delay the trial or it is otherwise inconvenient.

    Page 3 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026

    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    The Bombay High Court has, thus, concluded that the Court
    cannot be divested of the authority to direct separation of causes of
    action when the joinder of causes of action in pursuance of
    enabling provisions like Rule 3 or Order II has the effect of
    defeating the provisions of special law, like Section 8 of the Act,
    1996. The submission of the plaintiff therein that bifurcation of
    subject matter of suit therein was impermissible in law, was turned
    down noticing that such an argument cannot be accepted in an
    unqualified manner, was the submission is frought with the danger
    of defeating an arbitration agreement, by simply adding a cause of
    action, the plaintiff may have against the defendant, which is not
    covered by the arbitration agreement.

    9. It was, thus, held in Taru Meghani (supra) that if such an
    approach is readily accepted, it has the propensity to give lease to
    the plaintiff to circumvent arbitration agreement by uniting cause
    of action, which is beyond the purview of arbitration agreement. It
    would have the effect of denuding Section 8 of the Act, 1996 of all
    its force and vigor. Such an intention would also derogate from the
    object which the Arbitration and Conciliation Act, 1996 is intended
    to achieve, of minimal judicial intervention when the parties have
    agreed to arbitrate the dispute. With the above, the Bombay High
    Court had separated both the causes of actions and with regard to
    the one transaction, the parties were referred to arbitration in
    accordance with the arbitration clause contained therein, whereas
    with regard to the other, the plaintiff was given liberty to institute
    a fresh suit in the Court of competent jurisdiction.

    10. Reliance is also placed upon the decision of the Calcutta High
    Court in Lindsay International Private Limited and Others v/s.
    Laxmi Niwas Mittal and Others [(2022) 1 High Court Cases

    Page 4 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    (Cal) 23] wherein, in a suit-relief for specific performance of a pre-
    incorporation agreement against the defendant Nos. 1-38 and for
    specific performance of a non-competition agreement against
    defendant Nos. 39-42 as also for declaration and injunction, an
    application under Section 8 of the Act, 1996 was filed. The issue
    arose therein was as to the applicability of the dictum of the Apex
    Court in Sukanya Holdings Pvt. Ltd. (supra) about non-
    permisibility of bifurcation of subject matter or cause of action in
    the suit.

    11. Placing the decision in Lindsay International Private
    Limited (supra), it was vehemently argued by the learned senior
    counsel for the appellant before us that the Calcutta High Court
    has noted therein that unambiguous mandate on the Court is to
    refer the parties to the arbitration, with the only exception where
    the Court can refuse the reference, if it is prima facie established
    that no valid arbitration agreement exists. The onus to establish
    that a valid arbitration clause does not exist, rests squarely on the
    party who seek to resist the reference.

    12. While taking note of the object and reasons of the Arbitration
    and Conciliation (Amendment Bill 2015), the Calcutta High Court
    has further noted the long line of judgments of the Apex Court on
    the interpretation of various facets of the amended Section 8 and
    concluded that what emerges from the said provision is that the
    Court must keep a hands-off approach as opposed to face-off with
    the arbitration process and give a decisive push to the arbitral
    process once the Court is satisfied, prima facie, that a valid
    agreement exists in a matter which is arbitrable. The court’s
    inquiry is limited only to this and no more. The further question
    before the Calcutta High Court in light of Order II Rule 6 of CPC

    Page 5 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    was “can the cause of action in the suit be bifurcated?”.

    13. At this juncture, going through the judgment of the Calcutta
    High Court, we may note that while answering the said question,
    the Calcutta High Court reached at the conclusion that “it can be
    fairly assumed that the plaint has been prepared with the object of
    avoiding the arbitration agreement between the plaintiff No.1 and
    the vendor group of defendants therein”. The argument of the
    plaintiffs therein that the disputes, if referred, would result in
    bifurcation of composite cause of action or split-up necessary and
    proper parties, was held untenable, holding that the said
    interpretation would be destructive of the legislative intent to
    promote the arbitration. It was observed that none of the decisions
    including Vidya Drolia & Ors. Durga Trading Corporation
    [(2021) 2 SCC 1] have held that an application under Section 8
    will only exist, when the entire suit is capable of being referable to
    the arbitration.

    14. Further, referring to Sukanya Holdings Pvt. Ltd.(supra), it
    was observed therein that in view of the amendment of 2015 Act,
    Sukanya Holdings Pvt. Ltd. (supra) is no longer a relevant
    factor for the Court to consider at the stage of reference in an
    application under Section 8 of the Act, 1996. The Court is not even
    under a mandate post-amendment, to adjudicate on the
    bifurcability of the causes of action or the presence of parties who
    are necessary parties to the action, but not to the arbitration. The
    only brake in the momentum of the reference is the court finding
    prima facie that no valid arbitration agreement exists. The only bar
    to refer the dispute under the amended Section 8 of the Act, 1996
    is non-existence of a valid arbitration agreement.

    15. It was argued before us by the learned senior counsel for the

    Page 6 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    appellant that the Calcutta High Court relying upon the judgment
    of the Apex Court in N.N.Global Mercantile (P) Ltd. v/s. Indo
    Unique Flame Ltd. [(2021) 4 SCC 379] has held that the
    requirement of a valid arbitration agreement involves a dispute,
    which is arbitrable and as clarified by the Apex Court all civil or
    commercial disputes which are capable of being adjudicated by a
    Civil Court, in principle, are held capable of being resolved unless
    specifically excluded by the statute or by necessary implication.
    The Arbitration and Conciliation Act, 1996 does not contain any
    provision by which any particular category of dispute is held to be
    non-arbitrable. Section 2(3) of the Act saves certain prevalent laws
    under which dispute may not be submitted to the arbitration.
    However, the actions in persona which determines the rights and
    interest of the parties to the subject matter of dispute, are clearly
    arbitrable.

    16. It was, thus, held, in the facts of the said case, that the claims
    and disputes therein are entirely between the private parties for
    determination of their rights and obligations, as contained in the
    Purchase Orders containing the arbitration clause, and it was not a
    case where the cause of action and subject matter dispute require
    centralised adjudication or would have the effect of binding the
    third parties thereby referring piecemeal adjudication
    inappropriate and unenforceable. It was observed that even before
    the amendment was effected to Section 8 of the Act 1996 in 2016,
    once the existence of the valid arbitration agreement was admitted,
    the judicial authority was statutorily mandated to refer the matter
    to arbitration.

    17. Heavily relying upon the said decision, it was argued by the
    learned senior counsel for the appellant that the law to refer the

    Page 7 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    dispute to arbitration under Section 8 of the Act, 1996 is
    sacrosanct and no deviation is permissible with respect to the
    reliefs claimed in the instant suit, which are governed by the
    Arbitration Agreement between the parties. Thus, in view of Rule 6
    of Order II, the Court had no option, but to bifurcate the reliefs in
    the plaint and to refer the parties to arbitration with respect to the
    reliefs, which are directly and substantially governed by the
    arbitration clause, namely dissolution and rendition of accounts of
    the partnership firm.

    18. To deal with the submissions of the learned senior counsel for
    the appellant, we are required to go through the law pertaining to
    the scope and purport of Section 8 of the Arbitration and
    Conciliation Act, 1996, which has underwent a substantial
    amendment with the Act No. 3 of 2016, w.e.f. 23.10.2025,
    popularly known as the 2015 Amendment to the Arbitration and
    Conciliation Act, 1996
    . The list of pre-amendment 2015 decisions
    on Section 8 of the Act’ 1996 commenced from Sukanya Holdings
    (P) Ltd. v/s. Jayesh H. Pandya & Ors.[(2003) 5 SCC 531] and
    ends with Sundaram Finance Ltd. and Another v/s. T.
    Thankam [(2015) 14 SCC 444] decided on 14.04.2003 and
    20.02.2015; respectively.

    19. In Sukanya Holdings (P) Ltd. (supra), the question was as
    to whether the High Court was right in rejecting the application
    under Section 8 on the ground that subject matter of suit was not
    entirely between the contracting parties, reliefs other than the
    resolution was also claimed, and no power existed to partly refer
    the dispute to the arbitration. Considering the language of
    erstwhile Section 8 (pre-2015 amendment provisions),, it was held
    that the words “a matter” in Section 8 indicates that the entire

    Page 8 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    subject- matter of the suit should be subject to arbitration
    agreement. The suit should be in respect of “a matter” which the
    parties have agreed to refer and which comes within the ambit of
    the arbitration agreement. Where, however, the suit is commenced

    – “as to a matter” which lies outside the arbitration agreement and
    is also between some of the parties, who are not the parties to the
    arbitration agreement, there is no question of application of
    Section 8.

    20. On the question as to whether the dispute can be partly
    referred to the arbitration and whether such a course is
    permissible under Section 8 of the Act, 1996, it was held therein
    that to give an interpretation to Section 8 under which bifurcation
    of cause of action is permissible, would be laying down a totally
    new procedure not contemplated under the Act, 1996. Moreover,
    such bifurcation of suit in two parts, one to be decided by the
    arbitral tribunal and other by the trial court, would inevitably delay
    the proceedings, create risk of conflicting judgments, increase
    litigation cost and cause harassment to the parties.

    21. In Sundaram Finance (supra) decided on 20th February,
    2015, the question was whether by mere inclusion of arbitration
    clause, the jurisdiction of civil court is completely ousted. In a
    sense, the issue addressed by the Apex Court was as to what would
    be the approach of the civil court when an application is filed
    before it under Section 8 of the Act, 1996. Analysing the provisions
    of Section 8 of the Act, 1996 holding the language therein as
    peremptory, it was held that it is mandatory for the Court to refer
    the parties to arbitration once the prerequisite conditions of
    Section 8 are fully satisfied. It was held that the approach of the
    civil court is not to see whether it has jurisdiction or not, and

    Page 9 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    instead it should see whether its jurisdiction has been ousted or
    not. Once, it is brought to the notice of the Court that its
    jurisdiction has been taken away in terms of the special statute, it
    must first examine whether there is ouster of its jurisdiction
    thereunder. On the issue of bifurcation of cause of action, the Apex
    Court has referred and relied upon Sukanuya Holdings (P) Ltd.
    (supra) stating that the said issue is no more res integra. It was
    directed therein to the trial court to pass a fresh order on the
    application under Section 8 of the Act, 1996 adopting an approach
    in the the spirit of principle that general law should yield to special
    law, so as to see whether its jurisdiction has been ousted under the
    special statute or not.

    22. We may now go through the post-amendment decisions on
    Section 8 in Ameet Lalchand Shah and Others v/s. Rishabh
    Enterprises and Another [(2018) 15 SCC 678] decided on 3rd
    May, 2018. The Apex Court therein has noted that the amendments
    were brought in Section 8 to make it in line with Section 45 of the
    Act, 1996 contained in Chapter-I Part II of the Act, 1996. It was
    noted in paragraph No. ’27’ to ’30’ as under :-

    “Amendment to Section 8 of the Arbitration and Conciliation Act,
    1996

    27. Arbitration and Conciliation (Amendment) Act, 2015 has
    brought in amendment to Section 8 to make it in line with Section
    45
    of the Act. In view of the observation made in Sukanya Holdings
    [Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya
    , (2003) 5 SCC
    531] , Law Commission has made recommendation for amendment
    to Section 8 of the Act. Consequent to the 2015 Amendment Act,
    Section 8 is amended as under:

    “8. Power to refer parties to arbitration where there is an
    arbitration agreement.–(1) A judicial authority, before which
    an action is brought in a matter which is the subject of an
    arbitration agreement shall, if a party to the arbitration
    agreement or any person claiming through or under him, so
    applies not later than the date of submitting his first
    statement on the substance of the dispute, then,

    Page 10 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    notwithstanding any judgment, decree or order of the
    Supreme Court or any court refer the parties to arbitration
    unless it finds that prima facie no valid arbitration
    agreement exists.

    (2) The application referred to in sub-section (1) shall not be
    entertained unless it is accompanied by the original
    arbitration agreement or a duly certified copy thereof:

    Provided that where the original arbitration agreement or a
    certified copy thereof is not available with the party applying
    for reference to arbitration under sub-section (1), and the
    said agreement or certified copy is retained by the other
    party to that agreement, then, the party so applying shall file
    such application along with a copy of the arbitration
    agreement and a petition praying the court to call upon the
    other party to produce the original arbitration agreement or
    its duly certified copy before that court.

    (3) Notwithstanding that an application has been made
    under sub-section (1) and that the issue is pending before
    the judicial authority, an arbitration may be commenced or
    continued and an arbitral award made.”

    (emphasis supplied)

    28. “Principally four amendments to Section 8(1) have been
    introduced by the 2015 Amendments — (i) the relevant “party” that
    is entitled to apply seeking reference to arbitration has been
    clarified/amplified to include persons claiming “through or under”

    such a party to the arbitration agreement; (ii) scope of examination
    by the judicial authority is restricted to a finding whether “no valid
    arbitration agreement exists” and the nature of examination by the
    judicial authority is clarified to be on a “prima facie” basis; (iii) the
    cut-off date by which an application under Section 8 is to be
    presented has been defined to mean “the date of” submitting the
    first statement on the substance of the dispute; and (iv) the
    amendments are expressed to apply notwithstanding any prior
    judicial precedent. The proviso to Section 8(2) has been added to
    allow a party that does not possess the original or certified copy of
    the arbitration agreement on account of it being retained by the
    other party, to nevertheless apply under Section 8 seeking
    reference, and call upon the other party to produce the same.”

    (Ref.: Justice R.S. Bachawat’s Law of Arbitration and Conciliation,
    Sixth Edn., Vol. I (Sections 1 to 34) at p. 695 published by
    LexisNexis).

    29. Amendment to Section 8 by the 2015 Act, are to be seen in the
    background of the recommendations set out in the 246th Law
    Commission Report. In its 246th Report, Law Commission, while
    recommending the amendment to Section 8, made the following
    observation/comment:

    LC Comment:

    Page 11 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026

    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    “The words “such of the parties … to the arbitration
    agreement” and proviso (i) of the amendment have been
    proposed in the context of the decision of the Supreme Court
    in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya [Sukanya
    Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531] in
    cases where all the parties to the dispute are not parties to
    the arbitration agreement, the reference is to be rejected
    only where such parties are necessary [Ed.: Emphasis in
    original.] parties to the action — and not if they are only
    proper parties, or are otherwise legal strangers to the action
    and have been added only to circumvent the arbitration
    agreement. Proviso (ii) of the amendment contemplates a
    two-step process to be adopted by a judicial authority when
    considering an application seeking the reference of a
    pending action to arbitration. The amendment envisages that
    the judicial authority shall not refer the parties to arbitration
    only if it finds that there does not exist an arbitration
    agreement or that it is null and void. If the judicial authority
    is of the opinion that prima facie the arbitration agreement
    exists, then it shall refer the dispute to arbitration, and leave
    the existence of the arbitration agreement to be finally
    determined by the Arbitral Tribunal. However, if the judicial
    authority concludes that the agreement does not exist, then
    the conclusion will be final and not prima facie. The
    amendment also envisages that there shall be a conclusive
    determination as to whether the arbitration agreement is
    null and void.

    (2) The application referred to in sub-section (1) shall not be
    entertained unless it is accompanied by the original
    arbitration agreement or a duly certified copy thereof or a
    copy accompanied by an affidavit calling upon the other
    party to produce the original arbitration agreement or duly
    certified thereof in circumstances where the original
    arbitration agreement or duly certified copy is retained only
    by the other party.”

    (emphasis supplied)
    LC Comment:

    “In many transactions involving government bodies and smaller
    market players, the original/duly certified copy of the arbitration
    agreement is only retained by the former. This amendment would
    ensure that the latter class is not prejudiced in any manner by
    virtue of the same.” (Ref: 246th Law Commission Report,
    Government of India)

    30. The language of amendment to Section 8 of the Act is clear that
    the amendment to Section 8(1) of the Act would apply
    notwithstanding any prayer, judgment, decree or order of the
    Supreme Court or any other court. The High Court laid emphasis
    upon the word “… unless it finds that prima facie no valid
    agreement exists”. The High Court observed that there is no

    Page 12 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    arbitration agreement between Astonfield and Rishabh. After
    referring to Sukanya Holdings [Sukanya Holdings (P) Ltd. v. Jayesh
    H. Pandya
    , (2003) 5 SCC 531] and the amended Section 8 and
    Section 45 of the Act, the High Court pointed out the difference in
    language of Section 8 and Section 45 of the Act. The High Court
    distinguished between Sukanya Holdings [Sukanya Holdings (P)
    Ltd. v. Jayesh H. Pandya
    , (2003) 5 SCC 531] and Chloro Controls
    [Chloro Controls India (P) Ltd. v. Severn Trent Water Purification
    Inc.
    , (2013) 1 SCC 641 : (2013) 1 SCC (Civ) 689] , and observed
    that Sukanya Holdings [Sukanya Holdings (P) Ltd. v. Jayesh H.
    Pandya
    , (2003) 5 SCC 531] was not overruled by Chloro Controls
    [Chloro Controls India (P) Ltd. v. Severn Trent Water Purification
    Inc.
    , (2013) 1 SCC 641 : (2013) 1 SCC (Civ) 689] .
    In para 29 of the
    impugned judgment, it was held as under: (Ameet Lalchand case
    [Ameet Lalchand Shah v. Rishabh Enterprises, 2017 SCC OnLine
    Del 7865] , SCC OnLine Del)
    “29. The change in Section 8 is that the court is to — in
    cases where arbitration agreements are relied on — to refer
    the disputes in the suit, to arbitration, “notwithstanding any
    judgment, decree or order of the Supreme Court or any
    Court, refer the parties to arbitration unless it finds that
    prima facie no valid arbitration agreement exists”.
    The Court
    is of opinion that Sukanya [Sukanya Holdings (P) Ltd. v.
    Jayesh H. Pandya
    , (2003) 5 SCC 531] is not per se overruled,
    because the exercise of whether an arbitration agreement
    exists between the parties, in relation to the disputes that
    are the subject-matter of the suit, has to be carried out. If
    there are causes of action that cannot be subjected to
    arbitration, or the suit involves adjudication of the role
    played by parties who are not signatories to the arbitration
    agreement, it has to continue because “prima facie no valid
    arbitration agreement exists” between such non-parties and
    others, who are parties.”

    23. Interpreting the phrase “notwithstanding any judgment,
    decree or order of the Supreme Court or any Court refer the
    parties to agreement unless it finds that prima facie no valid
    agreement existence”, it was held that the amendment to Section 8
    by the 2015 Amendment, are to be seen in the background of the
    recommendation set out in 246th Law Commission Report, which
    was proposed in the context of the decision of the Apex Court in
    Sukanya Holdings (P) Ltd. (supra), in cases where all the
    parties to the dispute are not parties to the arbitration agreement.
    The amendment envisages that the judicial authority shall not refer

    Page 13 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    the parties to arbitration only if it finds that there does not exist
    any arbitration agreement or that it is null and void. However, if
    the judicial authority is of the opinion that prima facie the
    arbitration agreement exists, then it shall refer the dispute to the
    arbitration and leave the existence of arbitration agreement to be
    finally determined by the arbitral tribunal. The amendment also
    envisages that there shall be conclusive determination on the issue
    that the arbitration agreement exists or the arbitration agreement
    is null and void.

    24. In Vidya Drolia and Others v/s. Durga Trading
    Corporation [(2021) 2 SCC Page 1], the Apex Court has dealt
    with the issues; (i) meaning of non-arbitrability and when the
    subject-matter of the dispute is not capable of being resolved
    through arbitration; and (ii) who decides non-arbitrarily-whether
    Court at the referral stage under Section 8 of the Act, 1996 or
    Section 11 of the Act, 1996 or arbitral tribunal; (iii) as also scope
    and ambit of jurisdiction of the Court at the referral stage when
    objection to non-arbitrability is raised. Fourfold test propounded
    therein for determining when the subject-matter of a dispute in an
    arbitration agreement is not arbitrable, has been laid in paragraph
    Nos. ‘76.1’ to ‘76.4’ therein. It was, however, clarified that these
    tests are not water-tight compartments, they dovetail and overlap,
    albeit when applied holistically and pragmatically will help and
    assist in determining and ascertaining with great degree of
    certainty, when as per law in India, the dispute or subject-matter is
    non-arbitrable. Only when the answer is in affirmative that the
    subject-matter of the dispute would be non-arbitrable. The tests
    laid down in Vidya Drolia (supra) in paragraph Nos. ‘76.1’ to
    ‘76.4’ are extracted hereinbelow :-

    Page 14 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026

    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    “76.1. (1) When cause of action and subject-matter of the dispute
    relates to actions in rem, that do not pertain to subordinate rights
    in personam that arise from rights in rem.

    76.2. (2) When cause of action and subject-matter of the dispute
    affects third-party rights; have erga omnes effect; require
    centralised adjudication, and mutual adjudication would not be
    appropriate and enforceable.

    76.3. (3) When cause of action and subject-matter of the dispute
    relates to inalienable sovereign and public interest functions of the
    State and hence mutual adjudication would be unenforceable.
    76.4. (4) When the subject-matter of the dispute is expressly or by
    necessary implication non-arbitrable as per mandatory statute(s).”

    25. On the issue of existence of the arbitration agreement,
    referring to the language in Section 11, it was held that the
    expression “existence of arbitration agreement includes its
    validity”. Existence and validity are intertwined as arbitration
    agreement can be said to exist only if it is valid, legal and
    enforceable under the 1996 Act and the Contract Act, i.e. it meets
    and satisfies the statutory requirements of both the enactments,
    being enforceable in law.

    26. However, on the exercise of powers of prima facie judicial
    review as including validity, the referral court being the first forum
    that examines and decides the request for the referral, it was held
    that “absolute hands-off” approach would be counterproductive and
    harm arbitration as an alternative dispute resolution mechanism.
    Limited, yet effective intervention is acceptable as it does not
    obstruct, but effectuates arbitration. Exercise of limited prima
    facie judicial review does not in any way interfere with the
    principles of competence-competence and separation as to obstruct
    arbitration proceedings, but ensures that vexatious and frivolous

    Page 15 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    matters get over at initial stage. Exercise of prima facie power of
    judicial review as to the validity of the arbitration agreement, saves
    costs and check harassment of the objecting parties when there is
    clearly no justification and good reason not to accept the plea of
    non-arbitrability.

    27. It was held that Sections 8 and 11 of the Act, 1996 are
    complementary provisions and object and purpose behind the two
    provisions is identical to compel and force the parties to abide by
    their contractual understanding. Two provisions, therefore, lay
    down similar standard and not as laying down as different and
    separate parameters of judicial review by the Court and for
    determining whether the arbitration agreement is in existence,
    inasmuch as, the judicial review at the stage of reference is prima
    facie and not final. It was held in paragraph Nos. ‘152’ and ‘153’ as
    under :-

    “152. Which approach as to interpretation of an arbitration
    agreement should be adopted in a particular case would depend
    upon various factors including the language, the parties, nature of
    relationship, the factual background in which the arbitration
    agreement was entered, etc. In case of pure commercial disputes,
    more appropriate principle of interpretation would be the one of
    liberal construction as there is a presumption in favour of one-stop
    adjudication.

    153. Accordingly, we hold that the expression “existence of an
    arbitration agreement” in Section 11 of the Arbitration Act, would
    include aspect of validity of an arbitration agreement, albeit the
    court at the referral stage would apply the prima facie test on the
    basis of principles set out in this judgment. In cases of debatable
    and disputable facts, and good reasonable arguable case, etc., the
    court would force the parties to abide by the arbitration agreement
    as the Arbitral Tribunal has primary jurisdiction and authority to

    Page 16 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    decide the disputes including the question of jurisdiction and non-
    arbitrability.”

    28. In N.N.Globle Mercantile Pvt. Ltd. v/s. Indo Unique
    Flame Limited and Others [(2021) 4 SCC 379], the Apex Court
    applying the doctrine of separatability has held that the arbitration
    agreement being a separate and distinct agreement from the
    underlying agreement, contract would survive independently of the
    substantive contract and would not be rendered invalid,
    unenforceable or non-existent, even if the substantive agreement is
    not admissible in evidence and cannot be acted upon on account of
    non-payment of stamp duty.

    29. In Gujarat Composite Limited v/s. A Infrastructure
    Limited and Others [(2023) 7 SCC 193], the question
    concerning arbitrability of the dispute at the stage of Section 8
    application was raised. It was contended that the application
    seeking reference to the dispute under Section 8 of the 1996 Act
    having been filed subject to the Amendment of 2015, in the pending
    civil suit, there was no choice with the Court, but to refer the
    parties to the arbitration, even for deciding the arbitrability of the
    dispute. The respondents contested the claim on the ground that
    though under the amendment of 2015, Section 8 envisages that if
    the judicial authority is of the opinion that prim facie the
    arbitration agreement exists, then it shall refer the dispute to the
    arbitration and leave the existence of the arbitration agreement to
    be finally determined by the arbitral tribunal. However, if the
    judicial authority concludes that the agreement does not exist, then
    the conclusion will be final and not prima facie. The amendment of
    2015 also envisages that there shall be a conclusive determination
    as to whether the arbitration agreement is null and void. In the
    context of these assertions, the Apex Court noticing the provisions
    of Section 8 and the decisions holding the field during pre-

    Page 17 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026

    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    amendment and post-amendment regime referred to Ameet
    Lalchand
    (supra) and Vidya Drolia (supra) and observed in
    paragraph Nos. ’35’ and ’36’ as under :-

    “35. As explained by this Court in Ameet Lalchand
    Shah [Ameet Lalchand Shah v. Rishabh Enterprises
    , (2018)
    15 SCC 678 : (2019) 1 SCC (Civ) 308] , the amendment to
    Section 8 after the aforesaid decision in Sukanya
    Holdings [Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya
    ,
    (2003) 5 SCC 531] could be seen in the background of the
    recommendations of 246th Law Commission Report in which,
    inter alia, it was observed that as per the proposed
    amendment, judicial authority would not refer the parties to
    arbitration only if it finds that there does not exist an
    arbitration agreement or that it is null and void. If the
    judicial authority is of the opinion that prima facie the
    arbitration agreement exists, it would refer the dispute to
    arbitration and leave the existence of arbitration agreement
    to be finally determined by the Arbitral Tribunal.

    36. All the relevant aspects of the matter came up for fuller
    exposition by a three-Judge Bench of this Court in Vidya
    Drolia [Vidya Drolia v. Durga Trading Corpn.
    , (2021) 2 SCC 1
    : (2021) 1 SCC (Civ) 549] .
    In the said case, basically, the
    reference came to be made to the Bench of three Judges
    when the ratio expressed in Himangni
    Enterprises v. Kamaljeet Singh Ahluwalia [Himangni
    Enterprises
    v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC
    706 : (2018) 1 SCC (Civ) 82] , to the effect that landlord-
    tenant disputes governed by the provisions of the Transfer of
    Property Act, 1882
    were not arbitrable, was doubted. While
    dealing with the reference, the Court also dealt with the
    other interconnected aspects as to the meaning of non-
    arbitrability and when the subject-matter of the dispute
    would not be capable of being resolved through arbitration;
    and as to whether the question of non-arbitrability would be
    decided by the Court at the reference stage or by the
    Arbitral Tribunal in the arbitration proceedings.”

    30. The conclusions drawn in Vidya Drolia (supra) in
    paragraph No. ‘244’ noted in Gujarat Composite Limited
    (supra) are also relevant to be noted herein :-

    “244.1. Sections 8 and 11 of the Act have the same ambit with
    respect to judicial interference.

    244.2. Usually, subject-matter arbitrability cannot be decided at

    Page 18 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    the stage of Sections 8 or 11 of the Act, unless it is a clear case of
    deadwood.

    244.3. The court, under Sections 8 and 11, has to refer a matter to
    arbitration or to appoint an arbitrator, as the case may be, unless a
    party has established a prima facie (summary findings) case of non-
    existence of valid arbitration agreement, by summarily portraying a
    strong case that he is entitled to such a finding.

    244.4. The court should refer a matter if the validity of the
    arbitration agreement cannot be determined on a prima facie basis,
    as laid down above i.e. “when in doubt, do refer”.

    244.5. The scope of the court to examine the prima facie validity of
    an arbitration agreement includes only:

    244.5.1. Whether the arbitration agreement was in writing? or

    244.5.2. Whether the arbitration agreement was contained in
    exchange of letters, telecommunication, etc.?

    244.5.3. Whether the core contractual ingredients qua the
    arbitration agreement were fulfilled?

    244.5.4. On rare occasions, whether the subject-matter of dispute
    is arbitrable?”

    31. In the facts of the said case, however, it was held that the
    “present one cannot be said to be a case involving any “doubt”

    about non-existence of arbitration agreement in relation to the
    dispute in question”. It was, thus, concluded in Gujarat
    Composite Limited
    (supra) that there being no doubt about non-
    existence of the arbitration agreement in relation to the entire
    subject matter of the suit, and when substantive reliefs claimed in
    the suit fall outside the arbitration clause in the original license
    agreement, therefore, even on the principles enunciated in Vidya
    Drolia
    (supra), the prayer for reference to arbitration under
    Section 8 cannot be granted.

    32. In Cox and Kings Limited v/s. SAP India Private Limited
    and Another [(2024) 4 SCC 1], while dealing with the standard

    Page 19 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    of determination at the referral stage under Sections 8 and 11 of
    the 1996 Act, the Apex Court has held that the scope of reference
    under Sections 8 and 11 is limited. While Section 8 requires the
    referral Court to look into the prima facie existence of a valid
    arbitration agreement, Section 11 confines the Court’s jurisdiction
    to the existence of the “examination of the arbitration agreement”.
    Section 16 of the Arbitration and Conciliation Act, 1996
    incorporates the principle of competence-competence in the Indian
    Arbitration Law. The provision empowers the arbitral tribunal to
    rule on its own jurisdiction, including ruling on any objections with
    respect to the existence or validity of the arbitration agreement.

    33. On the question as to when a non-signatory person or entity
    is arrayed as a party at Section 8 or Section 11 stage, whether the
    referral court should delete or exclude such third party from the
    array of the parties before referring the matter to the Tribunal, it
    was held that in case of joinder of non-signatory parties to the
    agreement; where a signatory party to an arbitration agreement
    seeks joinder of a non-signatory party to the agreement; or whether
    a non-signatory party itself seeks invocation of arbitration
    agreement, the referral court will be required to prima facie rule
    on the existence on the arbitration agreement and whether the
    non-signatory is a veritable party to the arbitration agreement.

    34. However, it was held that in view of complexity of such a
    determination, the referral court should leave it for the Arbitration
    Tribunal to decide whether the non-signatory party is indeed a
    party to the arbitration agreement on the basis of factual evidence
    and application of legal doctrine. This interpretation also gives
    true effect to the doctrine of competence-competence by leaving
    the issue of determination of true parties to an arbitration

    Page 20 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    agreement to be decided by the Arbitration Tribunal under Section

    16. It was, thus, concluded that :-

    (i) Under the Arbitration Act, the concept of ‘party’ is distinct
    and different from the concept of “person claimed through or
    under” as party to the arbitration;

    (ii) The person claiming through or under can only assert
    right in a veritable capacity and it does not enable a non-
    signatory to become a party to the arbitration agreement.

    (iii) At the referral stage, the referral court should leave it
    for the arbitral tribunal to decide whether the non-signatory
    is bound by the arbitration agreement.

    35. In Rahul Verma and Others v/s. Rampat Lal Verma and
    Others (2025 SCC OnLine SC 578), in the Commercial Suit, the
    respondent filed an application under Section 8 was filed on the
    basis of the arbitration clause in the partnership deed. The High
    Court held that partnership deed binds the heirs of the deceased
    partner and referred the matter to the arbitration. The legal heirs
    of the deceased partner had challenged the same. Two questions
    fell for consideration before the Apex Court; (i) whether the legal
    heirs of the deceased partner being non-signatories to the
    partnership deed, can still be bound by the arbitration agreement
    therein and (ii) whether there is right to sue for the rendition of
    accounts to the legal heirs, entitling them to invoke the arbitration
    clause in the partnership deed. The decision of the Apex Court in
    Ravi Prakash Goel v/s. Chandra Prakash Goel [(2018) 13 SCC 667]
    was relied upon to squarely cover the facts of the case, wherein it
    is held that the arbitration agreement does not cease to exist on
    the death of any partner and the arbitration agreement can be
    enforced by or against the legal representatives of the deceased

    Page 21 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    partner of the partnership firm. It was held that the well
    established position in law is that the term ‘partners’ extends to
    and would include their legal heirs, representatives, assigns or
    legatees etc. Persons claiming under the rights of a deceased
    person are the representatives of the deceased, and therefore, both
    the parties to the agreement and their legal heirs are entitled to
    enforce the arbitral award and are bound by it. Since the legal
    heirs of the deceased partners stepped into the shoes of the
    deceased, the partnership agreement will operate to bind them. As
    a consequence, the right to sue for rendition of accounts also
    survives ensuring that the legal representatives can assert or
    defend the claims arising from the partnership agreement.

    36. From the conspectus of the abovenoted of the Apex Court,
    the principles governing the proceedings under Sections 8 and 11
    of the Arbitration Act, 1996, can be culled out as under [reference :

    Vidya Drolia (supra)]

    (i) The Court under Sections 8 and 11 of the Arbitration Act,
    1996 has no option but to refer the matter to arbitration or to
    appoint an Arbitrator, unless if a contesting party has
    established a prima facie case of non-existence of a valid
    arbitration agreement, by summarily portraying a strong case
    that there is no valid enforceable agreement between the
    parties in the eye of law.

    (ii) The Court shall refer the matter if the validity of the
    arbitration agreement cannot be determined on a prima facie
    basis, or when any doubt.

    (iii) The Scope of jurisdiction of the Court to examine the

    Page 22 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    prima facie validity of an arbitration agreement includes
    only : (a) whether the arbitration agreement is in writing?; (b)
    whether the arbitration agreement is contained in exchange
    of letters, telecommunications etc.; (c) whether the core
    contractual ingredients qua the arbitration agreement are
    fulfilled; and (d) on rare occasions, where the subject-matter
    of dispute is arbitrable, only in a clear case of deadwood.

    (iv) The principles of competence-competence carries positive
    and negative connotations. The negative effect is that the
    Courts at the referral stage, are not to decide on merits.

    Prima facie examination is not a full review but a primary
    first review to weed out manifestly ex facie non-existent and
    invalidate the arbitration agreement and non-arbitral
    disputes.

    (v) Only when the Court is certain that no valid agreement
    exist or the dispute/subject matter is not arbitrable, the
    application under Section 8 would be rejected.

    (vi) Referral proceedings are preliminary and summary and
    not a mini-trial.

    (vii) Existence of an arbitration agreement means an
    agreement that meets and satisfies the statutory
    requirements of both the Arbitration Act and the Contracts
    Act and when it is enforceable in law.

    (viii) Exercise of power of prima facie judicial review of
    existence as including validity of the arbitration agreement is
    justified, as the referral Court is the first forum that examines

    Page 23 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    and decides the request for the referral. Absolute “hands-off”

    approach would be counterproductive and harm arbitration,
    as an alternative dispute resolution mechanism.

    (ix) The general rule and principle, in view of the clear
    legislative mandate clear under the Amendment Act, 3 of
    2016 (to the Arbitration Act, 1996, known as 2015
    amendment), and on the principle of severability and
    competence-competence, is that the Arbitral Tribunal is the
    preferred first authority to determine and decide all
    questions of non-arbitrability.

    (x) Rarely as a demurrer the Court may interfere at Section 8
    or Section 11 stage, when it is manifestly and ex facie certain
    that the arbitration agreement is non-existent, invalid or the
    disputes are non-arbitrable, though the nature and facet is of
    non-arbitrability should, to some extent, determine the level
    and nature of judicial scrutiny.

    (xi) The restricted and limited review is to check and protect
    parties from being forced to arbitrate when the matter is
    demonstrably “non-arbitrable” and to cut off the deadwood.

    The Courts while analysing a case under Section 8 may
    choose to notify the issues which require adjudication
    pertaining to the validity of the arbitration agreement. If the
    Court cannot rule on the invalidity of the arbitration
    agreement on a prima facie basis, then the Court should stop
    any further analysis and simply refer all the issues to
    arbitration to be settled.

    37. In line with the above principles, considering the facts of this

    Page 24 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    case, we are required to note that the learned senior counsel for
    the appellant pressed his arguments only on the premise of Order
    II Rule 6 of the Code of Civil Procedure
    to submit that since some
    of the reliefs prayed in the suit are pertaining to the dissolution of
    partnership firm and rendition of accounts and the plaintiffs are
    heirs and legal representatives of deceased partner, the trial court
    was required to bifurcate the reliefs and refer the dispute to
    arbitration in so far as the claim of dissolution of partnership firm
    and rendition of accounts. For the rest of the reliefs pertaining to
    the recovery of the loan tendered by the plaintiffs to the
    partnership firm, the same can very well be looked into and
    adjudicated within the claim of dissolution in view of Section 48 of
    the Indian Partnership Act, 1932, which provides the mode of
    settlement of accounts between the partners, i.e. rendition of
    accounts of the partnership firm.

    38. Inviting attention of the Court to Section 48(b)(i), it was
    submitted that the assets of the partnership firm, including any
    sums contributed by the partners to make up deficiencies of
    capital, shall be applied in paying the debts of firm to the third
    parties. Hence, the claim of the plaintiff for recovery of loan
    extended to the partnership firm which is actually the debts of the
    partnership firm, would have to be paid at the time of rendition of
    the accounts between the partners only. Moreover, the plaintiff
    having stepped into the shoes of one of the partner, may be
    required to contribute to make up the deficiencies of capital, if any,
    in their capacity as a legal representatives of the deceased partner,
    to pay the debt of the firm to the third party, as sought to be
    recovered in the suit.

    39. The submission, thus is that, in this view of the matter, the

    Page 25 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    relief of recovery sought by the plaintiff in the suit can very well be
    claimed, adjudicated and settled during the course of arbitration in
    the process of dissolution and rendition of accounts of the
    partnership firm as per Section 48 of the Indian Partnership Act,
    1932. It was, thus, vehemently submitted by the learned senior
    counsel for the appellant that all the reliefs claimed in the suit
    including the recovery of loan, dissolution of partnership firm and
    rendition of accounts between the partners, are inextricably linked
    to each other. Unless and until, the partnership firm is dissolved
    and the accounts are settled between the surviving partners and
    the claim of deceased partner, the money given to the partnership
    firm by the plaintiffs in their own capacity cannot be paid.

    40. Keeping this in mind, we may require to take note of the
    contents of the plaint itself. A perusal of the plaint of the
    Commercial Civil Suit No. 638 of 2024, shows that the categorical
    statements of the plaintiffs are as under :-

    (a) A partnership deed dated 10.03.2010 was executed between the
    defendant No.1 and their predecessor namely late Shri Hitesh
    Hasmukhbhai Trivedi. The deceased partner and the defendant
    No.1 were equal (50% each) partners in the profit and loss of the
    firm.

    (b) Vide deed dated 23.06.2015, the defendant No.2 came to be
    inducted and under the reconstituted partnership firm, the share of
    the deceased partner and the defendant No.1 was reduced to 45%,
    as defendant No.2 was inducted at 10% share.

    (c) The plaintiffs are legal heirs and legal representatives of Shri
    Hitesh Hasmukhbhai Trivedi who died on 18.05.2021.

    Page 26 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026

    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    (d) The specific claim of the plaintiffs (four in number) in the suit
    is that during the life time of Shri Hitesh Hasmukhbhai Trivedi
    (partner), plaintiff Nos. 1 to 4 had given loans to the partnership
    firm of different amounts and all the said loans were acknowledged
    by the firm and its partners in their signed and audited
    balancesheet of the partnership firm in the financial year 2021-
    2022.

    (e) Besides that, after death of Shri Hitesh Hasmukhbhai Trivedi
    who was 45% partnership of the partnership firm, the rest of the
    partners, namely the defendant Nos. 1 and 2 have not taken any
    step to dissolve and wind up the partnership firm to settle the
    accounts of the deceased partner and have continued to use and
    siphon off the capital and the goodwill, as well as the share in the
    profit of late partner.

    (f) Moreover, the defendant inspite of a notice issued to them, have
    refused to pay the loan given by the plaintiffs to the partnership
    firm. The reliefs, as prayed in the suit, are under :-

    “A. That this Hon’ble Court may be pleased to award to the plaintiff
    no. 1 and from the defendants an amount of Rs. 39,54,000/-
    towards the repayment of the outstanding loan that the plaintiff no.
    1 had given to the firm of M/s. Team Engineers.

    B. That this Hon’ble Court may be pleased to award to the plaintiff
    no. 2 and from the defendants an amount of Rs. 2,00,000/- towards
    the repayment of the outstanding loan that the plaintiff no. 2 had
    given to the firm of M/s. Team Engineers.

    C. That this Hon’ble Court may be pleased to award to the plaintiff
    no. 3 and from the defendants an amount of Rs. 1,00,000/- towards
    the repayment of the outstanding loan that the plaintiff no 3 had
    given to the firm of M/s. Team Engineers.

    D. That this Hon’ble Court may be pleased to award to the plaintiff
    no. 4 and from the defendants an amount of Rs. 17,24,200/-

    Page 27 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026

    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    towards the repayment of the outstanding loan that the plaintiff
    no.4 had given to the firm of M/s. Team Engineer.

    E. That this Hon’ble Court may be pleased to award to the plaintiffs
    and from the defendants an amount of Rs. 39,180/- towards the
    loan given by Late Shri Hitesh Hasmukhbhai Trivedi to the firm of
    M/s. Team Engineers.

    F. That this Hon’ble Court may be pleased to award to the plaintiffs
    and from the defendants an amount of Rs. 1,42,13,920.97 towards
    the capital contribution made by Late Shri Hitesh Hasmukhbhai
    Trivedi.

    G. That this Hon’ble Court may further be pleased to dissolve and
    wind up the affairs and business of the partnership firm of M/s.
    Team Engineers and may further be pleased to have the assets and
    goodwill and receivables and profit of the said partnership firm of
    M/s. Team Engineers valued as on the date of death of Late Shri
    Hitesh Hasmukhbhai Trivedi and may direct the defendant to give
    to the plaintiffs 45% share of the funds, assets and goodwill and
    receivables and profit of the said partnership firm of M/s. Team
    Engineers as on the date of death of Late Shri Hitesh Hasmukhbhai
    Trivedi.

    H.That this Hon’ble Court may be pleased to award interest at the
    rate of 18% p.a. on the aforesaid amounts from the date of accrual
    till realisation.

    I. That this Hon’ble Court may be pleased to award costs in favour
    of the plaintiff and against the defendant.

    J. For such other and further relief as may be deemed fit in the
    facts of the present case.”

    41. Having perused the claims and the reliefs sought by the
    plaintiff in the suit, it may be seen that while relief for recovery of
    loan given by the plaintiffs to the partnership firm during the
    lifetime of the deceased partner late Shri Hitesh Hasmukhbhai
    Trivedi was claimed in the suit, the prayer clause(G) in para No.
    ’18’ also requires the Court to dissolve and windup affairs and
    business of the partnership firm and rendition of accounts of the
    partnership,

    42. In these facts of the present case, the question is as to

    Page 28 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    whether the reliefs prayed in the suit can be bifurcated so as to
    refer the plaintiff to arbitration under Section 8, for the relief(g) in
    prayer clause 18 with regard to dissolution and winding up of the
    affairs and business of the partnership firm and rendition of
    accounts, which is admittedly covered by the arbitration clause of
    the partnership deed, to which the deceased predecessor of the
    plaintiffs was signatory. There is also no dispute about the fact
    that the plaintiffs having stepped into the shoes of the deceased
    partner as his legal representatives will be bound by the
    partnership agreement and can assert or defend such claims
    arising from the partnership agreement, which contains an
    arbitration clause.

    43. However, the question is where the reliefs, claimed in the
    suit, which are inextricably linked, can be bifurcated so as to
    relegate the plaintiffs to arbitration for the dissolution of the
    partnership firm and rendition of accounts; and maintaining the
    suit for recovery of loan extended to the partnership firm. Another
    question before us is as to whether there exists any arbitration
    agreement between the plaintiffs and the defendants with respect
    to the relief of recovery of loan.

    44. Analysing the facts of this case, we find that the plaintiffs
    though are to be held being bound by the arbitration agreement
    contained in the partnership deed and they have a legal right to sue
    for rendition of accounts of partnership firm, which survives on
    them as legal representatives of a deceased partner and are also
    entitled to invoke the arbitration clause containing in the
    partnership deed, but the fact remains that there is no agreement
    at all between the plaintiffs and the defendants in so far as the
    reliefs pertaining to the recovery of the outstanding loan against

    Page 29 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    the partnership firm. The plaintiffs’ claim is that they have
    extended loan to the partnership firm in their individual capacity
    during the life time of deceased partner and they are entitled for
    recovery of the loan from the defendants, the surviving partners to
    the firm. Further, since the settlement of loan of the partnership
    firm would also require dissolution of the partnership firm and
    rendition of accounts, we find that both the issues being
    inextricably linked to each other have to be claimed in one
    suit/proceedings.

    45. The present is not a case where the plaintiffs can be said to
    have joined difference causes of action just to avoid or defeat the
    arbitration clause. The cause of action for recovery of loan, being
    not covered by the arbitration clause, the dispute cannot be
    referred to arbitration for the relief of recovery of loan extended by
    the plaintiffs in their own individual capacity during the lifetime of
    deceased partner, their predecessor. Further, as the entire dispute
    forming the subject-matter of suit is not governed by the
    arbitration agreement and the reliefs claimed against the
    defendants are inextricably interlinked and are incapable of
    piecemeal adjudication, the argument of the learned senior counsel
    for the appellant that the Court should refer the parties to
    arbitration under Section 8, cannot be sustained.

    46. The submissions seeking bifurcation of the cause of action
    based on the decision of the Bombay High Court in Taru Meghani
    (supra) and of Calcutta High Court in Lindsay International
    Private Ltd.
    (supra), on the strength of Order II Rule 6 of CPC,
    cannot be appreciated. In the facts and circumstances of the
    present case, it cannot be assumed that the plaint has been
    prepared with the object of avoiding the arbitration agreement

    Page 30 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    incorporated in the partnership deed between the deceased
    partner and the defendants herein. The plaintiffs having instituted
    the suit in their individual capacity for recovery of loan extended by
    them, cannot be said to be bound by the arbitration agreement
    contained in the partnership deed signed by their predecessor as
    partner to seek relief of recovery of loan. The arguments of
    settlement of accounts as per Section 48 of the Indian Partnership
    Act, 1932 made by the learned senior counsel for the appellant are
    neither here nor there, as it could not be argued that the
    respondents/plaintiffs can file statement of claim to seek recovery
    of loan before the Arbitrator.

    47. In the instant case, the Commercial Court cannot be said to
    have erred in holding that the suit contains multiple reliefs and the
    relief of recovery of the loan amount given by the plaintiffs to the
    partnership firm is not embedded in the agreement of the
    partnership deed, as such, cannot be said to be an arbitrable issue,
    which can be adjudicated by the Arbitrator. We further find that
    there is no doubt about the non-existence of the arbitration
    agreement between the parties for the reliefs claimed in the suit
    for recovery of loan and that the relief of dissolution of partnership
    firm and rendition of accounts though governed by the arbitration
    agreement contained in the partnership deed, cannot be separated
    and incapable of piecemeal adjudication, being inextricably
    interlinked with the relief of recovery of the loan. The plea of
    bifurcation of causes of action, if accepted, would lead to an
    incongruous situation, which may create the risk of conflicting
    decisions, delay the proceedings, increase litigation cost and cause
    harassment to the parties. When multiple causes of action which
    are inextricably interlinked, are joined in one suit against the same
    defendants, invocation of Order II Rule 6 seeking for separation of

    Page 31 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026
    NEUTRAL CITATION

    C/FA/2665/2026 JUDGMENT DATED: 22/06/2026

    undefined

    trials on the aforesaid grounds, is a misconceived argument and
    hence, rejected.

    48. None of the two decisions of the Bombay High Court in Taru
    Meghani (supra) and of Calcutta High Court in Lindsay
    International Private Ltd.
    (supra) heavily relied on by the
    learned senior advocate for the appellant, are applicable in the
    facts and circumstances of the present case.

    49. In the peculiar facts and circumstances of the present case,
    no infirmity can be attached to the order of the trial court. The
    appeal is dismissed being devoid of merits. The Civil Application
    for stay stands disposed of. No order as to costs.

    50. It is made clear that this judgment has been rendered in the
    peculiar facts and circumstances of the present case, and cannot be
    treated as a binding precedent in any other matter or should not
    even be a guidance on the question of law about the scope of
    Section 8 of the Arbitration and Conciliation Act, 1996. The
    District Courts in the State of Gujarat shall apply appropriate
    caution in referring this judgment in the cases before them.

    ..

    (SUNITA AGARWAL, CJ )

    (D.N.RAY,J)
    C.M. JOSHI

    Page 32 of 32

    Uploaded by C.M. JOSHI(HC01073) on Mon Jul 13 2026 Downloaded on : Sat Jul 18 01:47:53 IST 2026



    Source link

    LEAVE A REPLY

    Please enter your comment!
    Please enter your name here