Gujarat High Court
Nirmal Arvind Mody vs Neha H. Trivedi on 22 June, 2026
Author: Sunita Agarwal
Bench: Sunita Agarwal
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C/FA/2665/2026 JUDGMENT DATED: 22/06/2026
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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.
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.
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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
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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.
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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
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(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
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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
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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
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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
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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
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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
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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:
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“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
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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
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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 :-
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“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
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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
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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-
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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(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/-
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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
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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
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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
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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
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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
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