http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 3  

CASE NO.: Appeal (civil)  4610 of 2006

PETITIONER: Sandeep Kumar & Ors.                                             

RESPONDENT: Master Ritesh & Ors.                                             

DATE OF JUDGMENT: 31/10/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T [Arising out of S.L.P. (Civil) No.19125-33 of 2003]

S.B. SINHA, J :

       Leave granted.

                Dev Papers  (P) Ltd., Meham, is a company incorporated under the   Companies Act, 1956.  Appellants herein as also Respondent Nos.2 to 7  were its shareholders.  One R.P. Gupta was representing the appellants  whereas Satyadev Gupta was representing the defendants-respondents in the  Board of Directors.  Disputes and differences having  arisen between the  parties, a suit came to be filed by Appellants.   Admittedly,  an arbitration  agreement had been entered into by and between Plaintiffs-Appellants and  some of the Defendants.  However, some of the Defendants were not parties  to the said agreement.  In view of the existence of the said arbitration  agreement, an order was passed by the learned trial Judge in terms of the  Arbitration Act 1940.  The matter came up to this Court on an earlier  occasion.  Plaintiffs-Appellants herein made  a representation before this  Court that they would amend the plaint by deleting the names of   Respondents who were parties to the arbitration agreement and continue  with the suit as against those who were not parties thereto.  The  said  statements were recorded in the order of this Court in the following terms :

"Mr. K.N. Balgopal, learned counsel representing the  respondents in these 9 SLPs, states that the plaintiff(s) in  each of the 9 suits which have been ordered, shall confine  his/their suit against the principal debtor in each case and  shall drop him from the array of defendants all such  defendants other than principal defendant.  Prima facie,  on such stance being adopted by the petitioners’ learned  counsel, the grievance of the special leave petitioners,  apparently, vanishes.  Learned counsel for the parties  need and are granted time to check up on this aspect of  the matter."

                By an order dated 04.04.1997, the said special leave petition was  disposed of.  The matter in regard to the stay of the suit thereafter again  came up for hearing.  By  reason of  a judgment and order dated 13.08.1999,  it was, inter alia, held :  

"\005The legal proceedings in this case have been started  after the agreement  by persons claiming under parties to  the agreements.  The plaintiffs in all the nine cases are  claiming under Rajender Parshad Gupta and the  defendant is claiming through Satyadev Gupta, both of  whom are signatories/executants of the arbitration

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3  

agreement.  Moreover, the plaintiffs in their plaints have  admitted that they were bound by the agreement dated  6.8.88, so that they cannot now contend that they were  not signatories of the agreement.  The third contention is  that the proceeding must be with respect of the matter   agreed to be referred to arbitration.  This condition has  already been dealt within the preceding paragraphs and  need not be reproduced.  Further, the application for stay   has been made by the defendant, who is party to the legal  proceeding and was filed before filing the written  statement or taking any step in the proceedings.  I have  already held that the applicant is ready and willing to do  all things necessary for the proper conduct of arbitration.    The conditions set out in the authorities cited above, have  been fulfilled and the suits are liable to be stayed."

 In terms of the said findings the suit was again directed to be stayed.   The appeals preferred thereagainst by Appellants herein were also  dismissed.  The High Court by  reason of its impugned judgment passed in  C.R. No. 3045 of 2000 upheld the said findings.

Mr. K.N. Balgopal, the learned counsel appearing on behalf of  Appellants,  would submit that the courts below committed a serious error in  passing the impugned judgment  insofar as it failed to take into consideration  the effect of deleting the names of those defendants by amending the plaint.   According to the learned counsel although there might  exist an arbitration  agreement between  Appellants and some of the Defendants, but in view of  the fact that the amendments had been carried out in the plaint the arbitration  agreement could not have been enforced as against  Respondents who were  not parties thereto.   

Mr. Balbir Singh, the learned counsel appearing on behalf of  Respondents, on the other hand, would submit that the matter being  governed by the provisions of Section 8 of the Arbitration and Conciliation  Act, 1996,  the parties could raise the question of  jurisdiction of the arbitral  tribunal in terms of section 16 thereof.   

It appears that the counter affidavit has been filed by one Shri Ramesh  Kumar Gupta.  He had been representing a group in the suit.  His name had  been deleted from the array of the parties by amending the plaint.  In his  counter affidavit he does not state that he has any authority to represent   other Respondents or any authority to file a counter affidavit on their behalf.   Paragraph 7 of the plaint whereupon reliance has been placed reads as  under:-

"7.     That the plaintiff as well as defendant  No. 2 to 7  including defendant No. 5 are bound by the agreement  dated 6.8.88 and that defendant No. 2 to 4 have repayed  Rs.26,51,000/- and have to repay Rs. 2.95 lac including  amount of the plaintiff for which the plaintiff is filing the  suit against defendant No. 5 as well as defendant No. 2 to  4.  Defendant No.1 and defendants No. 6 to 7 have been  joined as proforma defendants."           

It may be true that Plaintiffs-Appellants had been representing a  group,  but admittedly all the parties to the suit were not parties to the  arbitration agreement.  If some of the Defendants were not parties to the  arbitration agreement, the question of invoking the arbitration clause as  against those Defendants would not arise.  As noticed hereinbefore,  in the  earlier round of litigation, Appellants categorically stated that the suit would  be confined only as against those who were not parties to the arbitration  agreement.  

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 3  

There were three parties to the said arbitration agreement.  Party No. 1  was represented by  (1) Satya Dev Gupta; (2) Ramesh Kumar Gupta; and (3)  Jai Dev Gupta.  Party No.2 was represented by (1) Rajender Parshad Gupta;  (2) Sham Lal Gupta; and (3) Sushil Gupta. The third party to the said  agreement was the company itself.  If  the names of  those who were in the  Party No. 1 and Party No.2 in the said agreement had been deleted from the  array of Defendants-Appellants and the claims against them have been given  up, we fail to see  as to how the arbitration agreement can still be invoked  under Section 34 of the Arbitration Act, 1940 or Section 8 of the Arbitration  and Conciliation Act,  1996.

For the reasons aforementioned, the impugned judgment cannot be  sustained which is set aside accordingly.  The Appeal is allowed.   No costs.