Holding

A final decision by a judicial authority not to refer parties to arbitration bars the later invocation of Section 11(6) and is governed by the doctrine of res judicata.

Summary

The parties were partners in a firm and a civil suit was filed concerning partnership property. The partnership deed contained an arbitration clause, but the civil court, after hearing the parties, held that it had jurisdiction to try the suit and declined to refer the matter to arbitration under Section 8(1) of the Arbitration and Conciliation Act, 1996. That decision became final. Subsequently, the respondents applied to the Chief Justice of the High Court under Section 11(6) of the Act for appointment of an arbitrator. The Supreme Court held that once a judicial authority has finally decided not to refer the dispute to arbitration, the Section 11(6) route is barred and the principle of res judicata applies. Accordingly, the High Court order was set aside and the appeal was allowed.

Issues considered

Whether a party can invoke Section 11(6) of the Arbitration and Conciliation Act, 1996 after a judicial authority has finally decided not to refer the dispute to arbitration under Section 8(1).
Whether the decision of the civil court not to refer to arbitration is subject to res judicata.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 8(1), s. 8(3)
Code of Civil Procedure, 1908s. 9A

Subjects

ArbitrationSection 11(6)Section 8Res judicataJurisdictionPartnership disputeChief Justice

Judgment

[2014] 12 S.C.R. 553

ANIL SIO JAGANNATH RANA AND OTHERS A
v.
RAJENDRA SIO RADHAKISHAN RANA AND OTHERS
(Civil Appeal No. 11604 of 2014)
DECEMBER 18, 2014
B
[ANIL R. DAVE AND KURIAN JOSEPH, JJ.]

Arbitration and Conciliation Act, 1996: s.11(6)- Once the
judicial authority takes a decision not to refer the parties to
arbitration, and the said decision becomes final, thereafter C
s. 11 (6) route before the Chief Justice is not available to either
party - Res judicata.

Allowing the appeal, the Court
HELD: 1. In the instant case, the order passed by the D
civil court that it was well within its jurisdiction to try the
suit, despite the objection regarding the existence of a
clause for arbitration, became final. Thereafter, Section
11 (6) jurisdiction of the Chief Justice cannot be invoked
.by either party. The principle of res judicata will also be E
attracted in such a case. [Para 14] [561-E]

Satyadhyan .Ghosal and Ors. v. Deorajin Debi (Smt.) and
Anr. AIR 1960 SC 941: 1960 SCR 590; Hope Plantations
Ltd. v. Talu~ Land Board, Peermade and Anr. (1999) 5 SCC F
590: 1998 (2) Suppl. SCR 514; Dr. Subramanian Swamy
v. State of Tamil Nadu and Ors (2014) 5 SCC 75: 2014
(1) SCR 308; Surjit Singh and Ors. v. Gurwant Kaur and Ors.
2014 (9) SCALE 768 - relied on.
Case Law Reference: G
1960 SCR 590 relied on Para 15
1998 (2) Suppl. SCR 514 relied on Para 16
553 H
554 SUPREME COURT REPORTS [2014] 12 S.C.R.

A 2014 (1) SCR 308 relied on Para 17
2014 (9) SCALE 768 relied on Para 17

CIVIL APPELLATE JURISDICTION : Civil Appeal No.
11604 of 2014.
B
From the Judgment & Order dated 28.03.2014 of the High
Court of Judicature at Bombay, Bench at Aurangabad in
Arbitration Application No. 12 of 2013.

Vivek C. Solshe, C.G. Scilshe for the Appellants.
c
Amol B. Karande for the Respondents.

The Judgment of the Court was delivered by

KURIAN, J.: 1. Leave granted.
D
2. Once a judicial authority takes a decision under Section
8(1) of The Arbitration and Conciliation Act, 1996 (hereinafter
referred to as "the Act") declining to refer the dispute pending
before it to arbitration and the said decision having become
E final, whether either party to the proceedings can thereafter
invoke. the jurisdiction of the Chief Justice under Section 11 (6)
of the Act, is the question arising for consideration in this case.
The scope of Section 8(3) of the Act is also an ancillary issue.

3. Appellants are defendant nos. 1, 2, 3 in Special Suit No.
F · 211 of 2009 on the file of Civil Judge Senior Division at
Aurangabad, Maharashtra. The suit is filed by a partnership
firm, viz., M/s. Rana Sahebram Mannulal and three others. The
dispute mainly pertains to the partnership business. Following
are the reliefs claimed:
G
"A) The special civil suit of the plaintiffs may kindly be
decreed with costs;

8) The plaintiffs may kindly be declared as valid
partners of the registered partnership firm under the
H
ANIL S/O JAGANNATH RANA v. RAJENDRA S/O 555
RADHAKISHAN RANA [KURIAN, J.]
name and style Mis S.M. Rana {Rana Sahebram A
Mannulal) and further it also may kindly be declared
that, the plaintiffs are the owners and possessors
of the land gut no. 240 situated at Dahegaon Tq.
Gangapur to the extent of 81 Rand the land gut No.
237 to the extent of 5H. 85R. situated· at Dahegaon B
Tq. Gangapur dist. Aurangabad and the land gut no.
9712 admeasuring .1 Acre 34R. situated at
Shranapur Tq. and Dist. Aurangabad and Gut No.
121 admeasuring 1 H. 14R. situated at village
Tisgaon Tq. and Dist. Aurangabad and the Plot No. c
12 out of the land Gut No. 17/2 admeasuring 5.30R.
situated at Garkheda Tq. and Dist. Aurangabad and
it may also be further declared the said property
belongs to the partnership firm and the plaintiffs are
the owners and possessors of the said property D
being the valid partners of the registered firm and
it may also be declared that the plaintiffs are the
owners of their respective shares in the said
properties.

C) It may kindly be declared that the registered sale E
deeds dated 1.8.2007 executed by defendant no.1
in favour of defendant no.2 in respect of land gut
no.240 to the extent of 81 R. situated at village
Dahegaon Tq. Gangapur Dist. Aurangabad bearing
registration Nos.3942/2007 and the registered sale F
deed dated 6.9.2007 bearing registration No.4506/
2007 in respect of land gut no.237 to the extent of
2H. 82R, situated at village Dahegaon Tq.
Gangapur Dist. Aurangabad executed by defendant
no.1 in favour of defendant no. 7 and the registered G
sale deed dated 30.7.2007 bearing registration
no.4318/2007 .executed by defendant no.2 in favour
of defendant no.1 in respect of land gut no.97/2 to
the extent of 20R. situated at Sharanapur Tq. and
Dist. Aurangabad, are null void, ab-initio and not H
556 SUPREME COURT REPORTS [2014] 12 S.C.R.

A binding upon the plaintiffs.

D) It may kindly be declared that the property
purchased by the defendant no.4 bearing land gut
no.17/2 out of it plot no.1 admeasuring 584.36
sq.mtrs. Situated at Garkheda,. Tq. and Dist.
B
Aurangabad and the land gut no.186 admeasuring
12A. 7G. purchased in the name of defendant no.4
by de"fendant no.1 situated at Dahegaon Tq.
Gangapur Dist. Aurangabad and the land Gut No.56
in the name of defendant no.3 to the extent of 25R
c and defendant no.5 to the extent of 25R. situated
at Sharanapur Tq. and Dist. Aurarigabad and the
land gut no.213 admeasuring 35R purchased in the
name of defendant no.3, under registered sale
deed no.1781 dated 25.4.2007 situated at
D Dahegaon Tq. Gangapur Dist. Aurangabad and the
land gut no.185 to the extent of 4A, 15G purchased
in the name of plaintiff no.1 and defendant no.1 to
the extent of 4A, 15G, situated at Dahegaon Tq.
Gangapur Dist. Aurangabad and the land gut
E no.167 /2 purchased in the name of defendant
no.167/2 purchased in the name of defendant no.5
admeasuring BA. 22G, situated at Daheaon Tq.
Gangapur Dist. Aurangabad, and the land Gut No.
6 purchased in the name of defendant no.5
F admeasuring SA, situated at Rahimpur Tq. and
Dist. Aurangabad and the land plot No.16
admeasuring 419 sq. mtrs. Situated at Mustafabad
Tq. and Dist. Aurangabad purchased in the name
of defendant no.4 is the property of partnership firm.
G As the said properties are purchased from the
nexus and income of the partnership .firm and
therefore, it may kindly be declared that, the said
properties belonging to the partnership firm i.e. M/
s S.M. Rana (Rana Sahebram Mannulal).
H
ANIL S/O JAGANNATH RANA v. RAJENDRA S/O 557
RADHAKISHAN RANA [KURIAN, J.]
E) The defendants no. 1 to 7 may kindly be restrained A
permanently from alienating and creating the third
party interest over the suit properties by issue of
perpetual injunction against the defendants no.1 to
7 their servants, their relatives, their agents or who
so ever claims on their behalf permanently, B
F) The profit from the whole sale kerosene business
run through the partnership firm M/s S.M. Rana
(Rana Sahebram Mannulal) pursuant to the whole
sale kerosene dealers license no.20/88 may kindly
.be recovered from the defendant nos.1, 2 and 3 c
from last three years with 18% interest per annum
and it may be awarded to the plaintiffs from the
defendant .nos. 1, 2 and 3.

G) Any other suitable and equitable relief may kindly o
be granted in favour of the plaintiffs."

4. The defendants/appellants had filed an application under
Section 9A of the Code of Civil Procedure, 19081 (hereinafter
referred to as "the CPC"), as applicable to the State of
Maharashtra, to dismiss the suit for want of jurisdiction since
E

1. "9A. Whereof the hearing of application relating to interim relief In a suit,
objection to jurisdiction is taken such issue to be decided by the court
as a preliminary issue.-(1) Notwithstanding anything contained in this Code
or any other law for the time being in force, if at the hearing of any application F
for granting or setting aside an order granting any interim relief, whether
by way of stay, injunction, appointment of a receiver or otherwise, made in
any suit, an objection to jurisdiction of the Court to entertain such suit is
taken by any of the parties. to the suit, the Court shall proceed to determine
at the hearing of such application the issue as to the jurisdiction as a
preliminary issue before granting or setting aside the order granting the
interim relief. Any such application shall be heard and disposed of by the G
Court as expeditiously as possible and shall not in any case be adjourned
to the hearing of the sutt.
(2) Notwithstanding anything contained in sub-section (1), at the hearing
of any such application, the Court may grant such interim relief as ii may
consider necessary, pending determination by it of the preliminary issue
as to the jurisdiction". ' H
558 SUPREME COURT REPORTS [2014] 12 S.C.R.

A the partnership deed contained a provision for arbitration and
hence the disputes were liable to be resolved in terms of the
Act. In other words, application filed by defendants, in essence,
was to be treated as an application under Section 8(1) of the
Act. The same was opposed by the plaintiff. The trial court
8 upheld the.objection and held that it was within the jurisdiction
of the court to try the dispute and, therefore, it was not required
under law to refer the same to arbitration.
l
5. The suit proceeded. The parties have examined all their
witnesses. '
c
6. While so, the respondents herein approached the Chief
Justice of the· High Court of Judicature at Bombay in Arbitration
Application No. 12/2013 under Section 11 (6) of the Act seeking
appointment of an arbitrator as per the terms of the partnership
o deed. At paragraph-4 of the application, it is stated as follows:

"4. The applicants further states and submits that, as per
clause 6 of the Partnership deed dated 13.12.2008
marked and annexed as Exhibit-8, it was decided
between the partners that if any dispute shall arise
E ·between them in respect of the c0nduct of the business of
partnership or in respect of the il)terpretation, operation or
enforcement of any of the terms and conditions of the deed
in respect of any other matter, cause or thing whatsoever,
the same shall be referred to the arbitration of the person
F appointed by the partners whose decision shall be final
and binding on all parties and legal representatives."

7. And further at paragraph-9 of the application, it is stated
as follows:
G "9. The applicant has not filed any other petition,
application or other proceedings before this Hon'ble Court
or before the Hon'ble Supreme Court of India, except the
present one touching the subject matter of this Arbitration
Application. However, the applicants deems it necessary
H
ANIL S/O JAGANNATH RANA v. RAJENDRA S/O 559
RADHAKISHAN RANA [KURIAN, J.]
to disclose that applicants have filed one civil suit for A
declaration and for other reliefs before the learned Civil
Judge Junior Division Aurangabad bearing Regular Civil
Suit No.2014/2012 having old special civil suit No.211/
2009 which is still pending for adjudication. However, the
subject mater of the suit involves some third parties also B
·and therefore that would not be an impediment to allow the
present application for appointment of the sole arbitrator.
The applicant craves leave and liberty to file the copy of
the plaint as and when necessary."

8. The appellants herein opposed the payer. To quote:
c
"7. The respondents no.1 to 3 humbly submit that from 2009
the parties are prosecuting the said spl. C.S. No.211/09
(now RCS No. 2014/2012) filed by applicants/petitioners
herein and in fact the evidence on their part i.e. plaintiffs D
is closed long back and the evidence of defendants is
going on and rather the defendants are on the verge of
closing their evidence after most probably examining
another few witnesses.
E
8. The respondents no.1 to 3 state that the present
application u/s 11 of the said Arbitration Act filed by the
applicants is nothing but to either delay or overcome the
proceedings in the suit pending between the parties.

9. The respondents no.1 to 3 humbly submit that in fact the F
applicants have waived their right of invoking the
arbitration clause the moment they opposed the
application filed by this answering respondent in the said
suit."
G
9. The High Court, as per the impugned order, ignored the
objection and held as follows:

"4. Sub-section (3) of Section 8 of the Act does not
preclude appointment of arbitration during course of
litigation pursuant to agreement. Taking into account sub- H
560 SUPREME COURT REPORTS [2014] 12 S.C.R.

A section (3) of Section 8 and Section 11 of the Arbitration·
and Conciliation Act, 1996, it would be expedient that
plir_suant to clause 6 of the partnership deed, a proper
·person be appointed as arbitrator to entertain dispute
between the parties."
B
10. Heard learned Counsel appearing for both the parties.

11. The. facts as narrated by us herein before would show
that the application filed by the respondents herein under
Section 11 of the Act is nothing but 'an abuse of process. The
C partnership firm itself is the first plaintiff in the suit. The dispute
between the parties is the subject of the suit. Precisely for that
reason, the appellants sought the matter to be referred tci the
arbitrator. That was opposed by the respondents. When the suit
is at the final stage, the respondents have sought appointment
D of an arbitrator under Section 11 (6) of the Act. Having
approached the civil court and hav.ing opposed the reference
to arbitration under Section 8(1) of the Act and the decision of
the court in that regard having become final, the respondents
cannot invoke jurisdiction under Section 11 (6) of the Act; it is
E hit by the principle of issue estoppal.
'
12. There is yet another angle to the issue. Section 8 of
the Act reads as follows:

"8. Power to refer parties to arbitration where
F there is an arbitration agreement.-(1) A judicial
authority before which an action is brought in a matt::r
which is the subject of an arbitration agreement shall, if a
party so applies not later than when submitting his first
statement on the substance of the dispute, refer the parties
G to arbitration.

(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.
H
ANIL S/O JAGANNATH RANA v. RAJENDRA S/O 561
RADHAKISHAN RANA [KURIAN, J.]
(3) Notwithstanding that an application has been A
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."

13. Under Section 8(1) of the Act, either party is free to
8
apply to the judicial authority within the prescribed time to refer
the parties to arbitration, in case the matter pending before it
is the subject matter of an arbitration agreement. Section 8(3)
of the Act however makes it clear that notwithstanding the
application under Section 8(1) of the Act and the issue pending
before the judicial authority, arbitration may be commenced or C
continued and an arbitral award can also be made. In other
words, despite the pendency of an application under Section
8(1) of the Act before the judicial authority, Section 8(3) of the
Act permits the parties to commence and continue the
arbitration and the arbitral tr!bunal is free to pass an award. That D
alone is what is contemplated under Sec\ion 8(3) of the Act.

14. In the suit instituted by the firm and some of the
respondents, the order passed by the civil court that it was well
within its jurisdiction to try the suit, despite the objection E
regarding the existence of a clause for arbitration, has become
final. Thereafter, Section 11 (6) jurisdiction of the Chief Justice
cannot be invoked by either party. The principle of ies judfcata
will also be attracted in such a case.

15. In Satyadhvan Ghosal and others v. Deorajin Debi F
(Smt.l and another, 2 this principle was discussed in detail and
it has been settled as follows. To quote:

"7. The principle of res judicata is based on the need of
giving a finality to judicial decisions. What it says is that G
once a res is judicata, it shall not be adjudged again.
Primarily it applies as between past litigation and future
litigation. When a matter - whether on a question of fact

2. AIR 1960 SC 941. H
562 SUPREME COURT REPORTS [2014) 12 S.C.R.

A or a question of law - has been decided between two
parties in one suit or proceeding' and the decision is final,
either because no appeal was t_aken to a higher court or
because the appeal was dismissed, or no appeal lies,
neither party will be allowed in a future suit or proceeding
B between the same parties to canvass the matter again.
This principle of res judicata is embodied in relation to
suits in Section 11 of the Code of Civil Procedure; but even
where Section 11 does not apply, the principle of res
judicata has been applied by courts for the purpose of
c achieving finality in litigation. The result of this is that the
original court as well as any higher court must in any future
litigation proceed on the basis that the previous decision
was correct.

8. The principle of res judicata applies also as between
D two stages in the same litigation to this extent that a court,
whether the trial court or a higher court having at an earlier
stage decided a matter in one way will not allow the parties
to re-agitate the matter again at a subsequent stage of the
same proceedings .... " ·
E
16. In Hope Plantations Ltd. v. Taluk Land Board.
Peermade and another3, it was held that the general principle
underlying the doctrine of res judicata is ultimately based on
considerations of public policy. One important consideration of
F public policy is that the decisions pronounced by courts of
competent jurisdiction should be final, unless they are modified
or reversed by appellate authorities; and the other principle is
that no one should be made to face the same kind of litigation
twice over, because such a process would be contrary to
G considerations of fair play and justice.

17. The principles as discussed above on res judicata
have been consistently followed by this Court. And the recent
judgments in that regard are in Dr. Subramanian Swamy v.

H 3. (1999) 5 sec 590.
ANIL S/O JAGANNATH RANA v. RAJENDRA S/O 563
RADHAKISHAN RANA [KURIAN, J.)
State of Tamil Nadu and others• and in Suriit Singh and A
others v. Gurwant Kaur and others 5 . Thus, once the judicial
authority takes a decision not to refer the parties to arbitration, ·
and the said decision having become final, thereafter Section
11 (6) route -before the Chief Justice is not available to either
~~ B
18. With great respect, the designated Judge has gone
wholly wrong in passing the order under Section 11 of the Act
when the civil court is in seisin of the dispute ancl where
arbitration has already been declined by the. said court.
c
19. The impugned order is hence set aside. The appeal
is allowed with costs of Rs.25,000/-.

Devika Gujral Appeal allowed.

4_ (2014) 5 sec 75.
5. 2014 (9) SCALE 768.