Holding

There is no valid arbitration agreement covering the entire subject‑matter of the suit, so the application under Section 8 cannot be entertained.

Summary

Gujarat Composite Ltd. entered into a licence agreement with A Infrastructure Ltd. in 2005 that contained an arbitration clause, and later entered into a tripartite loan agreement with the same party and Bank of Baroda that lacked any arbitration provision. Disputes arose over possession, loan repayment, and conveyance deeds, leading Gujarat Composite to seek reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The Commercial Court and the Gujarat High Court rejected the application, holding that the arbitration clause applied only to the original licence agreement and could not be extended to the tripartite agreement or to parties who were not signatories. On appeal, the Supreme Court affirmed that no valid arbitration agreement covered the entire subject‑matter of the suit, that the reliefs sought fell outside the licence agreement’s arbitration clause, and that bifurcation of the cause of action was impermissible. Consequently, the appeals were dismissed.

Issues considered

The dispute arising from the tripartite loan agreement and related reliefs is arbitrable under Section 8 of the Arbitration and Conciliation Act, 1996 as amended.
Whether an arbitration clause in a principal licence agreement can be read into subsequent agreements and bind parties who are not signatories.
Whether the court must refer a matter to arbitration when there is doubt about the existence of an arbitration agreement post‑amendment of Section 8.
Whether the cause of action can be bifurcated to refer only the arbitrable portion to arbitration while retaining non‑arbitrable claims in court.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11, s. 24, s. 7, s. 8
Arbitration and Conciliation (Amendment) Act, 2015
Transfer of Property Act, 1882

Subjects

ArbitrationArbitrabilitySection 8Arbitration clauseTripartite agreementNon‑party to arbitrationBifurcation of cause of actionCommercial CourtHigh CourtSupreme CourtMortgageLoanConveyance deed

Judgment

[2023] 5 S.C.R. 103 103

GUJARAT COMPOSITE LIMITED A
v.
A INFRASTRUCTURE LIMITED & ORS.
(Civil Appeal No. 3259 of 2023)
MAY 01, 2023 B
[DINESH MAHESHWARI AND SUDHANSHU DHULIA, JJ.]
Arbitration and Conciliation Act, 1996 – s.8 – Arbitrability
of the dispute in question – Held: Except the principal licence
agreement, none of the other agreements contained any arbitration
C
clause, even if they related to the same property and also involved
the appellant and the respondent No.1 – Even if the original licence
agreement is said to be the genesis of the contractual relations of
the appellant and the respondent No.1, that does not ipso facto lead
to the availability of the arbitration agreement in relation to the
dispute in question emanating from the tripartite agreement and D
which cannot be determined without reference to the said tripartite
agreement and without involving all the parties thereto – Thus, no
dispute resolution process, including arbitration, could be
undertaken in relation to the subject-matter of the suit without
reference to the terms of tripartite agreement and without involving
E
the bank-respondent No.2 – This is apart from the fact that the
other elements of dispute pertaining to the subsequent purchasers
too cannot be resolved in any forum without reference to the tripartite
agreement and its amended clause, which did not provide for
arbitration – Thus, there is no doubt about non-existence of
arbitration agreement in relation to the dispute in question – F
Substantive reliefs claimed in the suits fall outside the arbitration
clause in the original licence agreement – Therefore, the view taken
by the Commercial Court and the High Court in declining the prayer
of the appellant for reference to arbitration u/s.8 cannot be faulted
– Arbitration and Conciliation (Amendment) Act, 2015.
G
Dismissing the appeals, the Court
HELD: 1.1 Except the principal agreement dated
07.04.2005, none of the other agreements contained any
arbitration clause, even if they related to the same property and
H
103
104 SUPREME COURT REPORTS [2023] 5 S.C.R.

A also involved the appellant and the respondent No. 1. The later
transactions involved other parties too like the tripartite
agreement dated 06.07.2006 whereby the respondent No. 2 bank
sanctioned loan to the respondent No. 1 and then, supplemental
to the said tripartite agreement for dealing with the deposit of
title deeds. Similarly, the other deeds of conveyance dated
B
23.01.2015 involve the appellant and the other defendants. The
submissions made by the appellant with reference to the
amendment of Section 8 of the Act of 1996 and the later decisions
of this Court in interpretation of the amended Section 8 do not
inure to the benefit of the appellant. This is for the simple reason
C that no such conjunction can be provided to the original licence
agreement dated 07.04.2005 and the tripartite agreement
involving the Bank dated 06.07.2006 and 23.01.2008, whereby
the arbitration clause could be held applicable to the tripartite
agreement too. This is apart from the fact that in the frame of the
suit and various other reliefs claimed, involving subsequent
D
purchasers too and the allegations of fraud, the dispute cannot
be said to be arbitrable at all. 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. [Paras 17,
17.1][137-F-G; 138-A-C]
E 1.2 There being no doubt about non-existence of arbitration
agreement in relation to the entire subject-matter of the suit,
and when the substantive reliefs claimed in the suits fall outside
the arbitration clause in the original licence agreement, the view
taken by the High Court does not appear to be suffering from
F any infirmity or against any principle laid down by this Court.
Even if by reference to remote pedigree, the original licence
agreement is said to be the genesis of the contractual relations
of the appellant and the respondent No. 1, that does not ipso
facto lead to the availability of the arbitration agreement in relation
to the dispute in question, which emanates from the tripartite
G agreement and which cannot be determined without reference to
the said tripartite agreement and without involving all the parties
thereto. In other words, no dispute resolution process, including
arbitration, could be undertaken in relation to the subject-matter
of the suit without reference to the terms of tripartite agreement
H and without involving the bank- respondent No.2. This is apart
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 105
LIMITED & ORS.

from the fact that the other elements of dispute pertaining to the A
subsequent purchasers too cannot be resolved in any forum
without reference to the tripartite agreement and its amended
clause, which did not provide for arbitration. Thus, the ancestry
of the tripartite agreement, in the facts of the present case, does
not lead to the result desired by the appellant. Therefore, even
B
on the principles enunciated in Vidya Drolia, the prayer of the
present appellant for reference to arbitration under Section 8
cannot be granted. On the facts and in the circumstances of the
present case and in the nature of transactions as also the nature
of reliefs claimed in the suit, the view taken by the Commercial
Court and the High Court in declining the prayer of the appellant C
for reference to arbitration cannot be faulted. [Paras 17.2, 18,
18.1 and 20][138-D-H; 140-B-C]
Vidya Drolia and Ors. v. Durga Trading Corporation
(2021) 2 SCC 1; Ameet Lalchand Shah and Ors. v.
Rishabh Enterprises and Anr. (2018) 15 SCC 678 : D
[2018] 6 SCR 1001; ONGC Ltd. v. Discovery
Enterprises (2022) 8 SCC 42; Intercontinental Hotels
v. Waterline Hotels (2022) 7 SCC 662 – distinguished.
Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya & Anr.
(2003) 5 SCC 531 : [2003] 3 SCR 558; S. N. Prasad v. E
Monnet Finance Ltd. and Ors. (2011) 1 SCC 320 :
[2010] 13 SCR 207; Deutsche Bank Home Finance Ltd.
v. Taduri Sridhar and Anr. (2011) 11 SCC 375 : [2011]
5 SCR 674; Himangi Enterprises v. Kamaljeet Singh
Ahluwalia (2017) 10 SCC 706 : [2017] 10 SCR 139 –
referred to. F

Case Law Reference
[2003] 3 SCR 558 referred to Para 5.2
[2018] 6 SCR 1001 distinguished Para 6.2
G
[2010] 13 SCR 207 referred to Para 7.5
[2011] 5 SCR 674 distinguished Para 7.5
[2017] 10 SCR 139 referred to Para 12

H
106 SUPREME COURT REPORTS [2023] 5 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3259
of 2023.
From the Judgment and Order dated 23.04.2018 of the High Court
of Gujarat at Ahmedabad in FA No. 588 of 2018.
With
B Civil Appeal No. 3260 of 2023.
Nikhil Goel, Aniruddha Deshmukh, Adhitya Koshy Roy,
Ms. Naveen Goel, Advs. for the Appellant.
Ramesh Singh, Sr. Adv., Biju Mattam, Rahul Singh, N D Kaushik,
Satish Kumar, Avishkar Singhvi, Rohan Sharma, Pradhuman Gohil,
C
Mrs. Taruna Singh Gohil, Ms. Ranu Purohit, Alapati Sahithya Krishna,
Dushyant Parashar, Bhaskar, Manu Parashar, Dinesh Pandey,
Harshvardhan Singh Rathore, Muthuvel Palani M., Advs. for the
Respondents.
The Judgment of the Court was delivered by
D
DINESH MAHESHWARI, J.
Leave granted.
2. These appeals have been preferred against the common
judgment and order dated 23.04.2018 passed by the High Court of Gujarat
E whereby, the High Court has dismissed First Appeal Nos. 588 of 2018
and 587 of 2018 filed by the appellant against the order passed by the
Commercial Court, Ahmedabad dismissing the applications under Section
8 of the Arbitration and Conciliation Act, 19961 in Commercial Civil Suit
Nos. 90 of 2017 and 91 of 2017 respectively. Both these appeals, involving
common questions concerning arbitrability of the dispute, have been heard
F together and are being taken up for disposal by this common judgment.
3. It would be apposite to take note of the factual and background
aspects to the extent relevant for the points arising for determination in
the present appeals. Given the commonalities of the factual chronology,
it would be proper to accord primacy to facts of the lead matter i.e., the
G appeal arising from SLP (C) No. 16932 of 2018 [relating to First Appeal
No. 588 of 2018 in the High Court, arising from the order passed in
Commercial Civil Suit No. 90 of 2017], apart from noticing a few facts
that may be of relevance in the cognate appeal.

H 1
Hereinafter also referred to as ‘Act of 1996’ or simply ‘the Act’.
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 107
LIMITED & ORS. [DINESH MAHESHWARI, J.]

3.1. On 07.04.2005, the appellant herein entered into two licence A
agreements with respondent No. 1 and the sister concern of respondent
No. 12 (against whom the cognate appeal is filed). The first agreement
with respondent No. 1 was for licensing the operation of two
manufacturing units of the appellant, being A.C. Sheet and Cement
Grinding, with the licensing fee per quarter set at Rs. 5,00,000/- (Rupees
B
Five Lakh) for the combined use of land and building as well as factory
machinery and equipment. The second agreement with the sister concern
of respondent No. 1 was for licensing the operation of another
manufacturing unit of the appellant, being A.C. Pressure Pipe, with the
cumulative licensing fee per quarter set at Rs. 2,00,000/- (Rupees Two
Lakh). Both agreements were of the same nature and were executed C
for a term of 7 years (84 months). The relevant clauses of the agreement
entered into between the appellant and respondent No. 1 could be usefully
reproduced as under: -
“3. The duration of the Licence for manufacture will be for a
period of 84 months, extendable to a further period of 84 months D
on mutual consent from the date on which the LICENSEE takes
over production and manufacturing facilities after completion of
the necessary inspection and the compilation of inventories as
stipulated herein. The said takeover would be fully and duly
evidenced by acknowledgement of both the parties in writing, and
will constitute a pan of this Licence Agreement. E
*** *** ***
8. LICENSEE shall pay quarterly licence fee of Rs.1,00,000
(Rupees One lakh only) per quarter towards the use of land and
building including office building and Rs.4,00,000 (Rupees Four
lakhs only) per quarter towards the use of factory machinery & F
equipments. The Licence fee shall, be paid within 21 days of end
of the quarter.
*** *** ***
12. LICENSEE shall not be entitled to mortgage, assign, licence
G
or sublet the said Unit. However, LICENSEE shall be at liberty to
mortgage/ charge, Raw Material stock, Finished Goods book debts
and equipment brought in and belonging to LICENSEE under this
arrangement which shall be kept separately identified and insured.
*** *** ***
2
Hereinafter referred to as ‘sister concern’. H
108 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 15. The LICENSOR will be entitled to a Bonus, in addition to
licence fee payable under Clause 8, in consideration of the use of
its manufacturing facilities, licence, brand goodwill etc, as worked
out below:
i. 14% of the profit earned will be the retained profit in this
B arrangement and balance 86% shall be distributable as under:
a) The Bonus payable by LICENSEE to LICENSOR under
this Clause would be 43% of the divisible profit minus the
licence fee payable as per Clause 8 above. In the event the
amount of Bonus works out to be negative, then LICENSOR
C shall be liable to reimburse this amount to LICENSEE on
quarter to quarter basis.
b) The retained profit shall always belongs to the
LICENSEE during the continuation or upon determination
of the licence period.
D c) The computation of the Profit & Loss and its distribution
shall be done quarterly.
ii. Profit for this purpose means operating profits/losses earned
during the quarter, after deducting interest on working capital
and depreciation on the assets added by LICENSEE, but before
E charging the licence fee specified in Clause 8. The operating
profit shall be worked out on the basis of Accepted Accounting
principles.
*** *** ***
17. The LICENSEE at its absolute discretion may advance some
F
amount to the LICENSOR on the terms/conditions/security as
may be mutually agreed to facilitate smooth operation of this
agreement.
*** *** ***
G 32. Disputes if any, arising out of this Agreement shall be referred
to arbitration of a Sole Arbitrator if mutually agreed, failing which
Arbitrator will be appointed as per provisions of Arbitration and
Conciliation Act, 1996. The venue of Arbitration will be as decided
mutually but preferably at Delhi.”

H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 109
LIMITED & ORS. [DINESH MAHESHWARI, J.]

3.2. On the same date i.e., 07.04.2005, a supplementary agreement A
was also executed between the appellant-licensor, respondent-licensee,
and the sister concern as confirming party. As per the terms of this
agreement, appellant requested respondent No. 1 for some financial
assistance to arrive at a settlement with its creditors, employees as well
as statutory authorities for discharging their dues. The respondent No.
B
1, therefore, agreed to advance a sum of Rs. 5,30,00,000/- (Rupees Five
Crore Thirty Lakh) to the appellant with interest at 10% p.a. and as
consideration for the financial assistance rendered, it was agreed that
respondent No. 1 would be permitted to create a mortgage on the three
licensed manufacturing units in order to secure the ad hoc advance.
This advance was recoverable in ten quarterly instalments commencing C
from the 90th day of payment of the ad hoc advance out of the licence
fee and bonus under clauses 8 and 15 of the main agreement. A few
relevant clauses of the supplementary agreement dated 07.04.2005 could
also be usefully reproduced as under: -
“NOW, THEREFORE, in consideration of the premises and the D
mutual covenants set forth herein, and also in the main License
Agreement dated 7th April 2005 and for other good and valuable
considerations, the parties hereto hereby agrees as follows:
1. The LICENSOR requested the LICENSEE for some financial
assistance to arrive at an amicable settlement with the creditors; E
employees and statutory authorities for discharging of their dues.
2. The LICENSEE, in consideration of facilitating the smooth
operation of the main agreement dated 7th April 2005 between
LICENSOR and CONFIRMING PARTY and main agreement
dated 7 th April 2005 between LICENSOR and LICENSEE F
including smooth operation of A. C. Pipes, A. C. Sheets and
Cement Units, have agreed to advance a sum of Rs. 5,30,00,000
(Rupees Five Crores Thirty Lakhs only) to the LICENSOR
fetching interest at 10% per annum to be calculated at monthly
rests after receipt of the approval of LICENSOR’S secured
creditors as per Clause 4 of the main agreement and upon creation G
of mortgage on A.C. Sheet, A. C. Pipe and Cement manufacturing
Unit including building, plant, and machineries in favour of
LICENSEE for securing the above adhoc advance. LICENSOR
shall use the said (illegible) for entering into a settlement with its
secured creditors by making a down payment towards their dues H
110 SUPREME COURT REPORTS [2023] 5 S.C.R.

A and for payment of balance in an agreed manner and for obtaining
their consent to the above agreement and to pay and discharge
various other pressing liabilities of LICENSOR including payment
of dues of workers, statutory liabilities etc. This advance along
with interest thereon shall be recoverable in Ten. (10) quarterly
instalments, commencing from the 90th day of the payment of ad-
B
hoc advance amount, out of the licence fee payable as per Clause
8 and Bonus as per Clause 15 of the main Agreement.”
3.3. Subsequently, clauses 11 and 15 of the original licence
agreement, (pertaining to repurchase of assets and entitlement of licensor
to bonus) were amended by means of execution of an amendment
C agreement dated 25.06.2005 between appellant and respondent No. 1.
The amended clauses read as under: -
“Clause- 11: LICENSOR will allow LICENSEE to make
necessary modification/ addition/ changes in the machinery, building
or any other fixed assets for smooth operation of the plant. Minor
D expenses to the extent of Rs.25000/- (Rupees Twenty Five
Thousand only) may be debited to P&L Account and the expenses
in excess of specified amount will be capitalized and may be
funded by both the parties in the following ratio.
i) Licensor : 43%
E
ii) Licensee : 57%
Such expenses to be decided mutually and duly minuted.
Depreciation on these additions to the fixed assets shall be
calculated at the rates specified in the Companies Act as per
F Straight Line Method. Upon determination of the license period
the LICENSOR would be under obligation to buy these assets at
the Written Down Value.
b) Clause No.15 : The LICENSOR will be entitled to a Bonus, in
addition to license fee payable under Clause-8, in consideration of
the use of its manufacturing facilities, license, brand goodwill etc.
G
as worked out below.
i) The Bonus payable by LICENSEE to LICENSOR under this
Clause would be 43% of the profit. The Bonus so payable shall
be reduced by the amount of License fee payable as per Clause-
8 of the Agreement. However, in the event of loss, the LICENSOR
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 111
LIMITED & ORS. [DINESH MAHESHWARI, J.]

shall be liable to reimburse 43% of the total loss to LICENSEE on A
a quarter-to-quarter basis.
ii) Computation of the Profit & Loss and its distribution shall be
provisionally based on the annual audited accounts.
iii) Profit/Losses for this purpose means profits/losses earned, after
deducting interest on working capital and depreciation on the assets B
added by the LICENSEE but before changing the license fee
specified in Clause No. 8. The profit/loss shall be worked out on
the basis of accepted accounting principles.”
3.4. Thereafter, on 06.07.2006, a tripartite agreement was executed
by and amongst the appellant, respondent No. 1 and respondent No. 2 C
(Bank of Baroda3) upon sanctioning of a loan to the tune of Rs. 500 lakh
to respondent No. 1. The appellant agreed to create first charge on
fixed assets, which was to be released only with the consent of respondent
No. 1. However, it was also stipulated that if payment of corporate loan
was made directly by the appellant to the bank, the first charge could be D
released without the consent of respondent No. 1. The relevant clauses
of the tripartite agreement dated 06.07.2006 could be usefully reproduced
as follows: -
“WHEREAS Bank of Baroda has sanctioned Corporate loan of
Rs.500 lacs to M/s. A Infrastructure Limited on the terms & E
conditions stipulated in the sanction letter and to secure this above
loan in addition to other conditions and corporate guarantee also
provided by M/s. Gujarat Composite Limited.
Further M/s. Gujarat Composite Limited has agreed to create
first charge on the fixed assets as stipulated in the sanctioned F
letter in favour of Bank of Baroda.
Further M/s. Gujarat Composite Limited, has agreed that first
charges will be released by Bank of Baroda only with the consent
of M/s. A Infrastructure Limited even after repayment of the said
loan. Bank of Baroda further agreed to release the first charge
G
only with the consent of M/s. A Infrastructure Limited. However
in case M/s. Gujarat Composite Ltd. will make payment of this
corporate loan of Rs.500 lacs directly to Bank of Baroda. Bank
of Baroda will release the first charges without the consent of
M/ s. A Infrastructure Limited”
3
Hereinafter also referred to as ‘the bank’. H
112 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 3.5. An amendment was introduced to the aforementioned
tripartite agreement on 23.01.2008, so as to restrict the transfer of title
deeds of the land of appellant during the term of licence agreements.
The amended condition reads as follows: -
“Further M/ s. Gujarat Composite Limited, has agreed that First
B Charge will be released by Bank of Baroda only with the consent
of M/s. A Infrastructure Limited even after repayment of the said
loan. Bank of Baroda further agreed to release the First Charge
only with the consent of M/s. A Infrastructure Limited. However,
in case M/s. Gujarat Composite Ltd. will make payment of dues
against this corporate loan of Rs.500 lacs directly to Bank of
C Baroda, Bank of Baroda will release the First Charge without the
consent of M/s. A Infrastructure Limited. But M/s Gujarat
Composite agrees that the title Deeds of the land will not be
transferred to any other party during the currency of Licence
Agreements executed between M/s. A Infrastructure Limited and
D M/s. Gujarat Composite Ltd. “
3.6. The dispute in the present matter arose after respondent No.
1, by means of representation dated 22.02.2012, invoked clause 3 of the
original licence agreement and called upon the appellant to extend the
term of the licence agreement by a further period of 84 months. This
E extension was sought because appellant was unable to pay certain dues
owed to respondent No. 1 and sought time to arrange for payment. In
response to this representation, the appellant, through letter dated
29.02.2012, denied the proposal of respondent No. 1 to extend the term
of licence agreement as also the projected outstanding dues. Later, on
06.04.2012, which was the date of completion of tenure of the original
F licence agreement, respondent No. 1 did not hand over possession and
instead, declared its intention to continue with possession. Between April
2012 and March 2015, according to the appellant, certain attempts were
made to resolve the dispute, but to no avail. It is also a part of the case
of respondent No. 1 that certain parcels of land were transferred to
G respondent Nos. 3 to 5 in January 2015.
3.7. Then, on 07.04.2015, the appellant issued notice to respondent
No. 1 claiming recovery of possession of the manufacturing units as
well as certain monetary dues. In the notice, the appellant stated that the
licence had expired by efflux of time without any extension, hence
H possession by respondent No. 1 was illegal. Further, the appellant claimed
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 113
LIMITED & ORS. [DINESH MAHESHWARI, J.]

that there was a huge outstanding payable by respondent No. 1. In the A
reply dated 20.04.2015, respondent No. 1 disputed these claims and
asserted that the appellants had not cared to pay back its legitimately
claimed amounts. Yet again, between 26.08.2015 to 17.11.2016, attempts
were made to resolve the dispute but there was no positive outcome.
Seeing that the attempts to resolve the dispute had failed, on 28.02.2017,
B
the appellant served a notice on respondent No. 1 under Section 21 of
the Act of 1996 invoking the provision for arbitration contained in the
licence agreement (clause 32). Respondent No. 1 replied to this notice
on 27.03.2017, contesting the arbitrability of the dispute since it was
inextricably interconnected with other related transactions and unresolved
issues arising therefrom. It was asserted that as the jurisdiction of the C
arbitrator was derived from the agreement, adjudication of the alleged
dispute would go beyond the scope of the said agreement.
3.8. In this backdrop of events, the appellant preferred a composite
arbitration petition before the Gujarat High Court on 26.04.2017 being
IAAP No. 63 of 2017 against respondent No. 1 and its sister concern. D
On the other hand, respondent No. 1-A Infrastructure Limited-filed a
commercial civil suit bearing No. 90 of 2017 before the Commercial
Court at Ahmedabad on 27.04.2017 with the following defendants:
1. Gujarat Composite Limited
2. Bank of Baroda E

3. Real Home Corporation - a partnership firm
4. M/s. Raj Corporation (Confirming Party) - partnership firm
5. RJD Buildcon Ltd.
F
3.8.1. In the said suit, the respondent No. 1 (the plaintiff) made
the prayers for multiple reliefs in the following terms: -
“33) The Plaintiff therefore prays that:
(A) This Hon’ble Court may be pleased to direct the defendant
No.1 to pay to the Plaintiff herein a sum of Rs.32,66 crores with G
interest @ 14% per annum from the date of suit till realization
herein under this decree and any further orders to be passed by
this Hon’ble Court;
(B) This Hon’ble Court may be pleased to hold and declare that
the Deeds of Conveyance dated 23rd January, 2015 registered H
114 SUPREME COURT REPORTS [2023] 5 S.C.R.

A vide registration no. 742 and 750 executed by defendant No.1 in
favour of defendant Nos.3 and 5, as null and void;
(C) This Hon’ble Court may be pleased to permanently restrain
the defendant Nos.1, 3, 4 and 5 or their agent, executors, or
administrators from disturbing or obstructing the plaintiffs
B occupation possession of the suit property till the discharged;
(D) This Hon’ble Court may be pleased to direct the defendant
No.2 Bank not to release original title papers and other relevant
documents in favour of defendant Nos.1, 3 and/or 4;
(E) This Hon’ble Court may be pleased to hold and declare that
C the Conveyance Deed dated 23 rd January, 2015 entered into
between the defendant No. 1 and defendant No. 3 to 5 as null and
void;
(F) This Hon’ble Court may be pleased to direct the defendant
No. 2 to take over all the current assets of the plaintiff pertaining
D to or in connection with the operation of A.C. Sheet and Cement.
Manufacturing unit under license agreement at their book value
and make payment to the plaintiff for the current assets available
at the time of handing over of the possession, if required.”
3.9. An application was preferred by the appellant under Section
E 8 of the Act of 1996 in the said commercial civil suit bearing No. 90 of
2017 for reference of the dispute to arbitration. In the written statement
of the appellant, objection was also raised against the jurisdiction of the
Commercial Court, given the arbitration clause in the licence agreement.
Respondent No. 1 filed a reply to the application and the appellant filed
F an affidavit in rejoinder to the aforesaid reply on 03.07.2017.
3.10. In relation to the said application moved by the appellant in
terms of Section 8 of the Act of 1996, another material factor may also
be noticed. Two memos (pursis), came to be filed before the Commercial
Court on 06.12.2017. In one of the memos, the respondent Nos. 3 to 5
(subsequent purchasers of the property in question) purportedly stated
G
that they were not having any objection if the dispute concerning them
was resolved by arbitration proceedings. The appellant, by another memo
of the even date, suggested that the tripartite amended agreement was
with reference to the licence agreement and it was agreed that till the
time of the defendant No. 1 (appellant) making payment of a sum of Rs.
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 115
LIMITED & ORS. [DINESH MAHESHWARI, J.]

5 crore to the plaintiff, the title deeds of the immovable property would A
remain with the bank. The appellant suggested that with a view that the
dispute between the parties should be resolved by arbitration proceedings,
keeping all contentions open, they would be depositing the said amount
of Rs. 5 crore in the Court and that in this manner ‘the dispute with
defendant No. 2 would be ended’ and then, the bank who was handed
B
over the title deed, would deposit the same in the Court and the Court
would be pleased to place the same in sealed cover till the dispute of the
other parties was not resolved by arbitration proceedings.
3.11. Before adverting to the order passed by the Commercial
Court on the prayer of the appellant for reference to arbitration in terms
of Section 8 of the Act of 1996, we may complete the narration C
concerning the parallel proceedings in terms of Section 11 of the Act of
1996, even while deviating a little from the chronology. The said IAAP
No. 63 of 2017 was withdrawn on 07.07.2017, as it was a composite
petition against both respondent No. 1 and its sister concern with liberty
to file fresh petitions. Thereafter, two separate IAAPs being IAAP No. D
90 of 2017 and 89 of 2017 were filed by the appellant but, the proceedings
therein ultimately culminated in the common order dated 15.12.2017.
The High Court dismissed those applications in view of the fact that the
prayer of the appellant in terms of Section 8 of the Act had been rejected
by the Commercial Court on 13.12.2017 but, with liberty to the appellant
to file afresh under Section 11 of the Act after decision on the challenge E
to the order so passed by the Commercial Court. Be that as it may, this
aspect is not as such relevant for the present purpose and could be left
at that.
4. The Commercial Court at Ahmedabad, in the order dated
13.12.2017, rejected the application of the appellant under Section 8 of F
the Act of 1996. It was held that there was no arbitration clause in the
tripartite agreement and no reference had been made to the original or
supplementary licence agreement to give effect or consider the arbitration
clause as a part and parcel of the tripartite agreement. While referring
to clause 32 of the Licence Agreement dated 07.04.2005, the Court G
observed that it was explicitly clear that the arbitration clause was
applicable to the appellant and respondent No. 1, specifically in reference
to the original licence agreement and supplementary licence agreement
but the same could not be extended to apply to subsequent transactions
and agreements with different parties.
H
116 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 4.1. In consonance with the aforementioned observations, the
Commercial Court also held that there must be a valid arbitration
agreement in order to invoke the powers of the Court to refer the parties
to arbitration under Section 8 of the Act of 1996. It was further observed
that persons who are not parties to the arbitration agreement cannot be
referred to arbitration, as the binding effect would only apply to the
B
parties thereto, i.e., the appellant and respondent No. 1. Hence, if the
dispute was between parties and non-parties to the arbitration agreement,
appointment of arbitrator could only be made with respect to the parties.
The relevant parts of the order passed by Commercial Court could be
usefully reproduced as under: -
C “15….As such, no arbitration clause seems to have been inserted
nor any reference has been made as to the License Agreement
or Supplementary License Agreement executed between the
plaintiff and defendant No. 1 so as to give effect and to consider
as a part and parcel of the tripartite agreement executed between
D the plaintiff, defendant No. 1 and defendant No. 2.
16. Even perusing item No. 32 of the Licence Agreement dated
07/04/2005 executed between the plaintiff and defendant No. 1
wherein it has been expressly agreed upon between the parties
thereto that dispute, if any, arising out of this Agreement shall
E be referred to arbitration…..Thus, it is explicitly clear that the
arbitration clause is binding to the plaintiff and defendant No. 1
only and that too pertaining to the Licence Agreement/
Supplementary Licence Agreement and cannot be given effect
and extended and made applicable to the subsequent transactions
and/or agreements so executed between the plaintiff and
F defendant No. 1 with the strangers.
ARBITRATION AGREEMENT:
17. Now the question arises is as to what is an “arbitration
agreement” and/or “a valid arbitration agreement”? To meet
G with the aforesaid issue, the provisions of Section 7 of the
Arbitration Act requires to have a glance wherein the arbitration
agreement means an agreement between the parties to submit to
arbitration of or certain disputes which have arisen or which may
arise between them in respect of a definite legal relationship,
whether contractual or not.
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 117
LIMITED & ORS. [DINESH MAHESHWARI, J.]

18. It is further provided that the arbitration agreement must be in A
writing and signed by the parties and also in exchange of statement
– defence in which the existence of the agreement is alleged by
one party and not denied by the other party.
19. Thus, considering the facts of the case on hand while applying
the provisions of Section 7 of the Arbitration Act, the powers of B
the Court to refer the parties to arbitration are subject to fulfilment
of the required conditions i.e. there should be an arbitration
agreement and if the Court finds that no valid arbitration agreement
exists between the parties, then to invoke the powers under
Section 8 and the issue thereof does not arise.
C
20. Hence, on the aforesaid account and as discussed in the
foregoing paragraphs, the clause of arbitration so inserted is
between the plaintiff and defendant No.1 as inserted in the Licence
Agreement and the same cannot be applied to the subsequent
transactions and with the persons who are not the parties to the
arbitration agreement who cannot be compelled to or referred to D
arbitration. Hence, in view of the aforesaid, the arbitration clause,
the binding effect applies to the plaintiff and defendant No.1 only
and cannot be extended to the rest, admittedly who are not the
parties to the arbitration agreement.
21. Thus, the sum and substance of the aforesaid discussion is E
that the reference to the arbitration is possible only if there is a
valid arbitration agreement between the parties, but if the dispute
is between the parties to an arbitration with the other parties as
also non-parties to the arbitration agreement, a reference to the
arbitration or even the appointment of the arbitrator can only be F
made with respect to only the parties to the arbitration agreement
and not the non-parties.”
4.2. In terms of the requirements of Section 8 of the Act of 1996
the Commercial Court held that the matter could be referred to arbitration
only if it were a part of the subject-matter of the agreement. The reliefs G
sought by the plaintiff involved its challenge to the conveyance deeds as
violative of the undertaking submitted before the Industrial Tribunal as
also the fact that the transaction was entered into during the operation
of stay granted by the High Court4. Thus, this would not fall within the
4
We have not elaborated on the other litigations wherein the said orders were passed,
for being not entirely necessary in relation to the core question involved in the matter. H
118 SUPREME COURT REPORTS [2023] 5 S.C.R.

A scope of adjudication. The Commercial Court further held that the issue
of mortgage was not arbitrable. In essence, the considerations of the
Commercial Court had been that the relief sought by the plaintiff related
to several other transactions which did not provide for arbitration as a
dispute resolution mechanism. It was observed that the challenge to the
conveyance deed and also the relief sought against the bank to not release
B
documents in favour of appellant would only be capable of adjudication
by the Courts and could not be resolved by arbitrator.
4.3. Another ancillary observation had been that the conduct of
respondent Nos. 3 to 5 would indicate collusion with the appellant during
pendency of litigation. Thus, in substance, it was held that the issues in
C question were not connected with the licence agreement and that there
was no valid arbitration agreement between the plaintiff and the rest of
the defendants apart from defendant No. 1 (appellant). The Commercial
Court further clarified that a partial reference to arbitration would not be
possible because the cause of action could not be split into separate
D parts.
5. In appeal, the decision of the Commercial Court was upheld by
the High Court, after extensively taking note of the material aspects of
the pleadings in plaint and the rival submissions as also the principles
enunciated in the cited decisions, with the finding that it would not be
E proper to bifurcate the disputes in terms of arbitrable and non-arbitrable
disputes.
5.1. As regards the suit in respect of a matter which falls partly
within and partly outside the arbitration agreement, and also involves
non-parties as well as parties, it was held that Section 8 of the Act of
F 1996 would not be attracted, in reference to several decisions of this
Court. The High Court observed that the licence agreements were only
executed between the appellant and respondent No. 1 and respondent
Nos. 2 to 5 were not party to the agreement. There was a tripartite
agreement between the appellant, respondent No. 1 and the bank,
however, it was an admitted position that no arbitration agreement existed
G in that regard. Further, the tripartite agreement was an independent
agreement for mortgage by deposit of title deeds. It was further observed
by the High Court, as had also been observed by the Commercial Court,
that the appellant had breached the injunction granted by the High Court
as well as the undertaking before the Industrial Tribunal by selling some
H of the properties to respondent Nos. 3 to 5. Referring to the plaint
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 119
LIMITED & ORS. [DINESH MAHESHWARI, J.]

averments, the High Court took note of the reliefs sought by respondent A
No. 1 and the parties against whom reliefs were sought as also the
pleadings with respect to cause of action in the following words: -
“[8.5] In the present case as observed herein above there are
license agreements containing the arbitration clause, executed
between the plaintiff and the original defendant No.1 on one hand. B
Admittedly, the original defendant Nos.2 to 5 are not party to the
arbitration agreement. There is a tripartite agreement between
the original plaintiff, original defendant No.1 and the original
defendant No.2 (Bank of Baroda) under which the plaintiff and
the original defendant No.2 have prayed the reliefs. It is an
admitted position that in the tripartite agreement between the C
original plaintiff, original defendant No.1 and the original defendant
No.2 (Bank of Baroda), there does not exist any arbitration
agreement. Under the tripartite agreement the original defendant
No.1 has placed the title deeds and the said tripartite agreement
as such can be said to be an independent agreement and under D
the said tripartite agreement there is a mortgage by deposit of title
deeds in respect of immovables and hypothecation of movables.
It appears that the said tripartite agreement was executed while
sanctioning a corporate loan of Rs.500 lakh in favour of the original
plaintiff and the charge and mortgage has been created in favour
of Bank of Baroda – original defendant No.2. It appears that E
during the pendency and subsistence of the aforesaid mortgage
and as alleged by the original plaintiff surreptitiously and in breach
of the injunction granted by this Court as well as the undertaking
before the Industrial Tribunal, the original defendant No.1 has
sold some of the properties (mortgaged properties) in favour of F
original defendant Nos.3 to 5. In light of the above broad facts
and averments in the plaint, pleadings on the cause of action and
the reliefs sought are required to be considered.
[8.6] In the plaint in Commercial Civil Suit No.90/2017, the plaintiff
has sought the relief against the following defendants: G
1. Gujarat Composite Limited
2. Bank of Baroda
3. Real Home Corporation - a partnership firm
H
120 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 4. M/s. Raj Corporation (Confirming Party) - partnership firm
5. RJD Buildcon Ltd.
The suit is filed for recovery of legitimate dues, cancellation
of sale deed and for permanent injunction. In the suit the plaintiff
has prayed for the following reliefs.
B
“(A) This Hon’ble Court may be pleased to direct the defendant
No.1 to pay to the Plaintiff herein a sum of Rs.32.66 Crores
with interest @ 14% per annum from the date of suit till
realization herein under this decree and any further orders to
be passed by this Hon’ble Court;
C
(B) This Hon’ble Court may be pleased to hold and declare
that the Deeds of Conveyance dated 23 rd January, 2015
registered vide registration no. 742 and 750 executed by
defendant No.1 in favour of defendant Nos.3 and 5, as null
and void;
D
(C) This Hon’ble Court may be pleased to permanently restrain
the defendant Nos.1, 3, 4 and 5 or their agent, executors, or
administrators from disturbing or obstructing the plaintiffs
occupation possession of the suit property till the plaintiff claim
made in para (a) and (b) above is fully discharged;
E
(D) This Hon’ble Court may be pleased to direct the defendant
No. 2 Bank not to release original title papers and other relevant
documents in favour of defendant Nos.1, 3 and/or 4;
(E) This Hon’ble Court may be pleased to hold and declare
that the Conveyance Deed dated 23rd January, 2015 entered
F
into between the defendant No. 1 and defendant No. 3 to 5 as
null and void;
(F) This Hon’ble Court may be pleased to direct the defendant
No. 2 to take over all the current assets of the plaintiff pertaining
to or in connection with the operation of A.C. Sheet and Cement
G Manufacturing unit under license agreement at their book value
and make payment to the plaintiff for the current assets available
at the time of handing over of the possession, if required.”
[8.7] Necessary pleadings in the plaint with respect to cause of
action are as under:
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 121
LIMITED & ORS. [DINESH MAHESHWARI, J.]

1. The cause of action has arisen when the defendant No. 1, A
behind the back of the plaintiff, entered into Conveyance Deed
with defendant no. 3 and defendant No. 5.
2. Even the original title deeds and other documents partially
pertaining to the suit property are in the custody of defendant No.
2 Bank and by suppressing the fact that the plaintiff has absolute B
right over the suit property qua possession, the defendant No. 1
has entered into Conveyance Deed with defendant No. 3 and
defendant No. 5 stating that suit property is free from any
encumbrance and/or mortgage.
3. That the cause of action for filing the suit has arisen because C
the defendant No. 3 and defendant No. 5 made an application to
mutate the entry in the revenue record in regard to the Deed of
Conveyance. As the plaintiff is legitimately in possession of the
suit property by virtue of license agreement, supplementary
agreement, tripartite and amended tripartite agreement, it
vehemently opposed the said entry and ultimately the authority D
concerned rejected the application of the defendant No. 3 and
defendant No. 5 for mutation of entry in regard to Conveyance
Deed. Thus the mutation entry with regard to mortgage of the
suit property with defendant No. 2 Bank still exists and the
defendant No. 2 Bank has not removed/revoked the said mortgage. E
4. That though the plaintiff is in possession of the suit property by
virtue of license agreement, supplementary agreement, tripartite
agreement and amended tripartite agreement, the defendant No.
1; behind the back of the plaintiff, entered into Conveyance Deed
with defendant No. 3 and defendant No. 5. F
5. The defendant No. 1 even did not part with the sale
consideration with the plaintiff which it has received from defendant
No. 3 and defendant No. 5 for conveying the suit property to
defendant No. 3 and defendant No. 5.
6. That the cause of action for filing the suit has arisen also as G
defendant No. 1 had defaulted in repayment to Punjab National
Bank and hence was not in a position to get any loan whatsoever
in its own capacity from any financial institution, and as it was in
need of financial assistance, defendant No. 1 requested the plaintiff
for financial help, because of which plaintiff obtained corporate
H
122 SUPREME COURT REPORTS [2023] 5 S.C.R.

A loan of Rs. 05.00 Crores on its name from defendant No. 2 and
advanced the same to defendant No. 1.
7. Even during the currency of the license agreement, plaintiff
has paid other amounts also for and on behalf of the defendant
No. 1 towards wages to the workers, revenue taxes, electricity
B bills, excise duty, etc.
8. The cause of action has arisen because in lieu of all these
financial help from plaintiff, defendant No. 1 entered into tripartite
agreement and subsequently amended tripartite agreement with
plaintiff and defendant No. 2 Bank, whereby defendant No. 1
C mortgaged the suit property with defendant No. 2 Bank and stood
as guarantor towards the corporate loan which was obtained by
plaintiff in its name to help out the defendant No. 1, wherein it has
been specifically agreed by defendant No. 1 that unless all and
full legitimate dues of the plaintiff has been paid up, plaintiff shall
enjoy the possession of the suit property.
D
9. That the cause of action for filing of the suit has arisen also
because the plaintiff has to recover Rs. 32.66 Crores from the
defendant No. 1 towards corporate loan and other amount, which
the plaintiff has advanced to the defendant No. 1.”

E 5.2. As far as the first relief under paragraph 33(A) was
concerned, whereby respondent No. 1 sought recovery of Rs. 32.66
crore with interest @ 14% p.a. from the date of suit till realisation, the
High Court observed that this relief would lie against the appellant who
would be bound by the arbitration clause in the licence agreement. The
rest of the prayers were against respondent No. 2 - the bank, and
F respondent Nos. 3 to 5 - the subsequent purchasers, who were not parties
to the arbitration agreement. In the opinion of the High Court, the fact
that the reliefs were all interconnected and on the basis of multiple causes
of action, the dispute could not be bifurcated. Thus, the High Court applied
the law laid down in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya
G & Anr.: (2003) 5 SCC 531 and other referred decisions, to hold that
there was no error by the Commercial Court in rejecting the application
under Section 8 of the Act of 1996. The relevant observations of the
High Court are as follows: -
“[8.8] Considering the above and the reliefs prayed / sought in the
suit, it can be said that the prayer in terms of para 33(A) can be
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 123
LIMITED & ORS. [DINESH MAHESHWARI, J.]

said to be against the original defendant No.1 who is a party to A
the arbitration agreement contained in the license agreement.
Prayer in terms of paras 33(B), 33(C) and 33(E) can be said to be
against the original defendant No.1 and original defendant Nos.3
to 5. Original defendant Nos.3 to 5 are not party to the arbitration
agreement and as such they are third parties who have alleged to
B
have purchased the properties from the original defendant No.1
during the subsistence of the license agreement as well as they
have purchased the said property surreptitiously. The prayer in
terms of paras 33(D) and 33(F) can be said to be against the
original defendant No.2 – Bank of Baroda who admittedly is not
a party to the arbitration agreement. All these reliefs are C
interconnected and the reliefs sought in the plaint are on the basis
of multiple cause of actions and multiple reliefs against the
defendants and it is not possible to bifurcate the dispute in the suit
between the plaintiff and the original defendant No.1 (parties to
the arbitration agreement) and the original plaintiff and the original
D
defendant Nos.2 to 5 (nonparties to the arbitration agreement).
Therefore, applying the law laid down by the Hon’ble Supreme
Court in the case of Sukanya Holdings (P) Ltd. (Supra) and other
decisions referred to herein above, it cannot be said that the learned
Commercial Court has committed any error in rejecting section 8
application and refusing to refer the matter / dispute in the suit for E
arbitration.
*** *** ***
[8.13] Considering the facts and circumstances of the case narrated
herein above and the law laid down by the Hon’ble Supreme Court
in the case of Sukanya Holdings Pvt. Ltd. (Supra) and other F
decisions referred to herein above, it cannot be said that the learned
Commercial Court has committed any error in rejecting the
application under Section 8 of the Arbitration Act, 1996 and
refusing to refer the dispute / matter for arbitration. On facts it is
not proper, advisable and/or possible to bifurcate the disputes viz. G
arbitrable and nonarbitrable. We are in complete agreement with
the view taken by the learned Commercial Court while rejecting
the application under Section 8 of the Arbitration Act, 1996.”
5.3. Accordingly, the High Court proceeded to dismiss both the
appeals and thereby affirmed the order passed by the Commercial Court H
124 SUPREME COURT REPORTS [2023] 5 S.C.R.

A in rejection of the applications moved by the appellant under Section 8 of
the Act of 1996. Hence, these appeals.
6. Learned counsel for the appellant has, after reference to the
background aspects, strenuously argued that the Commercial Court and
the High Court have erred in law as also on facts in declining the
B applications moved by the appellant in terms of the amendment to Section
8 of the Act of 1996; and with reference to the later decisions of this
Court including the 3-Judge Bench decisions, has contended that the
impugned judgment and orders deserve to be set aside and the applications
made by the appellant deserve to be allowed.
C 6.1. Learned counsel for the appellant has contended that the
civil suits in question and the application therein for referral to arbitration
were filed subsequent to the amendment to Section 8 of the Act of 1996
in the year 2015, and therefore, the present matter is governed by the
amended Section 8 whereby and whereunder, there is no choice but to
refer the parties to arbitration, even for deciding the arbitrability of the
D dispute.
6.2. Learned counsel has argued that though the High Court relied
on the decision of this Court in Sukanya Holdings (supra) but the same
has been doubted and distinguished in various decisions of this Court
subsequently. In this regard, learned counsel has referred to various
E decisions in which the said decision in Sukanya Holdings was
distinguished or clarified; and has particularly referred to the decision in
Ameet Lalchand Shah and Ors. v. Rishabh Enterprises and Anr.:
(2018) 15 SCC 678 and a 3-Judge Bench decision in the case of Vidya
Drolia and Ors. v. Durga Trading Corporation: (2021) 2 SCC 1.
F Learned counsel would submit that now, the law pertaining to Section 8
of the Act of 1996 is solely interpreted keeping in view the amendment
to it. With reference to the case of Vidya Drolia (supra) learned counsel
has submitted that two major principles have been laid down therein:
one, that only those cases that are ‘deadwood’ should not be referred to
arbitration; and second, that whenever there is doubt, the correct course
G is to refer to arbitration. Further placing reliance on ONGC Ltd. v.
Discovery Enterprises: (2022) 8 SCC 42 and Intercontinental Hotels
v. Waterline Hotels: (2022) 7 SCC 662 he has submitted that unless
the issue before the Court patently indicates existence of deadwood,
Courts should ensure that arbitration is carried on. Learned counsel would
H submit that the High Court has adopted a rather restrictive interpretation
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 125
LIMITED & ORS. [DINESH MAHESHWARI, J.]

of the Act of 1996 in the order impugned, which deserves to be set A
aside.
6.3. Learned counsel for appellant has also submitted that the
mandate of Act of 1996 would have ensured the completion of
proceedings within a year, with a reduced scope of interference in the
possible Section 34 proceedings at the instance of either party, but the B
matter has remained pending with only framing of issues. Learned
counsel would further submit that the licensees are squatting over the
property, under a licence agreement dating back to the year 2005, without
performing any work and have illegally and unauthorisedly prevented
the appellant, who is the owner of the property, from dealing with it.
Learned counsel has underscored the point that the respondent No. 1 C
has not denied the existence of a dispute, but merely argues that the said
disputes cannot be resolved through arbitration due to the involvement
of the bank, an argument that cannot withstand legal scrutiny.
7. Per contra, learned counsel for the contesting respondent has
also referred to the background aspects and various transactions as also D
the grievance of the plaintiff- respondent No. 1 to submit that the dispute
as involved in the suit has rightly not been referred to arbitration.
7.1. Learned counsel for the contesting respondent would submit
that the underlying civil suits are spread over various agreements/
transactions and involve various parties where except the appellant none E
of the other defendants are parties to the arbitration agreement which is
contained only in the main licence agreement dated 07.04.2005. It has
also been submitted that the cause of action of the suits in question goes
beyond the transaction containing the arbitration agreement where even
the case of serious fraud has been alleged against the appellant and the F
dispute also pertains to mortgage. It has been particularly emphasised
that the tripartite agreement involving the appellant, respondent No.1
and Bank of Baroda lacks arbitration clause; and the dispute emanating
from the tripartite agreement and also pertaining to the questioned deeds
of conveyance cannot be correlated with the arbitration agreement in
the main licence agreement dated 07.04.2005. G
7.2. Learned counsel has also argued that for a matter to be
referred to arbitration, the entire subject-matter should be subject to
arbitration and while relying on Sukanya Holdings (supra), has submitted
that the suit cannot be bifurcated partially to refer a part of the suit to
arbitration and to allow the rest of it to continue. It has further been H
126 SUPREME COURT REPORTS [2023] 5 S.C.R.

A submitted that the reliefs claimed in the suits in question fall outside the
licence agreement and the disputes pertaining to different agreements/
transactions and causes of action arising therefrom goes beyond the
arbitration agreement.
7.3. Learned Counsel has further submitted that the supplementary
B agreement dated 07.04.2005 is ancillary to original agreement dated
07.04.2005 executed between the appellant and respondent No. 1 but,
the said tripartite agreement does not have any ancillary relationship
with the main agreement and the tripartite agreement having Bank of
Baroda as a party is independent of the original agreement.
C 7.4. Learned counsel also highlighted the amendment in the Act
of 2015, wherein Section 8 was amended envisaging that 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
D 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.
7.5. Learned counsel has also placed reliance on S.N. Prasad v.
Monnet Finance Ltd. and Ors.: (2011) 1 SCC 320 and Deutsche
E Bank Home Finance Ltd. v. Taduri Sridhar and Anr.: (2011) 11
SCC 375 wherein guarantors were not held to be bound by arbitration
agreement as they were not party to tripartite agreements having
arbitration clause. Learned counsel would also submit that the decisions
relied upon by the appellant do not apply to the present case because of
F non-existence of arbitration agreement in relation to dispute in question.
8. We have given anxious considerations to the rival submissions
and have examined the record with reference to the law applicable.
9. For dealing with the vexed question in these appeals as to
whether the parties were required to be referred to arbitration by allowing
G the applications moved by the appellant under Section 8 of the Act of
1996, appropriate it would be to take note of the provisions contained in
Section 8, as existing before its amendment by Act 3 of 2016 (w.r.e.f.
23.10.2015) and as existing now.
9.1. Earlier, Section 8 of the Act of 1996 read as under: -
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 127
LIMITED & ORS. [DINESH MAHESHWARI, J.]

“8. Power to refer parties to arbitration where there is an A
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 so applies not later than when submitting
his first statement on the substance of the dispute, refer the parties
to arbitration.
B
(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:
(3) Notwithstanding that an application has been made under
sub-section (1) and that the issue is pending before the judicial C
authority, an arbitration may be commenced or continued and an
arbitral award made.”
9.2 After the amendment by Act 3 of 2016, Section 8, now, reads
as under: -
“8. Power to refer parties to arbitration where there is an D
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, E
then, 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 F
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
G
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.
H
128 SUPREME COURT REPORTS [2023] 5 S.C.R.

A (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.”
10. In the case of Sukanya Holdings (supra), while dealing with
B the question of applicability of Section 8 of the Act, as then existing, this
Court underscored the requirements of correlation of subject-matter of
the suit and subject-matter of the arbitration agreement and, inter alia,
held as under: -
“12. For interpretation of Section 8, Section 5 would have no
C bearing because it only contemplates that in the matters governed
by Part I of the Act, the judicial authority shall not intervene except
where so provided in the Act. Except Section 8, there is no other
provision in the Act that in a pending suit, the dispute is required to
be referred to the arbitrator. Further, the matter is not required to
be referred to the Arbitral Tribunal, if: (1) the parties to the
D arbitration agreement have not filed any such application for
referring the dispute to the arbitrator; (2) in a pending suit, such
application is not filed before submitting first statement on the
substance of the dispute; or (3) such application is not accompanied
by the original arbitration agreement or duly certified copy thereof.
E This would, therefore, mean that the Arbitration Act does not oust
the jurisdiction of the civil court to decide the dispute in a case
where parties to the arbitration agreement do not take appropriate
steps as contemplated under sub-sections (1) and (2) of Section 8
of the Act.

F 13. Secondly, there is no provision in the Act that when the subject-
matter of the suit includes subject-matter of the arbitration
agreement as well as other disputes, the matter is required to be
referred to arbitration. There is also no provision for splitting the
cause or parties and referring the subject-matter of the suit to the
arbitrators.
G
14. Thirdly, there is no provision as to what is required to be done
in a case where some parties to the suit are not parties to the
arbitration agreement. As against this, under Section 24 of the
Arbitration Act, 1940, some of the parties to a suit could apply
that the matters in difference between them be referred to
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 129
LIMITED & ORS. [DINESH MAHESHWARI, J.]

arbitration and the court may refer the same to arbitration provided A
that the same can be separated from the rest of the subject-matter
of the suit. The section also provided that the suit would continue
so far as it related to parties who have not joined in such application.
15. The relevant language used in Section 8 is: “in a matter which
is the subject of an arbitration agreement”. The court is B
required to refer the parties to arbitration. Therefore, the suit should
be in respect of “a matter” which the parties have agreed to
refer and which comes within the ambit of arbitration agreement.
Where, however, a suit is commenced — “as to a matter” which
lies outside the arbitration agreement and is also between some
of the parties who are not parties to the arbitration agreement, C
there is no question of application of Section 8. The words “a
matter” indicate that the entire subject-matter of the suit should
be subject to arbitration agreement.
16. The next question which requires consideration is — even if
there is no provision for partly referring the dispute to arbitration, D
whether such a course is possible under Section 8 of the Act. In
our view, it would be difficult to give an interpretation to Section 8
under which bifurcation of the cause of action, that is to say, the
subject-matter of the suit or in some cases bifurcation of the suit
between parties who are parties to the arbitration agreement and E
others is possible. This would be laying down a totally new
procedure not contemplated under the Act. If bifurcation of the
subject-matter of a suit was contemplated, the legislature would
have used appropriate language to permit such a course. Since
there is no such indication in the language, it follows that bifurcation
of the subject-matter of an action brought before a judicial authority F
is not allowed.
17. Secondly, such bifurcation of suit in two parts, one to be decided
by the Arbitral Tribunal and the other to be decided by the civil
court would inevitably delay the proceedings. The whole purpose
of speedy disposal of dispute and decreasing the cost of litigation G
would be frustrated by such procedure. It would also increase the
cost of litigation and harassment to the parties and on occasions
there is possibility of conflicting judgments and orders by two
different forums.”
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130 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 11. As explained by this Court in Ameet Lalchand Shah (supra),
the amendment to Section 8 after the aforesaid decision in Sukanya
Holdings 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
B
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.
12.All the relevant aspects of the matter came up for fuller
C exposition by a 3-Judge Bench of this Court in the case of Vidya Drolia
(supra). In the said case, basically, the reference came to be made to
the bench of three judges when the ratio expressed in the case of
Himangi Enterprises v. Kamaljeet Singh Ahluwalia: (2017) 10 SCC
706, to the effect that landlord-tenant disputes governed by the provisions
D 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
E Tribunal in the arbitration proceedings. The 3-Judge Bench of course
overruled the decision in Himangi Enterprises (supra) and in that
context, made various observations and enunciated the relevant principles.
In the process, the decision in Sukanya Holdings (supra) was also
taken into consideration. In that regard and with reference to the reliance
F placed by learned counsel for the respective parties, we may refer to
the following observations and enunciations of the Court, in the lead
judgment as also in the concurring opinion in the following passages:-
“28. Another facet, not highlighted earlier, arises from the dictum
in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya [(2003) 5
G SCC 531], a decision upholding rejection of an application under
Section 8, on the ground that there is no provision in the Arbitration
Act to bifurcate and divide the causes or parties, that is, the subject-
matter of the suit/judicial proceedings, and parties to the 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
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 131
LIMITED & ORS. [DINESH MAHESHWARI, J.]

the arbitration agreement. The words “a matter”, it was interpreted, A
would indicate that the entire subject-matter of the suit should be
subject to arbitration agreement. Bifurcation of subject-matter or
causes of action in the suit is not permissible and contemplated.
Similarly, the parties to the suit should be bound by the arbitration
agreement, as there is no provision in the Arbitration Act to compel
B
third persons who have not exercised the option to give up the
right to have access to courts and be bound by the arbitration
clause. This would violate party autonomy and consensual nature
of arbitration. Bifurcation in such cases would result in a suit being
divided into two parts, one being decided by the Arbitral Tribunal,
and the other by the court or judicial authorities. This would defeat C
the entire purpose and inevitably delay the proceedings and increase
cost of litigation, cause harassment and on occasions give rise to
conflicting judgments and orders by two different fora. Cause of
action in relation to the subject-matter relates to the scope of the
arbitration agreement and whether the dispute can be resolved by
D
arbitration. Second mandate relating to common parties exposits
the inherent limitation of the arbitration process which is consensual
and mutual, an aspect we would subsequently examine.
**** **** ****
31. We are clearly bound by the dictum of the Constitution Bench E
judgment in Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd.,
(2005) 8 SCC 618] that the scope and ambit of court’s jurisdiction
under Section 8 or 11 of the Arbitration Act is similar. An application
under Section 11 of the Arbitration Act need not set out in detail
the disputes or the claims and may briefly refer to the subject-
matter or broad contours of the dispute. However, where judicial F
proceedings are initiated and pending, specific details of the claims
and disputes are normally pleaded and, therefore, the court or the
judicial authority has the advantage of these details. There is a
difference between a non-arbitrable claim and non-arbitrable
subject-matter. Former may arise on account of scope of the G
arbitration agreement and also when the claim is not capable of
being resolved through arbitration. Generally non-arbitrability of
the subject-matter would relate to non-arbitrability in law. Further,
the decision in Sukanya Holdings (P) Ltd. [Sukanya Holdings
(P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531] has to be read
H
132 SUPREME COURT REPORTS [2023] 5 S.C.R.

A along with subsequent judgment of this Court in Chloro Controls
(India) (P) Ltd. v. Severn Trent Water Purification Inc.(2013)
1 SCC 641.
**** **** ****
154.3. The general rule and principle, in view of the
B legislative mandate clear from Act 3 of 2016 and Act 33 of 2019,
and 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. The court has been
conferred power of “second look” on aspects of non-arbitrability
C post the award in terms of sub-clauses (i), (ii) or (iv) of Section
34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration
Act.
154.4. Rarely as a demurrer the court may interfere at
Section 8 or 11 stage when it is manifestly and ex facie certain
D that the arbitration agreement is non-existent, invalid or the disputes
are non-arbitrable, though the nature and facet of non-arbitrability
would, to some extent, determine the level and nature of judicial
scrutiny. 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
E court by default would refer the matter when contentions relating
to non-arbitrability are plainly arguable; when consideration in
summary proceedings would be insufficient and inconclusive; when
facts are contested; when the party opposing arbitration adopts
delaying tactics or impairs conduct of arbitration proceedings. This
F is not the stage for the court to enter into a mini trial or elaborate
review so as to usurp the jurisdiction of the Arbitral Tribunal but
to affirm and uphold integrity and efficacy of arbitration as an
alternative dispute resolution mechanism.
**** **** ****
G 238. At the cost of repetition, we note that Section 8 of the Act
mandates that a matter should not (sic) be referred to an arbitration
by a court of law unless it finds that prima facie there is no valid
arbitration agreement. The negative language used in the section
is required to be taken into consideration, while analysing the
section. The court should refer a matter if the validity of the
H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 133
LIMITED & ORS. [DINESH MAHESHWARI, J.]

arbitration agreement cannot be determined on a prima facie basis, A
as laid down above. Therefore, the rule for the court is “when in
doubt, do refer”.
239. Moreover, the amendment to Section 8 now rectifies the
shortcomings pointed out in Chloro Controls case [Chloro
Controls (India) (P) Ltd. v. Severn Trent Water Purification B
Inc., (2013) 1 SCC 641: (2013) 1 SCC (Civ) 689] with respect to
domestic arbitration. Jurisdictional issues concerning whether
certain parties are bound by a particular arbitration, under group-
company doctrine or good faith, etc., in a multi-party arbitration
raises complicated factual questions, which are best left for the
tribunal to handle. The amendment to Section 8 on this front also C
indicates the legislative intention to further reduce the judicial
interference at the stage of reference.
240. Courts, while analysing a case under Section 8, may choose
to identify the issues which require adjudication pertaining to the
validity of the arbitration agreement. If the court cannot rule on D
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.
**** **** ****
E
244: Before we part the conclusions reached, with respect to
Question 1 are:
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 F
the stage of Section 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 G
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”. H
134 SUPREME COURT REPORTS [2023] 5 S.C.R.

A 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.?
B
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?”
C 13. In the case of Oil and Natural Gas Corporation (supra),
another 3-Judge Bench of this Court essentially dealt with the group
companies doctrine and application of alter ego principle in arbitration
making a party not assenting to a contract containing arbitration clause
to be nevertheless bound by the clause if that party is ‘alter ego’ of an
D entity who is a party to the arbitration agreement. The observations
relied upon by learned counsel for the appellant from that case could
also be usefully extracted as under:-
“38. Explaining the application of the alter ego principle in
arbitration, Born also notes:
E “Authorities from virtually all jurisdictions hold that a party
who has not assented to a contract containing an arbitration clause
may nonetheless be bound by the clause if that party is an ‘alter
ego’ of an entity that did execute, or was otherwise a party to, the
agreement. This is a significant, but exceptional, departure from
the fundamental principle … that each company in a group of
F
companies (a relatively modern concept) is a separate legal entity
possessed of separate rights and liabilities.
* * *
“the group of companies doctrine is akin to principles of
G agency or implied consent, whereby the corporate affiliations
among distinct legal entities provide the foundation for concluding
that they were intended to be parties to an agreement,
notwithstanding their formal status as non-signatories.”
39. Recently, John Fellas elaborated on the principle of binding a
H non-signatory to an arbitration agreement from the lens of the
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 135
LIMITED & ORS. [DINESH MAHESHWARI, J.]

doctrine of estoppel. He situated the rationale behind the application A
of the principle of direct estoppel against competing considerations
of party autonomy and consent in interpreting arbitration
agreements. Fellas observed that non-signatory parties can be
bound by the principle of direct estoppel to prohibit such a party
from deriving the benefits of a contract while disavowing the
B
obligations to arbitrate under the same:
“There are at least two distinct types of estoppel doctrine
that apply in the non-signatory context:”the direct benefits”
estoppel theory and the “intertwined” estoppel theory. The
direct benefits theory bears the hallmark of any estoppel
doctrine-prohibiting a party from taking inconsistent positions C
or seeking to “have it both ways” by “rely[ing] on the contract
when it works to its advantage and ignor[ing] it when it works
to its disadvantage.” Tepper Realty Co. v. Mosaic Tile
Co. [Tepper Realty Co. v. Mosaic Tile Co., 259 F Supp 688
(SDNY 1966)]. The direct benefits doctrine reflects that core D
principle by preventing a party from claiming rights under a
contract but, at the same time, disavowing the obligation to
arbitrate in the same contract.
* * *
By contrast, the intertwined estoppel theory looks not to E
whether any benefit was received by the non-signatory, but rather
at the nature of the dispute between the signatory and the non-
signatory, and, in particular whether “the issues the non-signatory
is seeking to resolve in arbitration are intertwined with the
agreement that the estoppel [signatory party] has signed….the F
intertwined estoppel theory has as its central aim the perseveration
of the efficacy of the arbitration process is clear when one looks
at the typical fact pattern of an intertwined estoppel case.” [John
Fellas, “Compelling Signatories to Arbitrate with Non-Signatories”,
New York Law Journal (28-3-2022)]
G
(emphasis supplied)
40. In deciding whether a company within a group of companies
which is not a signatory to arbitration agreement would nonetheless
be bound by it, the law considers the following factors:
H
136 SUPREME COURT REPORTS [2023] 5 S.C.R.

A (i) The mutual intent of the parties;
(ii) The relationship of a non-signatory to a party which is a
signatory to the agreement;
(iii) The commonality of the subject-matter;
B (iv) The composite nature of the transaction; and
(v) The performance of the contract.””
14. In the case of Intercontinental Hotels Group (supra), the
Court has essentially proceeded on the enunciation in Vidya Drolia
(supra) even while accepting the requirement of constituting larger bench
C to settle the jurisprudence of the implication of non-stamping or under-
stamping on the arbitration agreement. This Court, however, provided
that until decision by the larger bench, the matters at pre-appointment
stage be not kept pending. Not much of dilation is required in that regard.
15. It is at once clear that the observations and enunciations in the
D aforesaid have no application to the facts of the present case.
16. As noticed, there had been multiple transactions in this matter.
Learned counsel for the contesting respondent has placed before us in
tabular form the relevant agreements, the contracting parties thereto,
the purpose of the agreement, and availability of arbitration clause therein.
E We may reproduce the same to facilitate an eye view of the salient
features of the transactions in question as follows: -

F

G

H
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 137
LIMITED & ORS. [DINESH MAHESHWARI, J.]

A

B

C

D

E

17. Thus, except the principal agreement dated 07.04.2005, none
of the other agreements contained any arbitration clause, even if they
related to the same property and also involved the appellant and the F
respondent No. 1. The later transactions involved other parties too like
the tripartite agreement dated 06.07.2006 whereby the respondent No.
2 bank sanctioned loan to the respondent No. 1 and then, supplemental
to the said tripartite agreement for dealing with the deposit of title deeds.
Similarly, the other deeds of conveyance dated 23.01.2015 involve the G
appellant and the other defendants.
17.1. The aforesaid position of the dealings of the parties, when
examined with reference to the reliefs claimed in the suit and the cause
of action pertaining to the said reliefs, as extensively noticed by the High
Court and extracted hereinabove, we are clearly of the view that the H
138 SUPREME COURT REPORTS [2023] 5 S.C.R.

A submissions made by the appellant with reference to the amendment of
Section 8 of the Act of 1996 and the later decisions of this Court in
interpretation of the amended Section 8 do not inure to the benefit of the
appellant. This is for the simple reason that no such conjunction can be
provided to the original licence agreement dated 07.04.2005 and the
tripartite agreement involving the Bank dated 06.07.2006 and 23.01.2008,
B
whereby the arbitration clause could be held applicable to the tripartite
agreement too. This is apart from the fact that in the frame of the suit
and various other reliefs claimed, involving subsequent purchasers too
and the allegations of fraud, the dispute cannot be said to be arbitrable at
all. The present one cannot be said to be a case involving any “doubt”
C about non-existence of arbitration agreement in relation to the dispute in
question.
17.2. There being no doubt about non-existence of arbitration
agreement in relation to the entire subject-matter of the suit, and when
the substantive reliefs claimed in the suits fall outside the arbitration
D clause in the original licence agreement, the view taken by the High
Court does not appear to be suffering from any infirmity or against any
principle laid down by this Court.
18. Even if by reference to remote pedigree, the original licence
agreement is said to be the genesis of the contractual relations of the
E appellant and the respondent No. 1, that does not ipso facto lead to the
availability of the arbitration agreement in relation to the dispute in
question, which emanates from the tripartite agreement and which cannot
be determined without reference to the said tripartite agreement and
without involving all the parties thereto. In other words, no dispute
resolution process, including arbitration, could be undertaken in relation
F to the subject-matter of the suit without reference to the terms of tripartite
agreement and without involving the bank- respondent No. 2. This is
apart from the fact that the other elements of dispute pertaining to the
subsequent purchasers too cannot be resolved in any forum without
reference to the tripartite agreement and its amended clause, which did
G not provide for arbitration. Thus, the ancestry of the tripartite agreement,
in the facts of the present case, does not lead to the result desired by the
appellant.
18.1. Therefore, even on the principles enunciated in Vidya Drolia
(supra), the prayer of the present appellant for reference to arbitration
H under Section 8 cannot be granted.
GUJARAT COMPOSITE LIMITED v. A INFRASTRUCTURE 139
LIMITED & ORS. [DINESH MAHESHWARI, J.]

19. So far as the propositions based on the memos before the A
Commercial Court dated 06.12.2017, as filed by the respondent Nos. 3
to 5 (subsequent purchasers) and by the appellant are concerned, the
submissions made on that basis do not take the case of the appellant any
further. As noticed, in the said memos, the respondent Nos. 3 to 5
purportedly stated that if dispute concerning them was resolved by
B
arbitration proceedings, they were not having any objection thereto. The
appellant, on the other hand, suggested that the tripartite amended
agreement was with reference to the licence agreement and it was agreed
that till the time of the defendant No. 1 (appellant) making payment of a
sum of Rs. 5 crore to the plaintiff, the title deeds of the immovable
property would remain with the bank. The appellant suggested that with C
a view that the dispute between the parties be resolved by arbitration
proceedings, keeping all contentions open, they would be depositing the
said sum of Rs. 5 crore in the Court and that in this manner ‘the dispute
with defendant No. 2 would be ended’ and then the bank, who was
handed over the title deed in their custody, would deposit the same in the
D
Court and the Court would be pleased to place the same in sealed cover
till the disputes of the other parties were resolved.
19.1. The memo submitted by the appellant was not likely to bring
about the desired legal effect. This is for the simple reason that even if
the appellant deposited the said sum of Rs. 5 crore in the Court, the bank
was not directly obliged to deposit the title deed in the Court as presumed E
by the appellant; and then, there was no reason that the Court was to be
obliged to accept such a proposition and to keep the title deed in its
custody till the completion of proceedings in any other forum. In other
words, if at all the matter was to be referred to arbitration, there would
not be any justification for the Court to retain the title deed. It would F
appear that the said memo dated 06.12.2017 by the appellant had only
been a desperate attempt to somehow seek arbitration despite being
aware of the fact that the core of the dispute in the civil suit related to
the tripartite agreement wherein the bank was an equal participant and
no effective award could have been made in the arbitration proceedings
in the absence of the bank. The necessity of the bank’s presence in the G
matter could not have been obviated by such nebulous suggestion as
stated in the memo filed by the appellant on 06.12.2017.
19.2. The other memo by respondent Nos. 3 to 5 had been of no
effect whatsoever. Consent of the said respondents, the subsequent
H
140 SUPREME COURT REPORTS [2023] 5 S.C.R.

A purchasers, for reference to arbitration could not have infused an
arbitration clause in the tripartite agreement and their memo could not
have propelled the matter to arbitration, particularly looking to the core
of the dispute and its obvious non-arbitrability for the reason that it related
to the tripartite agreement.
B 20. For what has been discussed hereinabove, on the facts and in
the circumstances of the present case and in the nature of transactions
as also the nature of reliefs claimed in the suit, the view taken by the
Commercial Court and the High Court in declining the prayer of the
appellant for reference to arbitration cannot be faulted.
C 21. Accordingly, and in view of the above, these appeals fail and
are, therefore, dismissed. No costs.

Divya Pandey Appeals dismissed.
(Assisted by : Roopanshi Virang, LCRA)

D

E

F

G

H