Supreme Court of India
MRS. HEMA KHATTAR & ANR.versusSHIV KHERA
- Citation
- 2017 INSC 324
- Decided
- 10 April 2017
- Disposal
- Appeal(s) allowed
- Bench
- MADAN B LOKUR
Holding
The suit was not barred for mis‑joinder; both appellants could be joined, and the civil court lacked jurisdiction after the Section 8 application, so the dispute must be referred to arbitration.
Summary
The parties entered into a written construction contract on 06‑06‑2009 containing an arbitration clause. Disputes over construction quality led to a meeting where the contract was terminated by mutual consent and an oral agreement was made with the husband of the original contractor to supervise the work, under which he incurred Rs 45 lakhs. The appellants filed a suit for declaration, injunction and recovery of that amount. The respondent moved an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking referral to arbitration. The High Court held the suit bad for mis‑joinder of parties and causes of action and gave the appellants an option to elect the reliefs, which was appealed. The Supreme Court held that both appellants could be joined in a single suit as the matters arose from a continuous agreement, and that the presence of an arbitration clause and a pending Section 8 application stripped the civil court of jurisdiction. Consequently, the High Court orders were set aside and the disputes were referred to the already appointed sole arbitrator.
Issues considered
- The suit is barred for mis‑joinder of parties and causes of action under Order II Rule 3/6 of the CPC.
- Whether the existence of an arbitration clause and a pending Section 8 application deprives the civil court of jurisdiction to entertain the suit.
- Whether the oral agreement that superseded the written contract carries forward the arbitration clause.
- Whether distinct causes of action (declaration/injunction and monetary recovery) can be tried together.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 8
- Code of Civil Procedure, 1908s. Order II Rule 3, s. Order II Rule 6, s. Order I Rule 1, s. Order I Rule 2
Subjects
ArbitrationMis‑joinderCause of actionSection 8Civil Procedure CodeArbitration clauseOral agreementConstruction contract
Judgment
[20 l 7] 4 S.C.R. 425
MRS. HEMA KHATTAR & ANR. A
v.
SHIV KHERA
(Civil Appeal No. 8837 of 2016)
APRIL 10, 2017 B
[MADAN B. LOKUR AND R. K. AGRAWAL, JJ.]
Code of Civil Procedure, 1908:
Or.JI, r.3 - Joinder of cause of action - Agreement containing
arbitration clause between appellant no. J and respon\ieni for C
construction of house of respondent - Dispute arose as to quality
of construction - Respondent appointed a sole arbitrator -
Thereafter in a meeting between them, it was decided that appellant
no.] would no longer remain the contractor - Agreement terminated
by mutual consent and it was decided that the construction would
0
be carried out by sub-contractor to be appointed as per advice ·of
appellant no.2, the husband of appellant no.1 - Appellant no.2
incurred expenditure on behalf of respondent which he sought to
recover in suit for declaration, permanent injunction and recovery
before the High Court - Respondent filed application u/s.8 of
Arbitration and Conciliation Act, 1996 claiming that the subject E
matter of dispute in the suit was pending adjudication before the
Arbitral Tribunal and, therefore, the suit cannot be proceeded -
High Court held that suit was bad for misjoinder of parties as well
as for cause of action and gave an option to appellant lo elect
whether they want the suit to be treated as a suit for recovery of F
money by appellant no.2 against the respondent or a suit for
declarations and injunction by appellant no.1 - Challenge against
- Held: Appellant nos.1 and 2 even though had different causes of
action against the respondent but the same was a continuity of written
agreement - The alleged written agreement contained a clause of
arbitration - Oral agreement having substituted the written G
agreement, the clause of arbitration contained therein would also
be applicable to the oral agreement - The civil court had no
jurisdiction to entertain a suit after an application u/s. 8 of the said
Act was made for arbitration - Jn such a situation, refusal to refer
the dispute to arbitration amounted to failure o,fjustice as also
H
425
426 SUPRF.ME COURT REPORTS [2017) 4 S.C.R.
A causing irreparable injury to the defendant - Dispute referred to
sole arbitrator already appointed for decision - Arbitration and
Conciliation Act, 1996 - s.8 - Cause of action.
Cause of action - Meaning of - Held: Is a bundle o,ffacts
which taken with the law applicable to them gives the plaintiff a
B right to relief against the defendant.
Allowing the appeal, the Court
HELD: 1. Admittedly, the cause of action for recovery of
Rs. 45 lakhs claimed in the present suit was the expe;iditure
alleged to have been incurred by appellant No. 2 pursuant to the
c oral agreement he claimed he had with the respondent. Appellant
No. 1 was not a party to the alleged oral agreement between
appellant No. 2 and the respondent for supervision of the
construction by him. The materials available on record,
particularly, the transcript of conversation between the appellant
D No. 2 and the respondent show that the oral agreement was
substituted in place of the alleged written agreement dated
06.06.2009 between appellant no.I and the respondent. There
was a complete discharge of the responsibilities and liabilities of
appellant No. 1 vis-11-vis the respondent and vice-versa. The plaint
also averred that after the accord between appellant No. 1 and
E the respondent and simultaneous discharge of the obligations, a
distinct oral agreement was entered into between appellllnt No.
2 and the respondent. It is quite clear that the cause of action:
the right to get declarations with regard to the said contract as
null and void or a right to seek an injunction restraining the
F respondent from taking any action on the basis of the said contract,
if any, with regard to the prior written agreement arises in favour
of appellant No. I against respondent and not in favour ofappellant
No. 2 as he was not a party to agreement dated 06.06.2009. On
the similar"Iines, the right to seek money decree, as is claimed
by the appellants, would be a distinct cause of action founded on
G subsequent oral agreement between the appellant No. 2 and the
respondent. [Paras 15, 16][435-B, D-H]
2.1 In Black's Law Dictionary, it has been stated that the
expression 'cause of action' is the fact or facts which give a person
a right to judicial relief. A cause of action, thus, mean3 every
H
MRS. HEMA KHATTAR & ANR. v. SHIV KHERA 427
fact, which, if traversed, it would be necessary for the plaintiff to A
prove in order to support his right to a judgment of the court. In
other words, it is a bundle of facts which taken with the law
applicable to them gives the plaintiff a right to relief against the
defendant. It must include some act done by the defendant since
in the absence of such an act no cause of action can possibly
8
accrue. It is not limited to the actual infringement of the right
sued on but includes all the material facts on which it is founded.
[Para 18)[436-G-H; 437-A]
2;2 Order II, Rule 3, provides for the joinder of several
causes of action and states that a plaintiff may unite in the same
suit several causes of action against the same defendant, or the C
same defendants jointly or several plaintiffs having causes of
action in which they are jointly interested against the same
defendant or defendants jointly may unite them in one suit. The
remedy for any possible inconvenience with regard to said rule
is supplied by the provisions of Order II, Rule 6, which authorizes D
the Court to order separate trials of causes of action which though
joined in one suit cannot be conveniently tried or disposed of
together. Similarly, Order I Rule 1 of the Code permits joinder
of more than one persons any right to relief in respect of, or
arising out of, the same act or transaction or series of acts or
transactions is alleged to exist in such persons, whether jointly, E
severally or in the alternative; and if such persons brought
.separate suits, any common question of law or fact would arise.
Order I Rule 2 provides that where it appears to the court that
any joinder of plaintiffs may embarrass or delay the trial of the
suit, the court may put the plaintiffs to their election or order F
separate trials or make such other order as may be expedient.
(Paras 19, 20](43J-B-E]
3. The appellants even though had different causes of action
against the respondent but it was a continuity of the agreement
dated 06.06.2009, therefore, both the appellants could have joined G
as plaintiffs in a suit and the suit is not bad for misjoinder of parties
or causes of action, Hence, the High Court was ~ot right in
giving an option to the appellants to pursue reliefs qua appellant
No. 1 or qua appellant No. 2 only. In the instant facts and
circumstances of the case, it is also imperative to find out whether
H
428 SUPREME COURT REPORTS [20 I 7] 4 S.C.R.
A the High Court was justified in deciding the maintainability of the
suit when an application under Section 8 of the Act is pending
adjudication before the Arbitral Tribunal. Where an agreement
is terminated by one party on account of the breach committed
by the other, particularly, in a case where the clause is framed in
wide and general terms, merely because agreement has come to
B
an end by its termination by mutual consent, the arbitration clause
does not get perished nor is rendered inoperative. In cases
where there is an arbitration clause in the agreement, it is
obligatory for the court to refer the parties to arbitration and
nothing remains to be decided in the original action after such an
c application is made except to refer the dispute to an arbitrator.
Therefore, it is clear that in an agreement between the parties
before the civil court, if there is a clause for arbitration, it is
mandatory for the civil court to refer the dispute to an arbitrator.
In the instant case, the pre-requisites for an applicatior. under
D Section 8 are fulfilled, viz., there is an arbitration agreement; the
party to the agreement brings an action in the court against the
other party; the subject matter of the action is the same as the
S"bject-matter of the arbitration agreement; and the other party
moves the court for referring the parties to arbitration before it
submits his first statement on the substance of the dispute. The
E civil court had no jurisdiction to entertain a suit after an application
under Section 8 of the Act is made for arbitration. In such a
situation, refusal to refer the dispute to arbitration would amount
to failure of justice as also causing irreparable injury to the
defendant. The ornl agreement as evidenced by the transcript of
conversation between the appellant No.2 and the respondent on
F
06/07.04.2011 substituting the alleged written agreement dated
06.06.2009 and which contained a clause for arbitration, the same
clause for arbitration would also be applicable to the oral
agreement. The disputes raised by the appellants is referred to
the sole arbitrator already appointed. (Paras 22, 23, 26, 27, 28
G and 29][438-B, C-D; 440-C-H; 441-A, C)
Ramesh Hirachand Kundanmal v. Municipal
Corporation of Greater Bombay and Others [1992] 2
SCR 1 : 1992 (2) SCC 524; Sundaram Finance Limited
and Another v. T. Thankam [2015] 2 SCR 228 : (2015)
H
MRS. HEMA KHATTAR & ANR. v. SHIV KHERA 429
14 SCC 444; P Anand Gajapathi Raju & Others v. A
P V.G Raju (Dead) and Others [2000] 2 SCR 684 :
(2000) 4 SCC 539; P.R. Shah, Shares and Stock
Brokers Private Limited v. B.HH Securities Private
Limited and Others [2011) 16 SCR 87 : (2012) 1 SCC
594 - relied on.
B
Kvaerner Cementation India Limited v. Bajranglal
Aganval and Another (2012) 5 SCC 214 - referred to.
Case Law Reference
[2all] 16 SCR 87 relied on Para 8
c
(2012) 5 sec 214 referred to Para 11
[1992] 2 SCR 1 relied on Para 21
[2015) 2 SCR 228 relied on Para 25
[2000] 2 SCR 684 relied on Para26
D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. i!837
of 2016.
From the Judgment and Order dated 28.09.2012 of the High Court
of Delhi at New Delhi in FAO (OS) No. 470of2012.
Jayant Bhushan, Sr. Adv., Ms. Prachi V. Sharma, Pradeep Kumar E
Bakshi, Advs. for the Appellants.
Sakal Bhushan, Firasat Ali, Chetan Roy, Rajeev Gupta, Zishan
A., P. D. Sharma, Advs. for the Respondent.
The Judgment of the Court delivered by F
R. K. AGRAWAL, J. I. Challenge in this appeal is to the legality
of the judgment and order dated 28.09.2012 rendered by a Division Bench
of the High Court of Delhi at New Delhi in FAO (OS) No. 470of2012
whereby the High Court dismissed the appeal filed by the appellants
herein.
G
2. Factual position in a nutshell is as follows:-
a) An agreement to reconstruct a building situated at C-6/4, Vasant
Vihar, New Delhi was executed between Hema Khattar-the appellant
No. I herein, wife of Ashwani Khattar - the appellant No. 2 herein,
carrying on business in construction under the name and style of Mis H
430 SUPREME COURT REPORTS [20 l 7] 4 S.C.R.
A Dessignz and Shiv Khera-the respondent herein on 06.06.2009.
b) Pursuant to the said agreement, the building site was handed
over to the appellant No. l herein on 09.11.2010 and thereafter the
execution of the work had started. In March 2011, as per Clau3e 16 of
the Agreement dated 06.06.2009, a spot inspection was conducted by
B renowned structural engineers which pointed out several structural
lacunae. On coming to know about the same, the respondent further
arranged inspection by various specialized agencies which confirmed
the same in their reports.
c) Being aggrieved by the quality of construction, the respondent
c served a legal notice dated 19.09.2011 to the appellant No. 1 seeking
damages. The respondent, vide Clause 33 of the said agreement,
appointed a sole arbitrator claiming that the appellant No. 1 has not
complied with the terms of the agreement whereby disputes, requiring
adjudication; have arisen between the parties. In statement of claims,
the respondent, besides other claims, also sought for a sum of Rs. 39.85
D lakhs paid to the appellant No. 1 along with a sum of Rs. 35,000/- for the
TDS deposited to her credit.
d) The appellants filed a suit for declarations, permanent injunction
and recovery before the High Court being CS(OS) No. 1532 of 2012
seeking a decree that the agreement dated 06.06.2009 ente:-ed into
E between the appellant No. 1 and the respondent was vitiated and had
been terminated by mutual consent by both the parties and any proceeding
initiated pursuant to the agreement is null, non-est and void and also for
recovery of an amount ofRs.45,50,000/-.
e) It is also pertinent to mention here that it was alleged in the
F plaint that a formal meeting was held between the parties in which it
was decided that appellant No. 1 will no longer be the contractor and the
agreement dated 06.06.2009 would stand terminated by mutual consent
and the construction would be carried out by the sub-contractors to be
appointed as per the advice of appellant No. 2 who would supervise the
G same without remuneration/profit.
t) The respondent filed I.A. No. 12124 of2012 in CS(OS) No.
1532 of2012 under Section 8 of the Arbitration and Conciliation Act,
1996 (in short 'the Act') claiming that the subject-matter of dispute in
the prnsent suit is already pending adjudication before the Arbitral Tribunal,
H hence, the suit cannot be proceeded with which was denied by the
MRS. HEMA KHATTAR & ANR. v. SHIV KHERA 43 l
[R. K. AGRAWAL, J.]
appellants in their reply to the above said application. A
g) Vide order dated 17.09.2012, learned single Judge of the High
Court, found that the suit is bad for misjoinder of parties as well as for
causes of action and gave an option to the appellants therein to elect
whether ~hey want the suit to be treated as a suit for recovery of money
by appellant No. 2 herein against the respondent or a suit for declarations B
and injur.ction by appellant No. I.
h) Being aggrieved by the order dated 17.09.2012, the appellants
went in appeal and filed FAO (OS) being No. 470 of 2012 before the
High Court. A division bench of the High Court, vide order dated
28.09.2012, dismissed the appeal. c
OAggrieved by the order dated 28.09.2012, the appellants have
filed this appeal by way of special leave before this Court.
3. Heard Mr. Jayant Bhushan, learned senior counsel for the
appellants and Mr. Sakal Bhushan, learned counsel for the respondent
and perused the records. D
Point for consideration:-
4. The only point for consideration before this Court is whether in
the pres1rnt facts and circumstances of the case the suit is barl for
misjoinder of parties as well as for causes of action?
E
Rival submissions:-
5. Learned senior counsel for the appellants contended before
this Court that the agreement dated 06.06.2009 was executed with
dishonest intention containing the arbitration clause and in any event the
same has been superseded by a subsequent oral agreement between F
appellant No. 2 herein and the respondent.
6. Learned senior counsel further contended that the High Court
erred in upholding that the cause ofaction with respectto relief of money
is an independent cause of action from that of the relief of declarations
and injunction. The High Court failed to appreciate that common trial of G
joint causes of action is necessary, if at all, as they raise common questions
oflaw and facts and the course adopted by the High Court would I.e}d to
multiplicity of proceedings causing delay. Learned senior counsel finally
contended that in view of the patent illegality in the orders passed by the
High Court, the same are liable to be set aside.
H
432 SUPREME COURT REPORTS [2017] 4 S.C.R.
A 7. Without prejudice to the aforesaid, learned senior counsel for
the appellants, in the alternative submitted that the entire matter be
referred to another sole arbitrator which may be appointed by this Court
as according to him, in the written contract, there was a clause for
arbitration and, subsequently, in the oral contract also, the terms of the
B
earlier contract continued to remain in operation except those which
were modified in the oral contract.
8. In support of the above submission, learned senior counsel for
-
the appellants placed reliance upon a judgment of this Court in P.R.
Shah, Shares and Stock Brokers Private Limited vs. B.H.H.
Securities Private Limited and Others (2012) I SCC 594. He has
C referred to paragraph 19 of the judgment which reads as under:-
"19. IfA had a claim against Band C, and there was an arbitration
agreement between A and B but there was no arbitration
agreement between A and C, it might not be possible to have a
joint arbitration againstB and C. A cannot make a claim against C
D in an arbitration against B, on the ground that the claim was being
made jointly against Band C, as C was not a party to the arbitration
agreement. But if A had a claim against Band C and if A had an
arbitration agreement with Band A also had a separate arl,itration
agreement with C, there is no reason why A cannot have ajoint
E arbitration against B and C. Obviously, having an arbitration
between A and B and another arbitration between A and C in
regard to the same claim would lead to conflicting decisions. In
such a case, to deny the benefit of a single arbitration against B
and Con the ground that the arbitration agreements against Band
Care different, would lead to multiplicity of proceedings, c0!1tlicting
F decisions and cause injustice. It would be proper and just to say
that when A has a claim jointly against B and C, and when there
are provisions for arbitration in respect of both Band C, there can
be a single arbitration."
9. Per contra, learned counsel for the respondent submi~ted that
G the suit has been filed by the two appellants jointly with respect to the
two separate alleged causes of action. He further submitted that the
alleged cause of action of the appellant No. I is based upon the agreement
dated 06.06.2009 between the appellant No. I and the respondent in
which appellant No. 2 cannot be said to have any joint interest and the
H alleged cause of action of appellant No. 2 is based upon an oral
MRS. HEMA KHATTAR & ANR. v. SHIV KHERA 433
[R. K. AGRAWAL, J.]
understanding arrived at between appellant No.2 and the respondent in A
which appellant No. I cannot be said to have any joint interest. Learned
counsel for the respondent further submitted that in such circumstances,
the instant suit in the present form is not maintainable in terms of Order
II Rule 3 of the Code of Civil Procedure, 1908 (in short 'the Code') and
the suit of the appellant No. I is required to be separated under Order II
B
Rule 6 of the Code.
10. Learned counsel further submitted that in view of the existence
of the arbitration clause in the agreement dated 06.06.2009 and the subject
matter of dispute between the patties in the present suit is already pe11.ding
adjudication before the Arbitral Tribunal, the instant suit filed by the
appellant No. l cannot be proceeded with and the matter is required to
c
be referred to arbitration. Learned counsel finally submitted that the
judgment rendered by the division bench of the High Court upholding the
decision of the learned single Judge is correct and no interference is
called for in the appeal.
11. Learned counsel further submitted that the oral contract did D
not contain any clause for arbitration and the dispute raised by the appellant
No. 2 cannot be referred to arbitration. In support whereof, he relied
upon a decision of this Court in Kv<temer Cementation lndi<t Limited
vs. Bajrangla/ Agarwal and Another (2012) 5 SCC 214 wherein this
Court has held that there cannot be any dispute that in the absen~e of E
arbitration clause in the agreement, no dispute could be referred for
arbitration to an Arbitral Tribunal.
12. Learned counsel, however, submitted that if this Court comes
to the conclusion that the matter should be resolved by way of arbitration,
the entif€ matter be referred to the sole arbitrator already appointed by F
the respondent.
Discussion:
13. From the materials on record, it is evident that an agreement
· dated 06.06.2009 was executed between the parties wherein appellant
No. I was the contractor and the respondent as a client. The agreement G
impugned clearly states that there is an arbitration clause therein. Owing
to the dispute among parties, the respondent, in exercise of his right
under the said clause, appointed a sole arbitrator. Subsequently, notices
were issued to the appellant No. 1 and the matter remained pending
despite appearance before the Arbitral Tribunal. In the meantime, the H
434 SUPREME COURT REPORTS [2017] 4 S.C.R.
A appellants jointly filed a suit before the High Court for declarations,
permanent injunction and recovery claiming a formal meeting was held
between the parties in which it was decided that appellant No. I will no
longef be the contractor and the agreement dated 06.06.200Q would
stand terminated by mutual consent and the construction would be carried
B out by the sub-contractors to be appointed as per the advice of appellant
No. 2 who would supervise the same without remuneration/profit. The
respondent filed I.A. No. 12124 of2012 in CS(OS) No. 1532 of2012
under Section 8 of the Act claiming that the subject-matter of dispute in
the present suit is already pending adjudication before the Arbitral Tribunal,
hence, the suit cannot be proceeded with. Vide order dated 17.09.2012,
C learned single Judge of the High Court, found that the suit is bad for mis-
joindcr of parties as well as for causes of action and gave an option to
the appellants to elect whether they want the suit to be treated as a suit
for recovery of money by appellant No. 2 herein against the respondent
or a suit for declarations and injunction by appellant No. l. The appellants
D went in appeal before the division bench of the High Court. Vide order
dated 28.09.2012, the division bench also dismissed the same.
14. From the facts of this case, we find that a suit was filed for
declarations, permanent injunction and recovery of money by the
appellants stating that a meeting was held in between the parties in which
it was decided that appellant No. I would no longer be the contractor
E and the agreement dated 06.06.2009 would stand terminated by mutual
consent and the construction would be carried out by the sub-contractors
to be appointed as per the suggestions of appellant No.2, who would
supervise the same but without any profit/remuneration as per the oral
agreement. The respondent agreed to make all payments towards
F purchase of material, construction, fee ofarchitect etc. Appellant No. 2
incurred an amount of Rs. 45 lakhs for and on behalf of the respondent
which is sought to be recovered under this suit. The appellants also
claimed a declaration to the effect that the agreement dated 06.06.2009
between appellant No. I and the respondent was obtained by fraud and
mis-representation, hence, it is null and void. Another declaration sought
G for in the suit was that the agreement dated 06.06.2009 stood terminated
by mutual consent. A decree for injunction is also sought for restraining
the respondent from initiating and carrying on any proceeding ari3ing out
of and on the basis of agreement dated 06.06.2009 between appellant
No. I and the respondent. On the other hand, the respondent took the
H
MRS. HEMA KHATTAR & ANR. v. SHIV KHERA 435
[R. K. AGRAWAL, J.]
preliminary objection that the suit is bad for misjoinder of parties and A
causes of action and further that the arbitration proceedings initiated by
the respondent, in terms of the arbitration clause, is pending adjudication
before the Arbitral Tribunal.
15. Admittedly, the cause of action for recovery of Rs. 45 hkhs
claimed in the present suit is the expenditure alleged to have been B
incurred by appellant No. 2 pursuant to the oral agreement he claims he
had with the respondent sometime in April, 2011. On the other hand, the
cause of action with respect to reliefs of declarations and injunction is
the agreement dated 06.06.2009. The alleged agreement dated
06.06.2009 was, admittedly, between the appellant No. l and the
respondent to which appellant No. 2 was only a witness, which as per C
. the terms of the plaint terminated later on by mutual agreement between
the appellant No. l and the respondent. At this stage, it was agreed
orally that appellant No. 2, who is the husband ofappellant No. 1, would
take over the execution of the pending works. Admittedly, Appellant No.
1 is not a party to the alleged oral agreement between Appellant No. 2 D
and the respondent for supervision of the construction by him.
16. From the materials available on record, particularly, the
transcript of conversation between the appellant No. 2 and the respondent
on 6th and 7th April, 2011, we find that the oral agreement was substituted
in place of the alleged written agreement dated 06.06.2009. There is a E
complete accord and discharge of the re~ponsibilities and liabilities of
appellant No. l vis-a-vis the defendant and vice-versa. The plaint also
avers that after the.accord between appellant No. 1 and the respondent
and simultaneous discharge of the obligations, a distinct oral agreement
was entered into between appellant No. 2 and the respondent. It is quite
clear from what has been stated above that the cause of action: the right F
to get declarations with regard to the said contract as null and void or a
right to seek an injunction restraining the respondent from taking any
action or. the basis of the said contract, if any, with regard to the prior
written agreement arises in favour of appellant No. l against respondent
and not in favour of appellant No. 2 as he was not a party to the agreement G
dated 06.06.2009. On the siinilar lines, the right to seek money decree,
as is claimed by the appellants, would be a distinct cause of action founded
on subsequent oral agreement between the appellant No. 2 and the
respondent
17. Learned single Judge of the High Court, vide order dated H
'
436 SUPREME COURT REPORTS [20 l 7] 4 S.C.R.
A 17 .09 .20 l 2, directed the parties· to elect as to whether they want the suit
to be treated as a suit for recovery of money by appellant No. 2 against
the respondent or a suit for declarations and injunction by appellant No.
l against the respondent and to amend the plaint accordingly. Learned
· single Judge, after taking a considered view that the suit is bad for
B misjoinder of parties and/or misjoinder of causes of action, held that the
application filed by the defendant under Section 8 of the Act would be
disposed of only after the appellants make an election in terms of this
ord•!r. The appellants herein, instead of amending the plaint, went in
appeal before the division bench, which got dismissed vide order dated
28.09.2012.
c 18. Since the suit was dismissed for misjoinder of parties and/or
causys of action, it is pertinent to mention here the law on the point
which is as under:-
Order II Rule 3
D "Joinder of causes of action - (I) Save as otherwise provided,
a plaintiff may unite in the same suit several causes of action
against the same defendant, or the same defendants jointly; and
any plaintiffs having causes of action in which they are jointly
interested against the same defendant or the same defendants
jointly may unite such causes of action in the same suit.
E
(2) Where causes of action are united, the jurisdiction of the Court
as regards the suit shall depend on the amount or value of the
aggregate subject matters at the date of instituting the suit."
Order II Rule 6
F "Power of Court to order separate trials - Where it appears
to the court that the joinder of causes of action in one suit may
embarrass or delay the trial or is otherwise inconvenient, the Court
may order separate trials or make such other order as may be
expedient in the interests of justice."
G In Black's Law Dictionary it has been stated that the expression
'cause of action' is the fact or facts which give a person a ·right to
judicial relief. A cause of action, thus, means every fact, which, if
traversed, it would be necessary for the plaintiff to prove in order to
support his right to a judgment of the court. In other words, it is a bundle
of facts which taken with the law applicable to them gives the plaintiff a
H
MRS. HEMA KHATTAR & ANR. v. SHIV KHERA 437
[R. K. AGRAWAL, J.]
right to relief against the defendant. It must include some act done by A
the defendant since in the absence of such an act no cause of action can
possibly accrue. It is not limited to the actual infringement of the right
sued on but includes all the material facts on which it is founded.
19. Order II, Rule 3, provides for the joinder of several causes of
action and states that a plaintiff may unite in the same suit several causes B
of action against the same defendant, or the same defendants jointly or
several plaintiffs having causes of action in which they are jointly
interested against the same defendant or defendants jointly may unite
them in one suit. The remedy for any possible inconvenience with regard
to said rule is supplied by the provisions of Order II, Rule 6, which C
authorizes the Court to order separate trials of causes of action which
though joined in one suit cannot be conveniently tried or disposed of
together.
20. Similarly, Order I Rule l of the Code permits joinder of more
than one persons any right to relief in respect ot: or arising out of, the
same act or transaction or series of acts or transactions is alleged to D
exist in such persons, whether jointly, severally or in the alternative; and
if such persons brought separate suits, any common question of law or
fact would arise. Order I Rule 2 provides that where it appears to the
court tha< any joinder of plaintiffs may embarrass or delay the trial of the
suit, the comt may put the plaintiffs to their election or order separate E
trials or make such other order as may be expedient.
21. In this connection, it is pertinent to refer to a judgment of this
Court in Rameslt Hiracltand Ku11da11mal vs. Municipal Corporation
of Greater Bombay and Otlters 1992 (2) SCC 524 wherein it was held
as under:- F
"14. It cannot be said that the main object of the rule is to prevent
multiplicity of actions though it may incidentally have that effect.
But that appears to be a desirable consequence of the rule rather
than its main objectives. The person to be joined must be one
whose presence is necessary as a party. What makes a person a G
necessary party is not merely that he has relevant evidence to
giye on some of the questions involved; that would only make him
a necessary witness. It is not merely that he has an interest in the
correct solution of some questions involved and has thought or
relevant arguments to advance. The only reason which makes it
H
438 SUPREME COURT REPORTS [2017] 4 S.C.R.
A necessary to make a person a party to an action is that he should
be bound by the result of the action and the question to be settled,
therefore, must be ir question in the action which cannot be
effectually and completely set~led unless he is a party."
22. In view of the foregoing discussion, we are of the opinion that
B the appelJants even though had different causes of action against the
respondent but it was a continuity of the agreement dated 06.06.2009
and oral agreement is evidenced by the transcript of conversation between
the appellant No. 2 and the respondent on 6/07.04.2011, therefore, both
the appellants could have joined as plaintiffs in a suit and the suit is not
. C bad for misjo!nder of parties or causes of action. Hence, learned single
Judge as also the division bench, was not right in giving an option to the
appellants to pursue reliefs qua appellant No. I or qua appellant No. 2
only.
23. In the present facts and circumstances of the case, it is also
imperativ.e to find out whether the High Cou1t was justified in deciding
D the maintainability of the suit when an application under Section 8 of the
Act is pending adjudication before the Arbitral Tribunal. Before
·proceeding further, it is appropriate to quote here Section 8 of the Act
which reads as under:-
"8. Power to refer parties to arbitration where there is an
E arbitration agreement. -[(I) Ajudicial 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,
F ·.:-·. then, notwithstanding any judgment, decree or order of the
Suprt1me Court or any Court, refer the paities to arbitration unless
it finds that prima facie no valid arbitration agreement exists.]
(2) The application referred to in sub-section (l) shall not be
entertained unless it is accompanied by the original arbitration
G 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 (I), and the said
agreement or certified copy is retained by the other party to
that agreement, then, the party so applying shall file such
H
MRS. HEMA KHATTAR & ANR. v. SHIV KHERA 439
[R. K. AGRAWAL, J.]
application along with a copy of the arbitration agreement and A
a petition praying the Court to call upon the other party to
produce the original arbitration agreement or its duly certified
copy before the Court.]
(3) Notwithstanding that an application has been made under sub-
section ( 1) and thatthe issue is pending before the judicial auth1)fity, B
an arbitration may be commenced or continued and an arbitral
award made."
24. It is also worthwhile to note Clause 33(d) of the agreement
dated 06.06.2009 which refers the parties to Arbitration:-
"Governing Law & Dispute Resolution: All or any disputes · ("~.
and differences whatsoever between the parties arising out of
this Agreement or relating to or touching the mutual rights and
obligations of the parties shall be subject to the jurisdiction of the
Courts/Forums in Delhi only and shall be referred for adjudication
to the sole arbitrator, to be appointed solely and exclusively by the D
FIRST PARTY, whose decision shall be final and binding upon
the parties. The arbitration proceedings shall be held at New
Delhi, India and only the Courts at New Delhi, India alone shall
have jurisdiction over the subject matter of this AG REEM ENT."
25. In Sundaram Finance Limited andA11other vs. T. Thank am E
(2015) 14 SCC 444, this Court has held as under:-
"8. Once there is an agreement between the parties to refer the
disputes or differences arising out of the agreement to arbitration,
and in case either party, ignoring the terms of the agreement,
approaches the civil court and the other party, in terms of Section
8 of the Arbitration Act, moves the court for referring the parties F
to arbitration before the first statement on the substance of the
di~pute is filed, in view of the peremptory language of Section 8
of the Arbitration Act, it is obligatory for the court to refer the
parties to arbitration in terms of the agreement, as held by this
Court in P. Anand Gajapathi Raju v. P. V.G Raju." G
26. In P. Anand Gajapatl1i Raju & Others vs. P. V.G Raju (Dead)
and Others (2000) 4 SCC 539, it was held as under:-
"5. The conditions which are required to be satisfied under sub-
sections ( l) and (2) of Section 8 before the court can exercise its
powers are: H
440 SUPREME COURT REPORTS [2017) 4 S.C.R.
A (I) there is an arbitration agreement;
(2) a party to the agreement brings an action in the court against
the other party;
(3) subject-matter of the action is the same as the subject-
matter of the arbitration agreement;
B
(4) the other party moves the court for referring the parties to
arbitration before it submits his first statement on the substance
of the dispute."
In view of the above, where an agreement is terminated by one
C party on ac:count of the breach committed by the other, pa11icularly, in a
case where the clause is framed in wide and general terms, merely
because agreement has come to an end by its termination by mutual
consent, the arbitration clause does not get perished nor is r011dered
inoperative. This Court, in the case of P. Anand Gajapatlii Raju (.mpra),
has held that the language of Section 8 is peremptory in nature. Therefore,
D in cases where there is an arbitration clause in the agreement, it is
obligatory for the court to referthe parties to arbitration in terms of their
arbitration agreement and nothing remains to be decided in the original
action after such an application is made except to refer the dispute to an
arbitrator. Therefore, it is clear that in an agreement between the parties
E before the civil court, ifthere is a clause for arbitration, it is mandatory
for the civil court to refer the dispute to an arbitrator.
27. Jn view of the above, we are of the considered opinion that in
the present case, the prerequisites for an application under Section 8 are
fulfilled, viz.., there is an arbitration agreement; the party to the agreement
F brings an action in the court against the other party; the subject matter
of the action is the same as the subject-matter of the arbitration
agreement; and the other party moves the court for referring the parties
to arbitration before it submits his first statement on the substance of the
dispute. We have come to the conclusion that the civil court had no
jurisdiction to entertain a suit after an application under Section 8 of the
G Act is made for arbitration. In such a situation, refusal to refer the dispute
to arbitration would amount to failure ofjustice as also causing irreparable
inj uiy to the defendant.
28. As we have already held that the oral agreement as ev,idenced
by the transcript of conversation between the appellant No. 2 and the
H
MRS. HEMA KHATTAR & ANR. v. SHIV KHERA 44 l
[R. K. AGRAWAL, J.]
respondent on 06/07 .04.20 l I substituting the alleged written agreement A
dated 06.06.2009 and which contained a clause for arbitration, the same
clause for arbitration would also be applicable to the oral agreement.
The Division Bench has also erred in law in affirming the order pi:ssed
by learned single Judge. Both the orders, therefore, cannot be sustained
and are set aside and, therefore, in view of the decision in P.R. Shah
B
(supra), there can only be one arbitrator and there can only be a single
arbitration.
29. In view of the foregoing discussion, the appeal succeeds and
is allowed. However, instead of remitting the matter back to the learned
single Judge for deciding the suit itself on merits, we refer the disputes
raised by the appellants in CS(OS) I 532 of 2012 to the sole arbitrator C
already appointed, viz., Hon'ble Mr. Justice V.K. Gupta (Retd.) and
request the arbitrator to decide the disputes expeditiously in accordance
with law.
D
Devika Gujral Appeal al!owed.
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