High Court of Judicature at Calcutta
SANJIB BANERJEE
Niranjan Lal Todi & Another
Versus
Nandlal Todi & Others
GA No. 1756 of 2010, GA No. 1596 of 2010, CS No. 121 of 2010
Decided On : 10-09-2010
ARBITRATION - Reference - Application under Section 8 of the Arbitration and Conciliation Act, 1996 - Maintainability - Suit for partition of family business and assets - Family settlement recorded in MOU - Agreement to implement the family settlement - Arbitration agreement - Scope of - Whether the subject matter of the suit is covered by the arbitration agreement - Whether the companies and other business entities are bound by the arbitration agreement - Held, the arbitration agreement is wide enough to cover the subject matter of the suit - The companies and other business entities are bound by the arbitration agreement, either directly or constructively.
Fact of the Case:
The plaintiffs, four brothers, filed a suit for partition of the family business and assets. The first defendant, the eldest brother, filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking a reference of the disputes to arbitration. The plaintiffs opposed the application, contending that the arbitration agreement did not cover the entire subject matter of the suit and that some of the parties to the suit were not parties to the arbitration agreement.
Finding of the Court:
The Court held that the arbitration agreement was wide enough to cover the subject matter of the suit. The Court also held that the companies and other business entities were bound by the arbitration agreement, either directly or constructively. Therefore, the Court allowed the application under Section 8 of the Arbitration and Conciliation Act, 1996, and referred the disputes to arbitration.
Issues: 1. Whether the subject matter of the suit is covered by the arbitration agreement? 2. Whether the companies and other business entities are bound by the arbitration agreement?
Ratio Decidendi: 1. The Court held that the arbitration agreement was wide enough to cover the subject matter of the suit. The Court noted that the arbitration agreement used words of the widest import and that it covered "all disputes and differences, mode and manner of implementation of matters in respect of which the parties have amicably resolved…" and "all other connected and incidental issues or matters arising out of or in relation thereto." 2. The Court held that the companies and other business entities were bound by the arbitration agreement, either directly or constructively. The Court noted that the family intended its companies to be bound by the MOU of 1989, even though the MOU was not signed on behalf of the companies. The Court also noted that the four brothers or branches were accountable for the family companies and their assets in the matter of division thereof.
Final Decision: The Court allowed the application under Section 8 of the Arbitration and Conciliation Act, 1996, and referred the disputes to arbitration.
SANJIB BANERJEE, J.
The suit is in the nature of partition. The first plaintiff and the first, seventh and eleventh defendants are brothers. In all, the plaintiffs claim reliefs under 30 heads spread over nine pages of the 111-page plaint in the suit instituted with leave under clause 12 of the Letters Parent and under Order II Rule 2 of the Code of Civil Procedure. The cause title runs into 21 pages. The second plaintiff is the son of the first plaintiff. The second to the tenth defendants belong to the first defendant’s branch; the twelfth to the sixteenth defendants are in the eleventh defendant’s branch; and, the eighteenth to the twentieth defendants are in the seventeenth defendant’s branch. The remaining defendants are mostly companies except three of them which are partnership firms. The plaintiffs claim such companies and firms to be part of the family business of the Todis and treat such business entities and their assets as part the joint family properties.
GA No. 1596 of 2010 is the plaintiffs’ interlocutory application in aid of the reliefs claimed in the suit. GA No. 1756 of 2010 is the first defendant’s application under Section 8 of the Arbitration and Conciliation Act, 1996 seeking a reference of the disputes to arbitration. There is an anomalous second prayer in the first defendant’s application to the effect that the four brothers be directed to proceed with the ongoing arbitration before a sole arbitrator, but such prayer may be seen as the general understanding of the Todi brothers that notwithstanding the ostensible independent identity of the family companies and firms, such companies and firms and the assets that are in their names are part of the joint properties.
The application under Section 8 of the 1996 Act was heard out and judgment reserved on August 5, 2010 after all the then appearing parties had concluded their submission. It was thereafter discovered that a number of the parties may not have been served since the affidavit-of-service was not on record. The application was then directed to appear on August 9, 2010 and the first defendant was called upon to produce the affidavit-of-service. No affidavit-of service was forthcoming. Service was directed to be effected on all the parties so that the views of the parties could be obtained as to whether they supported or opposed the first defendant’s prayer for reference of the disputes in the suit to arbitration. It was only on August 27, 2010 that a satisfactory report as to service could be placed by the first defendant. The order of such date recorded that only the plaintiffs and the 84th defendant appeared to oppose the application for reference. The 84th defendant claimed that it had no previous notice of the application and sought directions for filing its affidavit. All the defendants, save the defendant nos. 22, 28 and 33, have been represented. The three non-appearing defendants were served but chose not to appear. The 47th and 49th defendants have submitted that such companies have no connection with the Todi family and there are no Todi shareholders in their registers of members. They suggest that they are neither proper parties to the suit nor can the Todis claim anything against such companies or their assets. Such position has not been seriously disputed by the individual Todis or the Todi concerns which are represented.
It is the application under Section 8 of the 1996 Act that has to be taken up first, for if such application succeeds the plaintiffs’ interlocutory application would become meaningless. To appreciate the circumstances in which the first defendant, supported by the overwhelming majority of the other defendants, maintains that the disputes in the suit are liable to be referred to arbitration, it is the plaintiffs’ claim that has first to be seen. The following case has been made out in the plaint:
a. The four Todi brothers who are parties herein are sons of Brijlal Todi, deceased. Brijlal and his father Gan
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