The presence of a third party in a suit can render an arbitration agreement inoperative, at least for the time being, if the disputes in the suit are closely connected and intertwined with those arisen between the plaintiff and the third defendant.

The Court: Two applications AP No. 60 of 2005 and GA No. 3982 of 2005 filed in the aforesaid Suit being CS. No. 338 of 2002 have been heard one after another. The application being AP No. 60 of 2005 has been taken out on Notice of Motion by the first defendant in the suit namely Emirates Grains Products LLC and Others (hereinafter referred to as the said company) for an order referring the plaintiff and the first defendant to arbitration in respect of subject-matter of Civil Suit being No. 338 of 2003 mentioned above in accordance with the agreement dated 15th September, 2003 as referred to in paragraphs 3 and 4 of the petition. The said application mention arbitration agreement between the plaintiff and the first defendant which is part of parent agreement. The said arbitration agreement is adoption of Grain and Food Trade Association (in short GAFTA) Arbitration Rules, whereby and whereunder all disputes and differences between the parties are to be resolved as per procedure provided in the said Rule. The instant application was taken out on or about 22nd January 2005. The second mentioned application has been taken out by the plaintiff on or about 18th Day of March 2005 for interlocutory reliefs in the form of injunction restraining the defendant No.1 whether by itself or by its servants or agents or assigns or otherwise whosoever from giving any effect or further effect to any of the writings dated October 6, 2004 or October 14, 2004 or February 25, 2005 or March 7, 2005. The primary object of this interlocutory application of the plaintiffs is to obtain order of injunction against the first defendant from taking any step to initiate or to proceed with the arbitration proceedings in terms of the alleged agreement stated in their application.

2. Both these applications have been contested mutually by both the parties by filing their respective affidavits. I feel decision on the application of the first defendant for referring the dispute to arbitration agreement is having considerable being in the second application, for the first application succeeds obviously second application will automatically fail. The situation might be reversed in the event first application fails. Thus the decision on the first application is required to be rendered first before it is taken on the second application.

3. The learned Counsel for the first defendant/applicant in AP No. 60 of 2005 highlighting the fact that despite existence of the valid arbitration agreement and the issues in the suit are covered by the same, the present suit has been filed.

4. The learned Counsel for applicant/1st defendant submits that reading section 45 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 1996 Act) once it is established that there has been an arbitration agreement between the parties and the disputes in the plaint are covered thereby, the Court has to refer the parties to arbitration.

5. He says that the other defendants have been made parties' deliberately to defeat the arbitration clause as the disputes arose essentially between the plaintiff and the first defendant and other defendants did not have any connection nor bearing with the same. Actually the disputes canvassed in the plaint directly concerned with breach of the contract entered into by and between the plaintiff and first defendant as the plaintiff failed and neglected to ship and/or dispatch milling wheat as agreed upon. Second defendant is an agent of first one, whereas third is the ship owner. In support of his submission he has relied on decision of the Supreme Court in case of Shakti Bhog Foods Limited vs. Kola Shipping Limited, 2008(4) Vol 74 Arb LR I (SC).

6. His further contention is that although first defendant at one point of time had filed an application seeking extension of time to file written statement but such step cannot be said to be waiver of the arbitration agreement nor be construed to be submitting to the jurisdiction of the Civil Court ab