The main legal point established in the judgment is the enforceability of the Arbitration Agreement and the concept of limited liability under the Companies Act, 1956, in determining the liability of the defendants.

RAJIV SAHAI ENDLAW, J.

1. The plaintiff has sued under Order 37 of the CPC for a decree in the sum of Rs.40,48,927.11p against the four defendants jointly and severally pleading:-

(a). that the defendant no.1 Company acting through its Material Manager Mr. Manoj K. Sharma impleaded as defendant no.4 had entered into a contract dated 1st May, 2010 with the plaintiff whereunder the plaintiff had agreed to transport the goods manufactured by the defendant no.1 Company, raw material or any other commodity, to and fro Kota, to any other location;

(b). that though initially the defendant no.1 Company made payment for the services provided by the plaintiff on regular basis but thereafter started making lump-sum payments at regular intervals against the outstanding invoices of the plaintiff;

(c). that as on 9th May, 2011, payment under as many as ten invoices of the total value of Rs.50,48,927.11p was due to the plaintiff;

(d). that the defendant no.1 Company made part payment of Rs.10 lacs on 2nd May, 2011 with the assurance to pay the balance shortly and leaving a balance of Rs.40,48,947.11 due to the plaintiff;

(e). that the defendants no.2&3 namely Mr. S.K. Kaura and Mr. Atul Aggarwal, President and Zonal Head (Finance) of the defendant no.1 Company, in emails acknowledged and confirmed the liability to the plaintiff and assured payment but no payments were made;

2. Summons for appearance were issued to the defendants. However appearance was filed on behalf of the defendant no.1 Company only. No appearance was filed on behalf of the defendant no.2 despite service. The order dated 8th August, 2012 records the statement of the counsel for the defendant no.1 Company that the defendants no.3&4 were no longer in the employment of the defendant no.1 Company; they were ordered to be served by publication and were so served and there is no appearance on their behalf as well;

3. The defendant no.1 Company after appearance, filed this application under Section 8 of the Arbitration and Conciliation Act, 1996. Summons for judgment were however ordered to be served on the defendant no.1 Company and were served. The defendant no.1 Company has filed an application for leave to defend which application of the defendant no.1 Company was ordered to be kept in sealed cover awaiting the outcome of the application under Section 8.

4. The senior counsel for the plaintiff and the counsel for the defendant no.1 Company have been heard on the application under Section 8 of the Arbitration Act.

5. The Agreement dated 1st May, 2010 between the plaintiff and the defendant no.1 Company filed by the defendant no.1 Company along with the application and also filed by the plaintiff along with its documents, in Article IX thereof provides for arbitration as under:- “Any dispute arising out of or in connection with this Agreement shall be resolved by arbitration under the Arbitration and Conciliation Act, 1996, to be conducted by sole arbitrator who shall be appointed at the sole discretion of SGLK. The award given by sole arbitrator shall be final & binding on both the parties hereto.”

The defendant no.1 Company is referred to as SGLK in the said Agreement.

6. The senior counsel for the plaintiff does not dispute the existence of the Arbitration Agreement. His contention however is that the matter is not referable to arbitration since the plaintiff in the present suit has made the claim not only against the defendant no.1 Company with whom the plaintiff has an Arbitration Agreement but also against the defendants no.2 to 4. Reliance is placed on Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya AIR 2003 SC 2252. It is contended that since the entire subject matter of the suit i.e. the claim of the plaintiff not only against the defendant no.1 Company but also against the defendants no.2 to 4 with whom there is no Arbitration Agreement, is not subject matter of arbitration, no case for reference of the parties to arbitration is made out. Reliance is placed o