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2026 Supreme(Guj) 496
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Sunita Agarwal, C.J., D.N.Ray, J.
Nirmal Arvind Mody – Appellant
Versus
Neha H. Trivedi & Ors. – Respondents
R/First Appeal No. 2665 of 2026 Civil Application (For Stay) No. 1 of 2026
Decided On : 22-06-2026
For the Appellant : Mr. Unmesh Shukla, Sr. Adv. With Mr. Shashvata U Shukla, With Mr. Vinit Gajjar
Arbitration reference for a composite suit containing both arbitrable and non-arbitrable causes of action is not mandatory if the claims are inextricably linked. Bifurcation is impermissible where it would lead to conflicting judicial decisions, procedural delays, and increased harassment for the parties involved in the litigation.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 8 - Code of Civil Procedure, 1908 - Order II, Rule 6 - Indian Partnership Act, 1932 - Section 48 - Arbitrability of disputes - Joinder of multiple causes of action - Bifurcation of subject-matter - When claims involving dissolution of a partnership and recovery of loans are inextricably linked, the courts are not required to bifurcate the suit to refer only the arbitrable portion to arbitration. (Paras 37, 44, 45)
(B) Appeals - Scope and interference - Appellate court should not interfere with the exercise of discretion by the trial court in the absence of perversity or legal error. The determination of whether cause of action can be split is a matter governed by the exercise of judicial discretion under established procedural rules. (Para 47)
Facts of the case:
Legal heirs of a deceased person filed a suit against partners of a business entity seeking recovery of loans, along with the dissolution of the firm and rendition of accounts. The defendants filed an application to refer the dispute to arbitration, contending that the issues of dissolution and accounts were covered by an arbitration agreement. The trial court rejected the application, finding that the claims were part of a composite suit that could not be split.
Findings of Court:
The court observed that the relief for the recovery of loans—while arguably linked to the broader accounting process—was not covered by an arbitration agreement. Given the interdependent nature of the prayers, splitting the suit would lead to conflicting outcomes, excessive litigation, and procedural inefficiency. The court held that the mandate to arbitrate does not extend to forcing piecemeal adjudication of non-severable claims.
Issues: The main issue was whether a court is legally obligated to bifurcate a suit containing composite causes of action—some arbitrable and some not—to refer only the arbitrable claims to arbitration, or if the court should retain control over the entire matter to prevent potential conflicting judgments.
Ratio Decidendi: The court ruled that while the legislative intent favors arbitration, it does not mandate the bifurcation of a civil suit where claims are inextricably linked. The risk of fragmentation leading to inconsistent findings and procedural hardship outweighs the requirement for reference when such claims are fundamentally interdependent.
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. overview of the appeal against an order refusing to refer the matter to arbitration under section 8 of the act, 1996. (Para 1 , 2 , 3) |
| 2. appellant's submission on mandatory arbitration, bifurcation of causes of action under order ii rule 6 cpc, and reliance on previous high court rulings. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 37 , 38 , 39) |
| 3. evolution of section 8 jurisprudence regarding the scope of judicial intervention and prima facie standard in arbitration references post-2015 amendment. (Para 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36) |
| 4. assessment of specific relief claims in the plaint regarding recovery of individual loans versus partnership dissolution. (Para 40 , 41) |
| 5. arbitration cannot be invoked for causes of action not covered by the agreement if they are inextricably linked with non-arbitrable components. (Para 42 , 43 , 44 , 45 , 46 , 47 , 48) |
| 6. final dismissal of the appeal due to the absence of grounds for bifurcation and the non-arbitrability of linked claims. (Para 49 , 50) |
JUDGMENT :
Sunita Agarwal, C.J.
Heard the learned counsels for the parties and perused the record.
2. The present appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 (in short as 'the Act, 1996') against the judgment and order dated 10.07.2025 passed by the Commercial Court, City Civil Court, Ahmedabad, refusing to refer the parties to Arbitration under Section 8 of the Act, 1996, by rejecting Section 8 application moved by the appellant herein by the Commercial Court in Commercial Civil Suit no. 638 of 2024.
3. It is categorically recorded in the judgment impugned that multiple reliefs have been sought in the suit and one of them is for recovery of loan given by the plaintiffs to the partnership firm. Admittedly, the said dispute is not imbibed in the agreement under the partnership deed and as such, cannot be adjudicated by the Arbitrator. Reliance placed by the learned counsel for the defendant on the decision of the Apex Court in Mrs. Hema Khattar & Anr. V/s. Shiv Khera [2017 0 Supreme Court (SC) 325] was, thus, of no help.
4. Mr. Unmesh Shukla, the learned senior advocate for the appellant would submit that the plaintiffs are the heirs and legal representatives of late Hitesh Hasmukhbhai Trivedi, who was 45% partner in the partnership firm. The defendant Nos. 1 and 2 are the partners and the reliefs sought in the suit is to dissolve and wind up the affairs and business of the partnership firm, M/s. Team Engineers, and to give assets, goodwill, receivable and profit of the partnership firm available as on the date of death of late Hitesh Hasmukhbhai Trivedi, as per his share.
5. The submission is that the reliefs of dissolution/winding up and accounting of the assets of the partnership firm are directly and substantially covered by the arbitration clause contained in the partnership deed signed by the predecessor-in-interest of the respondents herein/original plaintiffs. The result is that on filling of the application under Section 8, there was no option before the Civil Court but to refer the parties to arbitration in view of the mandate of the said provision. It was argued that the language of Section 8 is peremptory, where the arbitration clause exists, it is mandatory for the Court to refer the parties to arbitration. Once pre-requisite conditions of Section 8 are fulfilled, no option is left to the Court, but to refer the dispute for arbitration.
6. The submission is that the approach of the Civil Court upon filling of Section 8 application should be to see whether its jurisdiction has been ousted or not. Once it is brought to the notice of the Court that its jurisdiction has been taken away in terms of the special statute, it must examine whether there is ouster or it has jurisdiction therein. General law must give way to the special law and the Civil Court shall ensure that the provisions of the speci
