The main legal point established in the judgment is that the reliefs prayed for in a suit must be within the scope of the arbitration agreement, and if the claims are intertwined and incapable of separation, the application to refer the parties to arbitration may be dismissed.

1. This is an application filed by the first defendant under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the parties to the suit to arbitration and consequently dismiss the suit itself. Heard the learned counsel for the applicant and the learned Senior Counsel for respondents 1 and 2, who are the plaintiffs in the suit. The suit is for a declaration to set aside the sale deed dated 17.9.2001 executed by the first defendant in favour of defendants 2 and 3; for recovery of possession an d for other reliefs. The first plaintiff, who is the husband of the second plaintiff, is an employee of the first defendant. Admittedly, there is an agreement called housing loan agreement to which the first defendant a the “lender” (Party of the first part); second plaintiff as the “Borrower” (Party of the third part) and the first plaintiff as the “Guarantor” (Party of the second part) are parties. This agreement admittedly relates to the housing loan availed of by the plaintiffs. It appears that ther e is a default in repayment of the loan amount. It is the case of the first defendant that when the first plaintiff was under their employment stationed at Pondicherry, he had committed several irregularities, which gave room for the employer to claim money from him under various heads. In other words, the employer namely, the first defendant has a claim against the first plaintiff not only on the basis of the housing loan agreement but also under other various heads. The first plaintiff is shown to be having a counter claim to the claim made by the employer under the above referred to heads. It is also not in dispute that pursuant to the power of attorney stated to have been executed by the second plaintiff in favour of the first defendant the property belonging to her had been sold by the first defendant in favour of defendants 2 and 3. Only in the above context, the suit had come to be filed impleading the “Lender” as well as the subsequent buyers as defendants 1 to 3.

2. Relying upon the arbitration clause contained in the housing loan agreement (see Article 11.1) it is contended before this Court by the learned counsel for the applicant/first defendant that the dispute raised in the suit is covered under the arbitration clause and therefore the suit ought not to have been entertained. To substantiate his argument, the learned counsel would state that the arbitration clause would cover not only the loan covered under the housing loan agreement but also the other claim, which the first defendant has against the plaintiffs. To sustain this argument, the first defendant also relies upon the letter dated 10.1.2000 (document No.9 filed along with the plaint) stated to have been written by the second plaintiff to the first defendant. Therefore the submission is that on a reading of this letter dated 10.1.2000 in the context of Article 11.1 of the housing loan agreement covers all disputes between the parties as projected in the suit and therefore the arbitration would be the only remedy to which the parties must go and not the regular suit. Mr. V.R. Venkataraman, Learned Senior Counsel appearing for the contesting parties would state that the dispute put forward in the suit before this Court is not a dispute under the loan agreement so as to attract the arbitration clause. In other words, according to the learned Senior Counsel the dispute in the suit is outside the scope of the arbitration clause. In any event, the entire dispute raised in the plaint is not covered under the arbitration clause. According to the learned Senior Counsel, prima facie a part of the dispute is covered under the arbitration clause and the rest of the dispute is outside the arbitration clause and therefore the suit would be maintainable. Admittedly, strangers are parties to the suit namely, defendants 2 and 3. The relief prayed for in the suit is mainly directed against them namely, to set aside the sale in their favour and to recover posses