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2026 Supreme(Online)(Ker) 30280
IN THE HIGH COURT OF KERALA AT ERNAKULAM
Syam Kumar V.M., J
Paulson Paulose – Appellant
Versus
C.K. Thomas – Respondent
OP(C) No. 775 of 2021
For the Appellants/Petitioners: S. Gopakumar, T.M. Binitha
When an application under Section 8 of the Arbitration and Conciliation Act is filed, the court must refer the dispute to arbitration if a valid agreement exists; procedural impleadment applications filed subsequently as maneuvers to avoid arbitration need not be heard at the threshold.
Headnote:The original petition arose from a dispute regarding the management and transfer of partnership assets. The petitioners, as plaintiffs in a suit, sought to implead a third-party entity before the court could determine an application for arbitration under S. 8 of the Arbitration and Conciliation Act, 1996. The court below was faced with cross-petitions: one for impleadment and another for referring the parties to arbitration. The court found that the impleadment request was a subsequent tactical maneuver filed after the arbitration request was already pending, and that all disputes regarding the partnership agreement fall squarely within the existing arbitration clause. The central issue was whether a trial court must prioritize an application for impleadment filed by plaintiffs over an application for reference to arbitration under S. 8 of the Arbitration and Conciliation Act. The court held that if a valid arbitration agreement exists, the mandate under S. 8 is to refer the parties to arbitration. It further held that questions regarding the necessity of impleading third parties can be determined by the arbitrator, and a party cannot circumvent an arbitration agreement by filing a belated impleadment motion if the core dispute is arbitrable. The court dismissed the original petition, declining to issue a direction to hear the impleadment petition prior to the arbitration application.
| Table of Content |
|---|
| 1. request to prioritize impleadment application over section 8 arbitration reference. (Para 1 , 2 , 3 , 4) |
| 2. court's discretion to deny impleadment if it acts as a maneuver to evade arbitration. (Para 6 , 7 , 8) |
JUDGMENT
Dated this the 18th day of May, 2026 This O.P.(C) is filed inter alia seeking to direct the 3rd Additional Subordinate Judge, Ernakulam, to consider Exhibit P6 impleadment petition filed by the petitioners, who are the plaintiffs in O.S.No.303 of 2019, before it proceeds to consider Exhibits P7 and P8 petition filed seeking to refer the matter to arbitration.
2. Service is complete as against the respondents.
3. The learned counsel for the petitioners submitted that the question of impleadment of respondent No.5, which is an incorporated entity, is to be considered first, since according to the learned counsel, the said respondent is a necessary party to the suit. It is submitted that the attempt of respondent Nos.1 to 4 is to get the plaintiffs non-suited at the threshold by getting the matter referred to arbitration and that the same is illegal and unsustainable.
4. It is noted that the dispute between the petitioners and respondents 1 to 4 arises out of a partnership arrangement. The firm thus created viz., M/s.C.K.Paulose & Brothers had been running a boarding and lodging business. Plaintiffs allege that respondents 1 to 4 had clandestinely transferred the property, in which the partnership firm was conducting lodging business as ‘Hotel Chakky’s', to respondent No.5 (M/s.Kobri Sons Pvt. Ltd.). O.S.No.303 of 2019 was thus filed by the petitioners as plaintiffs seeking declaration and injunction inter alia restraining respondents 1 to 4 from interfering with the functioning of the firm from the scheduled premises. Respondent No.5 was not arrayed as a party to the said suit and according to the plaintiff, it was only when another suit O.S.No.767 of 2020 was filed by respondent No.5 that the petitioners came to be aware of the alleged clandestine transaction. An interim injunction was obtained and later respondent Nos.1 to 4 entered in appearance in the suit and filed I.A.Nos.4 and 5 of 2020 respectively invoking Section 8 of the Arbitration and Conciliation Act, 1996 inter alia contending that Clause 24 of the partnership deed between the parties clearly stipulates referring disputes to arbitration and proceedings for arbitration already stand initiated. Since the dispute raised in the suit squarely falls within the ambit of Clause 24 of the partnership deed, the suit viz., O.S.No.303 of 2019 is to be referred to arbitration. It was also submitted in the said I.As that another suit between the parties viz., O.S.No.669 of 2019 had already been referred to arbitration. 5. Heard.
6. The short question to be considered is whether the petitioners are entitled to a direction that the Sub Court shall first consider the impleading petition before proceeding to consider Section 8 petition filed seeking reference to arbitration. It is noted that the impleading petition viz., I.A.No.6 of 2021 produced as Exhibit P6 is dated 10.02.2021. The Section 8 petition filed by respondents 1 to 4 (produced as Exhibits P7 and P8) are dated 11.01.2020 and 24.01.2020 respectively. It is thus evident that the petition to implead had been filed after being confronted with Section 8 petition and is an after thought.
7. Be that as it may, it is trite and settled that when a Section 8 petition is filed and the court is satisfied that there exists a binding arbitration agreement between the parties, then the parties are to be mandatorily referred to arbitration [see Vidya Drolia and others v. Durga Trading Corporation : (2021) 2 SCC 1)]. It is equally trite and settled that it is open to the Arbitrator to decide on the question of impleadment of non signatories/third parties [see Cox and Kings Ltd. v. SAP India Pvt. Ltd. : (2024 SCC OnLine SC 2452)]. If the impleadment is perceived as a maneuver to avoid the arbitration agree
