A dispute involving property rights and third parties cannot be referred to arbitration and must be resolved in civil court according to established legal principles.

ORDER

The plaintiffs in O.S.No.259 of 2021 before the District Munsif, Chengalpattu, aggrieved by the order passed in Section 8 application under the Arbitration and Conciliation Act, 1996, have filed the present revision petition.

2.I have heard Mr.S.Vasudevan, for Mrs.D.Meera, learned counsel for the petitioners and Mr.Salai Varun, learned counsel for the 1^st respondent, Mr.S.T.Raja, learned Standing Counsel for the respondents 4 to 6.

3.The plaintiffs have filed a suit for declaration, to declare a registered gift deed dated 21.06.2021, executed by the Developer, the 4^th defendant in favour of TANGEDCO, the 1^st defendant, as null and void and for other reliefs. Pending the suit, the Developer, namely the 4^th defendant took out an application under Section 8 of the Act, seeking the dispute to be referred to arbitration. The said application was resisted by the plaintiffs, but however, the trial Court allowed the application and referred the parties to arbitration and challenging the same, the present revision has been filed.

4.Mr.S.Vasudevan, learned counsel appearing for the petitioners would submit that the 1^st respondent in the revision, that is the Developer, was a power of attorney agent of the original land owners and after sale of about 650 apartments and having exhausted the entire undivided share, the Developer was not competent to execute the gift deed in favour of the 1^st defendant, TANGEDCO, especially when the apartment owners, numbering as many as 650, have already come to own the entire land in form of undivided shares, proportionate to the extent of the built up area of the apartments purchased by them. He would further state that challenging the said gift deed executed in favour of the 1^st defendant, the suit has been rightly filed and the reliefs sought for can only be tried before the competent Civil Court and it was not an arbitrable dispute.

5.The learned counsel for the petitioners would further state that the 1^st defendant is not a party to the construction agreement between the petitioners and the Developer and when such third parties are involved, the Civil Court alone would have to try the disputes. In support of his contentions, he would place reliance on the decision of the Hon'ble Supreme Court in Booz Allen and Hamilton Inc. Vs. SBI Home Finance Limited and others, reported in 2011 (5) SCC 532 and M.Mythrai and another Vs. T.Ramesh and others, reported in CDJ 2021 MHC 201, for the proposition that the dispute, that requires adjudication in the suit, pertains to a right in rem and the same cannot be tried by an Arbitrator and for the proposition that when there are third parties who have nothing to do with the arbitration clause and the reliefs sought are not connected to such third parties, then the cause of action cannot be split up or bifurcated.

6.The learned counsel for the petitioners would further state that the Association of flat owners also filed a W.A.No.2146 of 2021 and the Division Bench, by order dated 04.07.2023, has held that the parties would have to resolve the disputes only in the appropriate forum. He would also rely on the recent decision of the Hon'ble Supreme Court in Basheera Khanum Vs. The City Municipal Council and Another, reported in 2025 INSC 955, where the Hon'ble Supreme Court held that a valid registered document, conveying immovable property cannot be annuled by any procedure, other than a civil suit.

7.Mr.S.Vasudevan, learned counsel also relied on the decision of the Bombay High Court in M/s.Divya Enterprise and Others Vs. Capri Global Capital Limited in I.A.(L).No.25700 of 2025 in C.S(L).No.23360 of 2025 dated 09.10.2025, where the Bombay High Court, relying on the ratio laid down by the Hon'ble Supreme Court in Vidya Drolia and others Vs. Durga Trading Corpo