Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.5440 OF 2002

Booz Allen and Hamilton Inc.

… Appellant

Vs.

SBI Home Finance Ltd. & Ors.

… Respondents

J U D G M E N T

R.V.RAVEENDRAN, J.

The scope of section 8 of the Arbitration and Conciliation Act, 1996

(Act, for short) arises for consideration in this appeal by special leave.

2.

Capstone Investment Co. Pvt. Ltd. (second respondent herein, for

short “Capstone”) and Real Value Appliances Pvt. Ltd. (respondent No.3

herein, for short “RV Appliances”) are the owners of flat No.9A and 9B

respectively situated at “Brighton”, Napien Sea Road, Mumbai. Capstone

and RV Appliances had borrowed loans from SBI Home Finance Ltd., (the

first respondent herein, for short “SBI”) under two loan agreements dated

3.12.1994 by securing the said two flats in favour of SBI.

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3.

Under two leave and licence agreements dated 5.4.1996, Capstone and

RV Appliances permitted the appellant to use their respective flats, for the

term 1.9.1996 to 31.8.1999. Each licence agreement was signed, in addition

to the licensor and licensee, by the other flat owner (that is RV Appliances in

respect of agreement relating to 9A and Capstone in respect of agreement

relating to 9B) and SBI as confirming parties 1 and 2.

4.

On the same day (5.4.1996) a tripartite deposit agreement was entered

among RV Appliances and Capstone as the first party, appellant as the

second party and SBI as the third party. Under the said agreement, the

appellant paid a refundable security deposit of Rs.6.5 crores to Capstone and

RV Appliances (at the rate of Rs.3.25 crores for each flat). Clause (E) of the

said agreement confirmed that the appellant made the said deposit and

Capstone and RV Appliances received the said deposit on the basis of the

terms and conditions recorded in the two leave and licence agreements and

the deposit agreement; and that the three agreements together formed a

single integral transaction, inseparable, co-extensive and co-terminus in

character. Out of the said deposit of Rs.6.5 crores, a sum of Rs.5.5 crores

was directly paid to SBI on the instructions of Capstone and RV Appliances

towards repayment of the loan taken by Capstone and Real Value and the

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balance of Rs.1 crore accounted in the manner indicated therein. As a

consequence, the loan due by Capstone to SBI in regard to flat No.9A was

cleared, but the loan taken by RV Appliances remained due and outstanding.

Capstone however became a guarantor for repayment of the amount due by

RV Appliances and flat No.9A was secured in favour of SBI and a charge

was created in the shares relating to flat No.9A belonging to Capstone in

favour of SBI, as security for repayment of the loan by R V Appliances. We

extract below the relevant portion of para 5A of the agreement :

“However, notwithstanding the repayment of the dues of Capstone

Investment Co.Pvt.Ltd., the share Nos.4001 to 4250 of the Society and

Flat No.9A shall continue to be available to the Party of the Third Part as

security of the remaining dues of Real Value Appliances Ltd., and in this

connection it is agreed that upon liquidating the dues of Capstone

Investment Co.Pvt.Ltd., and in order to make available the said shares

Nos.4001 to 4250 and Flat No.9A as security, Capstone Investment

Co.Pvt.Ltd. shall become a Guarantor for repayment of dues of Real Value

Appliances Pvt.Ltd. The Parties of the Third Part are confirming that it has

no objection to the Party of the Second Part, its employee or officer

occupying the Flats and that as long as the balance of the principal amount

and interest due thereon is paid by the Parties of the First Part (or as per

arrangement hereafter recorded) by the Party of the Second Part to Party

of the Third Part, the Parties of the Third Part shall not enforce the

mortgage and will permit the Party of the Second Part, its employee or

officer to occupy the