[2024:RJ-JP:38780]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Arbitration Application No. 143/2023
Smt. Sulochna Devi W/o Late Shri Ram Gopal Runthla, Aged
About 74 Years, R/o 2 Jb Cantonment, Anand Pant Building,
Jhalupada, Shillong, Meghalaya Through Power Of Attorney
Holder Shri Ramesh Runthla S/o Late Shri Ram Gopal Runthla,
R/o G-135, 4 Th Floor, Preet Vihar, Delhi (E)
----Applicant
Versus
1. Shri Suresh Kumar Runthla S/o Late Shri Kanahaiya Lal
Runthla, R/o 9B, Purohit Ji Ka Bagh, Jaipur.
2. Smt Saroj Sharma W/o Shri Suresh Kumar Runthla, R/o
9B, Purohit Ji Ka Bagh, Jaipur.
3. Namit Runthala S/o Suresh Kumar Runthala, R/o 9B,
Purohit Ji Ka Bagh, Jaipur.
----Non-applicants
For Petitioner(s) : Mr. Swadeep Singh Hora,
Mr. Aditya Jain & Mr. Aamir Harun
For Respondent(s) : Mr. R. K. Daga,
Mr. Rahul Singh Chauhan
HON'BLE MR. JUSTICE SUDESH BANSAL
Order
06/09/2024
REPORTABLE:
1. By means of instant arbitration application under Section
11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as “the A&C Act”), the applicant has prayed to appoint
a sole Arbitrator to adjudicate the dispute that has arisen between
the parties due to committing breach of condition No.3 of the
Family Settlement Agreement and MOU dated 3rd December, 1997
whereunder it was agreed that the immovable property Plot No.18
Kanti Nagar Jaipur (measuring 416 Sq.Yrd. vacant land area) will
be transferred to first party or alternatively will be sold at the
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discretion and with consent of first party (applicant's husband but
now deceased) by the second party- non-applicants No.1 and 2. It
is the case of applicant that in utter violation to such Family
Settlement Agreement, the property has been transferred by non-
applicants No.1 and 2 in favour of their son, non-applicant No.3
through registered gift deed dated 29.07.2021. The applicant
seeks specific performance of condition No.3 of the Family
Settlement Agreement and wants to settle the dispute with the
non-applicants about such property. Since an arbitration
agreement is contained in Clause 10 of the Family Settlement
Agreement dated 3rd December 1997 itself, which talks about
appointment of an Arbitrator with mutual consent, if any dispute
arises but Arbitrator with mutual consent could not be appointed,
hence, applicant has filed this arbitration application on
16.10.2023 before the High Court seeking appointment of an
Arbitrator to adjudicate and settle such dispute between the
parties, about the immovable property in question, through
arbitration.
2. The copy of the Family Settlement Agreement and MOU
dated 3rd December, 1997 has been placed on record as Annexure-
A/1, which is the fundamental document to this Arbitration
Application. This document bears the nomenclature as “Family
Arrangement”. Applicant’s husband Shri Ram Gopal Runthala
(passed away on 16.04.2016) is first party in this document and
non-applicant No.1 Shri Suresh Kumar Runthala, who happens to
be the real brother of applicant’s husband, is the second party in
this document of family settlement. Both brothers are signatories
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to this document of “Family Arrangement”. Applicant, namely,
Smt. Sulochna Devi, who is wife of Ram Gopal Runthla (first party
and now deceased) and non-applicant No.2, namely, Smt. Saroj
Sharma, who is wife of non-applicant No.1- Suresh Kumar
Runthla, are also impleaded as party No.3 and 4 in the document
of “Family Arrangement” but they are non-signatory parties to this
document.
Non-applicant No.3-Mr. Namit Runthla who is son of non-
applicants No.1 and 2, is not party to this document of family
arrangement but since the property in question detailed out in
Clause 3, has been transferred by non-applicants No.1 and 2 in
favour of their son-non-applicant No.3, that too in breach of the
condition No.3 contained in Family Settlement Agreement,
therefore, non-applicant No.3-Mr. Namit Runthla has also been
impleaded as party by the applicant to this arbitration agreement
stating inter alia that he is also necessary and proper party
required to be heard in the lis about the immovable property in
question, since he has acquired title and interest in the property
through a registered instrument of Gift Deed.
The document of “Family Arrangement” is an unregistered
document and executed on a stamp paper of Rs.100/-. This
document incorporates the terms of settlement between the
family members, in respect of various family properties including
the immovable property in question bearing Plot No.18, Haathi
Babu Marg, Kanti Nagar, Jaipur. It would be apposite to reproduce
the document herein, highlighting the relevant portions, required
to be noticed to decide the present arbitration application:-
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FAMILY ARRANGEMENT
This AGREEMENT and M.O.U is made by and
between:-
1. Shri Ram Gopal Runthla S/o Shri K. L.
Runthala R/o Bara Bazar, Shillong (hereinafter
called 1st party).
2. Shri Suresh Kumar Runthala S/o Shri K. L.
Runthala R/o 9B, Purohit Ji Ka Bag, Jaipur
(hereinafter called IInd party).
3. Smt. Sulochana Devi w/o Shri R.G. Runthala
R/o Bara Bazar, Shillong.
4. Smt. Saroj Sharma w/o Shri S. K. Runthala
R/o 9B, Purohit Ji Ka Bag, Jaipur.
WHEREAS both First and Second parties are real
brothers and they both don’t want to keep any
dispute or tension for future and they have strong
desire to live happily and peacefully. So they
decided to remove all past disputes and wanted to
settle their family assets and bot the parties
decided to reduce into writing all the terms &
conditions.
1. That at the present party to the first and
second are partners in the firm M/s Runthala
Industries, Jaipur carried on solely by Shri S. K.
Runthala. It has been decided that first party R. G.
Runthala will retire from firm w.e.f. 31.03.1998 and
he shall get the amount standing credit in his
capital account and he will sign all the documents
and returns as required by law to complete the
formalities to remove his partnership.
2. The 1st and IInd parties are partners of the
firm M/s. Kanhiya lal Ram Gopal Runthala, Shillong
and it has been decided that Shri s. K. Runthala will
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retire from the firm w.e.f. 31.03.1998 and he will
get the amount standing in his Capital Account and
second party will sign all the documents, returns
etc. as required by law to remove his partnership.
3. That vacant land measuring 416 Sq.Yard
at Plot No.18, Kanti Nagar,jaipur is in the
name of Smt. Saroj Sharma wife of Shri S. K.
Runthala will be transferred to the 1st party or
alternatively with the consent of 1st party. This
land will be sold at the discretion of Shri R. G.
Runthala with his consent.
4. That one residential house where Shri S.
K. Runthala resided measuring approx. 299
Sq. Yards land at 9B, Purohit Ji Ka Bag, Jaipur
is the property of Smt. Saroj Sharma w/o Shri
S. K. Runthala and party to the first part or his
family members will have no right, title, claim
over this property and they shall not raise any
objection in future.
5. That Land & Building situated at village
Mundha Bhimsingh is in the name of Shri Ram
Goptal Runthala and he will enjoy titles and
possession on that property and second party will
have no right, title and claim over that property.
6. That agriculture land approx. 40 Bighas at
village Mindha at present is in the name of Shri S.
K. Runthala will be transferred to first party and /
alternatively with the consent of first party. It can
be sold at the discretion of Shri R. G. Runthala with
his consent.
7. That property situated at Sikar Road, Opp.
Road No.6, V.K.I.A., Jaipur which is in the name of
Shri K.L. Runthala will be transferred by Shri K. L.
Runthala to Shri Ram Gopal Runthala.
8. That other properties wherever situated in the
name of Shri K.L. Runthala, who is the father of
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both the parties will be the properties of Shri Ram
Gopal Runthala and Shri K. L. Runthala will perform
all necessary formalities to transfer these
properties.
9. That all the matters pending to any court of
law or legal proceedings (if any) by or through any
of their family members will be taken back and any
such legal proceeding in future with respect to
aforesaid properties shall stand null & void.
10. That if any dispute arises in future, all the
parties will appoint Arbitrator with mutual
consent and decision of Arbitrator will be
binding on all the parties.
All the parties joined their hands on this 3rd
day of December, 1997 with full sense and sound
mind before the witnesses.
Sd. of Ram Gopal Runthala (applicant’s husband
and now deceased)
Sd. of Suresh Kumar Runthala- Non-applicant No.1
Note:- Two copies of this Agreement have
been prepared and both the copies may be treated
as original.
(Emphasis supplied)
Applicant has filed the instant arbitration application for
appointment of an Arbitrator in view of Clause 10 of the Family
Settlement Agreement dated 3rd December, 1997 extracted
hereinabove, since the parties have failed to appoint an Arbitrator
with mutual consent.
3. The case of applicant is that applicant’s husband, namely,
Shri Ram Gopal Runthala (now deceased) and husband of non-
applicant No.2, namely, Shri Suresh Kumar Runthala (non-
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applicant No.1 herein) were real brothers. Two immovable
properties; (i) Plot No.18, Hathi Babu Marg, Kanti Nagar, Jaipur
(property in question herein) and (ii) Plot No.9B, Purohit Ji Ka
Bag, Jaipur were purchased through two different sale deeds in
the joint name of their respective wives i.e. applicant and non-
applicant No.2 and both were co-owners in ratio of 50% - 50% in
both the immovable properties. Since the applicant and her
husband used to reside in Meghalaya, a power of attorney dated
14.02.1985 was issued by the applicant in favour of her husband’s
brother i.e. non-applicant No.1 herein, to take care of the affairs
of the properties situated at Jaipur but non-applicant No.1,
misused his capacity of being power of attorney holder of
applicant and transferred her 50% ownership/ share in both the
properties to his wife non-applicant No.2 herein. For property No.
(i), sale agreement dated 20.02.1995 was executed by non-
applicant No.1 followed by registered sale deed dated 28.08.1995
and for property No.(ii), sale agreement dated 10.05.1995 was
executed by him followed by a registered sale deed dated
28.10.1995 and thereby 50% share of the applicant in both
properties was transferred by non-applicant No.1 in favour of his
wife i.e. non-applicant No.2 herein. According to applicant, such
transfer was made by Non-applicant No.1, in utter misuse of his
capacity as her sole power of attorney holder.
4. Further, the case of applicant is that thereafter, a “Family
Arrangement/ Settlement" was arrived at between the parties in
respect of all the joint properties and assets of family and with
consent of both brothers and their wives, a Family Settlement
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Agreement and MOU were arrived at between the parties and a
document under the nomenclature of "Family Arrangement" was
also entered into between parties on 3rd December, 1997.
5. It is the case of applicant that the applicant and non-
applicant No.2 were the consenting parties to this Family
Settlement Agreement, although both are non-signatory parties
and the Family Settlement Agreement was executed under the
signatures of their respective husbands only, who are party No.1
and 2 in this document of Family Settlement Agreement.
6. As per the document of “Family Arrangement”, more
particularly in paras 3 and 4, it was agreed between the parties
that the property No.(i) i.e. Plot No.18, Haathi Babu Marg Kanti
Nagar, Jaipur (property in question), which had been transferred
solely in the name of non-applicant No.2, will be transferred to the
first party, who is applicant’s husband or in the alternative will be
sold with his consent and property No.(ii) i.e. 9B, Purohit Ji Ka
Bagh, Jaipur, which too had been transferred in the sole name of
non-applicant No.2, shall remain continue with the second party
i.e. non-applicants No.1 and 2 or and the first party or his family
members will have no right, title and claim over this property.
7. The applicant has further pleaded that after execution of the
document of “Family Arrangement” on 3rd December, 1997,
applicant’s husband passed away on 16.04.2016 and till then,
Clause 3 of the Family Settlement Agreement was not acted upon
and property was too intact, however thereafter, non-applicants
No.1 and 2 intended to sell property No.(i) indicated in Clause 3 of
the Family Settlement Agreement to a third party apparently,
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taking benefit of the fact that the applicant's husband has passed
away and the property stands in the sole name of non-applicant
No.2, whereas according to Clause 3 of the Family Settlement
Agreement, this property was required to be transferred by non-
applicants No.1 and 2 in favour of applicant’s husband or to be
sold with his consent only. Since there was an arbitration
agreement to settle the dispute by Arbitrator as contained in
Clause 10, therefore, in such circumstances, applicant
immediately moved an application under Section 9 of the
Arbitration and Conciliation Act, 1996 before the Additional District
& Session Judge No.4, Jaipur, to restrain non-applicants No.1 and
2 for not transferring the property in question to any third party
without consent of applicant. It has further been pleaded inter alia
by the applicant that during the course of hearing of such
application, on 26.08.2022 non-applicants No.1 and 2 disclosed
that the property in question has already been transferred in the
name of their son, non-applicant No.3 herein, through a registered
document of declaration of gift deed dated 29.07.2021 and the
copy of such gift deed was produced before the Court on record on
26.08.2022.
8. It has further been pleaded and argued from the side of
applicant that the applicant, her husband and family have abided
with the terms of Family Settlement Agreement dated 3rd
December, 1997 and never interfered/ claimed any ownership and
possession of property No.(ii) i.e. 9B, Purohit Ji Ka Bagh, Jaipur,
which was agreed to be of non-applicants No.1 and 2 as per
Clause 4 of the Family Settlement Agreement, but the non-
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applicants No.1 and 2 have breached Clause 3 of the Family
Settlement Agreement, after death of applicant’s husband and
have transferred the property No.(i) i.e. Plot No.18, Haathi Babu
Marg, Kanti Nagar, Jaipur in favour of their son through a
registered Gift Deed dated 29.07.2021, which is clear violation of
Clause 3, therefore, after having knowledge about such violation
on 26.08.2022, a dispute has arisen between the parties in
respect of property No.(i) i.e. Plot No.18, Haathi Babu Marg, Kanti
Nagar, Jaipur and since there exists an arbitration agreement for
adjudication of such dispute, as contained in Clause 10 of the
Family Settlement Agreement, therefore, an Arbitrator is required
to be appointed to adjudicate and settle such dispute between the
applicant and non-applicants. It has been argued that undeniably,
Arbitrator has not been appointed by the mutual consent of
parties, hence, this Arbitration Application has been filed before
this Court.
9. Counsel for the applicant vehemently argued that since the
non-applicants No.1 and 2 have breached condition No.3 of the
Family Settlement Agreement and transferred property No.(i) i.e.
Plot No.18, Haathi Babu Marg, Kanti Nagar, Jaipur, in the name of
their son, hence, the applicant sent a legal notice dated
06.07.2023 to Non-applicants No.1, 2 and 3, invoking the
arbitration clause as contained in Clause 10 of the document of
Family Settlement Agreement and prayed for appointment of a
mutual Arbitrator to settle such dispute, but non-applicants
declined to appoint any Arbitrator. The copy of the legal notice
dated 06.07.2023 has been placed on record as Annexure-P7.
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10. It has further been pointed out that the legal notice was
addressed to all three non-applicants and same was acknowledged
and replied by and on behalf of all three non-applicants jointly
vide common reply notice dated 22.08.2023 (Annexure-P8)
through their Advocate, whereby the non-applicants have declined
to appoint a mutual Arbitrator as also denied to refer the dispute
for arbitration, alleging inter alia that the claim of applicant in the
property No.(i) i.e. Plot No.18, Haathi Babu Marg, Kanti Nagar,
Jaipur has turned to a dead claim. Therefore, the applicant has
filed the present arbitration application on 16.10.2023.
11. The Arbitration Application has been resisted by the non-
applicants and a joint reply has been filed, raising fundamentally
three objections;
(a) applicant has placed reliance on the Family
Settlement Agreement dated 3rd December, 1997
invoking Clause 10 of such agreement to appoint the
Arbitrator whereas applicant herself is not signatory to
this Family Settlement Agreement nor non-applicant
No.2 who was the sole owner of the property in
question, is signatory to this Family Settlement
Agreement; further the non-applicant No.3 to whom
the property has been transferred by non-applicant
No.2 through a registered Gift Deed dated
29.07.2021, is even not party to the Family
Settlement Agreement, therefore, the Arbitration
Agreement as incorporated in Clause 10 of this Family
Settlement Agreement is not binding and applicable to
applicant so also non-applicants No.2 and 3. As such
the applicant can-not seek appointment of an
Arbitrator on the basis of such Arbitration Agreement
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and same has no binding force against non-applicants
No. 2and 3.
(b) the claim put-forth by the applicant in the
property in question on the basis of Clause 3 of the
Family Settlement Agreement dated 3rd December
1997 has virtually turned into a dead claim by lapse
of time as much as the Arbitration Application too is
barred by limitation.
(c) the document of Family Settlement Agreement
dated 3rd December, 1997 is neither a registered
instrument nor sufficiently stamped, therefore, being
inadmissible in evidence, can-not be relied upon
before the Court of law for appointment of an
Arbitrator on the basis of the Arbitration Agreement,
incorporated in Clause 10 of such Family Settlement
Agreement.
12. OBJECTION (a):-
Coming to objection (a) of the non-applicants, at the first
instance, the objection seems to be appealing and persuasive for
the reason that admittedly, applicant and non-applicant No.2 are
not signatory party to the document of Family Settlement
Agreement, which incorporates arbitration agreement in its Clause
10. Moreover, non-applicant No.3 is not even party to this
document, therefore, obviously, a question arises as to how the
arbitration agreement can be held applicable to the non-signatory
party as well as non-party to the arbitration agreement, but after
thorough analytical discussion of facts and law, this Court finally
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reaches to the conclusion that the objection is without any
substance, for the following reasons:-
12.1.It is an established proposition of law that an arbitration
agreement is a contractual undertaking by two or more parties to
resolve their disputes through the process of arbitration. Consent
of parties to the arbitration agreement forms the corner stone of
arbitration and arbitration agreement should reflect that the
parties have consented to submit their dispute to the arbitration.
Such consent and intention of parties, to refer the dispute to the
arbitration, may be gathered by considering the attending
circumstances, conducts and other ancillary acts and deeds of the
parties expressly or impliedly. Section 2 (h) of the A & C Act, 1996
defines "Party" which means a party to an arbitration agreement.
Section 7 of the A & C Act, 1996 defines an arbitration agreement.
One of the foremost requirement of Section 7 is that an arbitration
agreement has to be in writing although such agreement may be
embodied in a document, an exchange of communications
including in electronic form, or in an exchange of statements of
claim and defence. For ready reference, Section 7 is being
extracted hereunder:-
"7. Arbitration agreement.—
(1) In this Part, “arbitration agreement” means an
agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise
between them in respect of a defined legal relationship,
whether contractual or not.
(2) An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a
separate agreement.
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(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is
contained in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other
means of telecommunication [including communication
through electronic means] which provide a record of
the agreement; or
(c) an exchange of statements of claim and
defence in which the existence of the agreement
is alleged by one party and not denied by the
other.
(5) The reference in a contract to a document
containing an arbitration clause constitutes an
arbitration agreement if the contract is in writing and
the reference is such as to make that arbitration clause
part of the contract."
(Emphasis supplied)
12.2.In a recent judgment, the Hon'ble Supreme Court had an
occasion to deal with the issue as to "Parties to the Arbitration
Agreement" in case of COX AND KINGS LIMITED VS. SAP
INDIA PRIVATE LIMITED AND ANOTHER:[(2024)4 SCC 1].
In this case, the Hon'ble Supreme Court, interpreted the group of
companies doctrine elaborately in context to the arbitration law in
India and concluded that in the definition of "Parties" under
Section 2 (1) (h) r/w Section 7 of the A & C Act, 1996 includes
both the signatory as well as non-signatory parties. The Hon'ble
Supreme Court held and observed that Section 2 (h) r/w Section 7
of the A & C Act does not expressly require the "Parties" to be a
signatory to an arbitration agreement or the underlying contract
containing the arbitration agreement. It has also been held and
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observed that an arbitration agreement may be entered into
between the parties in any form, for example orally or tacitly, as
long as the content of the agreement is recorded in writing. Thus,
the concept of law has clarified in explicit terms that law
eliminates the requirement of the signature of the parties to the
arbitration agreement. For ready reference, it will be apropos to
reproduce the relevant portion of the judgment dealing with the
clinching issue and para No.70, 71, 74, 83, 84 so also final
conclusion as recorded in para No.170, 170.1 to 170.5, 170.12
and 170.13 are being extracted hereunder:-
"70. The general method to figure out the parties to an
arbitration agreement is to look for the entities who are
named in the recitals and have signed the agreement.
The signature of a party on the agreement is the most
profound expression of the consent of a person or
entity to submit to the jurisdiction of an Arbitral
Tribunal. However, the corollary that persons or entities
who have not signed the agreement are not bound by it
may not always be correct. A written contract does not
necessarily require that parties put their signatures to
the document embodying the terms of the agreement.
Therefore, the term “non-signatories”, instead of the
traditional “third parties”, seems the most suitable to
describe situations where consent to arbitration is
expressed through means other than signature. A non-
signatory is a person or entity that is implicated in a
dispute which is the subject-matter of an arbitration,
although it has not formally entered into an arbitration
agreement. The important determination is whether
such a non-signatory intended to effect legal relations
with the signatory parties and be bound by the
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arbitration agreement. There may arise situations
where persons or entities who have not formally signed
the arbitration agreement or the underlying contract
containing the arbitration agreement may intend to be
bound by the terms of the agreement. In other words,
the issue of who is a “party” to an arbitration
agreement is primarily an issue of consent.
71. Section 2 of the Contract Act provides that when a
person signifies their willingness to do or to abstain
from doing anything, with a view to obtaining the
assent of that other to such act or abstinence, is said to
make a proposal. The proposal is said to be accepted
when the person to whom the proposal is made
signifies their assent. A proposal becomes promise
upon acceptance. Every promise and every set of
promises, forming the consideration for each other, is
an agreement. Importantly, Section 9 provides that a
promise is said to be express if the proposal or
acceptance of any promise is made in words, while a
promise is said to be implied if such proposal or
acceptance is “made otherwise than in words.” Thus, a
contract may either be express or implied.
74. Section 2(h) of the Arbitration Act defines a
“party” to mean a party to an arbitration agreement.
Section 7 defines an arbitration agreement to mean an
agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise
between them in respect of a “defined legal
relationship.” Section 7 requires that an arbitration
agreement has to be in writing. Section 7 indicates the
circumstances in which it is regarded as an agreement
in writing. Such an agreement may be embodied in a
document, an exchange of communications, including
in the electronic form, or in a statement of claim which
is not traversed in the defence. In Vidya Drolia v.
Durga Trading Corporation [(2021)2 SCC 1], this
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Court observed that a legal relationship means a
relationship which gives rise to legal obligations and
duties, and confers a right. Such a right may be
contractual or non-contractual. In case of a non-
contractual legal relationship, the cause of action arises
in tort, restitution, breach of statutory duty, or some
other non-contractual cause of action. Thus, the
legislative intent underlying Section 7 suggests that
any legal relationship, including relationships where
there is no contract between the persons or entities,
but whose actions or conduct has given rise to a
relationship, could form a subject matter of an
arbitration agreement under Section 7. This approach is
in line with the observations of Lord Hoffman in Fili
Shipping Co. Ltd. v. Premium Nafta Products Ltd.
[(2007) Bus LR 1719] where it was observed that:
“13. ...the construction of an arbitration clause
should start from the assumption that the parties, as
rational businessmen, are likely to have intended any
dispute arising out of the relationship into which they
have entered or purported to enter to be decided by
the same tribunal.”
(emphasis supplied)
83. Reading Section 7 of the Arbitration Act in view of
the above discussion gives rise to the following
conclusions: first, arbitration agreements arise out of a
legal relationship between or among persons or entities
which may be contractual or otherwise; second, in
situations where the legal relationship is contractual in
nature, the nature of relationship can be determined on
the basis of general contract law principles; third, it is
not necessary for the persons or entities to be
signatories to the arbitration agreement to be bound by
it; fourth, in case of non-signatory parties, the
important determination for the courts is whether the
persons or entities intended or consented to be bound
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by the arbitration agreement or the underlying contract
containing the arbitration agreement through their acts
or conduct; fifth, the requirement of a written
arbitration agreement has to be adhered to strictly, but
the form in which such agreement is recorded is
irrelevant; sixth, the requirement of a written
arbitration agreement does not exclude the possibility
of binding non-signatory parties if there is a defined
legal relationship between the signatory and non-
signatory parties; and seventh, once the validity of an
arbitration agreement is established, the court or
tribunal can determine the issue of which parties are
bound by such agreement.
84. It is presumed that the formal signatories to an
arbitration agreement are parties who will be bound by
it. However, in exceptional cases persons or entities
who have not signed or formally assented to a written
arbitration agreement or the underlying contract
containing the arbitration agreement may be held to be
bound by such agreement. As mentioned in the
preceding paragraphs, the doctrine of privity limits the
imposition of rights and liabilities on third parties to a
contract. Generally, only the parties to an arbitration
agreement can be subject to the full effects of the
agreement in terms of the reliefs and remedies because
they consented to be bound by the arbitration
agreement. Therefore, the decisive question before the
courts or tribunals is whether a non-signatory
consented to be bound by the arbitration agreement.
To determine whether a non-signatory is bound by an
arbitration agreement, the courts and tribunals apply
typical principles of contract law and corporate law. The
legal doctrines provide a framework for evaluating the
specific contractual language and the factual settings to
determine the intentions of the parties to be bound by
the arbitration agreement.
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170. In view of the discussion above, we arrive at the
following conclusions:
170.1. The definition of “parties” under Section 2(1)(h)
read with Section 7 of the Arbitration Act includes both
the signatory as well as non-signatory parties;
170.2. Conduct of the non-signatory parties could be
an indicator of their consent to be bound by the
arbitration agreement;
170.3. The requirement of a written arbitration
agreement under Section 7 does not exclude the
possibility of binding non-signatory parties;
170.4. Under the Arbitration Act, the concept of a
"party" is distinct and different from the concept of
"persons claiming through or under" a party to the
arbitration agreement;
170.5 The underlying basis for the application of the
group of companies doctrine rests on maintaining the
corporate separateness of the group companies while
determining the common intention of the parties to
bind the non-signatory party to the arbitration
agreement;
170.12. At the referral stage, the referral court should
leave it for the Arbitral Tribunal to decide whether the
non-signatory is bound by the arbitration agreement;
and
170.13. In the course of this judgment, any
authoritative determination given by this Court
pertaining to the group of companies doctrine should
not be interpreted to exclude the application of other
doctrines and principles for binding non-signatories to
the arbitration agreement."
Thus, a defined legal relationship between the parties to the
arbitration agreement is must to make the arbitration agreement
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applicable and binding upon them irrespective of signatory or non-
signatory party to the arbitration agreement.
12.3. In order to ascertain the accrual of a "defined legal
relationship" between the applicant and non-applicants, if any,
arose pursuant to the Family Settlement Agreement dated 3rd
December, 1997, on a closer and deeper scrutiny of the factual
matrix, this Court finds that indisputably, two immovable
properties; properties No.(i) and (ii) including the property in
question herein as property No.(i) were purchased in the joint
name of applicant and non-applicant No.2 and both had 1/2 - 1/2
share therein, but husband of non-applicant No.2, being a power
of attorney holder of applicant, transferred 1/2 share of applicant
in favour of his wife i.e. non-applicant No.2 and thus, both
properties in document came in the name of non-applicant No.2
alone. Thereafter, it appears that a "Family Arrangement" in
respect of all assets and properties of family including property
No.(i) and (ii), the terms and conditions of the "Family
Arrangement" arrived at between family members and were
reduced to writing in document dated 3rd December, 1997 under
the nomenclature of "Family Arrangement". In this document,
applicant, her husband and non-applicant No.2 as also her
husband, all were made party and in respect of property No.(i)
and (ii), it was agreed between the parties that property No.(i) will
be transferred to the first party and property No.(ii) shall remain
with the second party as much as first party will have no right,
title and claim over property No.(ii). It is true that the document
incorporating the terms and conditions of Family Settlement
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Agreement was signed by husband of applicant and husband of
non-applicant No.2 only, it means by both the brothers, and was
not signed neither by applicant nor by non-applicant No.2, yet
both have not questioned the terms and conditions of the Family
Arrangement.
As far as applicant is concerned, she clearly admits execution
and existence of the document of Family Settlement Agreement,
which is admittedly signed by her husband as first party.
Applicant's husband, undeniably has passed away after execution
of said agreement. Non-applicant No.1, is also another signatory
to the agreement and admits its execution. Non-applicant No.2
and 3, who have filed joint reply to the arbitration application
along with non-applicant No.1, have not questioned the execution
and existence of the Family Settlement Agreement but what has
been disputed by them that the non-applicant No.2 never signed
the agreement and non-applicant No.3 is not even party to the
agreement. The legal proposition has already been concluded
hereinabove that mere signature of a party to the agreement, is
not a conclusive proof and the non-signatory party may also be
bound by such agreement. The requirement of signature of a
party to the agreement is not essential and may be eliminated
depending on the facts and situation of a case. Nevertheless
establishment of a legal relationship is essential element, which
may be developed expressly or impliedly and consent of party
may be inferred and concluded orally as also by conduct or by
other means. In the present case, what has been observed by this
Court is that non-applicant No.2 may not have put her signature
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on the Family Settlement Agreement and only her husband, who is
non-applicant No.1 put his signature but it has not been pleaded
by non-applicant No.2, in the reply that her husband (non-
applicant No.1) put his signature to the Family Settlement
Agreement on her behalf as well without her consent and
knowledge as much as it is noteworthy that non-applicant No.2
has not denied the execution of the Family Settlement Agreement
nor has questioned the factum of arriving at the "Family
Arrangement" in respect of all the assets and properties of the
family. It is also not the case of non-applicant No.2 at all that she
had any dispute or difference with her husband, rather a joint
reply has been filed. Admittedly, she is enjoying the benefits of
this "Family Arrangement" in respect of property No.(ii) from the
side of applicant, since applicant has not claimed her share in
property No.(ii). Thus, the implied and tacit consent of non-
applicant No.2, who is obviously a party to the Family Settlement
Agreement, can be concluded and inferred by her conduct.
Considering reply to the arbitration application as also to the legal
notice of applicant and all attending circumstances holistically, it is
hereby concluded that she is also one of the consenting party to
the arbitration agreement.
12.4 Thus, after scrutiny of the factual matrix and study of the
legal proposition, this Court finally reaches to the conclusion that
the applicant and non-applicant No.2, despite being non-signatory
to the arbitration agreement, are party to this arbitration
agreement and bound by the same.
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12.5. As far as non-applicant No.3 is concerned, he is natural son
of non-applicants No.1 and 2 and has been impleaded as party
herein only for the reason that he has acquired ownership rights
and interest in the property in question through registered
instrument of Gift Deed dated 29.07.2021 executed in his favour
by non-applicant No.2. Thus, non-applicant No.3, steps in shoe of
non-applicant No.2 and therefore, the arbitration agreement is
equally applicable on non-applicant No.3 as well, once it has been
held that the same is applicable and binding upon the non-
applicant No.2.
As a final conclusion, objection (a) raised by and on behalf of
non-applicants is hereby answered and decided against the non-
applicants and in favour of applicant. The applicant and non-
applicants may or may not be signatory to the arbitration
agreement yet are held to be parties to the arbitration agreement
and the arbitration agreement incorporated in Clause 10 of the
Family Settlement Agreement dated 3rd December, 1997 is
applicable and binding on all the parties of this arbitration
application.
13. OBJECTION (b):-
In respect of objection (b) that the claim put-forth by the
applicant in property No.(i) on the basis of condition No. 3 of the
Family Settlement Agreement dated 3rd December, 1997, has
virtually been rendered a dead claim, with lapse of time. Firstly,
this Court is of the considered opinion that the issue of limitation
requires thorough scrutiny and examination of facts and law as
much as such can be dealt with finally by the Arbitration Tribunal
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itself and the High Court, at the stage of referring the dispute to
the Arbitration, is not required to enter into such issue of
limitation. Recently, when the similar issue came up for
consideration before the Hon'ble Apex Court in case of Arif Azim
Co. Ltd. Vs. Aptech Ltd. [(2024) 5 SCC 313], where the
question posed before the Apex Court as to whether the claims
sought to be arbitrated by the petitioner is ex facie barred by
limitation, and if so, whether the Court may refuse to refer them
to arbitration? was replied by the Apex Court and which has been
concluded in para 92 of the Judgment, which reads as under:-
"92. Thus, from an exhaustive analysis of the position
of the law on the issues, we are of the view that while
considering the issue of limitation in relation to a
petition under Section 11(6) of the 1996 Act, the
Courts should satisfy themselves on two aspects by
employing a two-pronged test-first, whether the
petition under Section 11(6) of the 1996 Act is barred
by limitation; and secondly, whether the claims sought
to be arbitrated are ex facie dead claims and are thus
barred by limitation on the date of commencement of
arbitration proceedings. If either of these issues are
answered against the party seeking referral of disputes
to arbitration, the Court may refuse to appoint an
Arbitral Tribunal."
Thus, by the aforesaid judgment, it stands clear that a prima
facie analysis of the issue of limitation may be done by the referral
court.
14. In this way, on prima facie scrutiny of the case in hand,
reveals that no specific period or date was fixed in Clause 3 of the
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Family Settlement Agreement to perform the agreement in respect
of transfer of property No.(i) by second party in favour of first
party, therefore, the limitation for seeking specific performance of
such clause, should start when the applicant got noticed that this
clause has been breached or violated as much as its performance
has been refused. Article 54 of the Limitation Act, 1963, comes in
play to govern the point of limitation on the subject matter of
dispute. Further, the other facts, which have emerged from the
record, go to show that after death of applicant's husband on
16.04.2016, non-applicants No.1 and 2 disclosed the factum of
transfer of property No.(i) in favour of their son i.e. non-applicant
No.3 through registered Gift Deed dated 29.07.2021. This
disclosure came to the knowledge of applicant on 26.08.2022,
during the course of proceedings of application under Section 9 of
A & C Act, 1996 filed by the applicant against non-applicants No.1
and 2. Hence, thereafter only, the cause of action for seeking
specific performance of condition No.3 has arisen to the applicant,
due to committing a clear breach of Clause 3 of the Family
Settlement Agreement by the non-applicants No.1 and 2.
Therefore, prima facie at the referral stage, it may not be held
that the claim of applicant on the subject matter is a dead claim,
however, the Arbitration Tribunal shall be free to render its final
finding on the issue of limitation without being biased by prima
facie view of this Court.
15. As far as limitation for filing an arbitration application is
concerned, in recent judgment of the Apex Court in case of Arif
Azim Co. Ltd. (supra), it has been held that the limitation period
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for filing a petition under Section 11 (6) of the A & C Act, 1996,
can only commence once a valid notice invoking arbitration has
been sent by the applicant to the other party, and there has been
a failure or refusal on the part of the other party in complying with
the requirements mentioned in such notice. It has also been held
that by virtue of Section 137 of the Limitation Act, 1963, limitation
for filing an Arbitration Application is three years. Thus, on the
factual scrutiny of the present case made hereinabove, the
Arbitration Application has been filed well within limitation period
of three years, after serving the legal notice dated 06.07.2023 and
on refusal by the non-applicants to appoint the Arbitrator.
Accordingly, the objection (b) raised by non-applicants
stands turned down and same is hereby rejected.
16. OBJECTION (c):-
This objection has been taken on record only for the purpose
of rejection and although during the course of arguments, counsel
for the non-applicants too does not dispute that the objection does
not survive in the light of conclusion and exposition of law,
expounded by the Hon'ble Apex Court in a recent judgment
delivered by the Constitutional Bench of seven judges in case of
In Re: Interplay Between Arbitration Agreements Under
The Arbitration and Conciliation Act 1996 And the Indian
Stamp Act, 1989 [AIR 2024 SC 1]. It is suffice to extract the
relevant conclusion of the Apex Court on the issue of admissibility
of the document incorporating the arbitration agreement, on the
issue of admissibility of document in evidence for want of
registration or insufficient stamping;
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c. An objection as to stamping does not fall for
determination under Sections 8 or 11 of the Arbitration
Act. The concerned court must examine whether the
arbitration agreement prima facie exists;
d. any objections in relation to the stamping of the
agreement fall within the ambit of the arbitral tribunal;
Therefore, objection (c) raised by the non-applicants is
hereby out-rightly rejected.
17. The High Court being a referral Court, while exercising its
powers under Section 11 of the A&C Act, 1996, is expected to look
into the matter as to existence of an arbitration agreement
between parties in view of Clause 11(6A) of the A&C Act,1996
which reads as under:-
“(6A) The Supreme Court or, as the case may be, the
High Court, while considering any application under
sub-section (4) or sub-section (5) or sub-section (6),
shall, notwithstanding any judgment, decree or order
of any Court, confine to the examination of the
existence of an arbitration agreement.”
18. A seven judges’ Bench of the Hon’ble Supreme Court in a
recent judgment dated 13th December 2023, delivered In Re:
Interplay Between Arbitration Agreements Under The
Arbitration and Conciliation Act 1996 And the Indian Stamp
Act, 1989 [AIR 2024 SC 1], has observed in Para Nos.152 &
154 that the omission of Section 11(6A), through Arbitration and
Conciliation (Amendment) Act, 2019 (Act 33 of the 2019), has not
been notified in the official gazette and therefore, the said
provision continues to remain in full force. In this judgment,
placing reliance on previous judgments of the Apex Court
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delivered in cases of Duro Felguera, S.A. Vs. Gangavaram Port
Limited [(2017) 9 SCC 129] and Mayavati Trading Private
Limited Vs. Pradyuat Deb Burman [(2019 8 SCC 714], it has
been held that the legislature confined the scope of reference
under Section 11(6A) to the examination of existence of an
arbitration agreement. It has been held that the referral Court
only need to consider one aspect to determine the existence of an
arbitration agreement- whether underlying contract contains
arbitration agreement, which provides for arbitration pertaining to
the dispute, which has been arisen between parties to the
agreement. Thus, this Court has to rely upon the provision of
Section 11(6A) of the A & C Act, 1996 which has been extracted
hereinabove.
19. It may be noted that Section 11(6A) of the A & C Act, 1996
was added by the Legislature by introducing the Arbitration and
Conciliation (Amendment) Act, 2015 (Act 3 of 2016), and there
was an impression that the provision of Section 11(6A) has been
omitted vide Arbitration and Conciliation (Amendment) Act, 2019
(Act 33 of the 2019), but the present prevailing position about
such proposition of law, has been clarified by the seven judges’
Bench of the Apex Court in the above referred judgment recently
delivered on 13th December 2023.
20. The final out come of the afore-referred discussion is that the
instant Arbitration Application deserves to be allowed and same
stands allowed.
21. This Court appoints Hon’ble Mr. Justice Dinesh Maheshwari,
Former Judge, Supreme Court of India, Mob. Nos.9485006617 &
8130740617, Address:- 103, Damodar Pearl Elegance Society, 16,
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Dusadon Ka Bagh, Near Diggi Palace, Tonk Road, Jaipur E-mail:-
pstojdmaheshwari@gmail.com as sole Arbitrator to adjudicate and
settle the dispute between parties in accordance with the
provisions of the Arbitration and Conciliation Act, 1996.
22. The appointment of the Sole Arbitrator is subject to the
declarations being made under Section 12 of the Arbitration &
Conciliation Act, 1996 with respect to independence and
impartiality, and the ability to devote sufficient time to complete
the arbitration within the prescribed period.
23. The arbitration fee of the Sole Arbitrator shall be payable in
accordance with the provisions contained in the Manual of
Procedure for Alternative Dispute Resolution, 2009 as amended by
the Manual of Procedure for Alternative Dispute Resolution
(Amendment), 2017 vide notification dated 23.03.2017 read with
4th Schedule appended to the Act of 1996 or as agreed by the
parties with consultation of Arbitrator.
24. The Registry is directed to intimate Arbitrator Hon’ble Mr.
Justice Dinesh Maheshwari, Former Judge, Supreme Court of
India, for his approval and consent to act as Arbitrator.
25. Parties are at liberty to raise all other issues before the
Arbitrator, which shall be considered in accordance with law.
26. Since as per Section 29A of the Arbitration and Conciliation
Act, 1996, the arbitration proceedings are required to be
concluded within scheduled time as stipulated therein, it is
expected from the parties to appear before the Arbitrator on
07.10.2024 or any other date as informed by the Arbitrator to
parties or agreed between parties with the consent of Arbitrator,
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and further parties shall provide their respective E-mail/ Contact
Number/ Mobile Number as also of their authorized
representatives/lawyers, appearing on their behalf before the
Arbitration Tribunal, in order to facilitate the Arbitrator to send
information to the parties, whenever required. The information
send by the Arbitrator, on such address/ E-mail/ cellphone of the
parties/ their authorized representatives/lawyers, shall be treated
as sufficient unless same is not changed.
27. The Arbitration Application stands allowed.
(SUDESH BANSAL),J
TN/23
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