Chowgule Lavgan Shiprepair Pvt. ... vs Marine Infrastructure (Goa) Pvt. ...
2023 Latest Caselaw 5103 Bom

2023:BHC-OS:4479

                                                                     17-IAL-35755-22.DOC


                                                                                 Sayali Upasani


                      IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                      ADMIRALTY AND VICE ADMIRALTY JURISDICTION
                            IN ITS COMMERCIAL ADMIRALTY DIVISION


                           INTERIM APPLICATION (L) NO.35755 OF 2022
                                                     IN
                        COMMERCIAL ADMIRALTY SUIT NO. 37 OF 2022


              Chowgule Lavgan Shiprepair Pvt. Ltd.                    ...Applicant/Org.
                                                                        Defendant No. 1
              In the Matter Between

              Marine Infrastructure (Goa) Pvt. Ltd.                              ... Plaintiff

                                Vs.
              Chowgule Lavgan Shiprepair Pvt. Ltd and                       ...Defendants
              Others



             Mr. Shyam Kapadia a/w Mr. Naishadh Bhatia i/b Crawford
             Bayley and Co., for Applicant.
             Mr. Yadunath Bhargavan a/w Mr. Shrishty Punjabi with mr.
             Rahul Yadav, Ms. Prachi Gharat, Ms. Sanjana Muttath i/b
             Rex Legalis, for Orginal Plaintiff.
             Ms. Usha Rahi i/b Mr. Dinesh Gupta, for Defendant No. 2.
             Ms. Ayesha Qazi i/b Mulla and Mulla and CBC, for
             Defendant No. 3.
                                                           CORAM:- N. J. JAMADAR, J.

RESERVED ON:- 31st JANUARY, 2023 PRONOUNCED ON:- 7th JUNE, 2023

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ORDER:-

1) The applicant-defendant No.1 has preferred this

application under Section 8 of the Arbitration and Conciliation

Act 1996 ("the Act 1996") to refer the parties to arbitration as

per the Arbitration Agreement purportedly contained in Clause

22 of the Standard Terms and Conditions of the contract, and

allied reliefs.

2) Marine Infrastructure (Goa) Pvt. Ltd. (Marine

Infrastructure), the plaintiff is the company registered under

the Companies Act, 1956 ("the Act 1956"). Plaintiff is the

registered owner of a Floating Crane 'F.C. Donna Paula' (IMO

No.8655801), ("the Vessel"). Chowgule Lavgan Shiprepair Pvt.

Ltd., is a private limited company. It also deals in the business

of Ship repairs. The defendant No.2 is the insurer for

defendant No.1. Defendant No.3 is the insurer for the plaintiff.

3) On 5th September 2021, the Vessel was delivered to

defendant No.1 for dry docking in order to ensure its sea-

worthiness. On 6th September 2021, the Vessel was taken to

the Ship lift facility. Plaintiff asserts, during the process of

hauling up the Vessel for inspection and repairs by defendant

No.1, the Aft portion of the ship lift platform collapsed and

Vessel was dislodged while being lifted by dry-dock lifting

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system. Asserting that the plaintiff has repeatedly pursued the

defendant No.1 to furnish the requisite information and

documents and also take responsibility for the damage

suffered by the Vessel and salvage costs and upon refusal of

defendant No,1 to part with the documents and take

responsibility for the damage and make good the loss, Marine

Infrastructure has instituted the suit seeking directions to

defendant No.1 to provide the documents to the Surveyors,

Insurers and the plaintiff, and to direct the defendant Nos.1 to

3 to jointly and severally pay the plaintiff a sum aggregating to

Rs.39,44,12,667/-, towards the expenses incurred by the

plaintiff and the loss of revenue, to direct defendant No.3 to

carry out detailed investigation, and also for damages to the

tune of Rs.3,00,00,000/-.

4) Defendant No.1 has taken out this application asserting

that on 25th June 2021, the defendant No.1 had provided

quotation for the dry docking of the Vessel in accordance with

the applicant's terms and conditions. On 26th August 2021,

Marine Infrastructure provided signed and stamped quotation

and applicant's Standard Terms and Conditions. Thus, a valid

and concluded contract came to be executed between

Chowgule Lavgan Shiprepair and Marine Infrastructure.

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Clause 22.1 of the Standard Terms and Conditions provides for

a dispute resolution machinism of Arbitration in accordance

with the Act, 1996, by Arbitral Tribunal consisting of 3

arbitrators.

5) Chowgule Lavgan Shiprepair claims Marine Infrastructure

has instituted this suit suppressing the said contract, in

general, and arbitration clause, in particular. In view of the

said arbitration clause, according to the Chaughule Ship

Repairs, the dispute between the parties is required to be

peremptorily preferred to arbitration. There is a valid and

subsisting agreement. Plaintiff being a party to the arbitration

agreement has filed an action before this Court and the

subject matter of the action is the same as the subject matter

of the arbitration agreement. Since the defendant No. 1 has

filed the application under Section 8 of the Act, 1966, before

submitting its statement on the substance of the dispute,

according to defendant No. 1, all the conditions for reference of

the dispute to arbitration are fulfilled. Hence, this application.

6) Plaintiff has resisted the application by filing an affidavit-

in-reply. It is denied that there was suppression on the part of

the plaintiff, of the arbitration agreement. According to

plaintiff, even if the alleged arbitration agreement would have

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been disclosed, Section 8 of the Act, 1966, would have no play

in the facts of the case at hand. Plaintiff claims that the

plaintiff has sought reliefs against defendant Nos. 1 to 3 jointly

and severally. Adverting to the prayer clauses in the plaint, the

plaintiff asserts there are some reliefs which are sought

against defendant No. 3 alone.

7) At the highest, according to the Plaintiff, an arbitration

agreement can be spelled out from the correspondence only

between the defendant No. 1 and plaintiff. Defendant Nos. 2

and 3 are not the parties to the said arbitration agreement.

Thus, there is no arbitration agreement between the plaintiff

and defendant Nos. 2 and 3. At best, the subject matter of the

suit is only partly covered under the arbitration agreement. It

would thus not amount to a "matter" which can be said to be a

subject matter of arbitration agreement.

8) In substance, the plaintiff asserts where a suit is

commenced as to the subject matter which lies outside the

arbitration agreement between the parties and is also between

some of the parties who are not parties to the agreement, there

is no question of application of Section 8 of the Act, 1966. The

plaintiff further asserts that even if the dispute between the

plaintiff and defendant No. 1 is referred to arbitration, it

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cannot be proceeded with as neither the defendant Nos. 2 and

3 can be added as parties nor any reliefs as sought in the

instant suit can be sought against them in the arbitration.

9) Defendant Nos. 2 and 3 have also resisted the application

by filing an affidavit-in-reply. Defendant Nos. 2 and 3 contend

that they have been unnecessary dragged into the dispute

between the plaintiff and defendant No. 1. Defendant Nos. 2

and 3 are neither necessary nor proper parties to the suit.

Defendant Nos. 2 and 3 are stated to be not parties to any

arbitration agreement and, therefore, they can not be forced to

arbitrate.

10) In the light of the aforesaid pleadings, I have heard Mr.

Kapadia, the learned Counsel for the applicant-defendant No.

1, Mr. Bhargavan, the learned Counsel for the plaintiff, Ms.

Ushnani, the learned Counsel for the defendant No. 2 and Ms.

Ayesha, the learned Counsel for the defendant No. 3, at some

length.

11) The learned Counsel took the Court through the

pleadings, application for reference and affidavits-in-reply and

documents on record.

12) Mr. Kapadia laying emphasis on the comprehensive

arbitration clause contained in the terms and conditions

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appended to the quotation, which has been accepted on behalf

of the plaintiff, would submit that there is a clear and explicit

arbitration agreement. Mr. Kapadia would submit that the

device of impleading an unnecessary party to the suit with a

view to frustrate an arbitration clause has been repelled by the

courts time and again. In the case at hand, according to Mr.

Kapadia, there is no averment regarding joint and several

liability of the defendant Nos. 2 and 3 along with defendant No.

1. The cause of action which the plaintiff, if at all may have, is

distinct qua the alleged wrongdoer and the insurer. By no

stretch of imagination, the defendant No. 1, on one part, and

defendant Nos. 2 and 3, on the other part, can be said to be

joint tort feasors. Impledement of defendant Nos. 2 & 3 as

party defendants to the suit is clearly with a design to defeat

the arbitration agreement. Such a device does not deserve to

be countenanced lest the object of the Act, 1966 would be

frustrated, urged Mr. Kapadia.

13) To lend support the aforesaid submissions, Mr. Kapadia

placed a strong reliance on the judgment of this Court in the

case of JSW Steel Ltd Vs. JFE Shoji Trade Corporation and

Others1. In the said case, this Court had referred to the

1 2009 SCC Online Bom 2069

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decision of the Andhra Pradesh High Court in the case of M/s.

Srivenkateswara Constructions and Others Vs. The Union of

India2, wherein it was observed that in order to circumvent an

Arbitration Clause, a plaintiff adds some unnecessary parties

to the suit and, yet, the court would be justified in granting

stay of proceedings under section 34 of Indian Arbitration Act,

1940.

14) Mr. Kapadia also placed reliance on a judgment of this

court in the case of Taru Meghani Vs. Shree Tirupati

Greenfield3, and a judgment of the learned single judge of

Calcutta High Court in the case of Lindsay International

Private Limited and Others Vs. Laxmi Niwas Mittal and

Others4, wherein the judgment of this Court in the case of

Taru Meghani (supra) was referred to.

15) In opposition to this, Mr.Bhargavan, would submit that by

present application, the defendant is, in effect, seeking

bifurcation of the causes of action and subject matter of the

suit, and, thereby force the plaintiff to maintain separate

actions against each of the defendants with the risk of the

entire claim of the plaintiff being frustrated. Inviting attention

2 AIR 1974 AP 278 3 AIR OnLine 2020 Bom 1867.

4 2022 SCC Online Cal 170

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to the court the surveyors report, "J. Basheer and Associates

Insurance Surveyors and Loss Assessors Private Limited" and

the written statement of defendant No. 3 an endeavour was

made to draw home the point that cause of action against

defendant Nos. 1 to 3 is indivisible. It was submitted that on

account of the failure on the part of the defendant Nos. 1 to

provide documents, the plaintiff risks losing of indemnity

furnished by defendant No. 3, the insurer.

16) Mr. Bhargavan strenuously countered the submissions on

behalf of the applicant-defendant No.1 that the defendant Nos.

2 and 3 are not the necessary parties. Mr. Bhargavan would

urge that the controversy sought to be raised by the defendant

No. 1 is squarely covered by the judgment of the Supreme

Court in the case of Sukanya Holdings (P) Ltd. Vs. Jayesh H.

Pandya and Another5. Reliance was also placed on the

judgment of the Supreme Court in the cases of Cox and Kings

Limited Vs. SAP India Private Limited and Another 6 and Vidya

Drolia and Others Vs. Durga Trading Corporation 7, to Bolster

up the submission that Sukanya Holdings (Supra) continues

to be good law even post 2016 amendment to the Arbitration

5 (2003) 5 SCC 531 6 (2022) 8 Supreme Court Cases 1 7 (2021) 2 Supreme Court Cases 1

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Conciliation Act, 1996.

17) Since the thrust of the objection to the reference of the

matter to arbitration revolves around the contention that the

subject matter partially lies outside the arbitration agreement

and is also between some of the parties (namely defendant

Nos. 2 and 3), who are not parties to the arbitration

agreement, primarily based on the enunciation of law in the

case of Sukanya Holdings (supra), it would be necessary to

make reference to the said decision. Before adverting to do so,

it may be apposite to first refer to the arbitration Clause

contained in the Standard Terms and Conditions.

18) Paragraph No. 22.1 under the caption Law and Arbitration

reads as under:-

22.1 This contract shall be governed by and construed in accordance with laws of India and any dispute arising out of for in connection with this contract shall be referred to arbitration in Mumbai in accordance with the Arbitration and Conciliation Act, 1996 or any statutory modification re- enactment thereof save to the extent necessary to give effect to the provisions of this Clause.

The arbitration shall be conducted in accordance with rules of Arbitration and Conciliation Act, 1996.

The reference shall be to three arbitrators a party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar dates of that notice and stating that it

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will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and give notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advice the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement.

Nothing herein shall prevent the parties agreeing in writing to vary these provisions to provide for the appointment of a sole arbitrator. "

19) Existence of the arbitration agreement, as such, can not

be put in contest. Nor it could be urged that the arbitration

agreement is not comprehensive enough to cover the disputes

that have arisen between the applicant-defendant No. 1 and

the plaintiff, in the least. If the aforesaid arbitration clause is

considered through the prism of the tests to be satisfied under

Section 8 of the Act, 1996, for reference of the dispute by the

judicial authority, it appears that all the conditions are exfacie

satisfied, in the sense that i) there is an arbitration clause in

the Standard Terms and Conditions, ii) the plaintiff being a

party to the agreement has brought an action in the court

against the other party to the contract-defendant No. 1, iii) the

subject matter of the action to the extent the plaintiff seeks

damages for the loss suffered by the plaintiff on account of the

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alleged damage to the Vessel while being lifted by dry-dock

lifting system, and the salvage costs and repairs, appears to be

the same as the subject matter of the arbitration agreement

and, iv) the defendant No. 1 has applied to the judicial

authority for referring the parties to arbitration before it has

submitted its first statement on the substance of the dispute.

20) I may hasten to add that, in view of the assertion on behalf

of the plaintiff that the claim in the instant suit covers

matters, which are outside the subject matter amenable to

arbitration and also against the parties, who are not parties to

the arbitration agreement, the controversy revolves around the

compliance on third requirement of the subject matter of the

action being the same as the subject matter of the arbitration

agreement. This aspect requires determination in the light of

the pronouncement in the case of Sukanya Holdings (supra),

on which the plaintiff places strong reliance, and the effect of

the 2016 amendment to the Arbitration and Conciliation Act,

1996.

21) In the case of Sukanya Holdings (supra), the Supreme

Court repelled the submission on behalf of the appellant

therein that a dispute which is covered by an arbitration

agreement between the parties, can be referred to arbitration,

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despite the suit having been filed claiming certain reliefs in

respect of a dispute, which was not subject matter of

arbitration, and it having been instituted against the persons

who were not parties to the arbitration agreement.

22) The Supreme Court observed, inter alia, as under:-

"12. For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part- I of the Act, Judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to he arbitrator. Further, the matter is not required to be referred to the arbitral Tribunal, if (1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that Arbitration Act does not oust the jurisdiction of the Civil Court to decide the dispute in a case where parties to the Arbitration Agreement do not take appropriate steps as contemplated under sub- sections (1) & (2) of Section 8 of the Act.

12. Secondly, there is no provision in the Act that when the subject matter of the suit includes subject matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitrators.

13. Thirdly, there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the arbitration

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agreement. As against this, under Section 24 of the Arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the Court may refer the same to arbitration provided that the same can be separated from the rest of the subject matter of the suit. Section also provided that the suit would continue so far as it related to parties who have not joined in such application.

15. The relevant language used in Section 8 is "in a matter which is the subject matter of an arbitration agreement", Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of 'a matter' which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words 'a matter' indicates entire subject matter of the suit should be subject to arbitration agreement."

(emphasis supplied)

23) In the case of Sukanya Holdings (supra), the Supreme

Court has held in clear and explicit terms that where a suit

has commenced as to "a matter", which lies outside the

arbitration agreement and is also between the some of the

parties who are not parties to the arbitration agreement, there

is no question of application of Section 8. The words, "a

matter" indicate that entire subject matter of the suit should

be subject to arbitration agreement. There is no provision for

splitting the cause or parties and referring the subject matter

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of the suit to arbitration.

24) Mr. Kapadia, the learned Counsel for the defendant No. 1

would urge that the aforesaid enunciation in the case of

Sukanya Holdings (supra), is required to be appreciated in the

light of the 2016 amendment to the Act, 1996. With the said

amendment, according to Mr. Kapadia there has been a

paradigm shift in the limits of judicial intervention. Mr.

Kapadia, submitted this position was explained by the learned

single Judge of Calcutta High Court in the case of Lindsay

International (supra), referring to a judgment of this Court in

the case of Taru Meghani (supra).

25) In the case of Taru Meghani (supra), I had an occasion to

consider the effect of import of the pronouncement of the

Supreme Court in the case of Sukanya Holdings (supra), to

determine the question whether the effect and force of the

arbitration agreement gets diluted on account of the inclusion

in the suit of a claim in respect of the dispute which is not

governed by the arbitration clause. An effort was made to

explore an answer to the said question in the light of the

legislative object contained in Section 8 of the Act, 1996, the

approach expected of the Court when an application for

reference under Section 8 of the Act, 1996, was to be decided

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and the provisions contained in Rule 3 and 6 of Order II of the

Code of Civil Procedure, 1908. The observations in paragraph

Nos. 17, 19, 21, 22 and 23, read as under:-

"....17. The question posed by the facts of the instant case, however, is required to be considered from the perspective of the legislative object contained in section 8 of the Act. It is trite that the language of section 8 is peremptory in nature. In the cases where there is an arbitration clause in the agreement, the Court is enjoined to refer the dispute to arbitration in terms of the arbitration agreement and the Court would have no jurisdiction to adjudicate the dispute after such an application seeking a reference under section 8 of the Act. Can this salutary object of the Act be defeated by adding a claim over and above the claim in respect of the matter which is squarely covered by arbitration agreement ?

19. The plaintiffs are within their rights in joining multiple causes of action against the defendants. In fact, the provisions contained in the Code envisage such joining of several causes of action by the plaintiffs against the defendants.

..........

21. On the one hand, the Code permits the plaintiff to unite multiple causes of action against the same defendants in one suit. On the other hand, in the event of possibility of embarrassment, delay or inconvenience, the court is empowered to direct separate trials or pass such other order as would advance the cause of justice. If a Court is empowered to order separate trial when it finds that the joinder of causes of action would embarrass or delay the trial or it is otherwise inconvenient, a fortiori a Court cannot be said to be divested of the authority to direct separation of causes of action when the joinder of causes of action, in pursuance of an enabling provision like Rule 3 has the effect of defeating the provisions of a special law, like section 8 of the Act.

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22. The aforesaid legal position is required to be considered coupled with the approach which is expected of the Court where an application seeking reference of the dispute to arbitration on the strength of an arbitration clause is preferred. Such an application, in substance, constitutes a plea of statutory exclusion of the jurisdiction of the court. A useful reference in this context can be made to the judgment of the Supreme Court in the case of Sundaram Finance Limited & Another Vs. T. Thankam 2, wherein the Supreme Court delineated the approach expected of the Civil Court in dealing with an application under section 8 of the Act, in Paragraph 13 :

"13 Once an application in due compliance of Section 8 of the Arbitration Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction. It should be to see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. Once it is brought to the notice of the court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statue, the civil court should first see whether there is ouster of jurisdiction in terms or compliance of the procedure under the special statute. The general law should yield to the special law - generalia specialibus non derogant. In such a situation, the approach shall not be to see whether there is still jurisdiction in the civil court under the general law. Such approaches would only delay the resolution of disputes and complicate the redressal of grievance and of course unnecessarily increase the pendency in the court."

23. In the light of the aforesaid exposition of the legal position, I am of the considered view that the broad submission on behalf of the plaintiffs that the

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reference of the dispute to arbitration as regards the first transaction, would entail the bifurcation of the subject matter of the suit and, thus, it is impermissible in law, cannot accepted in an unqualified manner. The submission is fraught with the danger of defeating an arbitration agreement by simply adding a cause of action the plaintiff may have against the defendants, which is not covered by the arbitration agreement. If such a course is readily accepted, it has the propensity to give a long leash to the plaintiff to circumvent the arbitration agreement by uniting a cause of action which is beyond the purview of the arbitration agreement. It would have the effect of denuding section 8 of the Act of its force and vigour. Such an interpretation would also derogate from the object which the Arbitration and Conciliation Act, 1996 is intended to achieve; of minimum judicial intervention where parties have agreed to arbitrate the dispute."

26) Mr. Bhargavan, the learned Counsel for the plaintiff

submitted that the aforesaid enunciation is of no assistance to

the defendant No. 1 as it was rendered in a completely distinct

fact situation. Mr. Bhargavan strenuously submitted that

enunciation in the case of Sukanya Holdings (supra) still

continues to be a good law, even post 2016 amendment, and

the pronouncements by the Supreme Court post the

amendment. A strong reliance was placed on the observations

of the Supreme Court in the case of Cox and Kings (supra),

wherein a reference was made to Sukanya Holdings (supra)

and the three Judge Bench decision of the Supreme Court in

the case of Vidya Drolia (supra), wherein also a reference was

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made to Sukanya Holdings (supra), to buttress the submission

that Sukanya Holdings (supra) still holds field.

27) The aspect of continued binding efficacy of Sukanya

Holdings (supra), was specifically considered by the Supreme

Court in the case of Emaar MGF Land Limited Vs. Aftab

Singh8. After adverting to the amendment brought about by

the 2016 Act, including amendment to Section 8, Supreme

Court noted the observations in paragraph Nos. 12, 13, 15 and

16 (extracted above) in the case of Sukanya Holdings (supra)

and held that the legislative change brought about by 2016

amendment was in clear departure of fulfilling various

conditions as noticed in the judgment in the cases of P. Anand

Gajapathi Raju and Others Vs. P.V.G. Raju (Dead) and Others 9

and Sukanya Holdings (supra). The observations in paragraph

No. 52 read as under:-

".......52. The law as declared by this Court in the above cases was in existence when the Law Commission submitted its 246th Report and Parliament considered the Bill, 2015 for Amendment Act, 2016. The Law Commission itself in its Report has referred to amendment in Section 8 in context of decision of this Court in Sukanya Holdings (P) Ltd. (supra), which was clearly noticed in the Note to Section 8 as extracted above. The words "notwithstanding any judgment, decree or order of the Supreme Court or any Court" added by

8 (2019) 12 SCC 751 9 (2000) 4 SCC 539

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amendment in Section 8 were with intent to minimise the intervention of judicial authority in context of arbitration agreement. As per the amended Section 8(1), the judicial authority has only to consider the question whether the parties have a valid arbitration agreement? The Court cannot refuse to refer the parties to arbitration "unless it finds that prima facie no valid arbitration agreement exists". The amended provision, thus, limits the intervention by judicial authority to only one aspect, i.e. refusal by judicial authority to refer is confined to only one aspect, when it finds that prima facie no valid arbitration agreement exists. Other several conditions, which were noticed by this court in various pronouncements made prior to amendment were not to be adhered to and the Legislative intendment was clear departure from fulfilling various conditions as noticed in the judgment of P. Anand Gajapathi Raju (supra) and Sukanya Holdings (P) Ltd. (supra)..."

28) In the case of Lindsay International (supra), a learned

single Judge of the Calcutta High Court, after following the

aforesaid pronouncement in the case of Emaar MGF Land

(supra) concluded that the law laid down in the case of

Sukanya Holdings (supra) may continue to be relevant for

deciding application under Section 8 filed prior to the

amendment of 2016 but not where the suit or application is

filed after 23rd October, 2015, when the amendment Act came

into force.

29) Mr. Bhargavan's reliance on the decision in the case of Cox

and Kings (supra) does not advance the cause of the

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submission to the extent desired by Mr. Bhargavan. The core

issue that was considered by the two Judge Bench of the

Supreme Court in Cox and Kings (supra) was the contours of

the, "group of companies doctrine" enunciated by the Supreme

Court in the case of Chloro Controls India Pvt Ltd Vs. Seven

Trent Water Purification Ind. And Others 10. A reference thus

came to be made to a Larger Bench doubting the correctness of

the law laid down in the case of Chloro Controls (supra) and

the judgments in which Chloro Controls (supra) was followed.

30) Undoubtedly, in the said judgment, the Supreme Court

observed that first case which dealt with group of companies

doctrine for domestic arbitration was Sukanya Holdings

(supra). However, I find it difficult to accede to the submission

that the said observation would imply that the decision in

Sukanya Holdings (supra) continues to hold the field despite

the legislative change brought about by 2016 amendment Act

and in the face of the observations of the Supreme Court in

the case of Emaar MGF Land (supra) (extracted above).

31) In my view, the abstract question as to whether the

Sukanya Holdings (supra) still continues to hold the field is not

required to be determined to the hilt in the backdrop of the

10 (2013) 1 SCC 641

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nature of the controversy in the case at hand. The plaintiff's

resistance to the arbitration is twofold. One, the defendant

Nos. 2 and 3 are not the parties to the arbitration agreement.

Two, certain reliefs are claimed against the defendant Nos.2

and 3 as well.

32) A meaningful reading of the plaint, however, indicates that

the substratum of the plaintiff's case is that the defendant No.

1 did not provide the requisite documents, facilitate the

inspection of the Vessel and make good loss suffered by the

plaintiff in salvaging the Vessel, carrying out repairs and loss

of revenue etc. Prima facie, apart from referring to the jural

relationship between the defendant Nos. 1 and 2, on one part,

and plaintiff and defendant No. 3, on the other part, no

averments are made qua the defendant Nos. 2 and 3. In

substance, the plaint singularly lacks the pleadings to sustain

the action against defendant Nos. 2 and 3. In fact, in

paragraph No. 36 of the plaint, it is averred that cause of

action for the suit arose on 1st April, 2022, when the defendant

No. 1 refused to provide the information required about the

accident of the Vessel owned by the plaintiff.

33) The jural relationship between the defendant Nos. 1 and 2

as well as the plaintiff and defendant No. 3 also assumes

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importance. On first principles, the defendant No. 2, the

insurer, would be called upon to indemnify the insured,

defendant No. 1, in case liability is fastened on the defendant

No. 1. The joinder of defendant No. 2 in the instant Suit thus

does not seem to arise out of any obligation which the

defendant No. 2 owes to the plaintiff. Apart from the prayer to

pass a joint and several money decree against the defendant

Nos. 1 to 3, there are neither averments nor any prayer qua

defendant No. 2.

34) As regards the defendant No. 3, the insurer of the plaintiff,

the only avements in the plaint which is of relevance is that

the defendant No. 3 had solicited certain documents which the

defendant No. 1 declined to furnish. The plaintiff has prayed

the following reliefs against defendant No. 3:-

"......

c) To direct the Defendant No. 3 to carry out detailed investigation through the Surveyors in a time bound manner as per the Inspection report of MMB dated 16.09.2021 and handover a copy to the Plaintiff.

......

e) To direct the Defendant No. 3 to carry out its inspection at earliest and insure the Plaintiff of the damages caused to their Vessel...."

35) The aforesaid prayers are, however, not supported by the

requisite pleadings. What is the nature of the contract between

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the plaintiff, the insured and defendant No. 3, the insurer, is

not spelled out. The plaintiff has not approached the Court

with a specific case that the defendant No. 3 has declined to

indemnify the plaintiff. Even if, that is the case of the plaintiff,

at best, the plaintiff can have an independent cause of action

against its insurer, arising out of the terms of the contract of

insurance.

36) Aforesaid being the nature of the averments in the plaint,

the mere fact that the defendant Nos. 2 and 3 are impleaded as

party defendants to the suit and certain reliefs are sought

against them, without making out a cause of action against

those defendants, would not change the nature of the claim. If

the dispute is essentially and primarily between the plaintiff

and the defendant No. 1 and the said dispute is squarely

covered by the arbitration agreement, addition of a party or

seeking a relief in the nature of disclosure would not be a

justifiable ground not to refer the parties to arbitration.

37) As observed in the case of Taru Meghani (supra) such a

course has the propensity to give a long leash to a party to

circumvent the arbitration agreement by adding a cause of

action which is beyond the purview of the arbitration

agreement and by adding a party who is not a party to the

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arbitration agreement.

38) Reliance by Mr. Kapadia on the judgment of the Division

Bench of this Court in the case of JSW Steel Ltd (supra)

appears to be well founded. In the said case, the Division

Bench agreed with the submission that, in a given case, a

plaintiff may file a suit to frustrate the arbitration proceedings

by joining some additional parties in the suit who may not be

directly concerned with the dispute in question only with a

view to see that since additional parties are there, the

arbitration proceedings should not go on.

39) Mr. Bhargavan's attempt to draw home the point that the

defendant Nos. 2 and 3 being the insurer of defendant No. 1

and plaintiff, respectively, are necessary parties to the

proceedings is not supported by the averments in the plaint. If

the plaintiff has an independent cause of action against the

defendant Nos. 2 and 3, nothing precludes the plaintiff from

working out the remedies against the defendant Nos. 2 and 3

in accordance with law.

40) In conclusion, in view of the constricted nature of the

judicial intervention post 2016 amendment, as enunciated by

the Supreme Court in the case of Vidya Drolia (supra) and the

line of decisions which follow the said view, the Court is

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obligated to refer the parties to Arbitration upon fulfillment of

the conditions enshrined in Section 8 of the Act, 1996 unless

the Court find that there is prima facie no valid agreement,

which is not the case at hand.

41) Thus, I am impelled to follow the rule emphatically laid

down in the case of Vidya Drolia (supra), "when in doubt, do

refer". In the peculiar facts of the case, the Court would thus

be justified in referring the disputes between the plaintiff and

defendant No. 1 to arbitration as the disputes are squarely

covered by the arbitration clause and all the conditions of

Section 8 of the Act, 1996, stand fulfilled, and grant liberty to

the plaintiff to institute a separate suit against defendant Nos.

2 and 3, if the plaintiff reckons that it has independent cause

of action against the defendant Nos. 2 and 3.

42) Resultantly, the application deserves to be partly allowed.

43)     Hence, the following order.


                                 -:ORDER:-

      (i)    The Interim Application is partly allowed.

(ii) The plaintiff and defendant No. 1 are referred to

arbitration in accordance with the arbitration clause

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contained in the Standard Terms and Conditions

(Clause 22.1 extracted above).

iii) The arbitral tribunal shall be appointed in

accordance with the arbitration clause and the

provisions contained in Arbitration and Conciliation

Act, 1996.

iv) The plaintiff is at liberty to institute a fresh

suit, if it chooses, to prosecute cause of action against

defendant Nos. 2 and 3, if any.

v) The Commercial Admiralty Suit No. 37 of 2022,

thus stands disposed.

 vi)       No costs.

 vii)      The plaintiff is entitled to refund of court fees, if

 any, in accordance with rules.

 viii)     In view of disposal of the Commercial Admiralty

Suit No. 37 of 2022, all pending applications also

stand disposed.

[N. J. JAMADAR, J.]