SANDEEP KUMAR AND ORS. versus MASTER RITESH AND ORS.

Citation: [2006] SUPP. 8 S.C.R. 57 · Decided: 31-10-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

, I,,. 
SANDEEP KUMAR AND ORS. 
v. 
MASTER RITESH AND ORS. 
OCTOBER 31, 2006 
[S.B. SINHA AND DAL VEER BHANDARI, JJ.] 
Arbitration Act, 1940; Section 34/Arbitration and Conciliation Act, 
1996; Section 8: 
A 
B 
Shareholders-Disputes-Filing of suit-Arbitration agreement- C 
Invoking of against. some of the defendants who were not parties to the 
Arbitration Agreement-Held: In terms of Section 34 of 1940 Act or Section 
8 of 1996 Act, the Arbitration Clause could not be invoked as against the 
defendants who were not parties to the Arbitration agreement. 
Appellants as also Respondent Nos.2 to 7 were shareholders in a 
Company. Disputes having arisen between the parties, a suit came to be filed 
by the appellants. In the meantime, an arbitration agreement had been entered 
into by and between plaintiffs-appellants and some of the defendants. In view 
D 
~f the existence of the said arbitration agreement, an order was passed by the 
trial Court in terms of the Arbitration Act 1940 and the matter came up to E 
this Court when plaintiffs-appellants made a representation before this Court 
that they would amend the plaint by deleting the names of respondents who 
were parties to the arbitration agreement and continue with the suit as against 
those who were not parties thereto. Their statements were recorded in the 
order of thi~ Court and the special leave petition was disposed of. The suit F 
came up for hearing when it was directed to be stayed by the trial Court. The 
appeals preferred thereagainst by Appellants were also dismissed. High Court 
upheld the findings of the trial Court. Hence the present appeal. 
Appellants contended that the Courts below committed a serious error 
in passing the impugned judgment insofar as it failed to take into G 
consideration the effect of deleting the names of some of the defendants by 
amending the plaint; and that although there might exist an arbitration 
agreement between Appellants and some of the Defendants, but in view of the 
fact that the amendments had been carried out in the plaint the arbitration 
agreement could not have been enforced as against Respondents who were 
57 
H 
A 
B 
c 
D 
E 
F 
58 
SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R. 
not parties thereto. 
Respondents submitted that the matter being governed by the provisions 
of Section 8 of the Arbitration and Conciliation Act, 1996, the parties could 
raise the question of jurisdiction of the arbitral tribunal in terms of section 
16 thereof. 
Allowing the appeal, the Court 
HELD: 1.1. It may be true that Plaintiffs-Appellants had been 
representing a group, but admittedly all the parties to the suit were not parties 
to the arbitration agreement. If some of the Defendants were not parties to 
the arbitration agreement, the question of invoking the arbitration clause as 
against those Defendants would not arise. [60-H; 61-A) 
1.2. There were three parties to the said arbitration agreement. If the 
names of those who were Party No. 1 and Party No.2 in the said agreement 
had been deleted from the array of Defendants-Appellants and the claims 
against them have been given up, then there is no reason as to how the 
arbitration agreement can still be invoked against them under Section 34 of 
the Arbitration Act, 1940 or Section 8 of the Arbitration and Conciliation 
Act, 1996. Hence, the impugned judgment cannot be sustained. [61-B-~-D) 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4610 of2006. 
From the Judgment and Order dated 24.10.2002 of the High Court of 
Punjab and Haryana at Chandigarh in C.R. Nos. 3045-3053/2000. 
K.N. Balgopal, P. Somasundram and Devendra Singh for the Appellants. 
Balbir Singh Gupta for the Respondent. 
The Judgment of the Court was delivered by 
S.B. SINHA, J: Leave granted. 
G 
Dev Papers (P) Ltd., Meham, is a company incorporated under the 
Companies Act, 1956. Appellants herein as also Respondent Nos.2 to 7 were 
its shareholders. One R.P. Gupta was representing the appellants whereas . 
Satyadev Gupta was representing the defendants-respondents in the Board 
of Directors. Disputes and differences having arisen between the parties, a 
H suit came to be filed by Appellants. Admittedly, an arbitration agreement had 
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SANDEEP KUMAR v. MASTER RITESH [S.B. SINHA, J.] 
59 
been entered into by and between Plaintiffs-Appellants and some of the A 
Defendants. However, some of the Defendants were not parties to the said 
agreement. In view of the existen

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