:1: IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL CIVIL CIVIL APPELLATE JURISDICTION APPELLATE JURISDICTION APPELLATE JURISDICTION WRIT WRIT WRIT PETITION NO. 7480 OF PETITION NO. 7480 OF PETITION NO. 7480 OF 2008 2008 2008 M/s. Niranjan Promoters & Developers Pvt. Ltd. ... Petitioner. V/s. Shree Sai Properties and Developers and Others. ... Respondents. Mr. S.P. Thorat with Vikram Pai i/b. S.V. Pitre for the Petitioner. Mr. Purushottam Chavan i/b. G.S. Godbole for Respondent Mr. R.S. Khandeparkar for Respondent Nos. 6 and 7. ..... CORAM CORAM CORAM : S.C. DHARMADHIKARI,J. : S.C. DHARMADHIKARI,J. : S.C. DHARMADHIKARI,J. 17TH 17TH 17TH APRIL 2009. APRIL 2009. APRIL 2009. P.C. P.C. P.C. : : : . This is a Writ Petition by the Original Plaintiff in Suit No.1349 of 2008 on the file of the Civil Judge, Senior Division, Pune. He filed the Suit for declaration and injunction. The relief is that Defendant No.5 has no right or authority to execute a Development Agreement and a Power of Attorney in favour of Defendant Nos.2,3 and 4, so also an Agreement executed on 19th October 2006 by Defendant Nos. 3,4 and 5 with Defendant No.1 in respect of the Suit property is illegal, bad in law and not binding on the Plaintiff. A challenge is raised also to the Sale Deed dated 31st December 2007 executed by the Defendants inter-se. The relief of permanent injunction with regard to a grant of FSI/TDR is also claimed. The Municipal Corporation of Pune is a party Defendant to the :2: Suit. 2. During the pendency of this Suit, an application was made for interim injunction by the Plaintiffs on which an order was made on 12th September 2008 restraining Original Defendant Nos. 1 and 6 from dealing with the suit property. The order was to operate till the next date of hearing of the application for interim injunction. 3. In the meanwhile, an application was made on behalf of Original Defendant No.1 and Original Defendant No.5 purporting to be application under Section 8 of the Arbitration and Conciliation Act, 1996 praying that the Plaintiff be directed to approach the Arbitrator. Reliance was placed upon clause 63 of the Agreement of the Articles of Association of the Plaintiff. 4. Paragraphs 2 and 3 of this application read thus :- "2. Plaintiff has produced on record, the Memorandum of Association and Articles of Association of Plaintiff company. On page 11 clause no.63 of Articles of Association, there is an Arbitration Clause, which is reproduced below :- 63. Whenever any difference arises between the Company on the one hand and any of the members, their executors, administrators or assigns of the :3: other hand toughing the true intent or Construction or the incidence or consequences of these presents or the stature or touching any breach or alleged breach or otherwise relating to the premises or to these presents or as to any stature affecting the Company or to any of the affairs of the Company including the ascertainment and or the fixing of the fair value of the shares of the Company, every such difference shall be referred to the decision of one or more arbitrators or an umpire to be appointed by the arbitration." 3. If the plaint is perused, entire controversy is amongst the 2 directors of the company and about the authority of Defendant No.5 as Director which is challenged by the Plaintiff on the grounds stated in the plaint. Thus, the said dispute squarely falls within the ambit of Arbitration Clause referred to above. It is, therefore, the submission of this Defendant that present suit cannot proceed further by this Hon’ble Court and it is necessary to direct the Plaintiff to approach Arbitrator as per the arbitration clause incorporated in the Articles of Association of the Plaintiff company produced by the Plaintiff on record. Hence, this application." 5. Similar application was made by Defendant No.5. :4: The thrust of the application is that the real dispute is between Plaintiff and Defendant No.5 and the authority of Defendant No.5 as Director of the Plaintiff. Therefore, both are bound by the Arbitration Agreement and the Suit, therefore, cannot proceed. The Court must exercise its power under the above-mentioned statutory provision. The application by Defendant No.5 was first in point of time whereas that of Defendant No.1 was made a little later. 6. Both applications were placed before the Trial Court after the Plaintiff filed his reply. By the impugned order, the learned Judge has held that the Application under Section 8 is maintainable and should be allowed. He, therefore, passed the following order :- "1. Application is hereby allowed as prayed for. 2. Plaintiff to raise dispute in between him and more particularly with Defendant No.5 before the Arbitrator. 3. Ad-interim order granted in favour of the Plaintiffs is hereby set aside. 4. Entire proceeding be returned to the Plaintiff for submitting to the Arbitrator." 7. It is this order (below Exhibit 30) dated 17th :5: October 2008, which is challenged by the Original Plaintiff in the instant Writ Petition invoking the powers of this Court under Article 227 of the Constitution of India. 8. I have heard Mr. Thorat, learned Counsel for the Petitioner and Mr. Godbole, learned Counsel appearing for Respondent No.1. With their assistance, I have perused the order passed by the Trial Court, the applications on which the same came to be passed, the provision in question and the decisions brought to my notice. 9. It is well settled that all ingredients of Section 8 have to be satisfied. The Judicial authority before which an action is brought in a matter, which is subject matter of an arbitration agreement shall, if a party so applies not later than submitting his first statement on the substance of the dispute, refer the parties to arbitration. The Supreme Court has held that the matter must be such as is subject of an Arbitration Agreement. Further, not just the matter but parties before it must also be parties to the Arbitration Agreement. If any reference is necessary, re-producing the following observations of the Hon’ble Supreme Court in AIR 2003 SC AIR 2003 SC AIR 2003 SC 2252 2252 2252 (Sukanya Holdings Pvt. Ltd. v/s. Jayesh H. Pandya (Sukanya Holdings Pvt. Ltd. v/s. Jayesh H. Pandya (Sukanya Holdings Pvt. Ltd. v/s. Jayesh H. Pandya & Anr.) Anr.) Anr.) would be sufficient :- 13. Secondly, there is no provision in the Act :6: 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. 14. 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 agreement. As against this, under S. 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 S.8 is - "in a matter which is the subject matter of an arbitration agreement." Court is required to refer the parties to arbitration. Thereafter, 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, :7: 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 S.8. The words ‘a matter’ indicates entire subject matter of the suit should be subject to arbitration agreement." 10. A bare perusal of the same would indicate that unless these ingredients are satisfied, no relief can be granted. In the instant case, admittedly, save and except the Petitioner - Plaintiff and Defendant No.5, the Arbitration Agreement is not between other parties to the Suit. Secondly, the arbitration agreement is contained in the Memorandum of the Articles of a company, which is the Petitioner - Plaintiffs. The property has changed hands and admittedly, Respondent No.1 - Original Defendant No.1 is not a party to the Arbitration Agreement. In such circumstances, how the above-mentioned principles are satisfied is not clear to me at all. The Trial Court without applying its mind to these vital aspects has allowed the instant application. Its order is patently unsustainable being vitiated by an error apparent on the face of the record. I would be failing in my duty if I do not interfere and quash and set aside the same. 11. Accordingly, the Petition succeeds. Rule is made absolute in terms of prayer clause (b). The order under :8: challenge is set aside. The application preferred by Original Defendant Nos.1 and 5 is dismissed. However, the Trial Court to endeavour and dispose off the interim injunction application as expeditiously as possible and in any event within a period of six weeks from the date of appearance of parties. Both sides to appear before the Trial Court on 27th April 2009. Ad-interim order in this Writ Petition to continue till the disposal of the interim injunction application before the Trial Court. (S.C. (S.C. (S.C. DHARMADHIKARI,J.) DHARMADHIKARI,J.) DHARMADHIKARI,J.)