DINESH MAHESHWARI, J.

Leave granted.

2. These appeals have been preferred against the common judgment and order dated 23.04.2018 passed by the High Court of Gujarat whereby, the High Court has dismissed First Appeal Nos. 588 of 2018 and 587 of 2018 filed by the appellant against the order passed by the Commercial Court, Ahmedabad dismissing the applications under Section 8 of the Arbitration and Conciliation Act, 1996 1 in Commercial Civil Suit Nos. 90 of 2017 and 91 of 2017 respectively. Both these appeals, involving common questions concerning arbitrability of the dispute, have been heard together and are being taken up for disposal by this common judgment.

Digitally signed by ARJUN BISHT Date: 2023.05.01 17:14:41 IST Reason:

3. It would be apposite to take note of the factual and background aspects to the extent relevant for the points arising for determination in 1 Hereinafter also referred to as ‘Act of 1996’ or simply ‘the Act’. 1 the present appeals. Given the commonalities of the factual chronology, it would be proper to accord primacy to facts of the lead matter i.e., the appeal arising from SLP (C) No. 16932 of 2018 [relating to First Appeal No. 588 of 2018 in the High Court, arising from the order passed in Commercial Civil Suit No. 90 of 2017], apart from noticing a few facts that may be of relevance in the cognate appeal.

3.1. On 07.04.2005, the appellant herein entered into two licence agreements with respondent No. 1 and the sister concern of respondent No. 12 (against whom the cognate appeal is filed). The first agreement with respondent No. 1 was for licensing the operation of two manufacturing units of the appellant, being A.C. Sheet and Cement Grinding, with the licensing fee per quarter set at Rs. 5,00,000/- (Rupees Five Lakh) for the combined use of land and building as well as factory machinery and equipment. The second agreement with the sister concern of respondent No. 1 was for licensing the operation of another manufacturing unit of the appellant, being A.C. Pressure Pipe, with the cumulative licensing fee per quarter set at Rs. 2,00,000/- (Rupees Two Lakh). Both agreements were of the same nature and were executed for a term of 7 years (84 months). The relevant clauses of the agreement entered into between the appellant and respondent No. 1 could be usefully reproduced as under: -

stipulated herein. The said takeover would be fully and duly evidenced by acknowledgement of both the parties in writing, and will constitute a pan of this Licence Agreement.

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8. LICENSEE shall pay quarterly licence fee of Rs.1,00,000 (Rupees One lakh only) per quarter towards the use of land and building including office building and Rs.4,00,000 (Rupees Four lakhs only) per quarter towards the use of factory machinery & equipments. The Licence fee shall, be paid within 21 days of end of the quarter.

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12. LICENSEE shall not be entitled to mortgage, assign, licence or sublet the said Unit. However, LICENSEE shall be at liberty to mortgage/ charge, Raw Material stock, Finished Goods book debts and equipment brought in and belonging to LICENSEE under this arrangement which shall be kept separately identified and insured.

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15. The LICENSOR will be entitled to a Bonus, in addition to licence fee payable under Clause 8, in consideration of the use of its manufacturing facilities, licence, brand goodwill etc, as worked out below:

In the event the amount of Bonus works out to be negative, then LICENSOR shall be liable to reimburse this amount to LICENSEE on quarter to quarter basis.

b) The retained profit shall always belongs to the LICENSEE during the continuation or upon determination of the licence period.

c) The computation of the Profit & Loss and its distribution shall be done quarterly.

ii. Profit for this purpose means operating profits/losses earned during the quarter, after deducting interest on working capital and depreciation on the assets added by LICENSEE, but before charging the licence fee specified in Clause 8. The operating profit shall be worked out on the basis of Accepted Accounting principles.

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17. The LICENSEE at its absolute discretion may advance some amount to the LICENSOR on the terms/conditions/security as may be mutually agreed to facilitate smooth operation of this agreement.

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32. Disputes if any, arising out of this Agreement shall be referred to arbitration of a Sole Arbitrator if mutually agreed, failing which Arbitrator will be appointed as per provisions of Arbitration and 3 Conciliation Act, 1996 . The venue of Arbitration will be as decided mutually but preferably at Delhi.” 3.2. On the same date i.e., 07.04.2005, a supplementary agreement was also executed between the appellant-licensor, respondent-licensee, and the sister concern as confirming party. As per the terms of this agreement, appellant requested respondent No. 1 for some financial assistance to arrive at a settlement with its creditors, employees as well as statutory authorities for discharging their dues. The respondent No. 1, therefore, agreed to advance a sum of Rs. 5,30,00,000/- (Rupees Five Crore Thirty Lakh) to the appellant with interest at 10% p.a. and as consideration for the financial assistance rendered, it was agreed that respondent No. 1 would be permitted to create a mortgage on the three licensed manufacturing units in order to secure the ad hoc advance. This advance was recoverable in ten quarterly instalments commencing from the 90th day of payment of the ad hoc advance out of the licence fee and bonus under clauses 8 and 15 of the main agreement. A few relevant clauses of the supplementary agreement dated 07.04.2005 could also be usefully reproduced as under: -

The amended clauses read as under: -

Depreciation on these additions to the fixed assets shall be calculated at the rates specified in the Companies Act as per Straight Line Method. Upon determination of the license period the LICENSOR would be under obligation to buy these assets at the Written Down Value.

b) Clause No.15 : The LICENSOR will be entitled to a Bonus, in addition to license fee payable under Clause-8, in consideration of the use of its manufacturing facilities, license, brand goodwill etc. as worked out below.

i) The Bonus payable by LICENSEE to LICENSOR under this Clause would be 43% of the profit. The Bonus so payable shall be reduced by the amount of License fee payable as per Clause-8 of the Agreement. However, in the event of loss, the LICENSOR shall 5 be liable to reimburse 43% of the total loss to LICENSEE on a quarter-to-quarter basis.

ii) Computation of the Profit & Loss and its distribution shall be provisionally based on the annual audited accounts.

iii) Profit/Losses for this purpose means profits/losses earned, after deducting interest on working capital and depreciation on the assets added by the LICENSEE but before changing the license fee specified in Clause No. 8. The profit/loss shall be worked out on the basis of accepted accounting principles.” 3.4. Thereafter, on 06.07.2006, a tripartite agreement was executed by and amongst the appellant, respondent No. 1 and respondent No. 2 (Bank of Baroda3) upon sanctioning of a loan to the tune of Rs. 500 lakh to respondent No. 1. The appellant agreed to create first charge on fixed assets, which was to be released only with the consent of respondent No.

1. However, it was also stipulated that if payment of corporate loan was made directly by the appellant to the bank, the first charge could be released without the consent of respondent No. 1. The relevant clauses of the tripartite agreement dated 06.07.2006 could be usefully reproduced as follows: -

In the reply dated 20.04.2015, respondent No. 1 disputed these claims and asserted that the appellants had not cared to pay back its legitimately claimed amounts. Yet again, between 26.08.2015 to 17.11.2016, attempts were made to resolve the dispute but there was no positive outcome. Seeing that the attempts to resolve the dispute had failed, on 28.02.2017, the appellant served a notice on respondent No. 1 under Section 21 of the Act of 1996 invoking the provision for arbitration contained in the licence agreement (clause 32). Respondent No. 1 replied to this notice on 27.03.2017, contesting the arbitrability of the dispute since it was inextricably interconnected with other related transactions and unresolved issues arising therefrom. It was asserted that as the jurisdiction of the arbitrator was derived from the agreement, adjudication of the alleged dispute would go beyond the scope of the said agreement. 3.8. In this backdrop of events, the appellant preferred a composite arbitration petition before the Gujarat High Court on 26.04.2017 being 8 IAAP No. 63 of 2017 against respondent No. 1 and its sister concern. On the other hand, respondent No. 1-A Infrastructure Limited-filed a commercial civil suit bearing No. 90 of 2017 before the Commercial Court at Ahmedabad on 27.04.2017 with the following defendants:

Manufacturing unit under license agreement at their book value and make payment to the plaintiff for the current assets available at the time of handing over of the possession, if required.” 9 3.9. An application was preferred by the appellant under Section 8 of the Act of 1996 in the said commercial civil suit bearing No. 90 of 2017 for reference of the dispute to arbitration. In the written statement of the appellant, objection was also raised against the jurisdiction of the Commercial Court, given the arbitration clause in the licence agreement. Respondent No. 1 filed a reply to the application and the appellant filed an affidavit in rejoinder to the aforesaid reply on 03.07.2017. 3.10. In relation to the said application moved by the appellant in terms of Section 8 of the Act of 1996, another material factor may also be noticed. Two memos (pursis), came to be filed before the Commercial Court on 06.12.2017. In one of the memos, the respondent Nos. 3 to 5 (subsequent purchasers of the property in question) purportedly stated that they were not having any objection if the dispute concerning them was resolved by arbitration proceedings. The appellant, by another memo of the even date, suggested that the tripartite amended agreement was with reference to the licence agreement and it was agreed that till the time of the defendant No. 1 (appellant) making payment of a sum of Rs. 5 crore to the plaintiff, the title deeds of the immovable property would remain with the bank. The appellant suggested that with a view that the dispute between the parties should be resolved by arbitration proceedings, keeping all contentions open, they would be depositing the said amount of Rs. 5 crore in the Court and that in this manner ‘the dispute with defendant No. 2 would be ended’ and then, the bank who was handed over the title deed, would deposit the same in the Court and 10 the Court would be pleased to place the same in sealed cover till the dispute of the other parties was not resolved by arbitration proceedings. 3.11. Before adverting to the order passed by the Commercial Court on the prayer of the appellant for reference to arbitration in terms of Section 8 of the Act of 1996, we may complete the narration concerning the parallel proceedings in terms of Section 11 of the Act of 1996, even while deviating a little from the chronology. The said IAAP No. 63 of 2017 was withdrawn on 07.07.2017, as it was a composite petition against both respondent No. 1 and its sister concern with liberty to file fresh petitions. Thereafter, two separate IAAPs being IAAP No. 90 of 2017 and 89 of 2017 were filed by the appellant but, the proceedings therein ultimately culminated in the common order dated 15.12.2017. The High Court dismissed those applications in view of the fact that the prayer of the appellant in terms of Section 8 of the Act had been rejected by the Commercial Court on 13.12.2017 but, with liberty to the appellant to file afresh under Section 11 of the Act after decision on the challenge to the order so passed by the Commercial Court. Be that as it may, this aspect is not as such relevant for the present purpose and could be left at that.

4. The Commercial Court at Ahmedabad, in the order dated 13.12.2017, rejected the application of the appellant under Section 8 of the Act of 1996. It was held that there was no arbitration clause in the tripartite agreement and no reference had been made to the original or supplementary licence agreement to give effect or consider the arbitration clause as a part and parcel of the tripartite agreement. While referring to 11 clause 32 of the Licence Agreement dated 07.04.2005, the Court observed that it was explicitly clear that the arbitration clause was applicable to the appellant and respondent No. 1, specifically in reference to the original licence agreement and supplementary licence agreement but the same could not be extended to apply to subsequent transactions and agreements with different parties.

4.1. In consonance with the aforementioned observations, the Commercial Court also held that there must be a valid arbitration agreement in order to invoke the powers of the Court to refer the parties to arbitration under Section 8 of the Act of 1996. It was further observed that persons who are not parties to the arbitration agreement cannot be referred to arbitration, as the binding effect would only apply to the parties thereto, i.e., the appellant and respondent No. 1. Hence, if the dispute was between parties and non-parties to the arbitration agreement, appointment of arbitrator could only be made with respect to the parties. The relevant parts of the order passed by Commercial Court could be usefully reproduced as under: -

pleadings in plaint and the rival submissions as also the principles enunciated in the cited decisions, with the finding that it would not be proper to bifurcate the disputes in terms of arbitrable and non-arbitrable disputes.

5.1. As regards the suit in respect of a matter which falls partly within and partly outside the arbitration agreement, and also involves non- parties as well as parties, it was held that Section 8 of the Act of 1996 would not be attracted, in reference to several decisions of this Court. The High Court observed that the licence agreements were only executed between the appellant and respondent No. 1 and respondent Nos. 2 to 5 were not party to the agreement. There was a tripartite agreement between the appellant, respondent No. 1 and the bank, however, it was an admitted position that no arbitration agreement existed in that regard. Further, the tripartite agreement was an independent agreement for mortgage by deposit of title deeds. It was further observed by the High Court, as had also been observed by the Commercial Court, that the appellant had breached the injunction granted by the High Court as well as the undertaking before the Industrial Tribunal by selling some of the properties to respondent Nos. 3 to 5. Referring to the plaint averments, the High Court took note of the reliefs sought by respondent No. 1 and the parties against whom reliefs were sought as also the pleadings with respect to cause of action in the following words: -

The suit is filed for recovery of legitimate dues, cancellation of sale deed and for permanent injunction. In the suit the plaintiff has prayed for the following reliefs.

“(A) This Hon'ble Court may be pleased to direct the defendant No.1 to pay to the Plaintiff herein a sum of Rs.32.66 Crores with interest @ 14% per annum from the date of suit till realization herein under this decree and any further orders to be passed by this Hon'ble Court;

(B) This Hon'ble Court may be pleased to hold and declare that the Deeds of Conveyance dated 23 rd January, 2015 registered vide registration no. 742 and 750 executed by defendant No.1 in favour of defendant Nos.3 and 5, as null and void;

(C) This Hon'ble Court may be pleased to permanently restrain the defendant Nos.1, 3, 4 and 5 or their agent, executors, or administrators from disturbing or obstructing the plaintiffs occupation possession of the suit property till the plaintiff claim made in para (a) and (b) above is fully discharged;

16 (D) This Hon'ble Court may be pleased to direct the defendant No. 2 Bank not to release original title papers and other relevant documents in favour of defendant Nos.1, 3 and/or 4;

(E) This Hon’ble Court may be pleased to hold and declare that the Conveyance Deed dated 23 rd January, 2015 entered into between the defendant No. 1 and defendant No. 3 to 5 as null and void;

(F) This Hon’ble Court may be pleased to direct the defendant No. 2 to take over all the current assets of the plaintiff pertaining to or in connection with the operation of A.C. Sheet and Cement Manufacturing unit under license agreement at their book value and make payment to the plaintiff for the current assets available at the time of handing over of the possession, if required.” [8.7] Necessary pleadings in the plaint with respect to cause of action are as under:

6.1. Learned counsel for the appellant has contended that the civil suits in question and the application therein for referral to arbitration were filed subsequent to the amendment to Section 8 of the Act of 1996 in the year 2015, and therefore, the present matter is governed by the amended Section 8 whereby and whereunder, there is no choice but to refer the parties to arbitration, even for deciding the arbitrability of the dispute. 6.2. Learned counsel has argued that though the High Court relied on the decision of this Court in Sukanya Holdings (supra) but the same has been doubted and distinguished in various decisions of this Court subsequently. In this regard, learned counsel has referred to various decisions in which the said decision in Sukanya Holdings was distinguished or clarified; and has particularly referred to the decision in 20 Ameet Lalchand Shah and Ors. v. Rishabh Enterprises and Anr. :

Learned counsel would submit that now, the law pertaining to Section 8 of the Act of 1996 is solely interpreted keeping in view the amendment to it. With reference to the case of Vidya Drolia (supra) learned counsel has submitted that two major principles have been laid down therein: one, that only those cases that are ‘deadwood’ should not be referred to arbitration; and second, that whenever there is doubt, the correct course is to refer to arbitration. Further placing reliance on ONGC Ltd. v. Discovery Enterprises: ( 2022) 8 SCC 42 and Intercontinental Hotels v. Waterline Hotels : (2022) 7 SCC 662 he has submitted that unless the issue before the Court patently indicates existence of deadwood, Courts should ensure that arbitration is carried on. Learned counsel would submit that the High Court has adopted a rather restrictive interpretation of the Act of 1996 in the order impugned, which deserves to be set aside. 6.3. Learned counsel for appellant has also submitted that the mandate of Act of 1996 would have ensured the completion of proceedings within a year, with a reduced scope of interference in the possible Section 34 proceedings at the instance of either party, but the matter has remained pending with only framing of issues. Learned counsel would further submit that the licensees are squatting over the property, under a licence agreement dating back to the year 2005, without performing any work and have illegally and unauthorisedly prevented the 21 appellant, who is the owner of the property, from dealing with it. Learned counsel has underscored the point that the respondent No. 1 has not denied the existence of a dispute, but merely argues that the said disputes cannot be resolved through arbitration due to the involvement of the bank, an argument that cannot withstand legal scrutiny.

7. Per contra, learned counsel for the contesting respondent has also referred to the background aspects and various transactions as also the grievance of the plaintiff- respondent No. 1 to submit that the dispute as involved in the suit has rightly not been referred to arbitration. 7.1. Learned counsel for the contesting respondent would submit that the underlying civil suits are spread over various agreements/transactions and involve various parties where except the appellant none of the other defendants are parties to the arbitration agreement which is contained only in the main licence agreement dated 07.04.2005. It has also been submitted that the cause of action of the suits in question goes beyond the transaction containing the arbitration agreement where even the case of serious fraud has been alleged against the appellant and the dispute also pertains to mortgage. It has been particularly emphasised that the tripartite agreement involving the appellant, respondent No.1 and Bank of Baroda lacks arbitration clause; and the dispute emanating from the tripartite agreement and also pertaining to the questioned deeds of conveyance cannot be correlated with the arbitration agreement in the main licence agreement dated 07.04.2005.

22 7.2. Learned counsel has also argued that for a matter to be referred to arbitration, the entire subject-matter should be subject to arbitration and while relying on Sukanya Holdings (supra), has submitted that the suit cannot be bifurcated partially to refer a part of the suit to arbitration and to allow the rest of it to continue. It has further been submitted that the reliefs claimed in the suits in question fall outside the licence agreement and the disputes pertaining to different agreements/transactions and causes of action arising therefrom goes beyond the arbitration agreement.

7.3. Learned Counsel has further submitted that the supplementary agreement dated 07.04.2005 is ancillary to original agreement dated 07.04.2005 executed between the appellant and respondent No. 1 but, the said tripartite agreement does not have any ancillary relationship with the main agreement and the tripartite agreement having Bank of Baroda as a party is independent of the original agreement. 7.4. Learned counsel also highlighted the amendment in the Act of 2015, wherein Section 8 was amended envisaging that if the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void. 23 7.5. Learned counsel has also placed reliance on S.N. Prasad v. Monnet Finance Ltd. and Ors. : ( 2011) 1 SCC 320 and Deutsche Bank Home Finance Ltd. v. Taduri Sridhar and Anr. : (2011) 11 SCC 375 wherein guarantors were not held to be bound by arbitration agreement as they were not party to tripartite agreements having arbitration clause. Learned counsel would also submit that the decisions relied upon by the appellant do not apply to the present case because of non-existence of arbitration agreement in relation to dispute in question.

8. We have given anxious considerations to the rival submissions and have examined the record with reference to the law applicable.

9. For dealing with the vexed question in these appeals as to whether the parties were required to be referred to arbitration by allowing the applications moved by the appellant under Section 8 of the Act of 1996, appropriate it would be to take note of the provisions contained in Section 8 , as existing before its amendment by Act 3 of 2016 (w.r.e.f. 23.10.2015) and as existing now.

9.1. Earlier, Section 8 of the Act of 1996 read as under: -

10. In the case of Sukanya Holdings (supra), while dealing with the question of applicability of Section 8 of the Act, as then existing, this Court underscored the requirements of correlation of subject-matter of the suit and subject-matter of the arbitration agreement and, inter alia, held as under: -

11. As explained by this Court in Ameet Lalchand Shah (supra), the amendment to Section 8 after the aforesaid decision in Sukanya Holdings could be seen in the background of the recommendations of 246th Law Commission Report in which, inter alia, it was observed that as per the proposed amendment, judicial authority would not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, it would refer the dispute to arbitration and leave the existence of arbitration agreement to be finally determined by the Arbitral Tribunal.

12. All the relevant aspects of the matter came up for fuller exposition by a 3-Judge Bench of this Court in the case of Vidya Drolia (supra). In the said case, basically, the reference came to be made to the bench of three judges when the ratio expressed in the case of Himangi Enterprises v. Kamaljeet Singh Ahluwalia : (2017) 10 SCC 706, to the effect that landlord-tenant disputes governed by the provisions of the Transfer of Property Act, 1882 were not arbitrable, was doubted. While dealing with the reference, the Court also dealt with the other interconnected aspects as to the meaning of non-arbitrability and when the subject-matter of the dispute would not be capable of being resolved through arbitration; and as to whether the question of non-arbitrability 27 would be decided by the Court at the reference stage or by the Arbitral Tribunal in the arbitration proceedings. The 3-Judge Bench of course overruled the decision in Himangi Enterprises (supra) and in that context, made various observations and enunciated the relevant principles. In the process, the decision in Sukanya Holdings (supra) was also taken into consideration. In that regard and with reference to the reliance placed by learned counsel for the respective parties, we may refer to the following observations and enunciations of the Court, in the lead judgment as also in the concurring opinion in the following passages:-

Former may arise on account of scope of the arbitration agreement and also when the claim is not capable of being resolved through arbitration. Generally non-arbitrability of the subject-matter would relate to non-arbitrability in law. Further, the decision in Sukanya Holdings (P) Ltd. [Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya , (2003) 5 SCC 531] has to be read along with subsequent judgment of this Court in Chloro Controls (India) (P) Ltd. v. Severn Trent Water Purification Inc. (2013) 1 SCC 641.

*** *** *** 154.3. The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence-competence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. The court has been conferred power of “second look” on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act. 154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably “non- arbitrable” and to cut off the deadwood. The court by default would refer the matter when contentions relating to non-arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the Arbitral Tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism.

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238. At the cost of repetition, we note that Section 8 of the Act mandates that a matter should not (sic) be referred to an arbitration by a court of law unless it finds that prima facie there is no valid arbitration agreement. The negative language used in the section is required to be taken into consideration, while analysing the section. The court should refer a matter if the validity of the arbitration 29 agreement cannot be determined on a prima facie basis, as laid down above. Therefore, the rule for the court is “when in doubt, do refer”.

239. Moreover, the amendment to Section 8 now rectifies the shortcomings pointed out in Chloro Controls case [ Chloro Controls (India) (P) Ltd. v. Severn Trent Water Purification Inc. , (2013) 1 SCC 641: (2013) 1 SCC (Civ) 689] with respect to domestic arbitration. Jurisdictional issues concerning whether certain parties are bound by a particular arbitration, under group-company doctrine or good faith, etc., in a multi-party arbitration raises complicated factual questions, which are best left for the tribunal to handle. The amendment to Section 8 on this front also indicates the legislative intention to further reduce the judicial interference at the stage of reference.

240. Courts, while analysing a case under Section 8 , may choose to identify the issues which require adjudication pertaining to the validity of the arbitration agreement. If the court cannot rule on the invalidity of the arbitration agreement on a prima facie basis, then the court should stop any further analysis and simply refer all the issues to arbitration to be settled.

**** **** **** 244: Before we part the conclusions reached, with respect to Question 1 are:

existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.

244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. “when in doubt, do refer”.

244.5. The scope of the court to examine the prima facie validity of an arbitration agreement includes only:

Learned counsel for the contesting respondent has placed before us in 32 tabular form the relevant agreements, the contracting parties thereto, the purpose of the agreement, and availability of arbitration clause therein. We may reproduce the same to facilitate an eye view of the salient features of the transactions in question as follows: -

17. Thus, except the principal agreement dated 07.04.2005, none of the other agreements contained any arbitration clause, even if they related to the same property and also involved the appellant and the respondent No. 1. The later transactions involved other parties too like the tripartite agreement dated 06.07.2006 whereby the respondent No. 2 bank sanctioned loan to the respondent No. 1 and then, supplemental to the said tripartite agreement for dealing with the deposit of title deeds. Similarly, the other deeds of conveyance dated 23.01.2015 involve the appellant and the other defendants.

17.1. The aforesaid position of the dealings of the parties, when examined with reference to the reliefs claimed in the suit and the cause of action pertaining to the said reliefs, as extensively noticed by the High Court and extracted hereinabove, we are clearly of the view that the submissions made by the appellant with reference to the amendment of 34 Section 8 of the Act of 1996 and the later decisions of this Court in interpretation of the amended Section 8 do not inure to the benefit of the appellant. This is for the simple reason that no such conjunction can be provided to the original licence agreement dated 07.04.2005 and the tripartite agreement involving the Bank dated 06.07.2006 and 23.01.2008, whereby the arbitration clause could be held applicable to the tripartite agreement too. This is apart from the fact that in the frame of the suit and various other reliefs claimed, involving subsequent purchasers too and the allegations of fraud, the dispute cannot be said to be arbitrable at all. The present one cannot be said to be a case involving any “doubt” about non-existence of arbitration agreement in relation to the dispute in question.

17.2. There being no doubt about non-existence of arbitration agreement in relation to the entire subject-matter of the suit, and when the substantive reliefs claimed in the suits fall outside the arbitration clause in the original licence agreement, the view taken by the High Court does not appear to be suffering from any infirmity or against any principle laid down by this Court.

18. Even if by reference to remote pedigree, the original licence agreement is said to be the genesis of the contractual relations of the appellant and the respondent No. 1, that does not ipso facto lead to the availability of the arbitration agreement in relation to the dispute in question, which emanates from the tripartite agreement and which cannot be determined without reference to the said tripartite agreement and 35 without involving all the parties thereto. In other words, no dispute resolution process, including arbitration, could be undertaken in relation to the subject-matter of the suit without reference to the terms of tripartite agreement and without involving the bank- respondent No. 2. This is apart from the fact that the other elements of dispute pertaining to the subsequent purchasers too cannot be resolved in any forum without reference to the tripartite agreement and its amended clause, which did not provide for arbitration. Thus, the ancestry of the tripartite agreement, in the facts of the present case, does not lead to the result desired by the appellant.

18.1. Therefore, even on the principles enunciated in Vidya Drolia (supra), the prayer of the present appellant for reference to arbitration under Section 8 cannot be granted.

19. So far as the propositions based on the memos before the Commercial Court dated 06.12.2017, as filed by the respondent Nos. 3 to 5 (subsequent purchasers) and by the appellant are concerned, the submissions made on that basis do not take the case of the appellant any further. As noticed, in the said memos, the respondent Nos. 3 to 5 purportedly stated that if dispute concerning them was resolved by arbitration proceedings, they were not having any objection thereto. The appellant, on the other hand, suggested that the tripartite amended agreement was with reference to the licence agreement and it was agreed that till the time of the defendant No. 1 (appellant) making payment of a sum of Rs. 5 crore to the plaintiff, the title deeds of the 36 immovable property would remain with the bank. The appellant suggested that with a view that the dispute between the parties be resolved by arbitration proceedings, keeping all contentions open, they would be depositing the said sum of Rs. 5 crore in the Court and that in this manner ‘the dispute with defendant No. 2 would be ended’ and then the bank, who was handed over the title deed in their custody, would deposit the same in the Court and the Court would be pleased to place the same in sealed cover till the disputes of the other parties were resolved. 19.1. The memo submitted by the appellant was not likely to bring about the desired legal effect. This is for the simple reason that even if the appellant deposited the said sum of Rs. 5 crore in the Court, the bank was not directly obliged to deposit the title deed in the Court as presumed by the appellant; and then, there was no reason that the Court was to be obliged to accept such a proposition and to keep the title deed in its custody till the completion of proceedings in any other forum. In other words, if at all the matter was to be referred to arbitration, there would not be any justification for the Court to retain the title deed. It would appear that the said memo dated 06.12.2017 by the appellant had only been a desperate attempt to somehow seek arbitration despite being aware of the fact that the core of the dispute in the civil suit related to the tripartite agreement wherein the bank was an equal participant and no effective award could have been made in the arbitration proceedings in the absence of the bank. The necessity of the bank’s presence in the matter 37 could not have been obviated by such nebulous suggestion as stated in the memo filed by the appellant on 06.12.2017.

19.2. The other memo by respondent Nos. 3 to 5 had been of no effect whatsoever. Consent of the said respondents, the subsequent purchasers, for reference to arbitration could not have infused an arbitration clause in the tripartite agreement and their memo could not have propelled the matter to arbitration, particularly looking to the core of the dispute and its obvious non-arbitrability for the reason that it related to the tripartite agreement.

20. For what has been discussed hereinabove, on the facts and in the circumstances of the present case and in the nature of transactions as also the nature of reliefs claimed in the suit, the view taken by the Commercial Court and the High Court in declining the prayer of the appellant for reference to arbitration cannot be faulted.

21. Accordingly, and in view of the above, these appeals fail and are, therefore, dismissed. No costs.

……....……………………. J.

(DINESH MAHESHWARI) ……....……………………. J.

(SUDHANSHU DHULIA) NEW DELHI;

MAY 01, 2023.