Summary
The Court set aside the referral of two civil suits to arbitration under a family memorandum executed only between two brothers. The company and bank against which relief was sought were not parties to the arbitration agreement, and non-family shareholdings could not be bound by that memorandum. The applications for reference were dismissed.
Issues
- Whether the two suits could be referred to arbitration under a memorandum executed only between the brothers when relief also concerned a company and bank outside that agreement.
Provisions considered
- Section 8, Arbitration and Conciliation Act, 1996Reference was unjustified on these facts because the memorandum was solely between the brothers, while the company and bank were not parties to its arbitration agreement. (¶¶ 7, 9, 10, 11)
Held
- The memorandum was executed exclusively between the appellant and his brother. The company was not a party; the second suit also sought substantive and consequential relief against Canara Bank, which was outside the arbitration agreement. (¶¶ 9, 10)
- In this setting, referring the suits to arbitration was erroneous. The family memorandum could not bind the non-family shareholdings of those who were not parties to it. (¶¶ 9, 10)
- The High Court judgment was set aside and both Section 8 applications dismissed. Consequential orders passed by the trial court pursuant to the High Court’s direction would no longer survive. (¶¶ 11, 12)
Result
Appeals allowed; High Court judgment set aside, Section 8 applications dismissed and consequential trial-court orders deprived of effect. Pending application disposed of.