Arbitration Can't Be Restricted To Specific Respondents When Agreements Form Part Of Single Commercial Transaction: Delhi High Court

The Delhi High Court bench of Justices Subramonium Prasad and Harish Vaidyanathan Shankar held that when an application under Section 8 of the Arbitration Act is filed in opposition to a civil suit, a party cannot later object that the arbitration was intended to apply only to specific respondents, especially when the pleadings indicate that the agreements formed part of a single commercial transaction. The present appeal has been filed under section 13(1A) of the Commercial Courts Act, 2015 read with section 96 of the Civil Procedure Code against a judgment dated 06.05.2022 passed by the District Judge seeking to remand the matter back to the court for trial and adjudication on merits. The Appellant filed a Civil Suit. In response, the Respondent filed an application under section 8 of the Arbitration Act seeking dismissal of the Suit and reference to the Arbitration based on clauses 16 and 17 of the Tripartite Agreement date 18.11.2008. The Appellant opposed the application stating that the suit was maintainable as it was filed based on the documents signed by the Respondents and the Agreement was referred only to establish their right to the flat the title of which was yet to be transferred from Respondent No. 3 to Respondent No. 1 The Court observed that the Tri Partite Agreement executed between the parties was an integral part of the composite loan arrangement between the parties. Given the nature of pleadings and reliefs sought, it would be difficult to isolate the agreement from the loan arrangement. The Appellant cannot be permitted to say that the suit was only for loan recovery and the Agreement was referenced only to assert rights over the flat and the liability of the Respondent No. 3. It further noted that the District Judge rightly held that it does not matter whether the surety agreement contained an arbitration clause. The agreement must be read in entirety to determine their composite nature. Since the loan was advanced to the Builder, the Agreement obligated the builder to return the amount which forms the foundation of the dispute. The court noted that the Supreme Court in Ameet Lalchand Shah v. Rishabh Enterprises held that in interconnected agreements which form a single transaction may be referred to arbitration even if some of them lacked arbitration clause or involved non-signatories. It held that “the pleadings and the prayer, read holistically, indicate that the Appellant, in fact, confirms that all the Agreements are an integral part of the entire transaction and that is the reason why the Suit makes express reference to all the Agreements which formed a part of the Transaction, inter alia, the Tri-partite Agreement, which contained the Arbitration Clause.” The court concluded that the Appellant by filing an application under section 8 of the Arbitration Act not only confirmed the mutual understanding of the parties but also consented to arbitration. Therefore, the objections raised by the Appellant on this ground are untenable. Accordingly, the present appeal was rejected. Case Title: CANARA BANK versus SANJEEV SHARMA & ORSCitation: 2025 LiveLaw (Del) 819 Case Number:Company Appeal (AT) (Ins.) No. 310 of 2024 Judgment Date: 16/07/2025 For Appellant: Ms. Rekha Rustagi, Advocate. For Respondents: Mr. Vinod Kumar and Mr. Sparsh Jhamb, Advocates for R-1 & R-2. Click Here To Read/Download The Order

Arbitration Can't Be Restricted To Specific Respondents When Agreements Form Part Of Single Commercial Transaction: Delhi High Court

Mohd Malik Chauhan

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