Interim Order 14

Order Details: COPY OF JUDICIAL PROCEEDINGS
Pdf Text: Civ suit 384/24
BALBIR SINGH Vs. M/S VKS AND S LEASING AND
FINANCE PVT LTD
07.03.2026
Present: Mr. Chandra Bhan Singh, Ld. Counsel for the
plaintiff (through VC).
Mr. Rishabh Gulati, Ld. Counsel for the
defendant (through VC).
Ms. Rashmi Nagpal, Ld. Proxy Counsel for the
defendant.
1. The application filed by the plaintiff under Section 8 of
the Arbitration and Conciliation Act, 1996 has been taken
up for consideration and disposal.
2. Mr. Gulati, Ld. Counsel for the defendant, submits that
the present matter be referred to arbitration in terms of
clause 10.14 of the loan agreement dated 27.11.2021. He
submits that the present dispute arises out of the said loan
agreement and, therefore, in view of the mandate of
Section 8 of the Arbitration and Conciliation Act, 1996, the
parties ought to be referred to arbitration for adjudication of
the dispute.
3. Mr. Bhan, Ld. Counsel for the plaintiff, submits that the
plaintiff is not a party to the arbitration agreement executed
between defendant no. 1 and defendant no. 3 and
therefore, the present application is misconceived and not
maintainable.
4. I have heard the submissions and perused the record.
It is an undisputed position that the plaintiff is neither a
Cont..
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signatory to the loan agreement dated 27.11.2021 nor a
part to the arbitration clause contained therein. Under the
Arbitration and Conciliation Act, 1996 there is no provision
for splitting of parties and referring part of the matter to
arbitration. The Hon’ble High Court of Delhi in Sharad
Gupta and Ors Vs. Shri Vinayak Infraland Pvt. Ltd. and
Ors1 held:
“12. In the present case, the prayers made in the
suit include relief against the defendant no. 5 as
well. Under the Arbitration and Conciliation Act,
1996 there is no provision for splitting of parties
and referring part of the subject matter to
arbitration. Reliance is placed on the judgment of
the Hon’ble Supreme Court in “Gujarat Composite
Limited Vs. A Infrastructure Limited & Ors,” 2023
LiveLaw (SC) 384, the operative portion 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:
“13. Secondly, there is no provision in the Act
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
Section 24 of the Arbitration Act, 1940, some of
the parties to a suit could apply that the matters
Cont..
1 2024 SCC OnLine Del 1438
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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. The section also provided that the suit
would continue so far as it related to parties who
have not joined in such appliances.
15. The relevant language used in Section 8 is:
“in a matter which is the subject of an arbitration
agreement”. The court is required to refer the
parties to arbitration. Therefore, 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, 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 Section 8. The words “a matter”
indicate that the entire subject-matter of the suit
should be subject to arbitration agreement….”
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
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appellant with reference to the amendment of
Section 8 of the Act of 1996 and the later
decisions of this Court in interpretation of the
amended Section 8 do not insure to the benefit
of the appellant. This is for the simple reason
that no such conjunction can be provided to the
original license 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
license 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.
…
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
found.”
13. Further, the judgment of Hon'ble Supreme
Court in Cox and Kings Ltd. v. SAP India Pvt.
Ltd., 2023 SCC Online SC 1634 will not be
applicable to the facts of the case since
Defendant no. 5 is a separate and distinct entity.
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There is also no contractual relationship between
the plaintiff and defendant no. 5”.
5. The learned Counsel for the defendant has placed
strong reliance on the judgments of the Hon’ble Supreme
Court in Cox and Kings Ltd. Vs. SAP India (P) Ltd2. and
Adavya Projects Pvt. Ltd. Vs. M/s Vishal Structurals
Pvt. Ltd and Ors3 to contend that ‘The Group of
Companies Doctrine’ permits even non-signatories to an
arbitration agreement to be referred to arbitration.
However, the submission is misconceived and untenable in
law. The Group of Companies Doctrine proceeds on the
principle that in a contract between two parties, a third
entity forming part of the same corporate group may, in
certain circumstances, be treated as a party to the
arbitration agreement, despite not being a formal signatory.
The doctrine is invoked— where two or more companies
forming part of a group of companies are related by such
degree of common ownership, management or control that
would lead to their being treated as a part/member of the
same group. In the present case, the plaintiff is an
independent individual entity and not a company forming
part of any corporate group with the defendants. Therefore,
the Group of Companies Doctrine has no application to the
facts of the present case. In this regard, the Hon’ble
Bombay High Court in M/s Mukesh Patel and Ors Vs.
Pant Nagar Ganesh Krupa Cooperative Housing
Cont..
2 2023 SCC OnLine SC 1634
3 2025 SCC OnLine SC 806
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Society Ltd and Ors4 held:
“25. If the non-signatory is not a related party, not
a group company or enterprise, has no
commonality of ownership, management or
control, is not alter ego of a party, and is not
undertaking a transaction that is contingent upon
or subservient to or a contact not forming part of a
wider, integral and composite transaction, it would
not be possible to invoke principles of making
such person a veritable party”.
6. In view of the foregoing discussion, I find no merit in
the application filed under Section 8 of Arbitration and
Conciliation Act, 1996. Accordingly, the application is
dismissed and disposed of.
7. List the matter for further proceedings on 30.04.2026.
(AYUSH SHARMA)
CIVIL JUDGE/EAST
KKD COURTS/07.03.2026
4 2025 BHC-OS: 18704
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