Gujarat High Court
M/S Jai Bharat Steel Company vs Mountain Shipping Ltd on 26 August, 2025
NEUTRAL CITATION
C/AS/20/2022 JUDGMENT DATED: 26/08/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/ADMIRALTY SUIT NO. 20 of 2022
With
CIVIL APPLICATION (FOR ORDERS) NO. 1 of 2022
In R/ADMIRALTY SUIT NO. 20 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE MAUNA M. BHATT
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Approved for Reporting Yes No
Yes
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M/S JAI BHARAT STEEL COMPANY
Versus
MOUNTAIN SHIPPING LTD & ANR.
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Appearance:
MR C B UPADHYAYA(3508) for the Defendant(s) No. 2
MR DHRUV TOLIYA(9249) for the Plaintiff(s) No. 1
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CORAM:HONOURABLE MRS. JUSTICE MAUNA M. BHATT
Date : 26/08/2025
ORAL JUDGMENT
1. Rule returnable forthwith. Learned advocate Mr.
C.B.Upadhyaya waives service of rule on behalf of respondent
No.2 (Defendant).
2. This Admiralty Suit is filed raising claim of
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Rs.1,20,00,000 (Rupees one crore twenty lac) towards damages,
with interest @ 18%, from the date of institution of suit till
actual payment. The plaintiff had filed Civil Suit No.36 of 1999
before learned Civil Court, Bhavnagar seeking damages for
default in sale of vessel known as M.V.Irene. [prayers in Civil
Suit No.36 of 1999- Page No.211]. It is case of the plaintiff in
the Civil Suit that on account of breach of memorandum of
agreement dated 18.09.1998, in relation to sale of vessel
M.V.Irene, between the plaintiff and the defendant No.1, the
suit was instituted (page No.241). It was case of the plaintiff
that on 18.09.1998, the plaintiff had executed an agreement
with defendant No.1 to purchase vessel M.V.Irene. Accordingly,
consideration as agreed in MOA was paid, despite that
possession of the vessel, free from all encumbrances was not
handed over to the plaintiff. Thus, there is breach of
agreement dated 18.09.1998 and therefore the claim lies
against defendant No.1.
3. Thus, on the basis of MOA dated 18.09.1998 executed
between plaintiff and defendant No.1; the Plaintiff initiated the
present proceedings in light of the order dated 31.03.1999
passed by High Court of Bombay (in Admiralty Jurisdiction). It
is true that the MOA dated 18.09.1998, at clause 18 contains
an arbitration clause.
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4. It is case of plaintiff that Defendant No.2 – Anslem
Shipping Limited is an independent entity owned and operated
by the very same management which was owning and
operating defendant No.1 – Company. Therefore, the plaintiff
preferred an application below Exhibit 14, to implead
Defendant No.2 as necessary party. The said application was
filed on the ground that ownership of Defendant Nos.1 and 2
is stemmed from the same root. However, there was no
privity of contract between the plaintiff and defendant No.2. It
is case of the plaintiff that party necessary for adjudication of
a dispute, by no stretch of imagination creates any privity of
contract between plaintiff and Defendant No.2.
5. After joining defendant No.2 as party, an application
below Exh.5 was filed by plaintiff, seeking continuation of
arrest of vessel (continuation of injunction). Exhibit -5 was an
application by the plaintiff, seeking to restrain Defendant from
selling, transferring or beaching the vessel. Ex. 5 came to be
rejected under order dated 25.02.1999.
6. Aggrieved by the order dated 25.02.1999, the plaintiff
approached this Court by way of Appeal from Order No.109 of
1999 and allied matters wherein, this Court by order dated
08/09.03.1999, by invoking the doctrine of lifting of corporate
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veil, allowed the appeal and granted injunction in favour of
plaintiff. (The order dated 08/09.03.1999 is at page 1253,
relevant paragraphs Nos.5, 8, 10, 12, 14, 15, 17.2, 17.3, 18
and 20). It would be apposite to refer to paras 18 to 20 of
order dated 08/09.03.1999, which reads as under:
“18. In view of the aforesaid situation, and the state of
the evidentiary material on record, I am satisfied that
the doctrine of “lifting the corporate veil” can be
justifiably invoked and once this is done, there is
sufficient material on record to hold at least on a prima
facie basis that the two defendants share a community of
interest, even if they do not share a common
management, common finances and/or a common
corporate umbrella under Symco Shipping Limited.
19. In the premises aforesaid, the two Appeals from
Order are admitted and directed to be heard together.
20. So far as the Civil Applications are concerned, the
same are disposed of by directing that the ad interim
status quo in respect of the ship M.V. ORIEINT STRIDE
granted by the trial court (which is in operation till
today) shall continue to operate till the final disposal of
the present appeals. However, this order shall stand
revoked ipso facto if the defendants or anyone of them
furnishes security to the satisfaction of the trial court
and/or furnishes unconditional irrevocable bank guarantee
in favour of the plaintiff of a Nationalised or Scheduled
bank in the sum of Rs.170 lacs (Rupees one hundred
seventy lacs). It is clarified that the suit is not stayed and
the defendants shall be at liberty to pursue their
application for referring the entire dispute to arbitration
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Act, 1996. The trial court will hear the parties on the
said application and shall pass appropriate orders thereon
in accordance with law.”
7. Pursuant to the order dated 08/09.03.1999 in Appeal
from Order Nos.109 of 1999 and 110 of 1999, Defendant No.2
preferred Civil Application No.3679 of 1999 and this Court by
order dated 07.05.1999 had modified the order and released
the vessel on condition to deposit sum of Rs.25,00,000/- before
Civil Court, Bhavnagar, by Defendant No.2. The order dated
07.05.1999 is at Page No.1333 and order of deposit of amount
of Rs.25,00,000/- is at page Nos. 1347, 1355 and 1359.
8. After the order dated 07.05.1999 of release of vessel and
after having deposited the amount of Rs. 25,00,000/-;
Defendant-No-2 filed applications involving arbitration clause
which are at Exh.21 Page No.481, Exh.46 Page No.939,
Exh.121 Page No.1483. The said applications were filed under
Section 45 of Arbitration and Conciliation Act, 1996
(hereinafter referred to as A&C Act) with the prayer to refer
the dispute to arbitration seated in London, United Kingdom. It
was case of the defendants that the Court at Bhavnagar is not
competent to decide the controversy in its civil jurisdiction.
However, the said applications were rejected vide order below
Exh. 125 dated 30.01.2012 (page 1867) in Special Civil Suit
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No.20 of 2001.
9. After rejection of the applications preferred by defendant
No.2 under Section 45 of A & C Act, an order dated
30.10.2018 was passed by Commercial Court, Rajkot to transfer
the captioned Admiralty Suit before this Court and the same is
numbered as Admiralty Suit No.20 of 2022.
9.1. After the suit having been transferred, issues were framed
below Exh.130 whereby issue No.5 was framed as “whether
the suit is maintainable at law in the present form?”
10. In response to the said issue, Defendant no.2 had
preferred Civil Application No.1 of 2022 under Order VII Rule
11 of Code of Civil Procedure, 1908 (“CPC” for short) which
is pending and has also preferred another application under
Order XIV Rule 2 of CPC, for treating the issue No.5 as
preliminary issue (issues at page 1891 dated 06.01.2015). On
an application preferred by Defendant No.2, the plaintiff had
filed its detailed reply. It is case of the Defendant No.2 that
this Court vide order dated 15.06.2023 after hearing the parties
at length had opined that as per Order XIV Rule 2 of the CPC,
1908, issue No.5 as referred herein above, is to be adjudicated
and disposed as preliminary issue. Whereas, it is case of the
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plaintiff that though the order dated 15.06.2023 is in detail
and after by-parte hearing, this Court has neither opined nor
had adjudicated upon issue No.5.
11. Referring to the order dated 15.06.2023, learned advocate
Mr. Tolia for the plaintiff submitted that though plaintiff had
executed the agreement with defendant No.1 there exists no
privity of contract with defendant No.2 and therefore, there is
no Arbitration agreement between plaintiff and defendant No.2.
Defendant No.2 though being a necessary party in these
proceedings herein, however, in absence of any arbitration
agreement between the plaintiff and defendant No.2, the
plaintiff cannot be subjected to any private forum such as
arbitration. Learned advocate further submitted that merely by
taking over ownership of defendant No.1 by defendant No.2,
by no stretch of imagination or by interpretation of any law, it
assigned the arbitration agreement prescribed under Clause 18
of agreement dated 18.09.1998 between plaintiff and defendant
No.2. Learned advocate submitted that arbitration agreement is
separate from the underlying contract and by mere taking over
ownership of defendant No.1 by defendant No.2, it would not
extend the privity of contract between the plaintiff and
defendant No.1 to defendant no.2.
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12. Learned advocate Mr. Tolia submitted that the law of
assigning of arbitration agreement is clear and necessitates the
unequivocal and explicit consent of a party to agree to the
assignment of Arbitration agreement. Therefore, in present
case, no deed of assignment is placed on record revealing
assigning of Clause 18 of the agreement dated 18.09.1998,
wherein the confirmation and the consent of the plaintiff is
sought supporting such assignment before taking over of
defendant No.1 by defendant No.2. Learned advocate therefore,
submitted that in absence of any lawful assignment, the privity
of contract or existence of arbitration agreement between the
plaintiff and defendant No.2, do not satisfy the necessary
ingredient of “in pursuance of an agreement in writing of
arbitration” as provided under Section 44 of A&C Act and
hence the present dispute cannot be referred to arbitration
under Section 45 of the A&C Act.
13. In support, learned advocate Mr. Tolia has relied on the
decision of Delhi High Court in the case of Delhi Iron and
Steel Company Limited v. U.P. Electricity Board reported in
2001 SCC Online Del 491 to submit that so far as arbitration
clause is concerned, the contract is personal in character and
incapable of assignment. Similar issue has been reiterated in
the judgment in the case of Vishranti CHSL v.Tattva Mittal
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Corporation Pvt. Ltd. reported in 2020 SCC Online Bom 7618.
Learned advocate therefore, submitted that the application
preferred by defendant No.2 under Order 14 Rule 2 of the CPC
is required to be rejected and the captioned suit is required to
be heard on merits.
14. Opposing the submissions, learned advocate Mr.
Upadhyaya for the deponent – Defendant No2 submitted that
the order dated 15.06.2023 passed by this Court is exhaustive
and speaks for itself. The said order was passed after bi-parte
hearing between the parties. The matter was adjourned, at the
behest of the plaintiff on one ground or other and therefore, it
has led the plaintiff to raise a fresh ground which was never
raised till the hearing took place and an order dated
15.06.2023 was passed.
15. Learned advocate Mr.Upadhyaya further submitted that
nowhere in the entire suit or either before this Court, the
plaintiff had raised a plea that the plaintiff was not signatory
to the MOA dated 18.09.1998. However, the said argument at
this juncture is erroneous because the very document is
endorsed by the plaintiff which is visible at page page 253. If
page 253 is perused, then it refers to the signature of plaintiff.
Admittedly defendant no.1, herein is signatory to the said
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agreement, and, the issue of defendant no.1 and defendant
no.2 are to be one entity has been decided by this Court vide
order dated 08/09.03.1999 and upheld by Hon’ble Apex Court
by virtue of order dated 08.04.1999 (page No.1351) by holding
that defendant Nos.1 and 2 are the same entity under the
same corporate umbrella. Therefore, the issue raised by the
plaintiff of non-signature on the agreement dated 18.09.1999 is
contrary to the facts on record as also beyond the order of
Hon’ble Supreme Court dated 08.04.1999. Moreover, even
otherwise also the Hon’ble Apex Court in the judgment in the
case of Cox and Kings Limited v. SAP India Pvt. Ltd reported
in (2024) 4 SCC 1 has dealt with the said issue and held that
all such aspects are to be considered by the Arbitrator after
referring the dispute to the learned Arbitral Tribunal after
examining the concept of group of companies. Therefore, the
issue in this Admiralty Suit is required to be referred to
Arbitration under Clause 18 of the MOA dated 18.09.1998.
Once the parties are referred to arbitration, whether Clause 18
of MOA dated 18.09.1998 is binding to the signatory or
otherwise, may be decided by learned Arbitral Tribunal.
Consideration
16. Facts recorded herein above are not in dispute and
therefore not repeated herein. It is noticed that the suit was
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filed by the plaintiff on account of alleged breach of MOA
dated 18.09.1998. It is case of the plaintiff that despite having
paid the full consideration as agreed between the parties, in
terms of MOA dated 18.09.1998, Defendant No.1 failed in
giving possession of vessel free from all encumbrances, which
resulted in to loss to the plaintiff, for which present suit has
been instituted.
17. Further, it is an admitted fact that issues were framed vide
order dated 06.01.2015 (issues at page 1891 dated 06.01.2015),
wherein issue No.5 reads as under “whether the suit is
maintainable at law in the present form?”. In response to
framing of issue No.5, Defendant no.2 preferred Civil
Application No.1 of 2022 under Order VII Rule 11 of Code of
Civil Procedure, 1908 (“CPC” for short) which is pending and
has also preferred another application under Order XIV Rule 2
of CPC, seeking to treat the issue No.5 as preliminary issue. To
the application filed by Defendant No.2, the plaintiff had filed
its detailed reply. It appears that on an application of
Defendant No.2 under Order XIV Rule 2 of CPC, hearing took
place and an order dated 15.06.2023 was passed. Operative
portion of order dated 15.06.2023 reads as under: –
“4. Heard learned Advocates for the parties who have not
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submitted anything further.
5. At the outset, in the considered opinion of this Court,
since the issue raised in the present application revolves
around Order 14 Rule 2 of the CPC, the same is reproduced
hereinbelow for benefit.
“2. Court to pronounce judgment on all issues.-(1)
Notwithstanding that a case may be disposed of on a
preliminary issue, the Court shall, subject to the
provisions of sub-rule (2), pronounce judgment on all
issues.
(2) Where issues both of law and of fact arise in the
same suit, and the Court is of opinion that the case or
any part thereof may be disposed of on an issue of law
only, it may try that issue first if that issue relates to-
(a) the jurisdiction of the Court, or
(b) a bar to the suit created by any law for the time
being in force, and for that purpose may, if it thinks
fit, postpone the settlement of the other issues until
after that issue has been determined, and may deal with
the suit in accordance with the decision on that issue.”
6. In a recent decision relied upon by the learned
Advocate for the defendant in case of Sathyanath and Anr.
Vs. Sarojamani (supra), the Hon’ble Supreme Court has
observed in Paragraph Nos. 5, 6, 7, 15, 16, 20 and 21 as
thus :
“5. The learned counsel for the appellants relied upon
provisions of Order 14 Rule 2 of the Code to contend
such Order 14 Rule 2 has been substituted by Central
Act 104 of 1976, whereby the Court is mandated to
pronounce judgment on all issues, even though the suit
can be disposed of on a preliminary issue. It was
argued that such amendment was necessitated to avoid
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only a preliminary issue is decided, the further appeal
and revision would be preferred only against the
preliminary issue and after the preliminary issue is
decided in favour of the plaintiffs, the evidence has to
be led on the remaining issues. Therefore, to ensure
expeditious disposal of the proceedings and to avoid
possibility of remand by the appellate or revisional
jurisdiction, it was made mandatory for the court to
record reasons on all the issues. Such finding would
obliviate the possibility of remand at appellate or
revisional stage, even if the finding on preliminary or
other issues are to be reversed.
6. Order 14 Rule 2 before amendment by the Act
104 of 1976 reads thus:
“2. Issues of law and fact.-Where issues both of
law and of fact arise in the same suit, and the
Court is of opinion that the case or any part
thereof may be disposed of on the issues of law
only, it shall try those issues first, and for that
purpose may, if it thinks fit, postpone the
settlement of the issues of fact until after the
issues of law have been determined.”
7. The said provision came up for consideration
before this Court in a judgment reported as S. S.
Khanna v. F. J. Dillon. It was held that under Order 14
Rule 2 of the Code where issues both of law and of fact
arise in the same suit and the Court is of opinion that
the case or any part thereof may be disposed of on the
issues of law only, it shall try those issues first, and
postpone the settlement of the issues of fact until other
issues of law have been determined. It was held as
under: (AIR pp. 502-03, para 18)
“18. … Under Order 14 Rule 2 Code of Civil
Procedure, where issues both of law and of fact
arise in the same suit, and the Court is of opinion
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that the case or any part thereof may be disposed
of on the issues of law only, it shall try those
issues first, and for that purpose may, if it thinks
fit, postpone the settlement of the issues of fact
until after the issues of law have been
determined. The jurisdiction to try issues of law
apart from the issues of fact may be exercised
only where in the opinion of the Court the whole
suit may be disposed of on the issues of law
alone, but the Code confers no jurisdiction upon
the Court to try a suit on mixed issues of law and
fact as preliminary issues. Normally all the issues
in a suit should be tried by the Court: not to do
so, especially when the decision on issues even of
law depend upon the decision of issues of fact,
would result in a lopsided trial of the suit.”
XXX XXX XXX
15. A Single Bench of Jammu and Kashmir High
Court in a judgment reported as Aruna Kumari v. Ajay
Kumar held as under:
“4. …Admittedly both the parties have to lead
evidence regarding both the issues. In case Issue 2
is allowed to be treated as preliminary the parties
will certainly lead evidence in the case and
instead of disposing of the case expeditiously it
will prolong the matter and frustrate the very
basis of law contained in Order 14 Rule 2, Civil
Procedure Code. The evidence to be led by both
the parties will almost cover both the issues and
it cannot, therefore, be said that by allowing Issue
2 to be treated as preliminary the trial of the case
would be expedited. When we review the whole
law on the point it becomes clear that where
issue of jurisdiction is a mixed question of law
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both the sides same cannot be treated as a
preliminary issue.”
16. The matter has also been examined by this Court
in a judgment reported as Ramesh B. Desai and v. Bipin
Vadilal Mehta wherein it was held as under:
“13. Sub-rule (2) of Order 14 Rule 2 CPC lays
down that where issues both of law and of fact
arise in the same suit, and the court is of the
opinion that the case or any part thereof may be
disposed of on an issue of law only, it may try
that issue first if that issue relates to (a) the
jurisdiction of the court, or (b) a bar to the suit
created by any law for the time being in force.
The provisions of this Rule came up for
consideration before this Court in S.S. Khanna v.
F.J. Dillon and it was held as under:
“* * *”
Though there has been a slight amendment in the
language of Order 14 Rule 2 CPC by the
amending Act, 1976 but the principle enunciated
in the abovequoted decision still holds good and
there can be no departure from the principle that
the Code confers no jurisdiction upon the court to
try a suit on mixed issues of law and fact as a
preliminary issue and where the decision on issue
of law depends upon decision of fact, it cannot be
tried as a preliminary issue.”
XXX XXX XXX
20. This Court in Sugandhi v. P. Rajkumar held that
if the procedural violation does not seriously cause
prejudice to the adversary party, the courts must lean
towards doing substantial justice rather than relying
upon procedural and technical violations. It is not to be
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forgotten that litigation is nothing but a journey
towards truth which is the foundation of justice and the
Court is required to take appropriate steps to thrash out
the underlying truth in every dispute. It was held as
under:
“9. It is often said that procedure is the
handmaid of justice. Procedural and technical
hurdles shall not be allowed to come in the way
of the court while doing substantial justice. If the
procedural violation does not seriously cause
prejudice to the adversary party, courts must lean
towards doing substantial justice rather than
relying upon procedural and technical violation.
We should not forget the fact that litigation is
nothing but a journey towards truth which is the
foundation of justice and the court is required to
take appropriate steps to thrash out the
underlying truth in every dispute. Therefore, the
court should take a lenient view when an
application is made for production of the
documents under sub-rule (3).”
21. The provisions of Order 14 Rule 2 are part of the
procedural law, but the fact remains that such
procedural law had been enacted to ensure expeditious
disposal of the lis and in the event of setting aside of
findings on preliminary issue, the possibility of remand
can be avoided, as was the language prior to the
unamended Order 14 Rule 2. If the issue is a mixed
issue of law and fact, or issue of law depends upon the
decision of fact, such issue cannot be tried as a
preliminary issue. In other words, preliminary issues can
be those where no evidence is required and on the basis
of reading of the plaint or the applicable law, if the
jurisdiction of the Court or the bar to the suit is made
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out, the Court may decide such issues with the sole
objective for the expeditious decision. Thus, if the Court
lacks jurisdiction or there is a statutory bar, such issue
is required to be decided in the first instance so that
the process of civil court is not abused by the litigants,
who may approach the civil court to delay the
proceedings on false pretext.”
[Emphasis Supplied]
6.1 From the observations of the Hon’ble Apex Court,
whereby the Hon’ble Apex Court has reiterated the law with
regard to exercise of power under Order 14 Rule 2 of the
CPC, it could thus be stated that while Order 14 Rule 2(1) of
the CPC inter alia requisites that even if a suit that could be
deposed of on preliminary issue, yet, the Court is mandated
to pronounce judgment on all the issues. This mandate is
subject to the exception carved out in Sub-rule (2) which
inter alia gives discretion to the Court to dispose of the suit
on an issue of law only, which relates either to the
jurisdiction of the Court to try the suit or a bar to the suit as
found in some law. The Hon’ble Apex Court in the decision
quoted hereinabove has inter alia laid down the law that the
intention of Sub-rule (2) after amendment is to ensure speedy
disposal of the suit on a question which is with regard to
jurisdiction or bar to suit where no evidence is required and
where the issue could be decided on plain reading of the
plaint or the applicable law. The Hon’ble Apex Court has
further observed that an issue which could be decided under
Sub-rule (2) of Order 14 Rule 2 of the CPC, is required to be
decided at the first instance so that the process of the Civil
Court is not abused by the litigants. The emphasized portion
of Para 21 quoted hereinabove clearly reflects the dictum of
the Hon’ble Apex Court in this regard.
7. Now keeping the law laid down by the Hon’ble Apex
Court explaining Order 14 Rule 2 of the CPC, this Court will
now proceed to decide the issue on merits.
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8. Learned Advocate for the plaintiff had raised an
objection that the request of the defendant to decide the
present suit by considering the issue No.5 framed in the array
of issues as a preliminary issue and whereas it has been
contended by the learned Advocate for the plaintiff that since
such type of application had been moved twice hereinbefore,
therefore consideration of the said request would amount to
the Court reviewing the orders of the Civil Court, which
orders have now acquired the status of orders passed by a
learned Co-ordinate Bench after transfer of the Admiralty Suit
to this Court and whereas such review ought not to be done
in absence of any application.
9. In this regard, it requires to be noted that the plaintiff
had moved two applications namely the first application at
Exh. 21 and the second set of applications at Exh. 46 and
Exh.121. It would be further pertinent to note that in
application Exh.21, the defendant had requested the Court to
frame a preliminary issue with regard to the suit not being
maintainable under Section 20 of the CPC and under the
provisions of the Arbitration and Conciliation Act. It appears
that such application had been rejected by the learned Civil
Court vide order dated 02.08.2002 inter alia observing that
the issue of maintainability is a mixed question of facts and
law, more particularly since the plaintiff”
10. It appears that thereafter the defendant had moved
application at Exh. 46 inter alia submitting to the learned
Civil Court that since there was an arbitration clause in the
agreement between the parties which contemplated arbitration
in the City of London, United Kingdom, therefore in view of
Section 45 of the Arbitration and Conciliation Act, 1996, the
Court did not have jurisdiction to try the dispute and whereas
the parties may be directed to refer the matter to the
arbitration.
11. As far as the application Exh. 121 is concerned, the
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defendant had moved the same contending that the plaintiff
firm was not registered under Section 69 of the Indian
Partnership Act and that under Section 2(e) of the Arbitration
and Conciliation Act, the learned Civil Court which was
taking up the matter at the relevant point of time i.e. Special
Judge, Alang, Bhavnagar, would not be the competent Court
to take up the issue, rather it would be the District Court
which would be competent to decide the issue as presented in
the suit. It would also be pertinent to state here that the
defendant in the subject matter of the application had
referred to Order 14 Rule 2 of the CPC and whereas no
averments with regard to the said provisions is found in the
application. It appears that vide common order dated
30.11.2010, the learned Civil Court had rejected the
application Exh.46 and the application Exh.121.
12. From a perusal of the above discussion, it would appear
that the defendant had requested for framing of a preliminary
issue with regard to the jurisdiction of the Court on account
of requirement of referring the dispute to an arbitration, more
particularly in view of the arbitration clause being in
existence in the agreement between the parties. It also
appears that the learned Civil Court had rejected the request
for framing of preliminary issue on this aspect and whereas
the Court also did not accede to the request of the defendant
that the Court did not have any jurisdiction to try the suit in
question.
12.1 In the considered opinion of this Court, if the defendant
had approached this Court with an application seeking for
framing of a preliminary issue with regard to jurisdiction or
seeking for a direction to refer the dispute to arbitration,
possibly, the orders referred to hereinabove of the year 2002
and the year 2010, may have created an estoppel against the
defendant from seeking the selfsame prayer. As against the
same, what appears here is that the learned Civil Court
concerned, had framed 08 issues vide order dated 06.01.2015
and whereas an additional issue being issue No.1A had been
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framed vide order dated 27.10.2015. The issue No.5 is that
“Whether the suit is maintainable at law in its present form?”
12.2 In the considered opinion of this Court, the issues
having been framed, in normal course, after leading of
evidence, the Court would be required to give its answer to
all the issues including the issue No.5. Even if the Court in
an interim order has observed that whether the dispute is
required to be referred to an arbitration is a mixed question
of law and fact, yet the same would preclude the Court trying
the suit finally to decide issue No.5 as a pure question of
law. Again, while though the Civil Court does not appear to
have out-rightly rejected the request of the defendant vide
Exh. 46 to refer the dispute to an arbitrator as per Section 45
of the Arbitration and Conciliation Act, yet, since the said
application has been rejected, even the same in the
considered opinion of this Court would not preclude the Court
taking up final hearing of the suit to decide if deemed
appropriate to refer the dispute to an arbitrator. This Court
arrives at the above conclusion on account of the settled
proposition that interim orders would not be binding on a
Court while hearing the proceedings finally.
12.3 It would also require to be mentioned here that the
defendant in application Exh. 121 has mentioned, more
particularly in the subject column of the said application, that
the application is under Order 14 Rule 2 of the CPC, yet it
appears that there is no averment in the said application with
regard to Order 14 Rule 2 of the CPC. Furthermore, it also
does not appear that the learned Court while rejecting the
said application had either referred to Order 14 Rule 2 of the
CPC or had made any observations which could even be
remotely corelatable as being observations made under Order
14 Rule 2 of the CPC, therefore, in the considered opinion of
this Court, mere mention of Order 14 Rule 2 in the subject
matter of an application and such application being rejected
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hearing of the suit to decide an issue which is part of the
issue framed, as a preliminary issue under Order 14 Rule
2(2).
13. Having regard to the discussion hereinabove, in the
considered opinion of this Court, as per the law laid down by
the Hon’ble Apex Court in case of Sathyanath and Anr. Vs.
Sarojamani (supra) that under Order 14 Rule 2(2) of the CPC,
the Court could dispose of an issue of law only without
pronouncing judgment on all the issues, if such issue relates
to jurisdiction of the Court or relates to a bar to the suit
created by a law which is in force. Furthermore, as per the
dictum of the Hon’ble Apex Court for ensuring speedy
disposal of a lis and also to ensure that the process of Civil
Court is not abused by litigants, the Court is obligated to
decide issue as per Order 14 Rule 2(2) of the CPC at the first
instance and further considering the fact that the previous
orders would not preclude this Court from deciding an issue
which is framed though the said aspect may have been
touched upon in the interim orders, therefore, in the
considered opinion of this Court, neither the interim orders
would act as a bar to this Court nor the fact of any particular
observations made in such interlocutory orders bind this Court
at the stage of finally deciding the issue already framed.
14. Furthermore, as far as the issue No.5 is concerned,
since it appears that the said issue is an issue of law more
particularly with regard to jurisdiction of this Court and could
be decided as such, more particularly without delving into the
facts, this Court deems it appropriate to take up the issue as
an issue of law under Order 14 Rule 2(2)(a) of the CPC.
Furthermore, since it appears that the defendant has not
preferred a specific application for taking up the issue No.5 as
an issue under Order 14 Rule 2(2) of the CPC and whereas
though in the considered opinion of this Court, in view of the
dictum of the Hon’ble Apex Court in case of Abdul Rahman
Vs. Parsonyn Bai, reported in (2003) 1 SCC 488 that “For the
purpose of disposal of the suit on the admitted facts,
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particularly when the suit can be disposed of on preliminary
issues, no particular procedure was required to be followed by
the High Court….”, yet to ensure that appropriate opportunity
is afforded to the plaintiff to make his submissions on the
aspect as to why the issue No.5 should not be taken up as a
preliminary issue under Order 14 Rule 2(2)(a) of the CPC and
the suit be decided on the said preliminary issue and also to
make submissions on the aspect as to why this Court ought
not to refer the dispute to be decided by arbitration as per
Clause 18 of the memorandum of agreement between the
parties dated 18.09.1998, list these matters on 07.07.2023 for
further submissions.”
18. Therefore, the contention of Defendant No.2 that this
Court vide order dated 15.06.2023, has held to decide the
issue as per Order 14 Rule 2(2) of CPC, as preliminary issue
merits acceptance. It is also noticed that joining defendant
No.2 was at the instance of plaintiff. Further, the contention of
Defendant No.2 that it (defendant no.2) and Defendant No.1
are the same entity because of their existence under the same
corporate umbrella appears to be correct in view of order
dated 08/09.03.1999. SLP filed against the said order came to
be disposed of under order dated 08.04.1999 by Hon’ble Apex
Court by granting liberty to the Defendant to approach high
court for modification (page No.1351). Significantly the finding
with regard to lifting of corporate veil has not been disturbed.
19. Further, as per the order dated 15.06.2023 of this court as
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referred to above, the issue No.5 as per Order 14 Rule 2(2) is
required to be decided as preliminary issue.
20. Moreover, issue no.5 that ‘whether the suit is
maintainable in law in the present form’, if considered in view
of clause 18 of MOA dated 18.09.1998 which provides for
arbitration clause, in the opinion of this Court, it would be
apposite to refer to the decision of Hon’ble Supreme Court in
the case of Cox and Kings Limited (supra) wherein it is held as
under:
“166. The above position of law leads us to the inevitable
conclusion that at the referral stage, the court only has to
determine the prima facie existence of an arbitration
agreement. If the referral court cannot decide the issue, it
should leave it to be decided by the arbitration tribunal.
The referral court should not unnecessarily interfere with
arbitration proceedings, and rather allow the arbitral
tribunal to exercise its primary jurisdiction. In Shin-Etsu
Chemical Co Ltd v. Aksh Optifibre Ltd,125 this Court
observed that there are distinct advantages to leaving the
final determination on matters pertaining to the validity of
an arbitration agreement to the tribunal:
74. […] Even if the Court takes the view that the
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arbitral agreement is not vitiated or that it is not
valid, inoperative or unenforceable, based upon
purely a prima facie view, nothing prevents the
arbitrator from trying the issue fully rendering a
final decision thereupon. If the arbitrator finds the
agreement valid, there is no problem as the
arbitration will proceed and the award will be
made. However, if the arbitrator finds the
agreement invalid, inoperative or void, this means
that the party who wanted to proceed for
arbitration was given an opportunity of
proceedings to arbitration, and the arbitrator after
fully trying the issue has found that there is no
scope for arbitration.”
167. In Chloro Controls (supra), this Court held that it is
the legislative intent of Section 45 of the Arbitration Act
to give a finding on whether an arbitration agreement is
“null and void, inoperative and incapable of being
performed” before referring the parties to arbitration. In
2019, the expression “unless it prima facie finds” was
inserted in Section 45. In view of the legislative
amendment, the basis of the above holding of Chloro
Controls (supra) has been expressly taken away. The
present position of law is that the referral court only
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needs to give a prima facie finding on the validity or
existence of an arbitration agreement.
168. In Deutsche Post Bank Home Finance Ltd v. Taduri
Sridhar,126 a two- Judge Bench of this Court held that
when a third party is impleaded in a petition under
Section 11(6) of the Arbitration Act, the referral court
should delete or exclude such third party from the array
of parties before referring the matter to the tribunal. This
observation was made prior to the decision of this Court
in Chloro Controls (supra) and is no longer relevant in
light of the current position of law. Thus, when a non-
signatory person or entity is arrayed as a party at Section
8 or Section 11 stage, the referral court should prima
facie determine the validity or existence of the arbitration
agreement, as the case may be, and leave it for the
arbitral tribunal to decide whether the non- signatory is
bound by the arbitration agreement.
169. In case of joinder of non-signatory parties to an
arbitration agreement, the following two scenarios will
prominently emerge: first, where a signatory party to an
arbitration agreement seeks joinder of a non-signatory
party to the arbitration agreement; and second, where a
non-signatory party itself seeks invocation of an
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arbitration agreement. In both the scenarios, the referral
court will be required to prima facie rule on the
existence of the arbitration agreement and whether the
non-signatory is a veritable party to the arbitration
agreement. In view of the complexity of such a
determination, the referral court should leave it for the
arbitral tribunal to decide whether the non- signatory
party is indeed a party to the arbitration agreement on
the basis of the factual evidence and application of legal
doctrine. The tribunal can delve into the factual,
circumstantial, and legal aspects of the matter to decide
whether its jurisdiction extends to the non-signatory
party. In the process, the tribunal should comply with
the requirements of principles of natural justice such as
giving opportunity to the non-signatory to raise
objections with regard to the jurisdiction of the arbitral
tribunal. This interpretation also gives true effect to the
doctrine of competence-competence by leaving the issue
of determination of true parties to an arbitration
agreement to be decided by arbitral tribunal under
Section 16.
H. Conclusions
170. In view of the discussion above, we arrive at the
following conclusions:
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170.1. xxxx
170.2. xxxx170.3. The requirement of a written arbitration
agreement under Section 7 does not exclude the
possibility of binding non-signatory parties;
170.4. Under the Arbitration Act, the concept of a
“party” is distinct and different from the concept of
“persons claiming through or under” a party to the
arbitration agreement;
170.5. The underlying basis for the application of the
group of companies doctrine rests on maintaining the
corporate separateness of the group companies while
determining the common intention of the parties to bind
the non- signatory party to the arbitration agreement;
170.6. xxxx
170.7. xxxx
170.8. xxxx
170.9. xxxx
170.10. xxxxx
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170.12. At the referral stage, the referral court
should leave it for the arbitral tribunal to decide
whether the non-signatory is bound by the arbitration
agreement; and170.13. In the course of this judgment, any
authoritative determination given by this Court
pertaining to the group of companies doctrine should
not be interpreted to exclude the application of other
doctrines and principles for binding non-signatories to
the arbitration agreement.”
21. Thus, as held by the Hon’ble Supreme Court all such
aspects including the issue of privity of contract between
plaintiff and defendant no.2, signatory- non signatory to the
MOA, and the group of companies are to be considered by
Learned Arbitral Tribunal once the dispute is referred.
Therefore, in the opinion of this court, in view of the order of
this Court dated 15.06.2023 and in view of the latest decision
of Hon’ble Supreme Court, in the case of Cox and Kings
Limited (supra) this Admiralty Suit No.20 of 2022, is disposed
of by relegating the parties to the remedy of Arbitration. All
available contentions are kept open.
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22. In view of disposal of Suit, the amount deposited by
defendant No. 2 of the sum of Rs.25,00,000/-, before City Civil
Court Bhavnagar with accrued interest thereon, is directed to
be paid over to defendant No.2 after due verification.
23. With this, the present Suit is disposed of. Rule is
discharged. No costs.
24. Consequentially, Civil Application(s) stands disposed of.
(MAUNA M. BHATT,J)
NAIR SMITA V./32
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