Dispute With Composite Cause Of Action Against Multiple Parties Not Arbitrable: Calcutta High Court

The Calcutta High Court on 6 March refused to refer a commercial dispute between Tirupati Vancom Pvt. Ltd. and others to arbitration, as the suit involved several defendants.

Justice Aniruddha Roy dismissed an application under Section 8 of the Arbitration and Conciliation Act, 1996, observing that where the cause of action and reliefs are inseparably connected, a dispute cannot be split and referred to arbitration even if an arbitration clause exists between some of the parties.

He observed:

“The plaintiff when files a suit against several defendants and the cause of action and reliefs pleaded in the plaint show they are so inter connected and intertwined that neither the cause of action nor the reliefs can be bifurcated or segregated, for such a plaint even if there is an existing and valid arbitration clause between the plaintiff and some of the defendants or any defendant, the subject matter of the suit is not permitted to be and cannot be referred to for arbitration.”

The dispute arose from a Memorandum of Understanding (MoU) executed on 21 June 2012 between Tirupati Vancom and certain defendants for the acquisition of 18% shares in a company holding leasehold rights over a property in Kolkata.

Tirupati Vancom claimed it had paid more than Rs. 11 crore towards the transaction, but the shares were never transferred. The defendants argued that the MoU contained an arbitration clause and that the dispute should therefore be referred to arbitration. According to them, Tirupati Vancom's claim essentially sought refund of money paid under the MoU and fell within the scope of the arbitration agreement.

Opposing the plea, Tirupati Vancom contended that payments had been made to multiple parties and that the reliefs sought (including declarations regarding an arbitral award and damages) were jointly claimed against all defendants.

The High Court accepted Tirupati Vancom's contention, observing that the pleadings disclosed a “composite cause of action” involving several parties. In such circumstances, the court held that the subject matter of the suit could not be referred to arbitration.

Accordingly, the Court dismissed the application seeking reference to arbitration.

For Plaintiff: Senior Advocate K.R. Thaker with Addvocates Sreenita Thaker, Sneha Singhania

For Defendants: Senior Advocate Ratnako Banerjee with Advocates Paritosh Sinha, K.K. Pandey, Zeeshan Haque, Mallika Bothra, Rudrajit Sarkar, Debangshu Dinda, Jai Kumar Surana, Abhimonyu Roy