(1) The petitioner and respondents no. 1 & 2 entered into an agreement about finance and distribution etc. of certain motion pictures. Petitioner claiming that respondents no. 1 & 2 in contravention of agreement have exhibited through no. 3 or have assigned some rights to No. 3, moved Court U/S 20 of Arbitration Act. The question was whether No. 3 was bound by Arbitration agreement.) Para 13 onwards the judgment is: -
(2) During the pendency of the proceedings, the petitioner died and his legal heirs were brought on the record and are the present petitioners.
(3) The first question that requires consideration, therefore, is whether respondent No. 3 could be said to be bound by the agreement of March 16, 1965, Ex. P. 1, between the petitioned and respondents No. 1 and 2 & the petitioner would be entitled to invoke the arbitration clause in the agreement so as to bring respondent No. 3 within the scope of the disputes between the petitioner and respondents No. 1 and 2 touching the question as to the petitioner's entitlement to the amount and to other reliefs in relation to the picture 'TEESRI KASAM' with which respondent No. 3 is said to be concerned, (4) Learned counsel for the petitioner contends that the agreement Ex. P. 1 according to its recital was binding not only on respondents No. 1 and 2 but on their "heirs, executors, legal representatives, assigns and all the persons deriving title under them", that in his reply to the petition, respondent No. 3 admited that the picture 'TEESRI KASAM' had been sold to the said respondent for valuable consideration paid bonafide although aside to be without the knowledge of petitionar's claim or title and that the said respondent had made actual release of the said picture claiming to have obtained its lawful possession from the other respondents in the ordinary course of business, that it has been established by the unrebutted testimony of the petitioner as PW1 that "this picture was got released in Delhi by respondents No. 1 and 2" through respondent No. 3 and that the said respondent. No 3 was "a sub-lessee, assignee or transferree" of the other respondents and that the said respondent No. 3 would, therefore, be deemed in law to be an assignee of the said respondents No. 1 and 2 and in the position of a person "deriving title under them" in terms of the recital contained in the said deed and that, therefore, the aforesaid artitration clause could be successfully invoked as against the said respondent No. 3 as well and should, therefore, be given effect to as against the said respondent. Learned counsel for the petitioner further contends that the agreement could be assigned in favor of another even though it contained an arbitration clause and relied in support of this proposition on a decision of this Court in the case of Shri Patanjal and another v. M/s. Rawalpindi. Theatres Private Ltd. Delhi, and the case of Shyler v. Woolf, Aer 1946 (2) 54.
(5) Learned counsel for respondent No. 3 on the other hand even while conceding that an agreement may be legitimately assigned even though it contained an arbitration clause, contended that the arbitration clause could ensure for the benefit of or against either the parties to the agreement which contained the arbitration clause or their "heirs, executors, legal representatives, assigns and persons deriving title under them" and that on a true construction of the aforesaid terms, it must be held that an assign or a person claiming any title under a party to the agreement so as to be bound by it must not be an assign of any claim or property forming subject matter of the agreement but of title to the totality of the agreement in the sense that such a person must become substituted for such a party either by operation of law as would happen, for example, in the case of heirs, executors and legal representatives, or by transfer inter vivos, and the other cases. It was further contended that assuming that respondents No. 1 and 2 had either transferred any interest in relation to 'TEESRI KASSAM', one of the pictures forming subject matter of the agreement, or had got it released through the said respondent No. 3 either as an agent or as representative or on some other arrangement including the transfer of their interest in the said picture, would not make respondent No. 3 either as an assign or as a person deriving title from the party so as to bind him with the various terms of the agreement including the arbitration clause. Learned counsel for respondent No. 3 further asserted that the petitioner had failed to establish even by his unrebuttcd evidence that respondent No. 3 was either an assign or could be said to have derived title under respondents No. 1 and 2 and was, therefore, wholly foreign to the agreement as indeed the arbitration clause and, therefore, the provisions of section 20 could not possibly be invoked against the said respondent, (6) After hearing learned counsel for the parties, it appears to me that the contention of respondent No. 3 is well founded and the petitioner's plea under Section 20 of the Act in so far as it seeks to involve respondent No. 3 must be dismissed.
(7) It has been pointed out above that the agreement was entered into between the petitioner on the one hand and responents No. 1 and 2 on the other, who were described as "borrowers'", and according to the recital in the agreement, the said expression "unless repugnant to the context or meaning thereof, shall include their heirs, executors, legal representatives, assigns and all the persons deriving title under them," The intention of the aforesaid recital, which is well known in the annals of drafting of conveyancing, is not only to bind the parties to the agreement but all those who, either by operation of law or by the act of the parties concerned, step into the shoes of the parties. This could be either on the death of a party in which case the agreement would bind the heirs, executors and administrators as the case may be, i.e., persons who on the death of a party represent the estate This is based on a fiction of law that even though a person may die a physical death, he is not extinct in law until his various rights and obligations have been finally dealt with and the legal personality of such a person is deemed to continue in the from of his heirs executors and legal representatives who continue to represent the deceased as it were until the rights and obligations of the deceased are determined, discharged or released as the case may be. Similarly, an agreement would bind those who claim under a party by virtue of an act of the party where for example a party may assign all his rights or obligations under an agreement to another by various modes known to law and such persons, therefore, would be bound by such an agreement as assigns or persons deriving title through the party who was its executor. In each case, it is necessary that the party who seeks to take advantage of such an agreement or who is sought to be bound by it, must in law have stepped into the shoes of the original party either by succession, operation of testamentary instrument or by the act of the party during his life time. It is, however, necessary that the party who claims to take advantage of the agreement or is sought to be bound by it, must have been an assign or a transferree of all rights or obligations under the agreement and a person who may have acquired any claim or property, forming subject matter of the agreement, or who may have acted as an agent or representative of such a party in relation to any such claim or property without having agreed to be bound by the terms of the agreement could not be said to have stepped into the shoes of the party and if any dispute arises between the original party with regard to their right and obligation under the agreement the transferree of such rights or benefit could not by virtue merely of such transfer, possibly be bound by the terms of the aforesaid agreement or by any arbitration clause that such an agreement may incorporate. This' is so because by merely acting for a party to the agreement in relation to any property or by purchasing any claim or property in relation to which an agreement may had been entered into between two parties, the transferree or the person acting for a party could not be said in law to have stepped into the shoes of the party so as to be bound by the agreement or to be entitled to take advantage of it.
(8) The petitioner's own case in his statement as PW1 is no more than that respondents No. 1 and 2 got the picture released in Delhi and U.P. through respondent No. 3 and that respondent No. 3 was "a sub-lessee, assignee or transferree of respondents No. 1 and 2". The petitioner nowhere claimed that respondent No. 3 was the assignee or transferree of all the rights and obligations of the respondants No. 1 & 2 under the said agreement. In fact, the petitioner does not appear to be certain as to the arrangement under which the picture was released by respondent No. 3. It is, therefore, not possible to give a finding on such a vague statement, even though unrebutted, that respondent No. 3 was an assignee or transferree of the rights of respondents No. 1 and 2 under the said agreement and even if it was assumed that the picture; was is got released by respondents No. 1 and 2, through respondant No. 3 either as their representative or as sub-lessee, or as assignee or transferres of respondents No. 1 and 2, it would not entitle the petitioner to invoke Section 20 of the Act as against the said respondent.
(9) In the result, the petitions in so far as they seek to involve respondent 3 in the arbitration proceedings are misconceived and must be dismissed.