Mohammad Ishaq Bhat v. Tariq Ahmad Sofi & Anr.

Whether stranger to an arbitration agreement can be impleaded a party to an application under Section 9 Jammu and Kashmir Arbitration and Conciliation Act, 1997 (for short Act) is the short controversy involved in the present revision petition.

2. First the back ground in which the revision petition is filed:

The petitioner's case is that the father of the petitioner acquired a tenancy right in a shop (hereinafter “suit shop”) measuring 23′ × 9′ situated at Kokerbazar, Srinagar on first baisakh 1991 svt and thereafter started business in the suit shop under the name and style of “Ghulam Rasool Joo & Co.”; that after demise of petitioner's father, the petitioner took over the possession of the suit shop and started the business of sanitary fitting and electric goods in the shop. It is pleaded that the petitioner at times allowed his son the respondent No. 2 herein to run the shop, though the tenancy rights and stock in the trade continued to be with the petitioner. The respondent No. 2 according to the petitioner without any right or interest in the suit shop on 7-3-1994 executed a rent deed in respect of the suit shop in favour of one Ghulam Qadir Mir resident of Exchange road, Srinagar, that the petitioner because of undesirable activity the respondent No. 2 disinherited the respondent No. 2 issued a public notice in this regard in a local daily and debarred the respondent No. 2 from running the suit shop. It is pleaded that the respondent No. 1 some time back informed the petitioner that his son the respondent No. 2 had executed a partnership deed with the respondent No. 1 regarding business being run in the suit shop, whereafter petitioner filed the suit for grant of declaratory decree declaring the partnership deed executed by the respondents on 31-3-2006 and registered on 3-4-2006 and rent deed executed on 7-3-1994 as null and void and ineffective as against rights of the petitioner and also permanent injunction decree restraining the respondents from interfering in the petitioner's possession over the suit shop. The respondent No. 2 is said to have admitted the plaintiff's suit. The Trial Court, according to the petitioner, granted ad interim order on 7-10-2006 directing the parties to maintain status quo on spot. It appears that the respondent No. 1 making use of arbitration clause appearing the partnership deed dated 7-10-2006 subject matter of Civil Suit instituted by the petitioner, filed an application under Section 9 of the Act for interim measures to protect the partnership business and assets thereof. The respondent No. 1 pleaded that the dispute between respondent No. 1 and respondent No. 2 had already been referred by respondent No. 1 to the arbitration and pending award as an interim measure the respondent No. 1 be allowed to run the business in the shop in accordance with terms and conditions of partnership agreement, the respondent No. 2 be restrained from causing interference in smooth running of the business and the respondent No. 2 be restrained from transferring the possession of the suit shop to any other person. The respondent No. 1 in alternative prayed for appointment of a receiver so as to save the partnership business from any loss.

3. The petitioner filed an application before the learned Principal District Judge, Srinagar on 29-12-2006 praying therein the petitioner be impleaded as respondent in the application. The petitioner's case was that the partnership agreement between the respondent 1 and 2 was nothing but a piece of fraud; that the petitioner was running his business in the suit shop and that the respondents had kept back vital information from the Court and ignored to disclose that the Civil Suit assailing validity of partnership deed was sub judice. The petitioner pleaded that the application under Section 9 of the Act was aimed to deprive the petitioner of his property and business. The application was resisted by the respondents on the ground that the petitioner not being a party to the arbitration agreement could not be added as a party to the application. It was admitted that Civil Suit regarding the subject matter of the application was awaiting disposal before 2nd Sub-ordinate Judge, Srinagar but pleaded that the suit was designed to defeat the rights of the respondent No. 1.

4. Learned Principal District Judge, Srinagar vide order dated 16-4-2007 impugned herein rejected the application of the petitioner and declined his prayer to be impleaded as party to the application. The application was dismissed on the sole ground that the petitioner was not party to the arbitration agreement interms of Section 2 (g) of the Arbitration and Conciliation Act, 1997 and thus cannot be impleaded as a party to the application.

5. The order dated 29-12-2006 is assailed inter alia on the ground that the petitioner being in physical possession of a suit shop is a proper and necessary party to the application and ought to have been arrayed as such by the Court. It is insisted that no reason has been spelt out in the impugned order prompting the Court to decline the prayer for impleadment and that the order thus violates principle of natural justice and fair play.

6. It is argued by counsel for the petitioner that the only interim measure by the Principal District Judge, Srinagar prayed for by the respondent No. 1 in the application under Section 9 of the Act, was likely to prejudice the rights of the petitioner and in face of Civil Suit already instituted, may impunge upon the rights of the petitioner without the petitioner being afford opportunity to project his case. The petitioner, it is insisted is a proper and necessary party and in his absence it may not be possible for the Court in the facts and circumstance of the case to pass just and proper order.

7. Learned counsel for the respondents on the other hand has reiterated his stand before the Court below that a person not party to arbitration agreement has no right to be impleaded as party to the proceedings under Section 9 of the Act. The learned counsel to buttress to his argument places strong reliance on AIR 2009 Guwahati 110, where the application of stranger to the arbitration agreement, for impleadment in proceedings under Section 9 of the Act was rejected on the ground that a person not party to the arbitration agreement cannot enter the Court for protection under Section 9 of the Act.

8. The Court while holding so, made following observation;

“The term “party” has been defined in Section 2(1)(h) of the Arbitration and Conciliation Act, 1996. It reads “party” means a party to an arbitration agreement. Therefore, a joint reading of Section 9 and Section 2(1)(h) of the Arbitration and Conciliation Act will go to show that an arbitration proceeding under Section 9 would only be maintainable between the parties to the arbitration agreement. Section 9 says that a party may before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36 may apply to a Court for the measures enumerated in I and II. Admittedly, the applicant herein is not a party to the arbitration agreement. Opposite party No. 1 and Opposite Party No. 2 are parties to the arbitration agreement and, therefore, the applicant herein would be a third party of the arbitration proceeding and being at this position cannot be impleaded as one of the respondents in appeal. Mr. Roy further relied in the decision of the case between Onyx Musicabsolute.Com Pvt. Ltd. v. Yash Raj Films Pvt. Ltd. reported in 2008 (6) Bom CR 418, wherein it was held by the Bombay High Court that relief under Section 9 of the Arbitration and Conciliation Act can be claimed by a party to an arbitration agreement against the other. It held since the defendant No. 3 is not a party to the arbitration agreement plaintiff are not entitled to claim any relief against the defendant. In our present case it is noticed that the arbitration agreement exists in between the opposite party No. 1 and 2 and not with the present applicant. Therefore, apparently in the proceeding in between the opposite party No. 1 and 2, in the nature of application under Section 9 of the Arbitration and Conciliation Act no relief can be sought by the applicant”.

9. Section 9 of the Act provides for interim measures for protection and preservation of the subject matter of arbitration proceedings and matters ancillary thereto. It also provides for interim measures like appointment of guardian for a minor or person of unsound mind to facilitate the arbitral proceedings. The provision enumerates the interim measures that the principal Court of original jurisdiction in a district of the High Court may order, to attain the objects set out therein. The concluding para of Section 9 of the Act provides that “a Court shall have same powers to make orders as it has for the parties for…………any proceedings before it”. There can be no disagreement with the legal preposition that right to seek interim measures vide Section 9 of the Act, is conferred exclusively on a party to the arbitration agreement. Section 2 (1)(g) of the Act leaves no room for any doubt in this regard. It defines “party” as “a party to a arbitration agreement”. In the circumstances, a stranger to the arbitration agreement cannot press into service Section 9 of the Act and ask the Court to order any interim measure for protection and preservation of the subject matter of arbitration agreement or other interim measures envisioned by the provision. The person, not a party to the arbitration agreement, no matter how grave and serious his grievance is can not approach to the Court with an application under Section 9 of the Act. It is exactly what has been laid down in AIR 2009 Guwahati 110. However restrictions placed on locus of a person to invoke Section 9 of the Act may not be applicable to a person who does not pray for any interim measures but intends to acquaint the Court with facts to enable the Court to make a just and proper order. If a person is materially and substantially interested in subject matter of the arbitration agreements and is likely to be materially affected by the order, the Court is asked to pass under Section 9 of the Act, is kept at bay there is every likelihood of justice being not done in the matter. A person having vital interest in the subject matter of arbitration agreement can not be asked to watch proceedings from the fence and leave the arena for the parties to the arbitration agreement to cut swords, when the victim of the out come of the dispute is non else but the person pushed to the fence. After all, what is endgame in proceedings before the Court. The Court is required to arrive at just conclusion and do justice between the parties. In order to enable the Court to discharge its mandate, it is necessary to a person who is interested in the subject matter of arbitration agreement and is in a position to render assistance to the Court is allowed to become a party to the proceedings. The case in hand is an illustrative instance of injustice that may be the result, if a person though stranger to arbitration agreement, is not allowed to become a party to the proceedings under Section 9 of the Act. The petitioner claims to be running business in the suit shop, in tenancy of his father for decades together and now in his possession as a tenant thereof. The respondent is claimed to have entered into a partnership with the respondent No. 2 petitioner's son where under tenancy rights in the suit shop along with business run in the suit shop, stands transfered to the firm, a plea vehemently denied by the petitioner. The petitioner as back as on 7-10-2006, i.e before the application under Section 9 of the Act was moved by the respondent No. 1, filed on declaratory and injunction suit and the ad-interim order has been passed by the Court, fact which has been with held by the respondent in the application under Section 9 of the Act. If in peculiar situation, without hearing the petitioner and affording the petitioner an opportunity to protect his case, any of the interim measures suggested by the respondent No. 1 is ordered, it may have disastrous consequence for the petitioner. To illustrate if, as an interim measure the respondent No. 1 is ordered to be allowed to ran the business in the suit shop, and the petitioner restrained from interfering in the business of the respondent No. 1 or receiver as suggested by the respondent is appointed, person prejudicially affected by such orders may be none else but the petitioner. So viewed Section 9 of the Act can not be interpreted to forbid impleadment of a person, not a party to the arbitration agreement, to the proceedings under Section 9 of the Act. The Court has ample powers to implead a person as a party to the proceedings under Section 9 of the Act where a person asking for impleadment is in a position to convince the Court that he is proper and necessary party to the proceedings and his presence before the Court, is bound to enable the Court to pass just and proper order. Any other interpretation would result in multiplicity of litigation and thus would be against the public policy. What emerges is that whereas' as stranger to an arbitration agreement can not be allowed to seek interim measure(s) under Section 9 of the Arbitration and Conciliation Act, 1997, a stranger may be impleaded as a party where the Court is convinced that the applicant is a proper and necessary party to the proceedings and his presence is bound to enable the Court to arrive at a just and proper conclusion.

10. In the present case the petitioner on the strength of averments made and material placed before the learned Principal District Judge, Srinagar had made out a case that his presence before the Court was proper and necessary for just orders in the proceedings. Learned Principal District Judge, thus ought to have impleaded the petitioner as a party respondent in the proceedings, under Section 9 of the Act in the revision petition, so viewed the order impugned is not in accordance with law and liable to be set aside.

11. Viewed thus Revision Petition is allowed. The order dated 16-4-2007 is over set and petitioner directed to be arrayed as respondent No. 5 in the proceedings under Section 9 of the Act.

12. Disposed of.

Petition allowed.