- (1.) The legal question raised is as to whether an interlocutory injunction may be granted in a civil suit to stall an arbitral reference that has been commenced by the defendants without recourse to any judicial authority or to the Chief Justice or his designate. THE larger issue that arises is as to whether a suit is maintainable to challenge the existence of an arbitration agreement.
(2.) Ga No. 379 of 2010 is the plaintiffs' principal interlocutory application in aid of the reliefs in the suit. GA No. 906 of 2010 is an application by the first and second defendants for rejection of the plaint and/or dismissal of the suit. GA No. 2143 of 2010 is the plaintiffs' application for extension of the interim order that has run out by efflux of time. The second and third plaintiffs and the first three defendants are brothers. The first plaintiff is a company in which the five brothers are or, claim to be, directors. The fourth defendant is the arbitrator nominated by the three other defendants in pursuance of an arbitration agreement said to be contained in a memorandum of understanding of March 15, 2007. The third defendant has obviously been served and was represented at an earlier stage of the proceedings as is recorded in an order dated February 24, 2010 passed in GA No. 379 of 2010. No affidavit has been used by the third defendant and such brother is not represented at the protracted final hearing. The fourth defendant has, understandably, not evinced any interest in the present proceedings and has chosen not to be represented in Court. The plaintiffs say that the second and third plaintiffs control the majority shareholding in the plaintiff company and that the three defendant brothers are minority shareholders in such company. The plaintiffs state that disputes and differences had arisen between the shareholders of the plaintiff company prior to January, 2006 resulting in the five Baheti parties to the present suit instituting proceedings under, inter alia, sections 397 and 398 of the Companies Act before the Company Law Board in Delhi against a sixth brother, Sushil Kumar, and the widow of a seventh brother. It is the plaintiffs' case that such company petition, CP No. 3 of 2006, was disposed of on the basis of two sets of terms of settlement executed on March 15, 2007: the first between the five Baheti brothers who are parties to the present suit on one side and Sushil Kumar and his immediate family on the other side; the second between these five Baheti brothers on the one side and the branch of the deceased seventh brother on the other side. The terms of settlement were taken on record by the Company Law Board on May 15, 2007 and CP No. 3 of 2006 disposed of on such basis. The plaintiffs have relied on the two several sets of the terms of settlement executed on March 15, 2007 and the Company Law Board order of May 15, 2007.
(3.) There is not much dispute between the parties to the present proceedings that upon the settlement between these Baheti brothers and the families of the two others, these five Baheti brothers came to be in exclusive management of the plaintiff company. The plaintiffs say that by or about March, 2009 disputes and differences arose between the two plaintiff brothers on the one hand and the three defendant brothers on the other. These disputes were in respect of the management and administration of the plaintiff company which carries on business as transporter of goods, passengers, livestock and materials. By the middle of the year 2009, a second petition under, inter alia, sections 397 and 398 of the Companies Act was instituted in respect of the plaintiff company by the plaintiff brothers against, inter alia, the defendant brothers. The plaintiffs demonstrate that by a consent order of July 20, 2009 the disputes covered in the second petition relating to the plaintiff company, CP No. 09(KOL)/09, were resolved. The order dated July 20, 2009 required the parties to report on October 30, 2009, possibly to ascertain whether the settlement had been completely worked out. Allegations have been made by the two sets of contesting parties of the other not complying with the informal terms recorded in the Company Law Board order of July 20, 2009. It is not necessary to enter into such disputes in the present proceedings. After the prelude spread over ten paragraphs, the plaintiffs' immediate cause for instituting the action is spelt out at paragraph 11 of their principal interlocutory application. They complain of a notice of November 24, 2009 issued by advocate representing the defendant brothers by which an arbitration clause was invoked for settlement of certain disputes on the basis of a claim that such arbitration clause was contained in a memorandum of understanding of March 15, 2007. The plaintiffs submit that there is no arbitration agreement between the plaintiffs and the first three defendants. At the time that the suit was instituted and the plaintiffs filed their principal interlocutory application, no copy of the arbitration agreement was apparently available with the plaintiffs. Upon a copy of the memorandum of understanding of March 15, 2007, which contains the arbitration agreement, being supplied to the plaintiffs, there is a more detailed attack as to the existence of the agreement in the affidavit in reply. But since the original grievance with which the plaintiffs came to Court was that no copy of the arbitration agreement had been supplied by the defendants despite demand, the challenge to the existence of the arbitration agreement is somewhat fluid in the petition relating to GA No. 379 of 2010. It is the plaintiffs' case that they were not aware of any arbitration agreement between themselves and the first three defendants. The challenge in the plaint and in their application is to the factum and existence of the arbitration agreement. The plaintiffs cite the surrounding circumstances and the failure of the first three defendants to cite the arbitration agreement at an earlier stage. They say that not only did the purported arbitration agreement not surface upon disputes breaking out between these five brothers, there was no reference to it despite the second company petition before the Company Law Board being instituted and, seemingly, the disputes being settled by July, 2009. They suggest that the purported arbitration agreement was thought up by the first three defendants or on their behalf in course of these three defendants attempting to wriggle out of the informal settlement recorded in the Company Law Board order of July 20, 2009.;