21 January 2022 | Lindsay International Private Limited v. Laxmi Niwas Mittal and others | IA No GA 04 of 2017 in CS No 2 of 2017 | 2022 SCC OnLine Cal 171 | Lindsay International Private Limited v. Laxmi Niwas Mittal and others | IA No GA 02 of 2017 in CS No 2 of 2017 | 2022 SCC OnLine Cal 170 Moushumi Bhattacharya J | Calcutta High Court

The Calcutta High Court has considered the applicability of the Supreme Court’s decision in Sukanya Holdings (2003) 5 SCC 531 to the present day Section 8 ACA. It has ruled that Sukanya no longer applies, and cause of action can be split.

In 2003, Sukanya had ruled that “where a suit is commenced in respect of a matter which falls partly within the arbitration agreement and partly outside and which involves parties some of whom are parties to the arbitration agreement while some are not so”, the matter cannot be referred to arbitration under Section 8 ACA [quoted portion from SCC headnote]. So does Sukanya still apply to Section 8 ACA because it was amended in 2015 requiring a court to refer parties to arbitration “notwithstanding any judgment, decree or order of the Supreme Court or any court … unless it finds that prima facie no valid arbitration agreement exists.”

The case emanates from the disputes between iron and steel baron LN Mittal (“LNM”), the Arcelor Mittal (“AM”) group and his brother in law. LNM allegedly made some promises in 1996 to his brother in law. As a result, a company Lindsay was established due to that pre-incorporation oral contract [for pre-incorporation contracts See Section 15 (h) of Specific Relief Act, 1963. For some background on the dispute, see 2018 SCC OnLine Cal 52].

According to Lindsay, the pre-incorporation contract, subsequent oral and written arrangements and practice of 20 years proceeded on the footing that Lindsay would be the sole supplier of the AM group worldwide for goods and services originating from India. The dispute covered in this Highlight involves some suppliers/vendors Lindsay had contracted to make the onward supplies to the AM group. The suit was filed against LNM and the AM group on the one hand (defendants number 1 to 38) and the suppliers/vendors on the other (defendants number 39 to 42).

The vendors applied to refer the matter to arbitration based on the arbitration agreements contained in the purchase orders issued to them. The AM group had applied under Section 8 ACA earlier, but only three years after filing its written statement.

Legislative intent apparent from the text of present Section 8

On the plain text of the provision, unless a valid arbitration agreement does not exist, the court must refer the parties to arbitration notwithstanding earlier judgments. The earlier judgments include Sukanya [citing Emaar MGF (2019) 12 SCC 751].

Lindsay’s case against the defendants

Independent reliefs have been claimed against the two sets of defendants. The relief against vendors was premised on a non-compete agreement. No conspiracy with the AM group is alleged. The pleadings belie the contention of inextricable inter-linkage. The cause of action pleaded against Lindsay and other vendors could easily be separated since independent reliefs had been claimed against each defendant.

The cause of action in the suit could be bifurcated

Order II Rule 6 Code of Civil Procedure Code, 1908 provides for bi-furcation by giving an option to the court to order separate trials. The suit could be bifurcated because the reliefs claimed against the groups are separate and independent.

It can reasonably be assumed that the plaint has been prepared with the object of avoiding the arbitration agreement between plaintiff no. 1 and the vendor group of defendants. In principle, all disputes can be adjudicated by arbitration (citing NN Global) except in some limited cases.

The interpretation supporting bi-furcation is destructive of the legislative intent to promote arbitration. Moreover, none of the decisions has held that an application under Section 8 ACA will only succeed if the entire suit can be referred to arbitration.

Is Sukanya relevant now?

Sukanya’s dictum has been rejected in NN Global 2021 SCC OnLine 13. Applying Sukanya today would be recasting Section 8 to say, “notwithstanding any judgment, decree or order of the Supreme Court or any court … [except Sukanya] ….”

The only requirement today is the existence of a valid arbitration agreement. Whether the AM group contracts are intertwined with the vendors' contracts is a matter for the arbitrator. In this case, an agreement exists, and it is wide enough to include all disputes arising out of or in connection with the purchase orders. The dispute is entirely between private parties.

Read the decision here.