Soumen Sen, J.
The defendant No.1, namely, Jindal Steel & Power Limited (hereinafter referred to as the 'applicant) has filed this application under Section 8 of the Arbitration and Conciliation Act, 1996 for referring the parties to arbitration in view of an arbitration clause in the coal purchase agreement entered into between the plaintiffs and the defendant No.1. The applicant has also incidentally prayed for stay of further proceedings in the suit.
The plaintiff has filed a suit against the defendants praying, inter alia, for a declaration that the coal purchase agreement and the associated pledge agreement are required to be delivered up and cancelled. The plaintiffs have also prayed for injunction and money reliefs against the defendant No.1.
In addition to the aforesaid, a money decree for Rs.970 crore has been claimed against the defendant No.2.
The case of the plaintiffs is that the defendant No.1 is a steel manufacturing company. The defendant Nos.2 and 3 were incorporated by the plaintiff No.1 with a view to provide backward integration and ensure a regular supply of coking coal for its coke plats in India. With such object the plaintiff No.1 has caused the defendant Nos.2 and 3 to acquire two hard coking coal mines in Australia being the ‘NRE No.1’ colliery and the ‘NRE Wongawilli’ colliery. While the ‘NRE No.1’ colliery started commercial production in September, 2005, the ‘NRE Wongawilli’ started commercial production in February, 2008. The defendant No.3 is a wholly owned subsidiary of the defendant No.2. The defendant Nos.2 and 3 were incorporated by the plaintiff No.1 with a view to ensure regular and uninterrupted supply of ROM coal mined from the NRE No.1 colliery and NRE Wongawilli colliery to its plants in India to ensure backward integration. It was at all material times intended by the plaintiff No.1 that the defendant Nos.2 and 3 should remain under the common control and management of the plaintiff No.1. Upon the defendant No.2 starting commercial production of coking coal sometime in September 2005, the plaintiff No.1 and the defendant No.2 on May 11, 2007 entered into a purchase agreement for purchase by the plaintiff No.1 of the entire quantity of ROM coal mine from NRE No.1 colliery of the defendant No.2.
Subsequently, the plaintiff No.1 and the defendant No.3 entered into a similar purchase agreement dated 4th November, 2007. On and from 2009, it was agreed by and between the plaintiff No.1 and the defendant Nos.2 and 3 that the price of ROM Coal would be the international price as set quarterly by BHP Billiton. In terms of the aforesaid agreement the defendant Nos.2 and 3 started supplying hard coking coal mined from the NRE No.1 and the NRE Wongawilli collieries to the plaintiff No.1. In the year 2012, there was a slump in the steel vis--vis coal and coke market. The defendant No.1 was looking for tying up long term source for procurement of imported coking coal to support its steel production and expansion plans in India. The defendant No.1 for that purpose approached the defendant No.2 through the plaintiff No.1 being the then holding company of the defendant No.2. The defendant Nos. 2 and 3 at the relevant time also required immediate funds for further development of their mines, which would in turn lead to increase in productivity of ROM coal and would create a surplus beyond the needs of the plaintiff No.1. This has led to a settlement agreement being entered into on 26th May, 2012, namely, ‘Option Off-Take Agreement’ by which the defendant No.1 was given an option to purchase upto 500,000 MT of ROM coal per year and to purchase such further additional quantity of ROM coal beyond 2.5 million MT subject to a maximum of an additional 500,000 MT per year, if produced by the defendant No.2, on the terms as contained in the said agreement. In view of the Option Off-Take Agreement on 26th May, 2012, a purchase agreement between the plaintiff No.1 and the defendant No.2 was also modified by providing that while the plaintiff No.1 would have the right to take 100% of the ROM produced by the NRE No.1 Colliery of the defendant No.2, it would not be under an obligation to do so, thereby permitting the sale of ROM by the defendant No.2 (along with defendant No.3) to third parties with the prior consent of the plaintiff No.1.
On 30th May, 2012, a subscription agreement was entered into between the defendant No.2 and the Jindal Steel & Power (Mauritius) Ltd. pursuant to which Jindal Steel & Power (Mauritius) Ltd. acquired 9.15% stake in the defendant No.2 company by way of fresh equity placement. One Jindal Steel & Power (Australia) Pty Ltd. also a subsidiary of the defendant No1 too acquired a 1.53% stake in the defendant No.2 company by way of market purchases. On 19th August, 2012, an amendment to the option off-take agreement dated 26th March, 2012 was entered into between the defendant No.2 and the defendant No.1 to further secure supply of hard coking coal to the defendant No.1. The defendant No.1 represented that the said defendant was interested only in the procurement of hard coking coal from the defendant Nos.2 and 3 and nothing more. At the relevant time the existing washeries of the defendant No.1 did not have the capacity to handle bulk of the additional coal agreed to be supplied by the defendant Nos.2 and 3 to the defendant No.1. The defendant No.1 agreed to purchase a portion of such coal from the plaintiff No.1 upon the same being washed at the washeries of the said plaintiff. Accordingly, on 27th August, 2013 the plaintiff Nos.1 and 2 and the defendant No.1 entered into a coal purchase agreement providing for sale and supply by the plaintiff No.1 of 50,000 MT (approximately 14 rakes) of NRE Australian hard coking coal of agreed specification to defendant No.1 at its Raigarh plant from the NRE had coking coal mines at Australia after washing the same at the washeries of the plaintiff No.1 at Gujarat and Karnataka at a base price agreed upon between the parties with an advance payment of Rs.24.75 crores against security of pledge of 1 crore equity shares of one Bharat NRE Coke Ltd held by the plaintiff No.1 and another 1 crore equity shares in Bharat held by the plaintiff No.2 in favour of the defendant No.1. As the defendant No.1 expected its new washery to be ready by the end of March, 2014, the said coal purchase agreement provided against payment of sums, as agreed between the parties, the plaintiff No.1 would supply to the defendant No.1 7150 MT (2 rakes) per month of NRE Australian hard coking coal of agreed specification from the NRE hard coking coal mines at Australia between 1st September, 2013 and 31st March, 2014. In terms of the coal purchase agreement, simultaneously with the execution of the same a Pledge Agreement was also executed by the plaintiff Nos.1 and 2 in favour of the defendant No.1 for pledge of the said 2 crore equity shares of Bharat. The supply of NRE Australian had coking coal by the plaintiff No.1 to the defendant No.1 was clearly dependent on supply of ROM coal by the defendant Nos.2 and 3 to the plaintiff No.1 under the purchase agreements dated 11th May, 2007 and 4th November, 2007. Subsequent to the execution of the coal purchase agreement on 27th August, 2013, an amendment was carried out on 12th September, 2013 with regard to the quantity of the sale of earlier hard coking coal of agreed specification.
The defendant No.1 was aware of the fact that in the event, the defendant Nos.2 and 3 stopped supply of NRE Australian hard coking coal to the plaintiff No.1. The said plaintiff would be unable to make supplies to the defendant No.1 under the Coal Purchase Agreement dated 27th August, 2013 as amended on 12th September, 2013. Upon assuming control of the defendant Nos.2 and 3 on October 16, 2013, the defendant No.1 and/or its subsidiaries wrongfully prevented the defendant Nos. 2 and 3 from supplying coal to the plaintiff No.1, thereby not only procuring the breach of agreements dated 11th May, 2007 and 4th November, 2007 by causing the defendant Nos.2 and 3 to act in breach thereof but also preventing the plaintiff No.1 from supplying washed coal under the coal purchase agreement dated 27th August, 2013 as amended on 12th September, 2013.
The agreement for pledge of shares of Bharat was entered into by the plaintiff Nos.1 and 2 with the defendant No.1 to secure the supply obligation undertaken by the plaintiff No.1 under the coal purchase agreement. The said pledge agreement as such expressly and/or by necessary implication contained a covenant to the effect that the defendant No.1 would not prevent the performance of such supply obligation by the plaintiff No.1 in any manner whatsoever. Having prevented the defendant Nos.2 and 3 from supplying coal to the plaintiff No.1 and by consequently preventing the said plaintiff No.1 from effecting supplies under the coal purchase agreement, the defendant No.1 has acted in breach of the fundamental term of the said pledge agreement as well.
On the basis of the aforesaid, the plaintiff No.1 has prayed for delivery up and cancellation of the said pledge agreement and a declaration that it has been discharged from all its obligations both under the coal purchase agreement and the pledge agreement.
The other claim in the suit is against the defendant No.2 on account of unpaid freight for the shipments made on 31st July, 2013 and 6th September, 2013 commencing the contract notes dated 2nd July, 2013 and 30th July, 2013 and the damage alleged to have been suffered by the plaintiff by reason of the failure on the part of the defendant No.2 in making further shipments. It is alleged that after making the said shipments, the management and control of the defendant No.2 and consequently the defendant No.3 was, however, taken over by the defendant No.1 and/or its subsidiaries, the defendant No.1 prevented the said defendant Nos.2 and 3 to pay freight and to make further shipment. It is alleged that after the defendant No.1 and/or its subsidiaries decided to take over and took control to the said defendant Nos.2 and 3 with the object of preventing supply of coal under the Coal Purchase Agreement referred to above. By stopping delivery of the coal shipped to the plaintiff No.1 and preventing the said plaintiff from obtaining delivery of the same, the defendant No.1 and/or its subsidiaries procured the breach of purchase agreements dated 11th May, 2007 and 4th November, 2007 that were entered into by the defendant Nos.2 and 3 with the plaintiff No.1. As the said defendant No.2 failed to make payment of freight in respect of the said shipments and consequently preventing delivery of the goods at their port of discharge at Kandla in Gujarat, the plaintiff No.1 through its shipping broker, called upon the defendant to make payment of the requisite freight charges so that the discharge of the goods may be made by the concerned vessels and the delivery of the same could be obtained by the plaintiff No.1. It is alleged that the defendant No.1, however, refused to pay the said amount and contended that it was the obligation of the plaintiff No.1 to pay the freight charges in respect of the said shipments and to obtain the discharge of the goods. Although, prior to such shipments the defendant No.2 agreed to make payment of such freight charges. It was only after the management and control of the defendant No.2 which was taken over by the defendant No.1 that the said defendant No.2 made such assertion and it was clearly orchestrated by the defendant No.1. It would be evident that having acquired and assumed control of the defendant Nos.2 and 3 the defendant No.1 decided to completely bypass the plaintiff No.1 and to establish a direct relationship with the defendant Nos.2 and 3. The failure to effect supply of the said coal by the defendant No.2 have resulted in damages and the plaintiff has claimed damages assessed at Rs.970 crores. The plaintiff No.1 had, accordingly, prayed for a separate decree for a sum of Rs.970 crores against the defendant No.2.
The claim against the defendant No.2, however, was dismissed on the ground of lack of territorial jurisdiction in view of the existence of a jurisdictional clause in the agreement dated May 11, 2007.
The defendant No.1 has filed this application, inter alia, on the ground that the subject matter of the suit is covered by the arbitration agreement as contained in the Coal Purchase Agreement dated 27th August, 2013 and the pledge agreement.
It is submitted that the coal purchase agreement contains an arbitration clause which expressly states that any claim, dispute or controversy arising out of or in relation to the agreement including any dispute with regard to the existence or validity would be resolved through arbitration. Clause 17 of the coal purchase agreement, inter alia, contains the arbitration clause which reads:-
'Clause 17. Governing Law and Jurisdiction'
17.1. This Agreement and all questions of its interpretation shall be construed in accordance with the laws of India.
17.2. The Seller and Pledges on one hand and the Buyer on the other hand hereto agree that any claim, dispute or controversy ('Dispute') arising out, or in relation to, this Agreement, including any Dispute with respect to the existence or validity hereof, the interpretation hereof, the activities performed hereunder, or the breach hereof, the disputing party hereto shall endeavour to settle such Dispute amicably. The attempt to bring about an amicable settlement shall be considered to have filed if not resolved within 30 days from the date the Dispute first arose, which shall be the date of the written notice first issued by a Party raising such Dispute to the other party ('Resolution Period'). Thereafter, the under solved Depute shall be adjudicated by arbitration and any party shall refer the Dispute to arbitration under the Arbitration and Conciliation Act, 1996 subject to the following terms and conditions.
17.3 The sole Arbitrator shall be jointly appointed by the Buyer on one hand and Seller and Pledgors on other hand. If the parties are unable to arrive at a consensus on the appointment of the sole arbitrator within fifteen (15) days from the expiry of the Resolution period, the dispute shall be referred to a panel of three Arbitrators, constituted as follows:-
(a) One arbitrator to be appointed by the Buyer.
(b) One arbitrator to be appointed by the Pledgers and Seller.
(c) Third arbitrator to be appointed by the two arbitrators appointed by the Parties as above, who shall be the presiding arbitrator.
(d) Such arbitration proceedings shall be conducted at Delhi. The arbitration proceedings shall be conducted in the English language.
17.4. The arbitral tribunal shall have powers to award and/or enforce specific performance. The arbitration award shall be final and binding on the Parties hereto.
17.5. Pending the submission of the Dispute to arbitration and thereafter until the arbitral tribunal passes its award, the Parties to this Agreement shall continue to perform all their duties and obligations under this Agreement without prejudice to a final adjudication in accordance with the said award.
17.6. Award of the costs of arbitration shall be determined by the arbitral tribunal.
17.7. The appropriate courts at Delhi will have exclusive jurisdiction to try any matter arising out of this arbitration agreement and under the Arbitration and Conciliation Act of 1996, including for seeking any interim relief before or during the arbitral process.'
Mr. Sudipto Sarkar, the learned Senior Counsel appearing with Mr. Ratnanko Banerjee, learned Senior Advocate and Ms. Mousumi Bhattacharya, Advocate had submitted that the real dispute between the plaintiffs and the defendant No.1 is arising out of the Coal Purchase Agreement dated 27th August, 2013. The learned Senior Counsel has referred to the plaint and submitted that whether under the said Coal Purchase Agreement the plaintiffs would be relieved of their obligation to supply coal is a dispute arising out of Coal Purchase Agreement dated 27th August, 2013 which contains an arbitration clause. The Coal Purchase Agreement was preceded by two agreements with the defendant Nos.2 and 3 in the year 2007, which are distinct and separate. The reference to such agreements are immaterial in order to ascertain where the plaintiffs have performed their obligation under the Coal Purchase Agreement dated 27th August, 2013. The contention of the plaintiff that the defendant No.1 has procured a breach of contract in preventing the defendant Nos.2 and 3 to supply the coal under their respective coal purchase agreement is without any foundation as such agreements were entered into at a point of time when the defendant No.1 was no way connected with the said defendants. Moreover, the obligations under the three several agreements are distinct and separate. The plaintiff would be required to refer to the Coal Purchase Agreement in order to substantiate its claim in the suit. The foundation of the suit is based on the said agreement and pledge agreement. The learned senior Counsel has referred to prayers ‘a’ to ‘f’ of the Plaint and submits that all such prayers are against the defendant No.1. The prayer for declaration that the plaintiffs are discharged from their obligation under the Coal Purchase Agreement and Pledge Agreement can only be passed by the arbitrators since it is an arbitrable dispute and such dispute is coming within the purview of the arbitration clause. The arbitration clause in the agreement in view of Section 5 and Section 8 of the Arbitration and Conciliation Act, clearly ousts the jurisdiction of a Civil Court. The learned senior Counsel relying upon Hindustan Petroleum Corpn. Ltd. Vs. Pinkcity Midway Petroleum’s reported at (2003) 6 SCC 503 and M/s. Sundaram Finance Limited & Anr. Vs. T. Thankam reported at AIR 2015 SC 1303 submitted that once the application under Section 8 of the Arbitration and Conciliation Act is filed it is the duty of the Court to see whether its jurisdiction has been ousted. Moreover, when the agreement contained in the arbitration clause is in the dispute and there is a valid arbitration clause, the Court has a mandatory duty to refer the dispute arising between the contracting parties to arbitrator. The language of Section 8 is preemptory in nature and, therefore, it is obligatory to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except it refers to a dispute to arbitration.
Mr. Jishnu Saha, learned senior Counsel appearing with Ms. Arpita Saha, Advocate submits that in considering the application under Section 8 of the Act, the Court is required to find out whether all the parties to suit are parties to the arbitration agreement and where the disputes which are the subject matter of the suit fall within the scope of the arbitration agreement.
It is argued that the defendant No.1 has procured a breach of contract by preventing the defendant Nos.2 and 3 to supply coal to the plaintiff No.1 knowing fully well that unless the said defendant Nos.2 and 3 supply coal to the plaintiffs, the said plaintiffs would fail to honour the terms of the coal purchase agreement dated 27th August, 2013. It is submitted that essential question to be decided in the suit is whether the defendant Nos.2 and 3 committed any breach of their respective agreements and if so whether such breach was occasioned by the defendant No.1, that is to say, if the defendant No.1 was instrumental in procuring such breach. The plaintiffs have averred that the plaintiffs are unable to supply coal in view of procurement of breach by the defendant No.1 after the said defendants have assumed control of the defendant No.2 on 16th October, 2013. The defendant Nos. 2 and 3 are not the parties to the coal purchase agreement.
The claim is partly based on tort and partly on contract. The procurement of breach by the defendant No.1 is a civil wrong and remedy lies in damages as also relieving the plaintiffs from performing their obligation under the contract. This claim based on tort is independent of the coal purchase agreement and cannot form the subject matter of an arbitration. It is submitted that during adjudication, the presence of the defendant Nos. 2 and 3 would be necessary. If it is adjudicated that the defendant Nos.2 and 3 have committed a breach of contract and such breach was induced by the defendant No.1 then such finding would seriously prejudice the right of the defendant Nos.2 and 3. The plaintiffs at the arbitration would not be able to establish procurement of breach of contract in absence of the defendant Nos.2 and 3. In any event, in order to prove its claim the presence of the defendant Nos.2 and 3 is necessary.
It is submitted that in order to apply Section 8, there must be an arbitration agreement and the matter involved in the suit must be the subject matter covered by the arbitration agreement. It is argued 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, this Court in view of the clear pronouncement of law on this point by the Hon’ble Supreme Court in Sukanya Holdings (P) Ltd. Vs. Jayesh H. Pandya & Anr. reported at (2003) 5 SCC 531 the Court cannot refer the dispute to arbitration. The frame of the suit is such that it cannot be said that the entire subject matter of the suit is covered by the coal purchase agreement. Since the Act does not contemplate bifurcating the suit in two parts one to be referred to arbitration for adjudication and other to be decided by the Civil Court, the application filed by the applicant must fail. Mr. Saha in this regard has relied upon the subsequent decisions which are:-
i) Rashtriya Ispat Nigam Ltd. & Anr. Vs. Verma Transport Co. reported at (2006) 7 SCC 275;
ii) India Household & Healthcare Ltd. Vs. LG Household & Healthcare Ltd. reported at (2007) 5 SCC 510;
iii) Niranjan Lal Todi & Anr. Vs. Nandlal Todi & Ors. reported at 2011 (1) CHN (Cal) 762;
iv) Rajeev Maheshwari Vs. Indu Kocher reported at 2011 (3) CHN (Cal) 680;
v) Booz Allen & Hamilton Inc. Vs. SBI Home Finance Limited & Ors. reported at (2011) 5 SCC 532;
vi) Kishan Mimani Vs. Indu Kocher reported at 2012 (4) CHN (Cal) 157;
vii) Utkarsh Tubes and Pipes Limited Vs. Simplex Infrastructures Limited & Anr. reported at 2015 (2) Arb. LR 27 (Calcutta).
It is submitted that whenever an attempt is made to distinguish Sukanya Holdings (supra) the Court made an enquiry to find out if the defendant Nos.2 and 3 have been unnecessarily impleaded or purposely impleaded to avoid the arbitration agreement. In the instant case, it is argued that the disputes are so inextricably connected, the presence of the defendant Nos.2 and 3 are essential if not proper for adjudication of the disputes canvassed in the suit.
It is submitted that the defendant Nos.2 and 3 are necessary parties as it meets the twin tests of a right to relief against such parties in respect of the controversies involved and for an effective decree to be passed in such proceeding. Mr. Saha is more emphatic with regard to the other limb of the requirement, namely, that in absence of the defendant Nos.2 and 3, no effective decree could be passed. It is further argued that even if the said defendants might be held to be not necessary parties but the said parties are proper parties whose presence would be required for effective adjudication of the dispute. In this regard Mr. Saha has relied upon the decisions of the Hon’ble Supreme Court in Kasturi Vs. Iyyamperumal & Ors. reported at (2005) 6 SCC 733 and Sindav Hari Ranchhod Vs. Jadev Lalji Jaymal & Ors. reported at (1997) 7 SCC 95.
Mr. Saha has relied upon the decisions in Jay Laxmi Salt works (P) Ltd. Vs. State of Gujarat reported at (1994) 4 SCC 1, Bloom Dekor Ltd. Vs. Subhash Himatlal Desai & Ors. reported at (1994) 6 SCC 322, Asia Industrial Technologies Ltd. Vs. Ambience Space Sellers Ltd. Vs. reported at 1998 PTC (18) 316 and Universal Petro-chemicals Limited Vs. B.P. P.L.C. & Ors. reported at (2006) 2 Cal LT 294 (HC) in aid of his submission that law courts in India have recognized the claim based on tort. Injury and damage are two basic ingredients of tort and in the instant proceeding it is argued that the acts of procurement of the breach of contract has resulted in the invasion of a legally protected interest of the plaintiff and has caused a civil injury to the plaintiff. Mr. Saha emphasized the observation of the Hon’ble Supreme Court in Jay Laxmi (supra) where the Hon’ble Supreme Court has said 'truly speaking entire law of torts is founded and structured on morality that no one has a right to injure or harm others intentionally or even innocently. Therefore, it would be primitive to class strictly or close finality (sic finally) the ever-expanding and growing horizon of tortuous liability.'
Mr. Saha has relied upon paragraphs 14 and 15 of Asia Industrial (supra) and submits that in the said decision it has been recognized that the Tort of Inducing breach of contract is that if the act of third party, either by persuasion, inducement or procurement results in breach of a contract, the third party would have committed an actionable interference with the contract. The positive case of the plaintiff is that the defendant No.1 has procured a breach of contract by preventing the defendant Nos.2 and 3 to supply the coal and it is a direct invasion to the right of the plaintiff to procure the coal and perform its obligation under the Coal Purchase Agreement dated 27th August, 2013. It is wrongful by itself and it amounts to an actionable interference. It is submitted that the cause of action is bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. Since the plaint discloses cause of action against the defendants and the plaintiff would be required to establish the bundle of facts at the trial, the plaintiff cannot be non-suited at the stage. In this regard Mr. Saha has relied upon a decision of A.B.C. Laminart Pvt. Ltd. & Anr. Vs. A.P. Agencies, Salem reported at (1989) 2 SCC 163.
Mr. Saha, the learned Senior Advocate in the alternative submits that since the issues are inextricably connected and the reference to both the Coal Purchase Agreements would be required to decide the issue, the plaintiffs are agreeable to have a consolidated reference so that all the issues between the parties are resolved once and for all. Mr. Ratnanko Banerjee, the learned Senior Counsel in reply has submitted that most of the judgments on Section 8 of the Arbitration and Conciliation Act relied upon by the plaintiff supports the contention of the applicant that the subject matter of the dispute is covered by the arbitration clause in the Coal Purchase Agreement and, accordingly, the parties are required to be referred to arbitration. Mr. Banerjee, the learned senior Counsel has specifically referred to Paragraph 35 of the Booz Allen (supra) where the Hon’ble Supreme Court held that every civil or commercial dispute, either contractual or non-contractual, which could be decided by a Court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. It is submitted that the tortious claim based on alleged procurement of breach of contract is a cause of action based on the Coal Purchase Agreement since in deciding the said issue the Court would be required to take into consideration the Coal Purchase Agreement entered into between the plaintiffs and the defendant No.1 and as such it is arbitrable. Mr. Banerjee has also relied upon Paragraph 39 of the decision of the Hon’ble Supreme Court in Renusagar Power Co. Ltd. Vs. General Electric Company & Anr. reported at (1984) 4 SCC 679 for the proposition that even an adjudication as to the liability as tortfeasor, would be covered by the arbitration clause. It is submitted that the test as laid down by the Hon’ble Supreme Court in Renusagar Power (supra) is whether even though it has lain in tort it 'arises out of' or is 'related to' the contract, that is to say, whether it arises out of the terms of contract or is consequential upon any breach thereof.
Mr. Banerjee has referred to Paragraph 22 of Rashtriya Ispat Nigam (supra) in support of the aforesaid submission where the scope and purport of such a clause was considered by the English Court in Heyman Vs. Darwins Ltd. reported at (1942) 1 All ER 337 and followed by the Hon’ble Supreme Court.
It is submitted that the Courts have consistently held while interpreting Sukanya Holdings (supra) that if on a meaningful assessment of the subject matter of the action it appears to the Court that the claimant is seeking to deliberately avoid the arbitration by adding a twist to a cause of action or implead a party which is not bound by the arbitration agreement, the Court must take into consideration the object of the Arbitration and Conciliation Act, 1996 and more particularly the mandate of Section 8 which leaves no room for the Court to continue with an action if it appears to the Court that the real and essential dispute between the parties is covered by the arbitration agreement.
The learned Senior Counsel has distinguished Sukanya Holdings (supra) by submitting that on the facts of that case it was found that the cause of action against the defendant who was not a party to the arbitration agreement was real and integral to the claim of the suit which in the present case is singularly absent.
In order to appreciate the rival contention it is necessary to consider the prayers made in the plaint:-
a) Decree declaring that being entitled to avoid the coal purchase agreement and the associated pledge agreement, the plaintiffs have avoided the same;
b) Decree declaring that the plaintiffs have been discharged from all their obligations in the pledge agreement and directing the delivery and cancellation of the same;
c) Decree of mandatory injunction directing the defendant no.1 to return the 1,00,00,000 shares of Bharat pledged by it to the plaintiff no.1;
d) Decree of mandatory injunction directing the defendant no.1 to return the 1,00,00,000 shares of Bharat pledged by it to the plaintiff no.2;
e) Decree for perpetual injunction restraining the defendant no.1 from giving any effect or further effect to the pledge agreement dated 27th August, 2013 or from in any manner acting in pursuance of the same;
f) Decree for Rs.15 crores in favour of the plaintiff no.1 and against the defendant no.1 as stated in paragraph 45 above. In support of the said prayer, the plaintiff has pleaded that after the management of the defendant Nos.2 and 3 were taken over by the defendant No.1 in or about 16th October, 2013, the defendant No.2 induced the defendant Nos.2 and 3 not to pay the freight charges in respect of the shipments made on 31st July, 2013 and 6th September, 2013 and further procured a breach of the agreement by preventing the defendant Nos.2 and 3 to effect future supply of coal in terms of the agreement entered into between the plaintiffs and the defendant Nos.2 and 3 on 11th May, 2007 and 4th May, 2007 respectively. According to the plaintiffs in view of such procurement of breach, the plaintiff No.1 is unable to supply coal to the defendant No.1 in terms of a subsequent agreement entered into on 27th August, 2013. The plaintiffs are essentially seeking an adjudication of their rights and obligations arising out of the Coal Purchase Agreement dated 27th August, 2013 which contains an arbitration clause. There are two distinct and separate cause of action pleaded in the Plaint although there is an attempt to show that the plaintiff No.1 is relieved of its obligation in view of failure on the part of the defendant Nos.2 and 3 to supply coal under the aforesaid agreements being induced by the defendant No.1. This frame of the suit has to be considered, keeping in mind, that the Purchase Agreement dated 27th August, 2013 contains an arbitration clause and the defendant Nos.2 and 3 are not parties to the said arbitration agreement. The plaintiffs have also separate contracts prior in point of time with the defendant Nos.2 and 3 which contains jurisdictional clause and I have already held that the suit against the defendant No.2 is not maintainable in this Court because of the said jurisdictional clause.
In view thereof, the suit only survives against the defendant No.1. There is no dispute that the parties have entered into the coal purchase agreement containing the arbitration clause. The arbitrability of the dispute is also not in question. The only question that arises for determination is whether having regard to the frame of the suit, the entire dispute can be referred to arbitration.
I have considered the arbitration clause. The said arbitration clause is wide enough and comprehensive to include any claim, which may even be based on tort. The jurisdiction of the arbitrator to decide a claim based on tort is well-settled. The said claim is arising out of and was related to the purchase agreement dated 27th A
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ugust, 2013. The issue sought to be raised by the plaintiffs that in order to establish procurement of breach of contract the presence of the defendant Nos.2 and 3 might be necessary. The party required as a witness to prove a case is not a necessary or a proper party. The real cause of action in the plaint is breach of contract by the defendant No.1 which could relieve the plaintiffs to perform its obligation under the Coal Purchase Agreement. During the course of hearing it might be necessary for either of the parties to have the presence of the defendant No.2 as a witness and for proper adjudication of the disputes. Section 27 of the Arbitration and Conciliation Act, 1996 has taken care of such situation. Moreover, it appears that the cause of action against the defendant No.2 is distinct and separate and can be tried separately. The defendant No.2 appears to have been roped in with a view to get rid of the arbitration clause and to give a picture that the defendant No.1 has procured a breach of agreement between the plaintiffs and the defendant Nos.2 and 3. The despondent No.2 had filed an application for revoking of leave under Clause 12 of the Letters Patent which was allowed by orders passed on December 3, 2015. If the plaint is read as a whole it gives an impression that the essential dispute is between the plaintiffs and the defendant No.1 arising out the Coal Purchase Agreement. The other agreements referred to in the pleadings are introductory in nature and are historical facts. Once an agreement is entered into by and between the parties, the rights and obligations of the parties are required to be decided in terms of the agreement. Any other agreement preceding the coal purchase agreement would not be relevant for the purpose of deciding the rights and obligations of the plaintiffs and the defendant No.1. The decree as claimed against the defendant No.1 is primarily arising out of the coal purchase agreement, which contains an arbitration clause. Whether the plaintiff is discharged from its obligations by reason of any act of the defendant No.1 would be again a matter arising out of the said coal purchase agreement and comes within the purview of Clause 17 of the Coal Purchase Agreement. The existence of a valid arbitration agreement stands admitted. In deciding the issue raised in this petition it is necessary to ascertain if the dispute falls within the arbitration clause. I have already observed that the arbitration clause in the agreement between the parties is broad enough to decide the prayer (a) to (f) of the plaint. The matter relating to the declaration that the plaintiffs would be relieved of their obligation under the Coal Purchase Agreement dated 27th August, 2013 would essentially be a dispute arising out of and in relation to the said contract and thus the arbitration agreement contained in Clause 17 of the Contract would be squarely attracted. Once the conditions precedent for involving the jurisdiction under Section 8 of the Act is fulfilled the judicial authority is under statutory duty to refer the matter to arbitration. A judicial authority would be denuded of its jurisdiction to continue with the suit once the dispute is arbitrable. In Hindustan Petroleum (supra) as also in Booz Allen (supra) the Hon’ble Supreme Court has emphasized that once the dispute is arbitrable, it is mandatory for the Civil Court to refer the dispute to an arbitrator. Under such circumstances, in my view, the parties should be referred to arbitration. There shall be an order in terms of Prayer (a) of the Notice of Motion. This application being G.A. No.3000 of 2015 succeeds. In view of the aforesaid, C.S.No. 227 of 2014 stands dismissed. However, there shall be no order as to costs.