1) The case involved a dispute between a contractor (Appellant 1) and client (Respondent) regarding a construction project, as well as a subsequent oral agreement replacing Appellant 1 with Appellant 2 to oversee construction. 2) The Respondent filed to stay the civil suit under Section 8 of the Arbitration Act, arguing the disputes were subject to arbitration clauses in the written and oral agreements. 3) The Supreme Court ruled the appellants could jointly file the suit and it was not misjoinder. It also ruled the disputes must be referred to the sole arbitrator previously appointed, as per the arbitration clauses.

1. Mrs. HemaKhattar & Anr
v.
Mr. ShivKhera
Citation: (2017) 7 SCC 716
by Harshal Bhale
Student of National University of Study and Research in Law, Ranchi (NUSRL)

2. Parties Involved
• Appellant no. 1 – Hema Khattar
• Appellant no. 2 – Ashwini Khattar
• Respondent – Shiv Khera

3. • On 06.06.2009, an agreement for the construction of a building was
executed between the parties wherein appellant No. 1 was the
contractor and the respondent as a client. The agreement impugned
clearly states that there is an arbitration clause for that regard.
• Clause 33(d) of the agreement: “Governing Law & Dispute
Resolution: All or any disputes and differences whatsoever between
the parties arising out of this Agreement or relating to or touching the
mutual rights and obligations of the parties shall be subject to the
jurisdiction of the Courts/Forums in Delhi only and shall be referred
for adjudication to the sole arbitrator, to be appointed solely and
exclusively by the FIRST PARTY, whose decision shall be final and
binding upon the parties. The arbitration proceedings shall be held at
New Delhi, India and only the Courts at New Delhi, India alone shall
have jurisdiction over the subject matter of this AGREEMENT.”
Facts

4. • During construction, an inspection was made by some renowned engineers
and specialised agencies which confirmed several structural lacunae in the
construction.
• Owing to the dispute among parties with regard to the quality of
construction, the respondent, in exercise of his right under the said clause,
appointed a sole arbitrator. Subsequently, notices were issued to the
appellant No. 1 and the matter remained pending despite appearance
before the Arbitral Tribunal.
• In the meantime, the appellants jointly filed a suit before the High Court
for declarations, permanent injunction and recovery.
• Also, it was alleged that a formal meeting was held and it was decided that
the appellant no. 1 would no longer remain a party to the agreement and
instead, appellant no. 2 would supervise the remaining construction,
without any remuneration, by appointing a new sub contractor.
Facts

5. • The respondent filed an application under Section 8 of the Arbitration
& Conciliation Act, 1996 claiming that the subject-matter of dispute in
the present suit is already pending adjudication before the Arbitral
Tribunal, hence, the suit cannot be proceeded with.
• The learned single Judge of the High Court, found that the suit is bad
for mis-joinder of parties as well as for causes of action.
• The appellants went in appeal before the division bench of the High
Court, the division bench also dismissed the same.
• Again the appellants approached the SC by appeal through special
leave.
Facts

6. Issues Involved
• Whether the suit is bad for misjoinder of parties as well as for causes
of action?
• Whether court can proceed with the suit or will have to refer to the
arbitration u/s 8?

7. Arguments of the Appellants
• The agreement dated 06.06.2009 was executed with dishonest
intention containing the arbitration clause.
• The High Court failed to appreciate that common trial of joint causes
of action is necessary, if at all, as they raise common questions of law
and facts and the course adopted by the High Court would lead to
multiplicity of proceedings causing delay the order passed by the HC
should set-aside.
• The alternative submitted that the entire matter be referred to
another sole arbitrator which may be appointed by this Court as
according to him, in the written contract, there was a clause for
arbitration and, subsequently, in the oral contract also, the terms of
the earlier contract continued to remain in operation except those
which were modified in the oral contract.

8. Arguments of the Respondant
• The suit has been filed by the two appellants jointly with respect to
the two separate alleged causes of action.
• The alleged cause of action of the appellant No. 1 is based upon the
agreement dated 06.06.2009 between the appellant No. 1 and the
respondent in which appellant No. 2 cannot be said to have any joint
interest and the alleged cause of action of appellant No. 2 is based
upon an oral understanding arrived at between appellant No.2 and
the respondent in which appellant No. 1 cannot be said to have any
joint interest.
• the subject matter of dispute between the parties in the present suit
is already pending adjudication before the Arbitral Tribunal, the
instant suit filed by the appellant No. 1 cannot be proceeded with and
the matter is required to be referred to arbitration.

9. Arguments of the Respondant
• The oral agreement did not contain any clause for arbitration and the
dispute raised by the appellant No. 2 cannot be referred to
arbitration.
• In support a case was reffered, Kvaerner Cementation India Limited v
Bajranglal Agarwal and Another, (2012) 5 SCC 214, wherein the
Court has held that there cannot be any dispute that in the absence
of arbitration clause in the agreement, no dispute could be referred
for arbitration to an Arbitral Tribunal.

10. Judgement of the Court
• The appellants even though had different causes of action against
the respondent but it was a continuity of the agreement dated
06.06.2009 and oral agreement is evidenced by the transcript of
conversation between the appellant No. 2 and the respondent,
therefore, both the appellants could have joined as plaintiffs in a
suit and the suit is not bad for misjoinder of parties or causes of
action.
• The court also took in consideration the claim of the party under
Sec. 8 of the Arbitration and Conciliation Act, 1996 & referred to
the very landmark judgement as mentioned below.

11. Judgement of the Court
• P. Anand Gajapathi Raju & Others vs. P.V.G. Raju (Dead) and
Others, (2000) 4 SCC 539, it was held as under:- The conditions which
are required to be satisfied under sub-sections (1) and (2) of Section
8 before the court can exercise its powers are:
1. there is an arbitration agreement;
2. a party to the agreement brings an action in the court against the
other party;
3. subject-matter of the action is the same as the subject-matter of
the arbitration agreement;
4. the other party moves the court for referring the parties to
arbitration before it submits his first statement on the substance of
the dispute.

12. Judgement of the Court
• The prerequisites for an application under Section 8 are fulfilled, viz.,
there is an arbitration agreement; the party to the agreement brings
an action in the court against the other party; the subject matter of
the action is the same as the subject-matter of the arbitration
agreement; and the other party moves the court for referring the
parties to arbitration before it submits his first statement on the
substance of the dispute.
• The civil court had no jurisdiction to entertain a suit after an
application under Section 8 of the Act is made for arbitration. In such
a situation, refusal to refer the dispute to arbitration would amount
to failure of justice as also causing irreparable injury to the defendant.

13. Judgement of the Court
• The appeal succeeds and is allowed.
• However, instead of remitting the matter back to the learned single
Judge for deciding the suit itself on merits, the court refer the
disputes raised by the appellants in to the sole arbitrator already
appointed.