ORDER
R. Balasubramanian, J.
1. This is an application filed by the first defendant under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the parties to the suit to arbitration and consequently dismiss the suit itself. Heard the learned counsel for the applicant and the learned Senior Counsel for respondents 1 and 2, who are the plaintiffs in the suit. The suit is for a declaration to set aside the sale deed dated 17.9.2001 executed by the first defendant in favour of defendants 2 and 3; for recovery of possession and for other reliefs. The first plaintiff, who is the husband of the second plaintiff, is an employee of the first defendant. Admittedly, there is an agreement called housing loan agreement to which the first defendant a the 'lender' (Party of the first part); second plaintiff as the 'Borrower' (Party of the third part) and the first plaintiff as the 'Guarantor' (Party of the second part) are parties. This agreement admittedly relates to the housing loan availed of by the plaintiffs. It appears that there is a default in repayment of the loan amount. It is the case of the first defendant that when the first plaintiff was under their employment stationed at Pondicherry, he had committed several irregularities, which gave room for the employer to claim money from him under various heads. In other words, the employer namely, the first defendant has a claim against the first plaintiff not only on the basis of the housing loan agreement but also under other various heads. The first plaintiff is shown to be having a counter claim to the claim made by the employer under the above referred to heads. It is also not in dispute that pursuant to the power of attorney stated to have been executed by the second plaintiff in favour of the first defendant the property belonging to her had been sold by the first defendant in favour of defendants 2 and 3. Only in the above context, the suit had come to be filed impleading the 'Lender' as well as the subsequent buyers as defendants 1 to 3.
2. Relying upon the arbitration clause contained in the housing loan agreement (see Article 11.1) it is contended before this Court by the learned counsel for the applicant/first defendant that the dispute raised in the suit is covered under the arbitration clause and therefore the suit ought not to have been entertained. To substantiate his argument, the learned counsel would state that the arbitration clause would cover not only the loan covered under the housing loan agreement but also the other claim, which the first defendant has against the plaintiffs. To sustain this argument, the first defendant also relies upon the letter dated 10.1.2000 (document No. 9 filed along with the plaint) stated to have been written by the second plaintiff to the first defendant. Therefore the submission is that on a reading of this letter dated 10.1.2000 in the context of Article 11.1 of the housing loan agreement covers all disputes between the parties as projected in the suit and therefore the arbitration would be the only remedy to which the parties must go and not the regular suit. Mr. V.R. Venkataraman, Learned Senior Counsel appearing for the contesting parties would state that the dispute put forward in the suit before this Court is not a dispute under the loan agreement so as to attract the arbitration clause. In other words, according to the learned Senior Counsel the dispute in the suit is outside the scope of the arbitration clause. In any event, the entire dispute raised in the plaint is not covered under the arbitration clause. According to the learned Senior Counsel, prima facie a part of the dispute is covered under the arbitration clause and the rest of the dispute is outside the arbitration clause and therefore the suit would be maintainable. Admittedly, strangers are parties to the suit namely, defendants 2 and 3. The relief prayed for in the suit is mainly directed against them namely, to set aside the sale in their favour and to recover possession from them. Defendants 2 and 3 are not parties to the agreement at all. Even on that ground, the suit is maintainable. In support of his contention the learned Senior Counsel would rely upon the judgment of the Supreme Court Sukanya Holdings Pvt. Ltd. v. jayesh H. Pandya, : [2003]3SCR558 . In the above referred to judgment, the Supreme Court has clearly laid down that in a civil proceeding the parties cannot be dissected to form more than one group and then refer the group covered under the agreement alone to go before the arbitrator.
3. I applied my mind to the arguments advanced by the learned counsel on either side. The housing loan agreement between the plaintiffs on the one hand the first defendant on the other hand admittedly relates to only the housing loan transaction. Therefore there cannot be any dispute that, if anything arises out of the said loan transaction in the context of the various terms of the housing loan agreement, then arbitration clause would prevail and the party should necessarily go before the arbitrator only. On the other hand, if there are some disputes which are not covered under the terms of the housing loan agreement, then it cannot be said that even in respect of such disputes, the parties must necessarily go before the arbitrator only as provided for under Article 11.1 of the agreement. To get over this tight situation only, the learned counsel for the applicant relies upon the letter dated 10.1.2000 sent by the second plaintiff to the first defendant. The learned counsel heavily relies upon para 1 of the letter as extracted hereunder to argue that the second plaintiff has agreed to have the other dispute namely, reliefs asked for against defendants 2 and 3 also covered under the arbitration clause.
'The house property under reference has been mortgaged to you to secure the loan amount of Rs. 8.00 lakhs. I have also executed a POA in your favour to sell the mortgaged property. The possession of the house is also with you from the date of mortgage since 15th August, 1998'.
In my opinion, the above extracted portion does not establish a concluded contract between the parties to have the dispute between plaintiffs and defendants 2 and 3 also to be taken before the arbitrator. Admittedly, to the house loan agreement defendants 2 and 3 are not parties. To the letter referred to above, the second plaintiff and the first defendant alone are parties. The sale challenged in the suit executed by the first defendant in favour of defendants 2 and 3 is long after this letter. Therefore I do not find any concluded contract containing an arbitration clause relating to the dispute between the plaintiffs on the one hand and defendants 2 and 3 on the other hand.
4. I have already found that defendants 2 and 3 are neither parties to the house loan agreement dated 1.9.1995, which is between the plaintiffs on the one hand and the first defendant on the other hand, nor they are parties to the letter dated 10.1.2000, which admittedly is written by the second defendant to the first defendant. The reliefs prayed for in the suit is to set aside the sale of the property forming the subject matter of the suit executed by the first defendant, in favour of defendants 2 and 3; for recovery of possession from them and for other reliefs. The reliefs referred to above is not covered under the documents referred to earlier. The Supreme Court of India, in the Judgment Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya, : [2003]3SCR558 , had held as follows:
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13. Secondly, there is no provision in the Act that when the subject matter of the suit includes subject matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referred the subject matter of the suit to the arbitrators.
14. Thirdly, there is no provision - as to what is required to be done in a case where some parties to the suit are not parties to the arbitration agreement. As against this, under Section 24 of the Arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the Court may refer the same to arbitration provided that the same can be separated from the rest of the subject matter of the suit. Section also provided that the suit would continue so far as it related to parties who have not joined in such application.
15. The relevant language used in Section 8 is - 'in a matter which is the subject matter of an arbitration agreement' Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of 'a matter' which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - 'as to a matter' which lies outside the arbitration agreement and is also between some of the parties, who are not parties to the arbitration agreement, there is no question of application of Section 8. The word 'a matter' indicates entire subject matter of the suit should be subject to arbitration agreement.
16. The next question which requires consideration is - even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, if follows that bifurcation of the subject matter of an action brought before a judicial authority is not allowed.
17, Secondly, such bifurcation of suit in two parts, one to be decided by the arbitral tribunal and other to be decided by the Civil Court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums'.
If the present application filed by the first defendant to refer the parties to arbitration is considered on the legal principle laid down by the Honourable Supreme Court of India in the above referred to judgment, I have no doubt at all that the application is definitely misconceived. On facts, it is clear that it is not possible to segregate the relief prayed for by the plaintiffs against defendants 2 and 3 into a separate unit of claim and refer the plaintiffs and the first defendant to an arbitrator in respect of the money claim made by the plaintiffs against the first defendant. The reliefs prayed for are intertwined and incapable of separation. The judgment of the Honourable Supreme Court of India referred to above squarely applies to the case on hand.
5. For all the reasons stated, the application stands dismissed.