Arbitral Reference Can’t Be Made Mechanically Under Section 8, If Some Parties To Suit Are Non-Signatories To Arbitration Agreement: Bombay High Court

The Bombay High Court has ruled that if the plaintiff seeks relief in a suit against parties, some of whom are not signatories to the arbitration agreement, the matter cannot be mechanically referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The Court took note that the Long Form Agreement, containing the arbitration clause, was signed only by three parties i.e., the two plaintiffs and the defendant no.1, RBEP. It is this Long Form Agreement which contains the arbitration clause and the rights claimed by the defendant - Madman Film Ventures Private Limited and the defendant - Zee Entertainment Enterprises Limited cannot be said to be underlying contracts or agreements to the Long Form Agreement.” The plaintiff, Super Cassettes, further contended before the High Court that certain copyrights were assigned in its favour by RBEP under assignment deeds and the disputes involving the said Copyrights were not relatable to the Long Form Agreement. Accepting the contentions raised by Super Cassettes, the bench said, “.plaintiff Super Cassettes is seeking specific reliefs in respect of the two lots of 6 films and 3 films, which have nothing to do with the Long Form Agreement, the disputes pertaining to such works / films cannot be said to be subject matter of the arbitration agreement, even on a prima facie examination. In other words, as per the amended Section 8 of the said Act, when this Court is examining at a prima facie stage, it is found that insofar as the said two lots of works are concerned, an arbitration agreement does not exist.” Noting that, on a prima facie examination, no arbitration agreement existed between the plaintiffs and the defendants - 5 and 6, who are non-signatories to the “Long Form Agreement” and who are claiming rights independent of the Long Form Agreement, the Court held, “…it would be against public policy and against the object of speedy disposal of cases to refer only the signatories to the Long Form Agreement to arbitration, because if the contentions raised on behalf of the applicant are to be accepted, it would inevitably lead to splitting of the suits, creating a situation where more than one proceeding would continue, resulting in conflicting / contradictory findings before different fora.” “The nature of disputes and the complexity of the matter warrants centralized resolution of disputes before this Court and consequent continuance of the suits for resolution of the disputes between the parties, in order to pronounce upon their rights and obligations,” the bench said.