The Punjab and Haryana High Court has held that an arbitration agreement limited to division of family assets and properties cannot bar a civil suit seeking wider reliefs such as partition, separate possession and rendition of accounts. The Court therefore dismissed a civil revision challenging the refusal to reject the suit under Order VII Rule 11 CPC.
The dispute arose from a July 5, 1999 arbitration agreement concerning division of the parties’ father’s assets and properties. After the parties were initially referred to arbitration, the proceedings did not conclude. A sole arbitrator was appointed in 2017, but the proceedings were terminated on January 6, 2018, for non-payment of fees. The respondents then filed the civil suit in 2018, seeking partition, separate possession and rendition of accounts.
The petitioner subsequently sought rejection of the suit under Order VII Rule 11 CPC, arguing that the disputes were covered by the arbitration agreement. The trial court rejected the plea, holding that the suit was broader than the arbitration agreement. In 2023, after a Coordinate Bench granted liberty to pursue remedies, the previously appointed arbitrator recalled the 2018 termination order and revived the arbitral proceedings. The petitioner thereafter challenged the trial court’s order for dismissing application for rejection of plaint before the High Court
Justice Lapita Banerji noted that the suit did not merely seek division of assets. It also sought a preliminary decree for possession by way of partition and rendition of accounts of the firm. The Court observed that while passing a preliminary decree, the civil court would have to consider the interests of other persons entitled in equity and law, something the arbitrator would not be able to do within the scope of the arbitration agreement.
The Court also noted that the claim for rendition of accounts of M/s T.G. Aggarwal & Company was outside the subject matter of the arbitration agreement. It referred to the Supreme Court’s decisions in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531 and Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532.
The High Court further recorded that the arbitral proceedings, revived in 2023, were still pending despite the expiry of the mandate under Section 29-A of the Arbitration and Conciliation Act, 1996, which had neither been extended by consent nor by a competent court. Finding no perversity in the trial court’s order, the Court dismissed the civil revision.
However, the Court clarified that the petitioner would remain free to raise all his issues in defence before the trial court through his written statement.
