Rv Solutions Pvt. Ltd. vs Ajay Kumar Dixit & Ors on 15 January, 2019
The present case was related to the right of a person who is non- signatory to the agreement i.e. who is not bound by the terms and conditions of the arbitration agreement.
Facts of the case
Plaintiff company was indulged in the business of providing the services related to telecommunication, information technology, cell-phones etc. Due to the certain issues which arose between the employees and the company, the employees i.e. the defendants left their job in the plaintiff company without giving any justified reason or proper notice. All the defendants held senior positions in the plaintiff company due to which they had access to the highly sensitive and important information, leakage of which can adversely affect the plaintiff company. After leaving the plaintiff company, defendants breached their employment contract and indulged in acts which were contrary to the terms of their employment. For this breach plaintiff filed suit against the defendant. Defendant no.5 was the company in which defendant no. 1 hold the position of CEO. It was alleged that defendant no. 1 may have used some sensitive information related to the business of plaintiff company to benefit defendant no. 5.
Whether an arbitration agreement will be binding on non-signatory parties?
Contentions of the parties
Defendant no. 1, 2 and 4 said that disputed shall be submitted to the arbitral tribunal due to the arbitration clause in the contract and filed application under section 8 of The Arbitration and Conciliation Act, 1996 to refer the matter o the arbitral tribunal. As far as defendant no. 3 and defendant no. 5 are concerned they were foreign parties which means they were not bound by the arbitration clause but they were no against referring the matter to the arbitral tribunal.
With respect to plaintiff, its contention was that matter cannot be referred to arbitral tribunal because it involved defendant no. 3 and defendant no. 5 which are not the parties to the arbitration agreement.
Decision of the Court
Before deciding on the matter for which the suit is filed, court decides to answer on the issue of arbitration agreement. Court said that that there is nothing in the act or under section 8 of The Arbitration and Conciliation Act, 1996 which prevent non signatories from resorting to the option of submitting the dispute to the arbitral tribunal. Court quoting section 8 of The Arbitration and Conciliation Act, 1996 said that the only condition for given under this section, which prevents the dispute to be referred to the arbitral tribunal is that arbitration agreement is invalid. This means that if there is an arbitration agreement and parties are non-signatories to the agreement but related indirectly in some way to the agreement, then also they can use the remedy of referring the matter to arbitral tribunal provided the arbitration agreement is valid.
Also, the point here to be noted is that defendant no.3 and defendant no.5 who were non-signatories did not objected against the matter to be refer to the arbitral tribunal. Court said that in some exceptional circumstances dispute of non-signatories parties without the prior consent can be referred to arbitral tribunal but in this case court has to examine the relationship of the parties to the agreement and also have to see that whether referring the dispute to the arbitration procedure will fulfil the purpose of serving the justice. In the present case court finally decided to refer the matter to the arbitral tribunal.