Allowed¶Order

Sri K S Raghunatha Setty v. Shree Nandi Hospital

Arbitration and Conciliation Act, 1996 – Section 8

Karnataka HC4 Jun 2026WP/1194/2021

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What is this about?

Writ petition allowed. High Court of Karnataka set aside Trial Court order under Section 8 of Arbitration and Conciliation Act, 1996 referring dispute to arbitrator. Composite recovery suit against partnership firm, partners, and non-signatory purchaser could not be compulsorily referred to arbitration under Clause 19 of Partner's Admission Deed per Cox and Kings Ltd v. SAP India Pvt Ltd ((2024) 4 SCC 1). Non-signatories cannot be compelled into arbitration.

What did the court decide?

The impugned order dated 27.07.2020 passed in O.S.No.26675/2018 is set aside; I.A.No.2 rejected; the suit restored to file; parties directed to appear before the Trial Court on 25.06.2026 ¶Order

Sri K S Raghunatha Setty Vs Shree Nandi Hospital — Arbitration | Karnataka HC (2026)

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4^TH DAY OF JUNE, 2026 BEFORE

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THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL WRIT PETITION NO.1194/2021 (GM-CPC)

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BETWEEN:

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Digitally signed by RUPA V Location: HIGH COURT OF KARNATAKA

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SRI. K.S. RAGHUNATHA SETTY SON OF LATE SRI. SRINIVASA SETTY AGED ABOUT 73 YEARS PERMANENTLY RESIDING AT FLAT NO.B-702 GR HEIGHTS, J.P.NAGAR PHASE 8, 80 FEET ROAD BANGALORE 560078 CURRENTLY RESIDING AT. NO.4180, ROYAL MEWS CIRCLE NAPERVILLE, ILLINOIS 60564 REPRESENTED BY HIS POWER OF ATTORNEY HOLDER SRI. VACHAN SUNKU SON OF SRI. SA JAGADEESHWAR AGED ABOUT 37 YEARS R/AT ASWATHADHAMA, NO.185 38TH CROSS, 5TH BLOCK JAYANAGAR, BANGALORE 560041.

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SRI. ABIJIT RAGHUNATH SON OF SRI K.S. RAGHUNATHA SETTY AGED ABOUT 42 YEARS PERMANENTLY R/AT FLAT NO.B-702 GR HEIGHTS, J.P.NAGAR PHASE 8, 80 FEET ROAD BANGALORE 560078 CURRENTLY RESIDING AT. NO.4180, ROYAL MEWS CIRCLE NAPERVILLE, ILLINOIS 60564

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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REP. BY HIS POWER OF ATTORNEY HOLDER SRI. VACHAN SUNKU SON OF SRI SA JAGADEESHWAR AGED ABOUT 37 YEARS R/AT ASWATHADHAMA, NO.185 38TH CROSS, 5TH BLOCK JAYANAGAR, BANGLORE 560041.

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…PETITIONERS

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(BY SRI. S. VIVEKANANDA, ADV., FOR SMT. GANGABAI V, ADV.,)

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AND:

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SHREE NANDI HOSPITAL NO.7, 2ND MAIN ROAD CHAMARAJPET, BENGALURU 560018 REP. BY ITS PARTNER DR. KIRAN M. NAGARAHALLI.S

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DR. MAHALAKSHMI TALYA AGED ABOUT 53 YEARS W/O DR. D. RAJASHEKARAPPA NO.139, 5^TH MAIN ROAD CHAMARAJPET, BENGALURUR 560018.

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DR. MAHESH K.V. AGED ABOUT 39 YEARS S/O LAE K.N. VENKATARAMANA SHETTY R/AT NO.319, 2ND G CROSS 5TH MAIN ROAD III STAGE, III BLOCK BASAVESHWRANAGAR BENGALURU-560079.

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DR. KIRAN M. NAGARAHALLI AGED ABOUT 40 YEARS S/O MOHAN S. NAGARHALLI R/AT NO.421, 1ST CROSS, 1ST STAGE TEACHER’S COLONY, NAGARBHAVI BENGALURU-560072.

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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MR. NATESH AGED ABOUT 47 YEARS S/O VASUDEVA RAO R/AT NO.48/6, GROUND FLOOR RANGA RAO ROAD, SHANKARAPURAM BENGALURU 560004.

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MR. KAMAL KUMAR S AGED ABOUT 33 YEARS S/O N. SUKUMAR R/AT NO.B/11, 4TH CROSS NEAR BLUE BELL SCHOOL ANUBHAV NAGAR NAGARBHAVI MAIN ROAD BENGALURU-560072.

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DR. HARISH G.S. MAJOR LEELAVATI MULTI-SPECIALITY HOSPITAL NO.7, 2ND MAIN ROAD, CHAMARAJPET BENGALURU-560018.

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…RESPONDENTS

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(BY SRI. SAMPATH BAPAT, ADV., FOR R1, R4, R5 & R6 SRI. T. SUBRAMANYA, ADV., FOR R2 R3 – DR. MAHESH K.V. – SD

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POSTAL TRACK SHEET IN R/O R7 – DR. HARISH G.S. IS ACCEPTED V/O DTD:19.04.2021)

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THIS W.P. IS FILED UNDER ARTICLE 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO CALL FOR THE LOWER COURT RECORDS IN O.S. NO.26675/2018. SET ASIDE THE ORDER DATED 27.07.2020, PASSED BY THE HON’BLE XXVI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, MAYO HALL, BENGALURU (CCH-20) IN O.S. NO.26675/2018 AT ANNEXUREA ON I.A.NO.02 FILED U/S 8 OF THE ARBITRATION AND CONCILIATION ACT, 1996 & ETC.

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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CORAM: HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL

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ORAL ORDER

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This petition is filed challenging the order dated 27.07.2020 passed in O.S.No.26675/2018 by the XXVI Additional City Civil and Sessions Judge, Mayo Hall, Bangalore (for short, 'the Trial Court').

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Sri.S.Vivekananda, learned counsel appearing for the petitioners submits that the petitioners have filed a suit against the respondents herein for recovery of a sum of Rs.42,00,000/- with interest at 12% p.a. In the said suit, the respondents filed a detailed written statement. It is submitted that the respondent Nos.1, 3 and 6 have filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (for short, 'the Act') seeking to refer the matter to the Arbitrator as per Clause 19 of the Partner’s Admission Deed dated 01.11.2017. The said application was opposed by the petitioners. However, the Trial Court, under the impugned order, allowed the application and the dispute was referred to the Arbitrator. It is further submitted that the Trial Court has erroneously recorded the finding that the defendant No.7 in the

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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suit is an assignee and he has waived off his right in view of non-filing of the objections to the application. Hence, as per Clause 19 of the Partner’s Admission Deed, the petitioners have to initiate arbitration proceedings with regard to the dispute. It is also submitted that the suit is a comparative suit filed not only against the partnership firm but also against other partners and defendant No.7 who is the subsequent purchaser of the defendant No.1-firm. It is contended that the petitioners intended to be the partners of the firm and invested money. However, without registering the Partner’s Admission Deed, they have abandoned the petitioners and proceeded to sell the defendant No.1-firm to the defendant No.7. It is further contended that if the petitioners are compelled to initiate the arbitration proceedings and if an award is obtained, it would be difficult for them to enforce the said award against the nonsignatory to the Partner’s Admission Deed. In support of his contentions, he placed reliance on the decision of the Hon'ble Supreme Court in the case of COX AND KINGS LIMITED Vs. SAP INDIA PRIVATE LIMITED AND ANOTHER¹ . Hence, he seeks to allow the writ petition.

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1 (2024) 4 SCC 1

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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Per contra , Sri.Sampath Bapat, learned counsel appearing for the respondent Nos.1, 4, 5 and 6 supports the order of the Trial Court and submits that the plaint averments indicate that the transaction is a loan transaction, however, he also admits the execution of the Partner’s Admission Deed dated 01.11.2017. It is submitted that once the petitioners are inducted as partners, they have to work out their remedies as per the Partnership Act either seeking for dissolution of the firm or they have to resign from the firm etc. and if there is any dispute relating to the firm, they have to raise the dispute before the Arbitrator as per Clause 19 of the Partner’s Admission Deed and the Trial Court, considering the said aspect has rightly come to conclusion that the defendant No.7 can be considered as an assignee under the other defendants and directed the petitioners to raise the dispute before the Arbitrator. Hence, he seeks to dismiss the petition.

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I have heard the arguments of the learned counsel for the petitioners, the learned counsel for the respondents and meticulously perused the material available on record.

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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The petitioners have filed O.S.No.26675/2018

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against the defendant No.1-Shree Nandi Hospital, a firm and defendant Nos.2 to 6 who are the partners of the defendant No.1-firm. The plaint averments indicate that the petitioner was assured by the partners of the defendant No.1 that they will include the petitioners as partners and based on such an assurance, they have invested the money and thereafter, defendant Nos.2 to 6 have failed to complete the registration of the Partner’s Admission Deed and later, the petitioners found that the defendant No.1-firm has been sold to the defendant No.7 by the other partners of the defendant No.1-firm. Based on such premise, a suit for recovery has been filed. The contesting defendants have filed a detailed written statement denying the assertions made in the plaint.

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Be that as it may, the defendant Nos.3 to 6 have filed an application under Section 8 of the Act, on the ground that the dispute between the parties may be referred to an Arbitrator as per Clause 19 of the Partner’s Admission Deed dated 01.11.2017. The said application was opposed by the petitioners. The Trial Court, under the impugned order,

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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referring to Clause 19 of the Partner’s Admission Deed, allowed the application and referred the dispute to the Arbitrator. It is to be noticed that the petitioners’ dispute is against the partnership firm as well as its partners-defendant Nos.2 to 6. The petitioners have made a specific assertion in the plaint that the defendant Nos.2 to 6 have sold the defendant No.1partnership firm to the defendant No.7. When such an assertion is made, the petitioners cannot be compelled to approach the Arbitrator by invoking Clause 19 of the Partner’s Admission Deed dated 01.11.2017 as the suit is a comparative suit filed against the defendant Nos.1 to 7 and admittedly, the defendant No.7, who is the purchaser of the defendant No.1-

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firm and the defendant No.2 are not the signatories to the Partner’s Admission Deed dated 01.11.2017.

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Keeping in mind the enunciation of law laid down by the Hon'ble Supreme Court in the case of COX AND KINGS LIMITED referred supra , the Court cannot compel the nonsignatories to the agreement to be a part of the arbitration proceedings. I am of the considered view that the Trial Court has committed a grave error in allowing the application filed

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NC: 2026:KHC:26549 W.P. No.1194/2021

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HC-KAR

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under Section 8 of the Act. Hence, I proceeded to pass the following:

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ORDER

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(i) The writ petition is allowed.

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(ii) The impugned order dated 27.07.2020 passed in O.S.No.26675/2018 by the XXVI Additional City Civil and Sessions Judge, Mayo Hall, Bengaluru, is set aside. Consequently, I.A.No.2 is rejected.

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(iii) The suit is restored to its file.

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(iv) The parties are directed to appear before the Trial Court on 25.06.2026

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Sd/(VIJAYKUMAR A. PATIL)

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JUDGE

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List No.: 1 Sl No.: 25

Sri K S Raghunatha Setty v. Shree Nandi Hospital

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Sri K S Raghunatha Setty v. Shree Nandi Hospital

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