2018 (7) TMI 2114 - HC - Indian Laws

Arbitral Award - existence of arbitration clause - tripartite agreement - contention is that no agreement having been signed by M/s IPROSUGAR Engineering Pvt. Ltd., with M/s Spray Engineering Devices Limited, to that effect, there is no arbitration clause existing - HELD THAT - Though undoubtedly a tripartite agreement is also shown to be in existence (copy Annexure P-4 referred to herein above), between three parties, including M/s IPROSUGAR Engineering Private Limited, that is an agreement with regard to the amount required to be paid by M/s Spray Engineering Devices Limited to M/s IPROSUGAR Engineering Private Limited, which does not override the agreement dated June 14, 2006 - once the agreement dated 14.06.2006 itself is the basis for the claim made in the suits filed by M/s IPROSUGAR Engineering Private Limited, it cannot approbate and reprobate to get out of the arbitration clause in the said agreement as regards any dispute arising with even the subsequently created joint venture company, i.e. M/s IPROSUGAR Engineering Private Limited, which is admittedly a company incorporated pursuant to the said agreement. As regards Section 7 of the Arbitration and Conciliation Act, 1996, obviously there is no dispute with what is stipulated therein, but in the opinion of this Court, in view of what has been observed herein above, M/s IPROSUGAR Engineering Private Limited would still be bound by the agreement as an agreement between the parties, once the reliance by the said company, in respect of the relief claimed by it in the civil suits filed by it, is in terms of that very agreement dated 14.06.2006. Petition dismissed.

Summary

Issues Involved:
1. Maintainability of the suits filed by M/s IPROSUGAR Engineering Private Limited in the face of an arbitration clause.
2. Applicability of the arbitration clause to the joint venture company (JVC) not having signed the deed of adherence.
3. Admissibility of claims based on admitted liabilities.
4. Interpretation and binding nature of the arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.

Issue-wise Detailed Analysis:

1. Maintainability of the suits filed by M/s IPROSUGAR Engineering Private Limited in the face of an arbitration clause:
The core issue in both revision petitions was whether the suits filed by M/s IPROSUGAR Engineering Private Limited were maintainable given the arbitration clause (clause 17) in the agreement between M/s IPRO Industrieprojekt GmbH and M/s Spray Engineering Devices Limited. The impugned orders were passed on applications filed under Section 8 of the Arbitration and Conciliation Act, 1996, seeking referral of disputes to an arbitrator. In one suit, the plaintiff sought recovery of amounts due, and in the other, a declaration for royalty payments for technology use.

2. Applicability of the arbitration clause to the joint venture company (JVC) not having signed the deed of adherence:
The arbitration clause's applicability was contested because the deed of adherence, which would bind the JVC to the agreement, was never signed. M/s Spray Engineering Devices Limited argued that the JVC, M/s IPROSUGAR Engineering Pvt. Ltd., was bound by the agreement's terms despite the lack of a signed deed of adherence, as the JVC was created pursuant to the agreement. Conversely, M/s IPROSUGAR contended that without the signed deed, the arbitration clause was not binding, making civil suits the only remedy.

3. Admissibility of claims based on admitted liabilities:
M/s IPROSUGAR relied on documents indicating admitted liabilities by M/s Spray Engineering Devices Limited, including a tripartite agreement and subsequent letters acknowledging amounts payable. However, the court noted that disputes over payments and royalty claims, despite admitted liabilities, fall under the arbitration clause if the agreement is invoked.

4. Interpretation and binding nature of the arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996:
Section 7 defines an arbitration agreement and its requirements. M/s IPROSUGAR argued that no arbitration agreement existed between it and M/s Spray Engineering Devices Limited due to the unsigned deed of adherence. However, the court held that since M/s IPROSUGAR’s claims in the suits were based on the agreement dated 14.06.2006, it could not selectively rely on certain clauses while rejecting the arbitration clause. The court emphasized that the JVC, being created pursuant to the agreement, was bound by its terms, including the arbitration clause.

Judgment:
The court dismissed Civil Revision No. 548 of 2016 filed by M/s IPROSUGAR Engineering Private Limited, upholding the order dated 29.09.2015, and referred the matter to arbitration as per the agreement dated 14.06.2006. Conversely, Civil Revision No. 6163 of 2015 filed by M/s Spray Engineering Devices Limited was allowed, setting aside the order dated 12.08.2015, and again referring the matter to arbitration. The interim orders were vacated.