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2018 (5) TMI 680 - SC - Indian LawsReference for arbitration - Maintainability of application - Section 8 of the Arbitration and Conciliation Act, 1996 - application dismissed on the ground that the agreements between the parties are not inter-connected with the principal agreement dated 05.03.2012 and therefore, the parties cannot be referred to arbitration. Held that - Since all the three agreements of Rishabh with Juwi India and Astonfield had the purpose of commissioning the Photovoltaic Solar Plant project at Dongri, Raksa, District Jhansi, Uttar Pradesh, the High Court was not right in saying that the Sale and Purchase Agreement (05.03.2012) is the main agreement. The High Court, in our view, erred in not keeping in view the various clauses in all the three agreements which make them as an integral part of the principal agreement namely Equipment Lease Agreement (14.03.2012) and the impugned order of the High Court cannot be sustained. Under the Act, an arbitration agreement means an agreement which is enforceable in law and the jurisdiction of the arbitrator is on the basis of an arbitration clause contained in the arbitration agreement - However, in a case where the parties alleged that the arbitration agreement is vitiated on account of fraud, the Court may refuse to refer the parties to arbitration. All the agreements and the parties thereon are referred to arbitration - appeal allowed.
Issues Involved:
1. Whether all four agreements are interconnected to refer the parties to arbitration despite the absence of an arbitration clause in the Sale and Purchase Agreement (05.03.2012). 2. Whether the reference to arbitration should be refused due to allegations of fraud. Detailed Analysis: Issue 1: Interconnection of Agreements and Arbitration Clause The primary issue was whether the four agreements, despite the absence of an arbitration clause in the Sale and Purchase Agreement (05.03.2012), are interconnected such that they should be referred to arbitration. The agreements in question are: 1. Equipment and Material Supply Contract (01.02.2012) between Rishabh and Juwi India. 2. Engineering, Installation and Commissioning Contract (01.02.2012) between Rishabh and Juwi India. 3. Sale and Purchase Agreement (05.03.2012) between Rishabh and Astonfield. 4. Equipment Lease Agreement (14.03.2012) between Rishabh and Dante Energy. The court noted that all four agreements were for the single purpose of commissioning a 2 MWp Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh. The clauses in the agreements indicated that they were interlinked and aimed at achieving this common objective. For instance, the Equipment and Material Supply Contract and the Engineering, Installation and Commissioning Contract between Rishabh and Juwi India explicitly mentioned the onward lease to Dante Energy. Similarly, the Sale and Purchase Agreement with Astonfield was for the purpose of onward leasing of goods to Dante Energy. The court emphasized that the interconnected nature of these agreements made them part of a single commercial project. The Equipment Lease Agreement, which contained an arbitration clause, was deemed the principal agreement, and the other three agreements were considered ancillary to it. Thus, the court concluded that all agreements and disputes arising therefrom should be referred to arbitration. Issue 2: Allegations of Fraud The second issue was whether the allegations of fraud leveled by the respondents should preclude the matter from being referred to arbitration. The respondents alleged that the appellants committed fraud and misrepresentation, which led to the filing of a criminal complaint and an FIR. The High Court had held that the serious allegations of fraud warranted the matter being tried in a civil court rather than being referred to arbitration. However, the Supreme Court referred to the precedent set in Ayyasamy v. A. Paramasivam and others, which stated that mere allegations of fraud are not sufficient to nullify an arbitration agreement. It is only in cases where the allegations of fraud are so serious that they make a virtual case of criminal offense or involve complicated issues that cannot be decided by an arbitral tribunal, that the matter should be tried in a civil court. In this case, the court found that the allegations were not of such a serious nature as to preclude arbitration. The allegations primarily involved misrepresentation and inducement to pay a higher price for equipment, which could be adequately addressed by an arbitrator. Therefore, the court held that the matter should be referred to arbitration. Conclusion The Supreme Court set aside the High Court's order and referred all four agreements and the parties involved to arbitration. The court directed that the appellants are jointly and severally liable to pay the arrears and future lease rent for the equipment at the rate specified in the Equipment Lease Agreement until the arbitration proceedings are concluded. The court also left it open to the parties to select an arbitrator or approach the appropriate High Court for the appointment of an arbitrator if they could not reach a consensus. The commercial suit filed by the respondents was disposed of accordingly.
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