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TMI Blog2018 (5) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Mr. Ranjan Gogoi And R. Banumathi JJ. For the Petitioner(s) : Ms. Kamini Jaiswal, AOR For the Respondent(s) : Mr. Kapil Sibal, Sr. Adv., Dr. Saif Mahmood, Adv., Mr. Amit Bhandari, Adv., Mr. Sumant De, Adv., Mr. Vivek Agarwal, Adv., Mr. Amrendra Kumar Mehta, AOR JUDGMENT R. BANUMATHI, J. Leave granted. 2. This appeal arises out of the judgment dated 17.04.2017 passed by the Delhi High Court in FAO(OS) (COMM) No.85 of 2017 in and by which the Division Bench affirmed the order of the Single Judge dismissing the application filed under Section 8 of the Arbitration and Conciliation Act, 1996 (the Act ) by holding that the agreements between the parties are not inter-connected with the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission of the plant at Jhansi - ₹ 2,20,19,270/- Both agreements contain arbitration clause - Parties agreed that the seat of arbitration shall be at Bombay 2. 05.03.2012 Rishabh entered into agreement with M/s. Aston Renewables Pvt. Ltd. (appellant no.2) (i) Purchasing CIS Photovoltaic products to be leased to Dante Energy (Appellant no.3) for energizing solar plant installed at Jhansi - ₹ 21,40,49,999/- This agreement does not contain arbitration clause. 3. 14.03.2012 Rishabh entered into agreement with M/s. Dante Energy Pvt. Ltd. (appellant no.3) Dante agreed to pay ₹ 13,50,000/- as lease rent for the equipment for March, 2012 and from April, 2012 onwards, ₹ 28,26,000/- per month. This agreement contains arbitration clause. Parties have agreed that the seat of arbitration shall be at Bombay. 6. Dispute arose between the parties when respondents alleged that appellant No. 3 Dante Energy has defaulted in payment of rent and that Astonfield committed fraud by inducing the Rishabh to purchase the Photovoltaic products by investing huge amount. The respondents have also alleged that the appellants have committed misrepresentation and criminal breach of trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Sale and Purchase Agreement (05.03.2012) is the main agreement and that other three agreements are inter-connected as they are executed between the same parties and the obligations and the performance of the terms of the agreements are inter-connected viz. commissioning of the Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, U.P. The respondents Rishabh and Dr. A.M. Singhvi resisted the application by contending that the suit is for declaration that the agreements are vitiated due to fraud and misrepresentation and while so, the matter cannot be referred to arbitration. It was further averred that the suit is neither concerned about the agreement dated 01.02.2012 with Juwi India nor concerned about Equipment Lease Agreement (14.03.2012); whereas the suit is concerned about the false assurances and fraud played by the appellants Ameet Lalchand Shah and Dante Energy regarding which a criminal case has also been registered and hence, the dispute is not referable to arbitration. 9. The learned Single Judge by order dated 15.03.2017 dismissed the application filed under Section 8 of the Act holding that the Equipment Lease Agreement (14.03.2012) between Rishabh and Dan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between Rishabh and Astonfield? 2. Whether reference of the dispute between the parties to arbitration is to be refused on the ground of allegations of fraud levelled against the appellants by the respondents in the plaint or whether the agreements ought to be taken as commercial undertaking of the parties with a sense of business efficacy as held in Ayyasamy case ? 12. First, the Rishabh entered into two agreements with Juwi India dated 01.02.2012:- (i) Equipment and Material Supply Contract; and (ii) Engineering, Installation and Commissioning Contract. The first agreement-Equipment and Material Supply Contract (01.02.2012) contains arbitration clause ( Clause 19.4 ). The second agreement Engineering, Installation and Commissioning Contract (01.02.2012) also contains arbitration clause ( Clause 25 ). Sale and Purchase Agreement (05.03.2012) between Rishabh and Astonfield for ₹ 25,16,00,000/- does not contain the arbitration clause. The fourth agreement namely Equipment Lease Agreement (14.03.2012) between Rishabh and Dante Energy contains arbitration clause ( Clause 29 ). A careful perusal of all the four agreements that is:- (i) Equipment and Material Supply Contract; (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh Juwi India is not the defendant, as discussed infra, Equipment and Material Supply Contract and Engineering, Installation and Commissioning Contract with Juwi India itself were for the purpose of commissioning Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh. 14. The clauses in the Equipment and Material Supply Contract (01.02.2012) between Rishabh and Juwi India clearly indicate that the Rishabh has entered into Lease Agreement with Dante Energy and that the Rishabh proposes to source Photovoltaic products/panels etc. and similar Solar Power generating equipments for onward lease of those goods to Dante Energy. The following clauses in the said Equipment and Material Supply Contract would clearly establish the link of Equipment and Material Supply Contract with the main Lease Agreement with Dante Energy:- This Equipment and Material Supply contract is between M/s Rishabh Enterprises .. (the Client ) AND Juwi India Renewable Energies Private Limited ..(the Supplier ) Whereas:- A. The Client ( Rishabh ) is entering into Lease Agreement with M/s Dante Energy Pvt. Ltd. ( Lessee ) and the Lessee ( Dante Energy ) has necessary authorizations to develop, own, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansformers and similar solar power generating equipments etc. and is entering into an Equipment Lease Agreement with M/s Dante Energy Pvt. Ltd. ( Lessee ). B. The Lessee ( Dante Energy ) has necessary authorizations to develop, own, operate and commercially exploit a 2 MWp thin-film photovoltaic solar plant at Dongri, Raksa, District-Jhansi, UP (Plant Site ), transmission line from power plant to the Grid Substation, bay extension work at the Grid Substation, including all of the infrastructure and relevant installations required to connect the electricityproducing equipment to the distribution/transmission grid at the Grid Substation in UP, India (the Facility ). C. The Client ( Rishabh ) proposes to purchase the Client s Equipment as required by the Lessee ( Dante Energy ) for onward lease to the Lessee ( Dante Energy ). D. The Lessee ( Dante Energy ) requires the services for design, engineering, construction, erection, testing, commissioning and handing over of the Facility to the Client ( Rishabh ) and accordingly the Client ( Rishabh ) has agreed to identity the competent Contractor ( Juwi India ) for undertaking the above work . E. The Contractor ( Juwi India ) has represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Sale and Purchase Agreement and its apendices. The products under this Agreement shall be used for the 2 MWp grid connected solar PV power project being set up by the Lessee ( Dante Energy ) at Dongri, Raksa, District-Jhansi, Uttar Pradesh (Plant Site) The Buyer ( Rishabh ) is purchasing the above goods for onward supply/lease to lessee ( Dante Energy ). Lessee ( Dante Energy ) will have the right to inspect the respective goods and based on the confirmation from the Lessee ( Dante Energy ), the respective goods will be purchased by the Buyer ( Rishabh ) for onward sale to Lessee ( Dante Energy ) and will be consigned to the Project Site. Though the Sale and Purchase Agreement (05.03.2012) does not have any arbitration clause, by the above clauses, it is clearly linked with the main agreement - Equipment Lease Agreement (14.03.2012). Sale and Purchase Agreement was entered into between Astonfield and Rishabh only for the purpose of onward transmission of leasing of the goods by Rishabh to Dante Energy. There is no merit in the contention that the Sale and Purchase Agreement is not connected with the Equipment Lease Agreement with Dante Energy. 17. Equipment Lease Agreement (14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found suitable for its commercial use of the same. (ii) Pursuant to this lease agreement, the respective Equipments, will be purchased by the Lessor ( Rishabh ) from the respective Supplier and accordingly, the Equipments will be consigned directly to the project site in the State of Uttar Pradesh. Accordingly, in the present case, the delivery of respective Equipments will be effected by Endorsement of the consignment Note in the favour of Lessee ( Dante Energy ) by the Lessor ( Rishabh ). (v) Irrespective of how and by whom the delivery is effected, it is hereby agreed that the entire risk, cost or any outgoing pertaining to the said delivery and installation shall be at the cost and risk of the Lessor ( Rishabh ) . The above extracted clauses clearly demonstrate that all the four agreements are inter-connected. Clause (v) in Article 4 in the Equipment Lease Agreement that delivery and installation shall be at the cost and risk of Rishabh (Lessor) is clearly linked with the Engineering, Installation and Commissioning Contract between Rishabh and Juwi India. 18. The High Court placed reliance upon Sukanya Holdings for dismissal of the application filed under Section 8 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed. 19. Mr. Sibal, learned senior counsel for the respondents submitted that the High Court rightly relied upon Sukanya Holdings as it relates to Part-I of the Act that the parties who are not signatories to the arbitration agreement (in this case, Astonfield under Sale and Purchase Agreement) cannot be referred to arbitration. It was further submitted that Chloro Controls arises under Part-II of the Act and was rightly distinguished by the High Court and Sukanya Holdings was not overruled by Chloro Controls and hence, the appellants cannot rely upon Chloro Controls. It was contended that the Sale and Purchase Agreement (05.03.2012) under which huge money was parted with, is the main agreement having no arbitration clause cannot be referred to arbitration. It was submitted that the subject matter of the suit cannot be bifurcated between the parties to arbitration agreement and others. 20. In Chloro Controls , this Court was dealing with the scope and interpretation of Section 45 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) and the Rishabh s Sale and Purchase Agreement with Astonfield (05.03.2012) are ancillary agreements which led to the main purpose of commissioning the Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh by Dante Energy (Lessee). Even though, the Sale and Purchase Agreement (05.03.2012) between Rishabh and Astonfield does not contain arbitration clause, it is integrally connected with the commissioning of the Solar Plant at Dongri, Raksa, District Jhansi, U.P. by Dante Energy. Juwi India, even though, not a party to the suit and even though, Astonfield and appellant No.1 Ameet Lalchand Shah are not signatories to the main agreement viz. Equipment Lease Agreement (14.03.2012), it is a commercial transaction integrally connected with commissioning of Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, U.P. Be it noted, as per clause(v) of Article 4, parties have agreed that the entire risk, cost of the delivery and installation shall be at the cost of the Rishabh (Lessor). Here again, we may recapitulate that engineering and installation is to be done by Juwi India. What is evident from the facts and intention of the parties is to facilitate procuremen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or order of the Supreme Court or any court refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. 25. Principally four amendments to Section 8(1) have been introduced by the 2015 Amendments - (i) the relevant party that is entitled to apply see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie. The amendment also envisages that there shall be a conclusive determination as to whether the arbitration agreement is null and void. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof or a copy accompanied by an affidavit calling upon the other party to produce the original arbitration agreement or duly certified thereof in circumstances where the original arbitration agreement or duly certified copy is retained only by the other party. LC Comment: In many transactions involving Government bodies and smaller market players, the original/duly certified copy of the arbitration agreement is only retained by the former. This amendment would ensure that the latter class is not prejudiced in any manner by virtue of the same ( Ref: 246th Law Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the plaint is based on the averments that from inception, the intention of appellants/defendants was to cheat the respondents and the respondents were made to part with large sums of money on the basis of the misrepresentation made by the appellants. It was submitted that alternative prayer in the plaint will not convert the fraud suit to a regulatory suit because of alternative prayer since alternative prayer lease rental has been projected only as an alternative remedy. Placing reliance upon Arundhati Mishra (Smt) v. Sri Ram Charitra Pandey (1994) 2 SCC 29, it was submitted that it is settled law that it is open to the parties to raise mutually inconsistent pleas and the relief could be granted on the alternative plea so raised. 30. Refuting the above contentions, Mr. Shanti Bhushan, learned senior counsel for the appellants placed reliance upon Ayyasamy case to contend that there are no serious allegations in the plaint to decline reference of the matter to arbitration. It was submitted that mere allegations of fraud were not sufficient to detract from the performance of the obligation of the parties in terms of the agreement and refer the matter to arbitration. 31. Under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of an obligation by contracting parties to resolve their disputes through a private tribunal. The intent of the parties is expressed in the terms of their agreement. Where commercial entities and persons of business enter into such dealings, they do so with a knowledge of the efficacy of the arbitral process . The commercial understanding is reflected in the terms of the agreement between the parties. The duty of the court is to impart to that commercial understanding a sense of business efficacy . ( Underlining added ) 33. When we apply the aforesaid principles to the facts of the present case, as discussed earlier, both parties have consciously proceeded with the commercial transactions to commission the Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, U.P. The first respondent has proceeded to procure the materials, entered into agreement with Juwi India for engineering, installation and commissioning and the sale and purchase agreement with Astonfield, were all the conscious steps taken in the commercial understanding to commission the Solar Plant at Dongri, Raksa, District Jhansi, U.P. Even though Juwi India and Astonfield are not parties to the main agreement - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase Agreement (05.03.2012) between Rishabh and Astonfield; and (iv) Equipment Lease Agreement (14.03.2012) between Rishabh and Dante Energy and the parties thereon are referred to arbitration. 36. As per the terms of Equipment Lease Agreement (14.03.2012), appellant No.3 - Dante Energy has to pay lease rentals of ₹ 13,67,500/- for the month of March, 2012 and with effect from April, 2012 to pay lease rentals of ₹ 28,26,000/- per month for a period of fifteen years. Learned Senior Counsel for respondents, Mr. Sibal has submitted that appellant No.3 - Dante Energy has not paid the rentals as per the terms and conditions of Equipment Lease Agreement. Mr. Sibal has also drawn our attention that Astonfield Solar Rajasthan Pvt. Ltd. has transferred 99.99% of its shares to ARRL (Mauritius) Ltd. (Holding Company) and Ameet Lalchand Shah has only one share (0.01%). Our attention was also drawn to Astonfield Solar Gujarat Pvt. Ltd., which has also transferred 99.99% of its shares to ARRL (Mauritius) Ltd. (Holding Company) and that Ameet Lalchand Shah has only one share (0.01%). It was also submitted that the appellant No.1 - Ameet Lalchand Shah was subsequently removed from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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