AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 680
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.... (P) Ltd. v. Jayesh H. Pandya and another (2003) 5 SCC 531. 3. Brief facts which led to filing of this appeal are as follows:- On 01.02.2012, the first respondent - Rishabh Enterprises (the 'Rishabh'), the sole proprietorship concern of the second respondent - Dr. A.M. Singhvi entered into two agreements with M/s Juwi India Renewable Energies Pvt. Ltd. (Juwi India) namely:- (i) Equipment and Material Supply Contract for purchase of power generating equipments to the tune of Rs. 8,89,80,730/-; and (ii) Engineering, Installation and Commissioning Contract for installation and commissioning of the Solar Plant for Rs. 2,20,19,270/-. Both these agreements contain arbitration clause. 4. The first respondent - Rishabh entered into Sale and Purchase Agreement dated 05.03.2012 with the second appellant company - Astonfield Renewables Private Limited (Astonfield) for purchasing CIS Photovoltaic products to be leased to appellant No.3 - Dante Energy Pvt. Ltd. (Dante Energy) to be installed at the Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh. As per the agreement, these products were valued for Rs. 25,16,00,000/-. The second appellant - Astonfield received Rs. 21,40,49....
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....and leased to Dante Energy. The respondents have also filed a criminal complaint before the Economic Offences Wing at Delhi against the appellants, based on which, FIR No. 30 of 2015 was registered. The appellants have filed writ petition bearing CWP No.619 of 2016 before the High Court of Delhi seeking quashing of the said FIR which is sub judice. There was also an enquiry by the Income Tax Authorities seeking explanation from the appellants regarding transfer of money to the sons of Dr. A.M. Singhvi i.e. Rs. 2,50,00,000/- to Mr. Avishkar Singhvi and Rs. 7,50,00,000/- to Mr. Anubhav Singhvi. Appellant No.1 - Ameet Lalchand Shah was summoned by the Income Tax Authorities seeking explanation with regard to transfer of the said money to the sons of Dr. A.M. Singhvi. 7. Owing to the dispute between the parties, appellant No.3 - Dante Energy issued notice dated 13.02.2016 invoking arbitration clause and nominated Justice Sujata Manohar, former Judge, Supreme Court of India as the Arbitrator. The respondents namely the Rishabh and its sole proprietor preferred a Civil Suit (Commercial) No.195 of 2016 before the High Court on 11.03.2016 against all the appellants levelling various ....
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....r/principal agreement and the agreements between the respondents and Astonfield and Juwi India cannot be said to be ancillary agreements to the same. The learned Single Judge further held that not only the respondents accuse the appellants of fraud but appellants also accuse the respondents of fraud, concealment and suppression of material facts and that there was also a registration of a criminal case based on the complaint filed by the respondents and also the enquiry by the Income Tax Authorities regarding transfer of Rs. 10,00,00,000/- to the sons of Dr. A.M. Singhvi and when there are such serious issues between the parties, they cannot be referred to arbitration. 10. Being aggrieved by the dismissal of the application, the appellants preferred appeal before the Division Bench which came to be dismissed. The Division Bench pointed out the difference in the language between Section 8 and Section 45 of the Act and after referring to Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. and others (2013) 1 SCC 641, observed that Sukanya Holdings was not overruled. The Division Bench further pointed out that in spite of amendment brought in under Sect....
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....allation and Commissioning Contract; (iii) Sale and Purchase Agreement; and (iv) Equipment Lease Agreement shows that all the four agreements were for the single purpose to commission 2 MWp Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh to be purchased by Rishabh and leasing the equipments to Dante Energy. 13. The averments in the plaint also prima facie indicate that all the four agreements are inter-connected and that appellant No.1 - Ameet Lalchand Shah is stated to be the promoter and controlling man of both Astonfield as well as Dante Energy. We may usefully refer to the relevant averments in the plaint which read as under:- "Defendant No.1, Mr. Ameet Lalchand Shah, is the Promoter of the Defendant Nos. 2 and 3 Companies. Through his other group companies, Defendant No.1 is also the controlling shareholder of Defendant Nos. 2 and 3. He is involved in running the day to day affairs of the said companies and it is on his instructions and directions and under his overall control and dictation that the said companies are run. He is the co-founder and the co-chairman of the "Astonfield Group" consisting of various companies incorporated both o....
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....e 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'). B. The Client (Rishabh) proposes to source Photovoltaic Products/Panels, Inverters, Transformers and similar solar power generating equipments, etc. for sale of goods to the Client (Rishabh) and the Client (Rishabh) will onward lease these goods to M/s Dante Energy Pvt. Ltd. (Lessee). C. The Client (Rishabh) wishes to engage the Supplier (Juwi India) for supply of Equipment (as defined below) and materials with respect to the development of the Solar Park. D. The M/s Dante Energy Private Limited (Lessee) will have the right to inspect the respective goods to be sourced by the Client (Rishabh) and based on the confirmation from the M/s Dante Energy Private....
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.... agreed to identity the competent Contractor (Juwi India) for undertaking the above work. E. The Contractor (Juwi India) has represented to the Client (Rishabh) and the Lessee (Dante Energy) that the Contractor (Juwi India) has the requisite experience, expertise, resources and skills for undertaking and performing all the activities and services required for design engineering, construction, erection, testing, commissioning and handing over of the Facility and has submitted an offer to the Client (Rishabh) in response to the Technical Specifications as set out by the Client (Rishabh). F. Based on the offer submitted by the Contractor (Juwi India) and relying on the Contractor's representations and warranties herein, and on the concurrence and approval of the Lessee (Dante Energy), the Client (Rishabh) wishes to appoint the Contractor (Juwi India) to undertake the Services and (except for purchase of the Client's Equipments) to perform all the activities and services required for design, engineering, construction, erecting, testing, commissioning and handing over of the Facility and the Contractor (Juwi India) has agreed to such appointment and to undertake such o....
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....f 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 (14.03.2012) between Rishabh and Dante Energy is only a follow-up of all the above three agreements as is clear from the various clauses in the Equipment Lease Agreement. The relevant clauses of Equipment Lease Agreement (14.03.2012) are as under:- "Equipment Lease Agreement M/s Rishabh Enterprises.......... (Lessor) AND M/s Dante Energy Pvt. Ltd........... (Lessee) is setting up a 2 MWp grid connected solar PV power project at Dongri, Raksa, District- Jhansi, Uttar Pradesh (Plant Site)...... Whereas the Lessor (Rishabh) is the owner of certain Photovoltaic products/Panels, Inverters, Transformers and similar solar power generating equipments etc. (herein referred to as "Equipments"), more particularly described in the First Schedule hereunder written. And whereas the Lessee (Dante Energy) has necessary authorizations to develop, own, operate and commercially exploit a 2 MWp thin-film photovoltaic solar plant on the Site ("SPY Power Plant"), ....
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....quipment 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. In Sukanya Holdings, the suit was filed for dissolution of the partnership firm and accounts and inter alia challenged the conveyance deed executed by the partnership firm in favour of M/s West End Gymkhana Limited. An application filed under Section 8 of the Act was opposed by respondent No.1 thereon by contending that the subject matter of the suit was not between the contracting parties and that the reliefs claimed are not only against respondents No. 1 and 2 who are the contracting parties but are claimed against the remaining twenty-three parties who are the purchasers/tenants of disputed flats. This Court held that if all the parties to the suit are not parties to the agreement then the matter cannot be referred to arbitration since there is no provision in the Act for partly referring the dispute to arbitration. This Court noted that th....
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....ement (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 Act - Part-II of the Act and in that context, discussed the scope of relevant principles on the basis of which a non-signatory party also could be bound by the arbitration agreement. Under Section 45 of the Act, an applicant seeking reference of disputes to arbitration can either be a party to the arbitration agreement or any person claiming through or under such party. Section 45 uses the expression "....at the request of one of the parties or any person claiming through or under him....." includes non-signatory parties who can be referred to arbitration provided they satisfy the requirements of Sections 44 and 45 read with Schedule I of the Act. In para (73) of Chloro Controls, this Court held as under:- "73. A non-signatory or third party could be subjected to arbitration without their prior c....
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....ic 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 procurement of equipments, sale and purchase of equipments, installation and leasing out the equipments to Dante Energy. The dispute between the parties to various agreements could be resolved only by referring all the four agreements and the parties thereon to arbitration. 22. Parties to the agreements namely Rishabh and Juwi India:- (i) Equipment and Material Supply Agreement; and (ii) Engineering, Installation and Commissioning Contract and the parties to Sale and Purchase Agreement between Rishabh and Astonfield are one and the same as that of the parties in the main agreement namely Equipment Lease Agreement (14.03.2012). All the four agreements are interconnected. This is a case where several parties are involved in a single commercial project (Solar Plant at Dongri) executed through....
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.... 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 seeking reference to arbitration has been clarified/amplified to include persons claiming "through or under" such a party to the arbitration agreement; (ii) scope of examination by the judicial authority is restricted to a finding whether "no valid arbitration agreement exists" and the nature of examination by the judicial authority is clarified to be on a "prima facie" basis; (iii) the cut-off date by which an application under Section 8 is to be presented has been defined to mean "the date of" submitting the first statement on the substance of the dispute; and (iv) the amendments are expressed to apply notwithstanding any prior judicial precedent. The proviso to Section 8(2) has been added to allow a party that does not possess th....
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....y 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 Commission Report, Government of India) 27. The language of amendment to Section 8 of the Act is clear that the amendment to Section 8(1) of the Act would apply notwithstanding any prayer, judgment, decree or order of the Supreme Court or any other Court. The High Court laid emphasis upon the word ".....unless it finds that prima-facie no valid agreement exists". The High Court observed that there is no arbitration agreement between Astonfield and Rishabh. After referring to Sukanya Holdings and the amended Section 8 and Section 45 of the Act, the High Court pointed out the difference in language of Section 8 and Section 45 of the Act. The High Court distinguished between Sukanya ....
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....ally 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 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. In Ayyasamy case, this Court held that mere allegation of fraud is not a ground to nullify the effect of arbitration agreement between the parties and arbitration clause need not be avoided and parties can be relegated to arbitration where merely simple allegations of fraud touc....
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....d 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 - Equipment Lease Agreement (14.03.2012), all the agreements/contracts contain clauses referring to the main agreement. It is the duty of the Court to impart the commercial understanding with a "sense of business efficacy" and not by the mere averments made in the plaint. The High Court was not right in refusing to refer the parties on the ground of the allegations of fraud levelled in the plaint. 34. It is only where serious questions of fraud are involved, the arbitration can be refused. In this case, as contended by the appellants there were no serious allegations of fraud; the allegations levelled against....
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.... 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 Board of Directors of Astonfield Solar Gujarat Pvt. Ltd. by the shareholders by EGM dated 17.12.2016. We do not propose to go into the merits of this contention; however, keeping in view that Astonfield has transferred its shareholdings qua Rajasthan and Gujarat Solar Power units, in our view, the interest of the respondents is to be protected till the matter is resolved by the arbitrator by directing the appellants to pay the arrears of lease rent and also to pay the future lease rent for the equipments at the rate of Rs. 28,26,000/- per month. 37. The impugned order of the High Court is set aside ....