Sushma Shivkumar Daga & Anr. v. Madhurkumar Ramkrishnaji Bajaj & Ors.

15. On 25/07/2008, another tripartite agreement was executed between the parties, in supersession of the earlier agreements replacing all prior agreements and understandings, whether oral AJN or written, regarding the subject matter thereof. This agreement dated 25/07/2008 again comprised, an arbitration clause in the form of paragraph 23.2, which reads thus: “23.[2] It is agreed between Parties that in the event of any disputes or differences between the Parties in relation to this Agreement or in reation to any matter touching or arising from this Agreement,the Parties shall refer such disputes and differences to the arbitration under the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification thereof.”

16. The new agreement also enlisted the properties in distinct schedules including the properties acquired by EAPL out of the funds provided by MB group.

17. The suit came to be filed by the plaintiff revolving around the Indenture made on 17/12/2019 between SD referred to as the ‘Transferor’ through its constituted attorney EAPL (defendant No.2) and, the EAPL, the company through its authorized signatory, referred to as “the Confirming Party” and defendant No.1, referred to as “MB” as the ‘Transferee’. By the said indenture, the Transferor acting through his constituted attorney, transferred and assured to the Transferee all his reversionary right, title and interest and the Confirming Party transferred and assured to the Transferee absolutely forever all its right, title and interest in the development agreement (development rights) in AJN all the piece and parcel of lands set out in the agreement. The said Indenture referred to the earlier agreement under which the full consideration of money was already received by the Transferor under the development agreement on or before its execution from the confirming party and the payment of which the Transferor had already acknowledged and discharged the Confirming Party of the same. Pertinent to note that SD is referred to in the Indenture as the Transferor, in its widest purport, the expression shall unless repugnant to the context or contrary to the meaning thereof be deemed to mean and/or include his heirs, executors and administrators. The agreement is accompanied with the true copy of the resolution passed in the Meeting of the Board of Directors of EAPL, authorizing one Vinay Lagad, officer of the Company to appear before the Office of the Sub-Registrar of Assurances to admit execution of and register the Deed of Transfer. The Indenture is signed by Vinaykumar Lagad based on the aforesaid authorization along with the Confirming Party, EAPL and, MB. It is this document which is sought to be assailed in the suit as being null and void as against the interest of the plaintiffs and the relief is sought in the backdrop of the plea to the effect that defendant No.1 in gross violation of the understanding recorded in the agreement dated 31/03/2007 and reasserted in agreement dated 25/07/2008 have executed a registered Deed of Conveyance on 17/12/2019 thereby conveying the suit property to himself and the claim of the plaintiffs is that it could not have been done without seeking AJN prior written permission of the plaintiffs, being the legal heirs and beneficiaries of the Will of SD. The said Deed of Conveyance is asserted to be illegal and unauthorized and in gross violation of Clause 16 of the development agreement and as amounting to fraud and not binding upon the plaintiffs. It is also pleaded that defendant Nos.[1] and 2 have failed to perform their obligation of development as promised in the development agreement and they have no serving right much less to execute the conveyance which, in any event, has been terminated by letter dated 25/09/2021. Apprehending that the defendants may transfer the properties for their benefit, the plaintiffs seek the relief of cancellation of agreement dated 17/12/2019 executed by defendant No.2 as constituted attorney of SD as Transferor of First Part and defendant No.1 himself referred to as Transferee on the Third Part and defendant No.2 as Confirming Party on the Second Part. Apart from this, five registered development agreements executed on various dates in 2007-2008 are sought to be cancelled.

18. On the suit being filed, the defendants, banking upon the arbitration clause in the two agreements, sought reference of the dispute for arbitration, in terms of Section 8 of the Arbitration Act. On perusal of the two agreements, wherein the arbitration clause is comprised of, it can be seen that these agreements are the business agreements executed between SD, plaintiff No.1 and defendant No.1 and the company being the tripartite AJN agreement and since the first agreement was superseded by the second agreement continuing the very same arrangements, this agreement forms the genesis of the subsequent development agreement and can be referred to as the mother agreement. The subsequent development agreements are executed in order to give effect to the business arrangements agreed between the parties and contained in first agreement dated 31/03/2007. The distinct development agreements were executed in respect of the properties which are enlisted in the Second Schedule in agreement dated 31/03/2007, under the caption of “properties acquired by SD from funds provided by MB and being brought in the company by SD”. The said development agreements, therefore, flow out of the mother agreement and cannot be disintegrated or separated from it. It is apparent on perusal of the business arrangement arrived at by the tripartite agreement and the documents of Indenture, which is subject matter of challenge in the suit, which is a sequel to the different development agreements under which late SD received consideration and agreed to make over the development rights to the company, as to read as also flowing from the other agreements. This agreement consisted a clause 23.2, wherein the parties have agreed that in the event any dispute or difference between the parties in relation to this agreement, or in relation to any matter touching or arising from this agreement, the matter shall be referred to arbitration. AJN

19. Let me ascertain whether there exists an Arbitration Agreement and whether the clause contemplating reference for arbitration govern the subject matter of the suit instituted by the plaintiffs. Before I proceed to determine so, I deem it appropriate to reproduce Section 8 of the Arbitration Act, which reads thus: “8. Power to refer parties to arbitration where there is an arbitration agreement.-(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree 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 AJN the other party to produce the original arbitration agreement or its duly certified copy before the 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.”

20. In Sundaram Finance Limited v. T. Thankam reported in (2015) 14 SCC 444, the following observations are relevant to determine the scope of a clause being contained in an agreement and it reads thus: “8. Once there is an agreement between the parties to refer the disputes or differences arising out of the agreement to arbitration, and in case either party, ignoring the terms of the agreement, approaches the civil court and the other party, in terms of Section 8 of the Arbitration Act, moves the court for referring the parties to arbitration before the first statement on the substance of the dispute is filed, in view of the peremptory language of Section 8 of the Arbitration Act, it is obligatory for the court to refer the parties to arbitration in terms of the agreement, as held by this Court in P. Anand Gajapathi Raju v. P.V.G. Raj, (2000) 4 SCC 539.

35. In P. Anand Gajapathi Raju v. P.V.G. Raju' it was held as under: (SCC p. 542, para 5) AJN

21. Learned senior counsel Mr. Samdani is perfectly justified in submitting that the phraseology used in the said clause shall be construed liberally and, in support, he fall back on the decision of Renusagar Power Company Limited v. General Electric Company & Anr. reported in (1984) 4 SCC 679, wherein while construing use of various phrases in the agreement and in ascertaining whether a given dispute comes within the scope or purview of an arbitration clause or not, it is held that it all depends primarily upon the terms of the clause itself; and it is a question of what the parties intent to provide and what language they employ. The expressions used by the parties such as “arising out of” or “in respect of” or “in connection AJN with” or “in relation to” or “in consequence of” or “concerning” or “relating to” are held to be of widest amplitude and content and include questions as to the existence, validity and effect (scope) of arbitration agreement. On dealing with the earlier decisions, revolving around such clauses and whether it amounted to “Arbitration Agreement”, the law is summarized as under: “25. Four propositions emerge very clearly from the authorities discussed above: (1) Whether a given dispute inclusive of the arbitrator’s jurisdiction comes within the scope or purview of an arbitration clause or not primarily depends upon the terms of the clause itself; it is a question of what the parties intend to provide and what language they employ. (2) Expressions such as "arising out of" or "in respect of" or "in connection with" or in relation to" or "in consequence of" or "concerning" or "relating to the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope) of the arbitration agreement. (3) Ordinarily as a rule an arbitrator cannot clothe himself with power to decide the questions of his own jurisdiction (and it will be for the court to decide those questions) but there is nothing to prevent the parties from investing him with power to decide those AJN questions, as for instance, by a collateral or separate agreement which will be effective and operative. (4) If, however, the arbitration clause, so widely worded as to include within its scope questions of its existence, validity and effect (scope), is contained in the underlying commercial contract then decided cases have made a distinction between questions as to the existence and or validity of the agreement on the one hand and its effect (scope) on the other and have held that in the case of former those questions cannot be decided by the arbitrator, as by sheer logic the arbitration clause must fall along with underlying commercial contract which is either non-existent or illegal while in the case of the latter it will ordinarily be for the arbitrator to decide the effect or scope of the arbitration agreement i.e. to decide the issue of arbitrability of the claims preferred before him.”

22. Another decision of the Apex Court on which Mr. Samdani has placed reliance is Ameet Lalchand Shah & Ors. v. Rishabh Enterprises & Anr. reported in (2018) 15 SCC 678, wherein somewhat similar situation was placed before the Apex Court, where there were distinct agreements entered into between the parties for operating Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh. This involved four agreements entered by the respondent Rishabh Enterprises with distinct entities and barring one agreement for purchasing AJN the photovoltaic products to be leased out for solar plant at Dante Energy, the agreement contained an arbitration clause. In the wake of the aforesaid facts, the observations of the Apex Court in paragraph Nos.24 to 26 are applicable to the present case and I deem it appropriate to reproduce the same. “24. In a case like the present one, though there are different agreements involving several parties, as discussed above, it is a single commercial project, namely, operating a 2 MWp Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh. Commissioning of the Solar Plant, which is the commercial understanding between the parties and it has been effected through several agreements. The agreement - Equipment Lease Agreement (14-3-2012) for commissioning of the Solar Plant is the principal/main agreement. The two agreements of Rishabh with Juwi India: (i) Equipment and Material Supply Contract (1- 2-2012); and (ii) Engineering, Installation and Commissioning Contract (1-2-2012) and the Rishabh's Sale and Purchase Agreement with Astonfield (5-3) -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 (5- 3-2012) 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 AJN a party to the suit and even though, Astonfield and Appellant 1 Ameet Lalchand Shah are not signatories to the main agreement viz. Equipment Lease Agreement (14-3-2012), it is commercial transaction integrally connected with a 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 procurement of equipments, sale and purchase of equipments, installation and leasing out the equipments to Dante Energy. The dispute between the parties to parties thereon to arbitration.

25. 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 (14-3-2012). All the four agreements are inter-connected. This is a case where several parties are involved in a single commercial project (Solar Plant at Dongri) executed through several agreements / contracts. In such a case, all the parties can be covered by the arbitration clause in the main agreement i.e. Equipment Lease Agreement (14-3 2012).” AJN

23. Applying the authoritative pronouncements as above, in my considered opinion, on reading of the two subject agreements, the second superseding the first, the pre-requisites for an application under Section 8 are fulfilled viz. there is an arbitration agreement, the party to the agreement brings an action in the court against the other party, subject-matter of the action is the same as the subject-matter of the arbitration agreement and the other party moves the court for referring the parties to arbitration before it submits its first statement on the substance of the dispute.”

24. In the wake of clause 21(B) in the agreement dated 31/03/2007 and clause 23.[2] in the agreement dated 25/07/2008, the dispute must go to the arbitrator and merely because the SD is no more available for its enforcement, can be no ground to resist the reference to the arbitrator since the clause itself contemplated that any dispute or differences between the parties in relation to the “agreement” or in relation to “any matter touching or arising from the agreement” shall be referred to the arbitration under the Arbitration & Conciliation Act, 1996 along with any statutory modification thereof.

25. In the wake of the aforesaid clauses contained in the said two agreements unmistakenly intended to refer the dispute arising out of or in connection with or in relation to the two AJN agreements for arbitration.

26. Learned counsel for the petitioners has placed reliance on the decision of the Apex Court in Vidya Drolia & Ors. v. Durga Trading Corporation reported in (2021) 2 SCC 1, which exhaustively dealt with the non arbitrable claim and non arbitrable subject matter and have focused on the claim(s) in or subject matter of a dispute, which are not arbitrable by propagating a four fold test. On reading of the aforesaid judgment, it can be observed that the aforesaid authoritative pronouncement focused on the test to determine the non arbitrability and several disputes like insolvency, intra-company disputes, grant and issue of patent and registration of trade marks, criminal cases, matrimonial disputes, probate and testamentary matters and are held to be non arbitrable. However, the conclusive observations while comparing the language of Sections 8 and 11, in paragraph 244.4, the ratio has been culled out to the following effect: “244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. “when in doubt, do refer”.

27. In paragraph 244.5, the scope of determining an arbitration agreement has been further culled out as under: AJN “244.5. The scope of the court to examine the prima facie validity of an arbitration agreement includes only; whether the arbitration agreement was in writing? or whether the arbitration agreement contained in exchange of letters, telecommunication, etc.? or whether the core contractual ingredients qua the arbitration agreement were fulfilled? and on rare occasions, whether the subject matter of dispute is arbitrable?” The ratio flowing from the aforesaid decision, in my considered opinion, in no way, assist the petitioners.

28. In Pravin Electrical Private Limited v. Galaxy Infra & Engineering Private Limited reported in (2021) 5 SCC 671, the crux of Section 8 and Section 11 again came to be strengthened by determining the issues to the following effect: “(1) Whether an arbitrator could be appointed and the issue of existence of the arbitration agreement be referred for arbitration? and (2) whether the finding of the High Court, that an arbitration agreement exists between the parties was liable to be set aside?”

29. In paragraph No.15 of the report, the following observations succinctly reproduce the observations in Vidya Drolia (supra). AJN “15. Dealing with "prima facie" examination under Section 8, as amended, the Court then held: (Vidya Drolia casell, SCC pp. 110-11, para 134) "134. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straightforward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. Only when the court is certain that no valid arbitration agreement exists or the disputes/subject-matter are not arbitrable, the application under Section 8 would be rejected. At this stage, the court should not get lost in thickets and decide debatable questions of facts. Referral proceedings are preliminary and summary and not a mini trial. This necessarily reflects on the nature of the jurisdiction exercised by the court and in this context, the observations of B.N. Srikrishna, J. of "plainly arguable" case in Shin-Etsu Chemical Co. Ltd. 12 are of importance and relevance. Similar views are expressed by this Court in Vimal Kishor Shah wherein the test applied at the pre arbitration stage was whether there is a "good arguable case" for the existence of an arbitration agreement.”

30. The position of law has been further clarified with an observation that when it appears that, prima facie review of the AJN existence of an arbitration agreement by the court would be inconclusive, or on consideration inadequate as it requires detailed examination, the matter should be left for final determination by the Arbitral Tribunal selected by the parties by consent. The underlying rationale being not to delay or defer and to discourage parties from using referral proceedings as a ruse to delay and obstruct. In such cases, a full review by the Courts at this stage would encroach on the jurisdiction of the Arbitral Tribunal and violate the legislative scheme allocating jurisdiction between the Courts and the Arbitral Tribunal.

31. A meaningful reading of the aforesaid two decisions would lead to an irresistible conclusion that the court by default, would refer the matter to arbitration when contentions relating to non arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings.

32. In the wake of the aforesaid test being laid down by Their Lordships of the Apex Court, the clause relied upon in this case as arbitration agreement, leaves me with no option than to uphold the impugned order under which the learned Civil Judge, Senior Division at Vadgaon, Pune has referred the AJN dispute to arbitration. The writ petition must fail and deserves a dismissal.

33. The writ petition is accordingly dismissed.

34. In view of the dismissal of the writ petition, the interim application does not survive and the same is disposed of as such. [SMT.

BHARATI DANGRE, J.] AJN