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TMI Blog2010 (4) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... ich Rs.24.19 crores was payable in cash and Rs.74 crores by issue of 74 lakhs shares (of the face value of Rs.10/- at a premium of Rs.90/- per share). Clause 10 of the agreement relates to arbitration. Clause 11 of the agreement relates to approval. The said clauses are extracted below : "10. Governing Law and Jurisdiction. This AGREEMENT shall be governed by and interpreted in accordance with the laws of India. The Parties submit to the exclusive jurisdiction of the court in the city of Chennai, Tamil Nadu. Any dispute, difference, claims or questions arising under this agreement or concerning any matter covered by this Agreement or touching upon this Agreement, the same shall be referred to arbitration before a sole arbitrator to be appointed by consent of Seller, Buyer/IW. The decision/award of the Sole Arbitrator shall be final and binding on all parties. The provisions of the Arbitration and Conciliation Act, 1996, with such amendments thereto as may be applicable, shall apply to the proceedings. The venue of the arbitration shall be Chennai and the language of the Arbitration shall be English." "11. Approval. Notwithstanding anything to the contrary herein contained in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EGs. The order however clarified that whatever had been stated therein was in the context of disposal of the applications seeking interim measures under section 9 of the Act and nothing contained therein should be construed as findings on merits and the Arbitrator should determine the issues raised before him uninfluenced by the observations made in the said order. 7. Wescare filed a petition under section 11(6) of the Act against Subuthi and Indowind for appointment of a sole arbitrator to arbitrate upon the disputes between them in respect of agreement dated 24.2.2006. Subuthi resisted the said petition alleging that as the agreement dated 24.2.2006 did not contemplate any transaction between Wescare and itself (Subuthi) and as no transaction took place between Wescare and Subuthi under the agreement dated 24.2.2006, there was no cause of action nor any arbitrable dispute between them. Indowind resisted the petition on the ground that it was not a party to the agreement dated 24.2.2006 entered into between Wescare and Subuthi; that it had not ratified the agreement dated 24.2.2006 or acted upon it; that there was no arbitration agreement between Wescare and Indowind; that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is challenged in this appeal by special leave. On the contentions urged the following two questions arise for consideration: (i) Whether an arbitration clause found in a document (agreement) between two parties, could be considered as a binding arbitration agreement on a person who is not a signatory to the agreement? (ii) Whether a company could be said to be a party to a contract containing an arbitration agreement, even though it did not sign the agreement containing an arbitration clause, with reference to its subsequent conduct? 10. Section 7 defines an arbitration agreement and it is extracted below : "7. Arbitration agreement.-(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in- (a) a document signed by the parties' (b) an exchange of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore follows that neither sub-section (5) nor clauses (b) and (c) of sub-section (4) of section 7 applies. Therefore, what remains to be seen is whether there is any 'document signed by parties', as provided in clause (a) of sub-section (4) of section 7. 13. Wescare puts forth the agreement dated 24.2.2006 as an agreement signed by the parties containing an arbitration agreement but the said agreement is signed by Wescare and Subuthi and not by Indowind. It is not in dispute that there can be appointment of an arbitrator if there was any dispute between Wescare and Subuthi. The question is when Indowind is not a signatory to the agreement dated 24.2.2006, whether it can be considered to be a 'party' to the arbitration agreement. In the absence of any document signed by the parties as contemplated under clause (a) of sub-section (4) of section 7, and in the absence of existence of an arbitration agreement as contemplated in clauses (b) or (c) of sub-section (4) of section 7 and in the absence of a contract which incorporates the arbitration agreement by reference as contemplated under sub-section (5) of section 7, the inescapable conclusion is that Indowind is not a party to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Indowind, will not make Indowind a party in the absence of a ratification, approval, adoption or confirmation of the agreement dated 24.2.2006 by Indowind. 16. Clause 11 of the agreement dated 24.2.2006 categorically states that the agreement shall be null and void and of no effect whatsoever unless it is expressly approved by the respective Board of Directors/shareholders of Wescare, Subuthi and Indowind. It is admitted that the Board of Directors of Wescare and Subuthi approved the agreement. But the Board of Directors or the shareholders of Indowind did not approve the agreement. In the absence of such approval by Indowind, and in the absence of Indowind being a party or signatory to the agreement dated 24.2.2006, it is ununderstandable as to how Indowind can be deemed to be a party to the agreement dated 24.2.2006 and consequently a party to the arbitration agreement contained therein. 17. Wescare referred to several acts and transactions as also the conduct of Indowind to contend that an inference should be drawn that Indowind was a party to the agreement or that it had affirmed and approved the agreement or acted in terms of the agreement. An examination of the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave;-vis the other party. If in a summary proceedings by a consumer against a service provider, the insurer is added as a co-complainant or if the insurer represents the consumer as a power of attorney, there is no need to examine the nature of rights inter-se between the consumer and his insurer." 19. The scope of examination of the agreement dated 24.2.2006, by the learned Chief Justice or his Designate under section 11(6) is necessarily to be restricted to the question whether there is an arbitration agreement between the parties. The examination cannot extend to examining the agreement to ascertain the rights and obligations regarding performance of such contract between the parties. This Court in SBP & Co. v. Patel Engineering Limited [2005 (8) SCC 618] and in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. [2009 (1) SCC 267] has held that when an application is filed under section 11, the Chief Justice or his Designate is required to decide only two issues, that is whether the party making the application has approached the appropriate court and whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the confirmation dated 15.3.2006 by Wescare to Indowind relating to the sale of WEGs, relied on by Wescare, very significantly do not refer to the agreement dated 24.2.2006. They are straight and simple delivery notes and an invoice in regard to the sale of goods. They can be independent transactions which do not depend on or relate to the agreement dated 24.2.2006. If they were with reference to the agreement dated 24.2.2006, it is strange that Wescare did not choose to refer to the said agreement in any of these documents. 23. Strong reliance is placed on the Red Herring Prospectus issued by the Indowind in connection with the public issue of its shares. We extract below the relied upon portions of the prospectus : "30. We have agreed to takeover the assets of Wescare (India) Limited, subject to approval of owners of assets and statutory formalities, but only a portion of acquisition has been completed. Our Company agreed to takeover wind mills along with land, infrastructure and spares from Wescare India Limited. But due to non receipt of approvals from the lenders/lessors, only a part of the total being 6.49 MW has been acquired by us. The Company is not certain of comple ..... X X X X Extracts X X X X X X X X Extracts X X X X
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