TMI Blog2010 (4) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents 1 and 2 are companies incorporated under the Companies Act, 1956. Wescare Care (I) Ltd., the first respondent (for short Wescare ), is in the business of setting up and operating/managing windfarms and generation of power from Wind Electric Generators. Subuthi Finance Ltd - second respondent ( Subuthi for short) is a promoter of the appellant company Indowind Energy Ltd., (referred to as Indowind ). On 24.2.2006 an agreement of sale was entered into between escare and Subuthi. The agreement described Wescare (India) Ltd. including its subsidiary RCI Power Ltd as the seller/Wescare . It described Subuthi Finance Ltd. and its nominee as buyer and as the promoters of Indowind Energy Ltd. Under the said agreement, the seller agreed to transfer to the buyer certain business assets of the seller for a consideration of Rs.98.19 crores, of which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or otherwise disposing of the 31 WEGs and the land appurtenant thereto. (ii) OA NO.642/2007 to restrain Subuthi and Indowind from operating or running the WEGs pending completion of arbitration proceedings. (iii) OA NO.975/2007 to restrain Indowind from proceeding with the issue of initial public offer, proposed under the Red Herring Prospectus issued by it, pending final disposal of the arbitration proceedings. 6. The said applications were dismissed by a learned Single Judge of the Madras High Curt on 21.8.2007, holding as follows : (a) As Indowind has not signed nor ratified the agreement dated 24.2.2006, the maintainability of the applications under section 9 of the Act was doubtful. (b) As the WEGs were purchased by Indowind after paying the entire sale consideration, Wescare was not entitled to an injunction restraining Indowind from alienating the WEGs. 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 uninflue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the WEGs. and making payment therefor, both in cash and by allotment of shares. Indowind had in fact purchased from Wescare 39 WEGs. in March, 2006, the consideration for which was paid partly in cash and partly by allotment of shares, thereby indicating that Indowind acted in terms of the agreement dated 24.2.2006. (e) The Red Herring Prospectus issued by Indowind in connection with the public issue of equity shares gives a clear indication that it is bound by the agreement dated 24.2.2006 between Wescare and Subuthi (vide Risk Factor Nos.30 and 31). (f) Signature of a party is not a formal requirement of an arbitration agreement either under sub-section (4)(b) and (c) or under sub-section (5) of section 7 of the Act. Therefore, Indowind could be held to be a party to the agreement dated 24.2.2006, even if it had not executed the said agreement. 9 The said judgment 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould satisfy two conditions : (i) it should be between the parties to the dispute; and (ii) it should relate to or be applicable to the dispute. [See: Yogi Agrawal v. Inspiration Clothes U Ors. - 2009 (1) SCC 372]. 12. Wescare has not entered into any agreement with Indowind, referring to the agreement dated 24.2.2006 containing the arbitration agreement, with the intention of making such arbitration agreement, a part of the their agreement. Nor is it the case of Wescare that there has been any exchange of statements of claim and defence in which it had alleged the existence of an arbitration agreement and the same had been accepted and not denied by Indowind in the defence statement. It is also not the case of Wescare that any exchange of letters, telex, telegrams or other means of telecommunication referred to and provided a record of any arbitration agreement between the parties. It 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 agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders or Directors lead to an inference that one company will be bound by the acts of the other. If the Director who signed on behalf of Subuthi was also a Director of Indowind and if the intention of the parties was that Indowind should be bound by the agreement, nothing prevented Wescare insisting that Indowind should be made a party to the agreement and requesting the Director who signed for Subuthi also to sign on behalf of Indowind. The very fact that parties carefully avoided making Indowind a party and the fact that the Director of Subuthi though a Director of Indowind, was careful not to sign the agreement as on behalf of Indowind, shows that the parties did not intend that Indowind should be a party to the agreement. Therefore the mere fact that Subuthi described Indowind as its nominee or as a company promoted by it or that the agreement was purportedly entered by Subuthi on behalf of 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 whats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t whether adequate stamp duty has been paid under the Stamp Act, it will not be necessary to examine whether it is validly executed or whether it is fraudulent or forged. On the other hand, if a document is being examined in a criminal case in the context of whether an offence of forgery has been committed, the question for examination will be whether it is forged or fraudulent, and the issue of stamp duty or registration will be irrelevant. But if the document is sought to be produced and relied upon in a civil suit, in addition to the question whether it is genuine, or forged, the question whether it is compulsorily registrable or not, and the question whether it bears the proper stamp duty, will become relevant. If the document is examined in the context of a dispute between the parties to the document, the nature of examination will be to find out that rights and obligation of one party vis- -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 insur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or document, that it is a party to the arbitration agreement dated 24.2.2006 or that it is bound by the arbitration agreement contained therein, it could have been possible to say that Indowind is a party to the arbitration agreement. But that would not be under section 7(4)(a) but under section 7(4)(b) or section 7(5). Be that as it may. That is not the case of Wescare. In fact, the delivery notes/invoices issued by Wescare do not refer to the agreement dated 24.2.2006. Nor does any letter or correspondence sent by Indowind refers to the agreement dated 24.2.2006, either as an agreement executed by it or as an agreement binding on it. We may now refer to the several documents referred to and relied on by Wescare. 22. The first is in regard to the sale of WEGs by Wescare to Indowind. The letter dated 15.3.2006 enclosing the invoice, the delivery notes dated 15.3.2006 given by Wescare to Indowind, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Prospectus. Para 30 of the Prospectus merely refers to Indowind agreeing to take over the wind mills along with land, infrastructure and spares from Wescare. It does not refer to the agreement dated 24.2.2006 nor does it state that the takeover of the wind mills etc., was in pursuance of the agreement dated 24.2.2006. Para 31 of the Prospectus specifically states that Subuthi had entered into an agreement dated 24.2.2006 with Wescare to acquire WEGs and other assets in the name of its nominee Indowind. This has never been disputed by anyone. But what is significant is that there is no acknowledgement or statement that the said agreement was authorized to be entered on its behalf by Indowind or Indowind had ratified or approved the said agreement. Para 31 also refers to the applications under section 9 filed by Wescare and the interlocutory applications filed in such applications. But then that also does not help as in fact in the said application under section 9 the High Court has held that Indowind is not a party to the agreement dated 24.2.2006 and therefore not a party to an arbitration agreement. 24. Wescare relied upon two decisions of the US Court of Appeals to conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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