TMI Blog2014 (1) TMI 830X X X X Extracts X X X X X X X X Extracts X X X X ..... uld claim through or under signatory party. Once this link is established, then Court shall refer them to arbitration. Use of word ‘shall’ would have to be given its proper meaning and cannot be equated with word ‘may’, as liberally understood in its common parlance. Expression ‘shall’ in language of Section 45 is intended to require Court to necessarily make a reference to arbitration, if conditions of this provision are satisfied. Right to reference is a legal right which has its own contours and is not an absolute right, free of any obligations/limitations - Normally, arbitration takes place between persons who have, from outset, been parties to both arbitration agreement as well as substantive contract underlining that agreement. But, it does occasionally happen that claim is made against or by someone who is not originally named as a party. These may create some difficult situations, but certainly, they are not absolute obstructions to law/ arbitration agreement. Arbitration, thus, could be possible between a signatory to an arbitration agreement and a third party. A non-signatory or third party could be subjected to arbitration without their prior consent, but this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Agreement. Other terms and conditions of Principal Agreement referred to management of company by appointment or reappointment of Directors or Managing Directors inasmuch as Clause 8.6 contemplated execution of agreement which was appended as Appendix III. Still, certain other clauses of Principal Agreement specifically dealt with sale of goods manufactured by joint venture Company, nationally and internationally. This resulted in signing of International Distribution and Export Sales Agreement between parties. May be all parties to lis are not signatory to all agreements in question, but still they would be covered under expression ‘claiming through or under’ parties to agreement. Interests of these companies are not adverse to interest of principal company and/or Joint Venture Company. On contrary, they derive their basic interest and enforceability from Mother Agreement and performance of all other agreements by respective parties had to fall in line with contents of Principal Agreement - some agreements contain arbitration clause, while others don’t. Shareholders Agreement, Financial and Technical Knowhow License Agreement and Export Sales Agreement contain arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent upon effective execution of the principal agreement. The distinguished learned counsel appearing for the parties have raised critical questions of law relatable to the facts of the present case which in the opinion of the Court are as follows : (1) What is the ambit and scope of Section 45 of the Arbitration and Conciliation Act, 1996 (for short the 1996 Act )? (2) Whether the principles enunciated in the case of Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya [(2003) 5 SCC 531], is the correct exposition of law? (3) Whether in a case where multiple agreements are signed between different parties and where some contain an arbitration clause and others don t and further the parties are not identically common in proceedings before the Court (in a suit) and the arbitration agreement, a reference of disputes as a whole or in part can be made to the arbitral tribunal, more particularly, where the parties to an action are claiming under or through a party to the arbitration agreement? (4) Whether bifurcation or splitting of parties or causes of action would be permissible, in absence of any specific provision for the same, in the 1996 Act? 3. Chloro Controls (India) Priva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motion No.2382 of 2004 as not surviving. Against this order, an appeal was preferred, which came to be registered as Appeal No.24 of 2005 and vide a detailed judgment dated 28th July, 2011, a Division Bench of the High Court of Bombay set aside the order of the learned Single Judge and dismissed both the notices of motion taken out by the plaintiff in the suit. 4. Notice of Motion No.778 of 2004 was dismissed by another learned Single Judge of the High Court of Bombay, declining the reference of the suit to an arbitral tribunal vide order dated 8th April, 2004. This order was again assailed in appeal by the defendants in the suit and another Division Bench of the Bombay High Court, vide its judgment dated 4th March, 2010, allowed the Notice of Motion No.778 of 2004 and made reference to arbitration under Section 45 of the 1996 Act. 5. The judgments of the Division Benches, dated 4th March, 2010 and 28th July, 2011, respectively, have been assailed by the respective parties before this Court in the present Special Leave Petitions, being SLP(C) No.8950/2010 and SLP(C) No.26514-15/2011, respectively. Thus, both these appeals shall be disposed of by this common judgment. 6. Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and sale of gas chlorination equipment and Hypogen electro- chlorination equipment Series 3300, etc. This led to the execution of joint venture agreements between the appellant and Respondent No. 1. The joint venture agreements were signed between these companies for constituting a joint venture company under the name and style of Capital Control (India) Pvt. Ltd., with 1,50,000 equity shares of Rs. 10 each and 50 per cent shareholding with each party. These agreements being prior to the merger of Capital Control (Delaware) Co. Inc. with Capital Control Co. Inc. and also prior to the change of name of Capital Control Co. Inc. to Severn Trent Water Purification Inc., 50 per cent of the shares allotted to the foreign collaborators were to be equally divided between Capital Control (Delaware) Co. Inc. and Capital Control Co. Inc. These joint venture agreements were executed between the parties on 16th November, 1995, as already noticed. However, the joint venture company had been incorporated on 14th November, 1995 itself. 10. In the year 1998, Excel Technologies International Corporation came to be acquired by Severn Trent Services (Delaware) Inc. This company was dealing in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication Inc. (Respondent No.1) 2. Capital Controls (India) Private Ltd. (Respondent No.5) Yes 5. 16.11.1995 Export Sales Agreement 1. Capital Controls Company Inc., (Colmar) now Severn Trent Water Purification Inc. (Respondent No.1) 2. Capital Controls (India) Private Ltd. (Respondent No.5) Yes 6. 16.11.1995 Trademark Registered User License Agreement 1. Capital Controls Company Inc., (Colmar) now Severn Trent Water Purification Inc. (Respondent No.1) 2. Capital Controls (India) Private Ltd. (Respondent No.5) No 7. August 1997 Supplementary Collaboration Agreement 1. Capital Controls Company Inc., (Colmar) now Severn Trent Water Purification Inc. (Respondent No.1) 2. Capital Controls (India) Private Ltd. (Respondent No.5) Facts 12. Prior to the formation of the joint venture company, the Chloro Controls Group carried on the business of manufacture and sale of gas chlorination equipments and from 1980 onwards, it developed and commenced the manufacturing of electro-chlorination equipment also. The business was done in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Controls/Severn Trent Group). Till January 1999, the respondent Nos.1 and 2 developed and sold electro- chlorination equipment under the brand name Hypogen and from January 1999 onwards, the said brand was replaced by the brands Sanilec and Omnipure . Respondent Nos.1 and 2 carried on the business of manufacture, supply, sale and distribution of chlorination equipments, including gas and electro-chlorination equipments. Respondent No.3 is a company incorporated under the Companies Act and engaged in the business of manufacture and marketing of electro-chlorination equipment. In or about the year 1989-90, the said Respondent no.3 was floated as a joint venture in technical and financial collaboration with the De Nora group of Italy which held 51% of the equity share capital of the said respondent. Respondent No.4 is a Private Limited Company incorporated under the Companies Act and carried on business in electro-chlorination equipments. It had a tie-up with an American Company called Excel Technologies International Inc. which was engaged in the business of electrolytic disinfection equipment. 15. Respondent No.5, i.e., Capital Controls (India) Private Ltd. is a Company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anaging Director s Agreement, all dated 16th November, 1995. Lastly, the parties also entered into and executed a Supplementary Collaboration Agreement in August, 1997. We have already noticed that except respondent Nos.3 and 4 who were not signatory to any agreement, all other parties were not parties to all the agreements but had signed one or more agreement(s) keeping in mind the content and purpose of that agreement. 19. Now we shall proceed to discuss each of these agreements. Share Holders Agreement 20. The Shareholders Agreement dated 16th November, 1995 was entered into and executed between the Capital Control (Delaware) Co. Inc., respondent No. 2, on the one hand and Chloro Controls (India) Private Ltd., the appellant company run by the Kocha/ Capital Controls group and Mr. M.B. Kocha, respondent No. 9, on the other. As is apparent from the pleadings on record, these two groups had negotiated for starting a joint venture company in India and for this purpose they had entered into the Shareholders Agreement. The main object of this agreement was to float a joint venture company which would be responsible for manufacture, sale and services of the products as define ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contemplated grounds for termination of the Agreement, whereby the party not in default could terminate the Agreement by giving notice in writing to the other party. The period of notice in the event of a material breach was 90 days from the date of such notice. Clause 21.3 provided that in the event of the termination of the Agreement, the joint venture company would be wound up and all obligations undertaken by Chloro Controls under different agreements would cease with immediate effect. In such an eventuality, even the name of the joint venture company was required to be changed and the word Capital , either individually or in combination with other words, was to be removed. 21. Two other very material clauses of this Agreement, which require the attention of this Court, are clauses 4 and 30. In terms of clause 4.5, the Kocha Group and their company Chloro Controls were bound not to engage themselves, directly or indirectly, or even have financial interest in the manufacture, sale or distribution of chlorination equipment which were similar to those manufactured by the joint venture company during the term of the Agreement. In terms of clause 30, all or any disputes or di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Afghanistan, Nepal and Bhutan but the agreement also stated that exports to other countries were not permissible except with the specific authorization by respondent No.1. Besides providing the rights and duties of the Distributors, this Agreement also stated the schedule for delivery of products/orders, the prices payable, commissions and inspection. It also provided for the terms of payment. Distributor s orders of products were subject to acceptance by the seller at its offices and the seller reserved his right, at any time, to cease manufacture as well as offering for sale any product and to change the design of product. 24. This distributorship right was non-assignable and was exclusively between the distributor and the seller. The relationship between the parties was agreed to be that of a seller and purchaser. Clause 11 of the Agreement then clearly postulated that the distributor was an independent contractor and not joint venture or partner with an agent or employee of the seller. Clause 13 provided that the Agreement contained the entire understanding between the parties with respect to that subject matter and superseded all negotiations, discussions, promises or agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. M.B. Kocha, on terms already agreed to between the parties to the Shareholders Agreement. 29. The joint venture company, which is stated to have been incorporated on 14th November, 1995, held Board Meeting on 16th November, 1995 and as contemplated under Clause 8.6 of the Shareholders Agreement, appointed Mr. Kocha as the Managing Director of the Company for three years commencing from 1st April, 1996. This Managing Directors Agreement spelt out the powers which the Managing Director could exercise and more specifically, under Clause 3, the powers which the Managing Director could exercise only with the prior approval of the Board of Directors of the Joint Venture Company. For instance, under Clause 3 (k), the Managing Director was not entitled to undertake any new business or substantially expand the business contemplated thereunder except with the approval of the Board of Directors. Further, clause 6 contained a non-compete clause requiring Mr. Kocha not to run any similar business for two years after the date of termination of the Agreement. 30. This Agreement also did not contain any arbitration agreement and provided no terms which were not within the contemplation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense Agreement and Trademark Registered User Agreement 32. Now, we shall deal with both these agreements together as both these agreements are inter-dependent and one finds elaborate reference to one in the other. Furthermore, both these agreements have been entered into and executed between Capital Control Co. Inc. on the one hand and the joint venture company on the other. 33. Under clause 14 of the Shareholders Agreement, it was required of the parties to cause the joint venture company to enter into the Financial and Technical Know-How License Agreement with the Capital Controls under which the latter was to grant the joint venture company the right and license to manufacture the products in India in accordance with the Technical Know-How and other technical information possessed by Capital Controls. Clause 18 of the Principal Agreement also referred to this agreement and postulated that if the Government of India did not grant permission for the terms of foreign collaboration contained in this agreement, even the Principal Agreement, i.e. the Shareholder s Agreement would be liable to be terminated without giving rise to any claim for damages. Both these clauses provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 14.2 provided practically for the conditions of termination of this Agreement similar to those contemplated for the Share Holders Agreement. Neither any modification/amendment of this Agreement nor any waiver of its terms and conditions was to be binding upon the parties unless made in writing and duly executed by both the parties. Appendix I to this agreement recorded the products which the joint venture company was to manufacture. In the event of dispute, the parties were expected to settle it by friendly negotiations, failing which it was to be referred to the ICC, by three Arbitrators designated in conformity with the relevant Rules. Clause 26, the Arbitration clause, read as under:- Any dispute or difference arising under or in connection with this Agreement, or any breach thereof, which cannot be settled by friendly negotiation and agreement between the parties shall be finally settled by arbitration conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three arbitrators designated in conformity with those Rules. The Arbitration proceedings shall be held in London, England and shall be governed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted use of the trademarks did not involve the payment of any royalty or other consideration, other than the royalties payable under the Financial and Technical Know-How License Agreement by joint venture company to the licensor company. This agreement was terminable on the conditions stipulated in clause 16, which again were similar to the termination clause provided in other agreements. This Agreement did not contain an arbitration clause. Supplementary Collaboration Agreement 39. The last of the documents in this series which requires to be mentioned by the Court is the Supplementary Collaboration Agreement. Any joint venture agreement in India which is in collaboration with a foreign partner can be commenced only after obtaining the permission of the Government of India. The parties herein had already executed a joint venture agreement dated 16th November, 1995. The company obtained the permission of the Government of India vide its letter No. FC-II 830(96)245(96) dated 11th October, 1996 amended on 21st April, 1997. The company then commenced the operation and business of the joint venture company with effect from 1st April, 1997. 40. In the letter by the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., somewhere in August 1997, all other agreements had been executed, the joint venture company had come into existence and, in furtherance to those agreements, it had commenced its business. 43. As we have already noticed under the head Corporate Structure , the name of Respondent No. 1, Capital Control Co. Inc. was changed to Severn Trent Water Purification Inc. with effect from 1st April, 2002. Later on, respondent no.2, Capital Control (Delaware) Co. Inc. was merged with the respondent no.1 on 31st March, 2003. Thus, for all purposes and intents, in fact and in law, interest of respondent no.1 and 2 was controlled and given effect to by Severn Trent. 44. On this issue, version of the respondents had been disputed in the earlier round of litigation between the parties where respondent No. 1, Severn Trent Water Purification Co. Inc., USA, had filed a petition for winding up respondent No. 5-Chloro Controls India Pvt. Ltd., the joint venture company, on just and equitable ground under Section 433(j) of the Companies Act. In this petition, specific issue was raised that merger of Capital Controls (Delaware) Co. with Severn Trent was not intimated to the respondent No. 5 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 47. The appellant had filed a derivative suit being Suit No. 233 of 2004 praying, inter alia, for a decree of declaration that the joint venture agreements and the supplementary collaboration agreement are valid, subsisting and binding and that the scope of business of the joint venture company included the manufacture, sale, distribution and service of entire range of chlorination equipments including electro- chlorination equipment. An order of injunction was also obtained restraining respondent Nos. 1 and 2 from interfering in any way and/or preventing respondent No.5 from conducting its business of sale of chlorination equipments including electro-chlorination equipment and that they be not permitted to sell their products in India save and except through the joint venture company, in compliance of clause 2.5 of the Financial and Technical Know-How License Agreement read with the Supplementary Collaboration Agreement. Besides this, certain other reliefs have also been prayed for. 48. After the institution of the suit, as already noticed, the respondent Nos.1 and 2 had terminated the joint-venture agreements vide notices dated 23rd January, 2004 and 21st July, 2004. Resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against these respondents. Unless the Court, in exercise of its power under Order I, Rule 10(2) of the CPC, struck out the name of these parties as being improperly joined, the decision of the High Court would be vitiated in law as these parties admittedly were not parties to the arbitration agreement. 3. On its plain terms, Section 45 of the 1996 Act provides that a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration. The expression party refers to parties to the action or suit. The request for arbitration, thus, has to come from one of the parties to the suit or action or any person claiming through or under him. The Court then can refer those parties to arbitration. The expression parties used under Section 45 would necessarily mean all the parties and not some or any one of them. If the expression parties is not construed to mean all parties to the action and the agreement, it will result in multiplicity of proceedings, frustration of the intended one-sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged arbitration clause is unenforceable. Thus, in the present case, out of all the agreements signed between different parties, four agreements, i.e., Managing Director Agreement, International Distributor Agreement, Trademark Registered User Agreement and the Supplementary Collaboration Agreement, have no arbitration clause. Furthermore, different agreements have been signed by different parties and respondent No.9 is not a party to some of the agreements containing/not containing an arbitration clause. In any case, respondent Nos.3 and 4 are not party to any of the Agreements and the cause of action of the appellant against them is limited to the scope of International Distributor Agreement vis- -vis the products covered under the joint-venture agreement. On these contentions, it is submitted that the judgment of the High Court is liable to be set aside and no reference to arbitral tribunal is possible. Also, the submission is that, within the ambit and scope of Section 45 of the 1996 Act, multiple agreements, where some contain an arbitration clause and others don t, a composite reference to arbitration is not permissible. There has to be clear intention of the parties t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy over the other remedies. Sukanya being a judgment relatable to Part 1 (Section 8) of the 1996 Act, would not be applicable to the facts of the present case which exclusively is covered under Part II of the 1996 Act. vi) The 1996 Act does not contain any restriction or limitation on reference to arbitration as contained under Section 34 of the 1940 Act and therefore, the Court would be competent to pass any orders as it may deem fit and proper, in the circumstances of a given case particularly with the aid of Section 151 of the CPC. vii) A bare reading of the provisions of Section 3 of the 1961 Act on the one hand and Section 45 of the 1996 Act on the other clearly suggests that change has been brought in the structure and not in the substance of the provisions. Section 3 of the 1961 Act, of course, primarily relates to stay of proceedings but demonstrates that the plaintiff claiming through or under any other person who is a party to the arbitration agreement would be subject to the applications under the arbitration agreement. Thus, the absence of equivalent words in Section 45 of 1996 Act would not make much difference. Under Section 45, the applicant seeking reference can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt signed by the parties or entered in any of the specified modes. Subject to the exceptions stated therein, the reference shall be made. 55. The language of Section 45 read with Schedule I of the 1996 Act is worded in favour of making a reference to arbitration when a party or any person claiming through or under him approaches the Court and the Court is satisfied that the agreement is valid, enforceable and operative. Because of the legislative intent, the mandate and purpose of the provisions of Section 45 being in favour of arbitration, the relevant provisions would have to be construed liberally to achieve that object. The question that immediately follows is as to what are the aspects which the Court should consider while dealing with an application for reference to arbitration under this provision. 56. The 1996 Act makes it abundantly clear that Part I of the Act has been amended to bring these provisions completely in line with the UNCITRAL Model Law on International Commercial Arbitration (for short, the UNCITRAL Mode Law ), while Chapter I of Part II is meant to encourage international commercial arbitration by incorporating in India, the provisions of the New York C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this Chapter 1 of Part II. 60. Amongst the initial steps, the Court is required to enquire whether the dispute at issue is covered by the arbitration agreement. Stress has normally been placed upon three characteristics of arbitrations which are as follows (1) arbitration is consensual. It is based on the parties agreement; (2) arbitration leads to a final and binding resolution of the dispute; and (3) arbitration is regarded as substitute for the court litigation and results in the passing of an binding award. 61. Mr. Nariman, learned senior counsel appearing on behalf of the appellant, contended that in terms of Section 45 of the 1996 Act, parties to the agreement shall essentially be the parties to the suit. A stranger or a third party cannot ask for arbitration. They have to be essentially the same. Further, the parties should have a clear intention, at the time of the contract, to submit any disputes or differences as may arise, to arbitration and then alone the reference contemplated under Section 45 can be enforced. 62. To the contra, Mr. Salve, the learned senior counsel appearing for respondent No. 1, submitted that the phrase at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sionally happen that the claim is made against or by someone who is not originally named as a party. These may create some difficult situations, but certainly, they are not absolute obstructions to law/the arbitration agreement. Arbitration, thus, could be possible between a signatory to an arbitration agreement and a third party. Of course, heavy onus lies on that party to show that, in fact and in law, it is claiming through or under the signatory party as contemplated under Section 45 of the 1996 Act. Just to deal with such situations illustratively, reference can be made to the following examples in Law and Practice of Commercial Arbitration in England (Second Edn.) by Sir Michael J. Mustill: 1. The claimant was in reality always a party to the contract, although not named in it. 2. The claimant has succeeded by operation of law to the rights of the named party. 3. The claimant has become a part to the contract in substitution for the named party by virtue of a statutory or consensual novation. 4. The original party has assigned to the claimant either the underlying contract, together with the agreement to arbitrate which it incorporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one, where origin and end of all is with the Mother or the Principal Agreement, the fact that a party was non-signatory to one or other agreement may not be of much significance. The performance of any one of such agreements may be quite irrelevant without the performance and fulfillment of the Principal or the Mother Agreement. Besides designing the corporate management to successfully complete the joint ventures, where the parties execute different agreements but all with one primary object in mind, the Court would normally hold the parties to the bargain of arbitration and not encourage its avoidance. In cases involving execution of such multiple agreements, two essential features exist; firstly, all ancillary agreements are relatable to the mother agreement and secondly, performance of one is so intrinsically inter- linked with the other agreements that they are incapable of being beneficially performed without performance of the others or severed from the rest. The intention of the parties to refer all the disputes between all the parties to the arbitral tribunal is one of the determinative factor. 70. We may notice that this doctrine does not have universal acceptance. Som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to standard terms and conditions or other standard forms and documents which may contain an arbitration clause and, therefore, these terms would become part of the contract between the parties by reference. The solution to such issue should be case-specific. The relevant considerations to determine incorporation would be the status of parties, usages within the specific industry, etc. Cases where the main documents explicitly refer to arbitration clause included in standard terms and conditions would be more easily found in compliance with the formal requirements set out in the Article II of the New York Convention than those cases in which the main contract simply refers to the application of standard forms without any express reference to the arbitration clause. For instance, under the American Law, where standard terms and conditions referred to in a purchase order provided that the standard terms would have been attached to or form part of the purchase order, this was considered to be an incorporation of the arbitration agreement by reference. Even in other countries, the recommended criterion for incorporation is whether the parties were or should have been aware of the arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not lead to inconsistency or insensibility or absurdity then effect should be given to the intention of the parties and the arbitration clause as agreed should be made binding on parties to the Bill of Lading. If the parties to the Bill of Lading being aware of the arbitration clause in the Charter Party Agreement have specifically incorporated the same in the conditions of the Bill of Lading then the intention of the parties to abide by the arbitration clause is clear. Whether a particular dispute arising between the parties comes within the purview of the arbitration clause as incorporated in the Bill of Lading is a matter to be decided by the arbitrator or the court. But that does not mean that despite incorporation of the arbitration clause in the Bill of Lading by specific reference the parties had not intended that the disputes arising on the Bill of Lading should be resolved by an arbitrator. 74. Reference can also be made to the judgment of this Court in the case of Olympus Superstructure Pvt. Ltd. v. Meena Vijay Khetan Ors. [(1999) 5 SCC 651], where the parties had entered into a purchase agreement for the purchase of flats. The main agreement contained the arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there are disputes arising under the main agreement and the Interior Design Agreement is not in dispute) it is the general arbitration clause 39 in the main agreement that governs because the questions arise also in regard to disputes relating to the overlapping items in the schedule to the main agreement and the Interior Design Agreement, as detailed earlier. There cannot be conflicting awards in regard to items which overlap in the two agreements. Such a situation was never contemplated by the parties. The intention of the parties when they incorporated clause 39 in the main agreement and clause 5 in the Interior Design Agreement was that the former clause was to apply to situations when there were disputes arising under both agreements and the latter was to apply to a situation where there were no disputes or differences arising under the main contract but the disputes and differences were confined only to the Interior Design Agreement. A case containing two agreements with arbitration clauses arose before this Court in Agarwal Engg. Co. v. Technoimpex Hungarian Machine Industries Foreign Trade Co. There were arbitration clauses in two contracts, one for sale of two machines t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reference, without any further exercise of discretion {refer General Electric Co. v. Renusagar Power Co. [(1987) 4 SCC 137]}. These are the issues which go to the root of the matter and their determination at the threshold would prevent multiplicity of litigation and would even prevent futile exercise of proceedings before the arbitral tribunal. 77. The issue of whether the courts are empowered to review the existence and validity of the arbitration agreement prior to reference is more controversial. A majority of the countries admit to the positive effect of kompetenz kompetenz principle, which requires that the arbitral tribunal must exercise jurisdiction over the dispute under the arbitration agreement. Thus, challenge to the existence or validity of the arbitration agreement will not prevent the arbitral tribunal from proceeding with hearing and ruling upon its jurisdiction. If it retains jurisdiction, making of an award on the substance of the dispute would be permissible without waiting for the outcome of any court action aimed at deciding the issue of the jurisdiction. The negative effect of the kompetenz kompetenz principle is that arbitrators are entitled to be the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contract, like a joint venture or some other legal relationship of similar kind and the contract contains an arbitration clause, when a dispute arises, the members of the consortium or the joint venture may decide that they would each like to appoint an arbitrator. In distinction thereto, in cases involving several contracts with different parties, a different problem arises. They may have different issues in dispute. Each one of them will be operating under different contracts often with different choice of law and arbitration clauses and yet, any dispute between say the employer and the main contractor is likely to involve or affect one or more of the suppliers or sub-contractors, even under other contracts. What happens when the dispute between an employer and the main contractor is referred to arbitration, and the main contractor wishes to join the sub-contractor in the proceedings, on the basis that if there is any liability established, the main contractor is entitled to pass on such liability to the sub- contractor? This was the issue raised in the Adgas case {Abu Dhabi Gas Liquefaction Co. Ltd. v. Eastern Bechtel Corp. [1982] 2 Lloyd s Rep. 425, CA}. Adgas was the owner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable procedure and the status of the non-signatories. The consequences of all parties not being common to the action and arbitration proceedings are, as illustrated above, multiplicity of proceedings and frustration of the intended one stop action . The Rule of Mischief would support such interpretation. Even if some unnecessary parties are added to the action, the Court can always strike out such parties and even the cause of action in terms of the provisions of the CPC. However, where such parties cannot be struck off, there the proceedings must continue only before the Court. 84. Thus, the provisions of Section 45 cannot be effectively applied or even invoked. Unlike Section 24 of the 1940 Act, under the 1996 Act the Court has not been given the power to refer to arbitration some of the parties from amongst the parties to the suit. Section 24 of 1940 Act vested the Court with the discretion that where the Court thought fit, it could refer such matters and parties to arbitration provided the same could be separated from the rest of the subject matter of the suit. Absence of such provision in the 1996 Act clearly suggests that the Legislature intended not to permit bifurcate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvanced by Mr. Nariman is accepted, then mischief will be encouraged which would frustrate the arbitration agreement because a party not desirous of going to arbitration would initiate civil proceedings and add non-signatory as well as unnecessary parties to the suit with a view to avoid arbitration. This would completely frustrate the legislative object underlining the 1996 Act. Non-signatory parties can even be deemed to be parties to the arbitration agreement and may successfully pray for referral to arbitration. 88. As noticed above, the legislative intent and essence of the 1996 Act was to bring domestic as well as international commercial arbitration in consonance with the UNCITRAL Model Rules, the New York Convention and the Geneva Convention. The New York Convention was physically before the Legislature and available for its consideration when it enacted the 1996 Act. Article II of the Convention provides that each contracting State shall recognise an agreement and submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not concerning a subject matter capable of settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claiming through or under him appearing in Section 45 of the 1996 Act. Article II(1) and (3) have to be read in conjunction with Section 45 of the Act. Both these expressions have to be read in harmony with each other. Once they are so read, it will be evident that the expression legal relationship connotes the relationship of the party with the person claiming through or under him. A person may not be signatory to an arbitration agreement, but his cause of action may be directly relatable to that contract and thus, he may be claiming through or under one of those parties. It is also stated in the Law and Practice of International Commercial Arbitration, Alan Redfern and Martin Hunter (supra), that for the purposes of both the New York Convention and the UNCITRAL Model Law, it is sufficient that there should be a defined legal relationship between the parties, whether contractual or not. Plainly there has to be some contractual relationship between the parties, since there must be some arbitration agreement to form the basis of the arbitral proceedings. Given the existence of such an agreement, the dispute submitted to arbitration may be governed by the principles of delictual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles should be adopted or not. If in the facts of a given case, it is not possible to construe that the person approaching the forum is a party to the arbitration agreement or a person claiming through or under such party, then the case would not fall within the ambit and scope of the provisions of the section and it may not be possible for the Court to permit reference to arbitration at the behest of or against such party. 96. We have already referred to the judgments of various courts, that state that arbitration could be possible between a signatory to an agreement and a third party. Of course, heavy onus lies on that party to show that in fact and in law, it is claiming under or through a signatory party, as contemplated under Section 45 of the 1996 Act. 97. Michael J. Mustill and Stewart C. Boyd in The Law and Practice of Commercial Arbitration in England have observed that the applicant must show that the person whose claim he seeks to stay is either a party to the arbitration agreement or a person claiming through or under such a party. It is further noticed that it occasionally happens that the plaintiff is not himself a party to the arbitration agreement on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation agreement are to be referred to arbitration and court proceedings may continue with respect to the other parties, even if this creates a risk of conflicting decisions. 102. We have already discussed that under the Group of Companies Doctrine, an arbitration agreement entered into by a company within a group of companies can bind its non-signatory affiliates, if the circumstances demonstrate that the mutual intention of the parties was to bind both the signatory as well as the non-signatory parties. 103. The question of formal validity of the arbitration agreement is independent of the nature of parties to the agreement, which is a matter that belongs to the merits and is not subject to substantive assessment. Once it is determined that a valid arbitration agreement exists, it is a different step to establish which parties are bound by it. Third parties, who are not explicitly mentioned in an arbitration agreement made in writing, may enter into its ratione personae scope. Furthermore, the Convention does not prevent consent to arbitrate from being provided by a person on behalf of another, a notion which is at the root of the theory of implied consent. 104. If one analy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms through or under one of the main party to the agreement. In such situations, the parties would aim at achieving the object of making their bargain successful, by execution of various agreements, like in the present case. 106. The New York Convention clearly postulates that there should be a defined legal relationship between the parties, whether contractual or not, in relation to the differences that may have arisen concerning the subject matter capable of settlement of arbitration. We have referred to a number of judgments of the various courts to emphasize that in given circumstances, if the ingredients above-noted exist, reference to arbitration of a signatory and even a third party is possible. Though heavy onus lies on the person seeking such reference, multiple and multi-party agreements between the parties to the arbitration agreement or persons claiming through or under such parties is neither impracticable nor impermissible. 107. Next, we are to examine the issue whether the cause of action in a suit can be bifurcated and a partial reference may be made by the Court. Whatever be the answer to this question, a necessary corollary is as to whether the Court should or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a question whether the plaintiff was a party to the contract containing the arbitration clause or not. Still in the case of Sumitomo Corporation (supra), this Court primarily declined the reference to arbitration for the reason that the disputes stated in the petition did not fall within the ambit of the arbitration clause contained in the agreement between the parties and also that the Joint Venture Agreement did not itself contain a specific arbitration clause. An observation was also made in paragraph 20 of the judgment that the party would mean the party to the judicial proceeding should be a party to the arbitration agreement. 111. It will be appropriate to refer to the contentions of Mr. Salve, the learned senior counsel. According to him, reference, even of the non-signatory party, could be made to arbitration and upon such reference the proceedings in an action before the Court should be stayed. The principle of bifurcation of cause of action, as contemplated under the CPC, cannot stricto sensu apply to Section 45 of the 1996 Act in view of the non-obstante language of the Section. He also contended that parties or issues, even if outside the scope of the arbitration a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owly and must be given expanded meaning to achieve the twin objects of arbitration, i.e., firstly, the parties should be held to their bargain of arbitration and secondly, the legislative intent behind incorporating the New York Convention as part of Section 44 of the Act must be protected. Moreover, paragraph 20 of the judgment of Sumitomo Corporation (supra) does not state any principle of law and in any event it records no reasons for arriving at such a conclusion. In fact, that was not even directly the issue before the Court so as to operate as a binding precedent. For these reasons, respectfully but without hesitation, we are constrained to hold that the conclusion or the statement made in paragraph 20 of this judgment does not enunciate the correct law. Scope of jurisdiction while referring the parties to arbitration 114. An application for appointment of arbitral tribunal under Section 45 of the 1996 Act would also be governed by the provisions of Section 11(6) of the Act. This question is no more res integra and has been settled by decision of a Constitution Bench of seven Judges of this Court in the case of SBP and Co. v. Patel Engineering Ltd. and Anr. [(2005) 8 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aragraph, this Court held that the scope of order under Section 11 of the 1996 Act would take in its ambit the issue regarding territorial jurisdiction and the existence of the arbitration agreement. The Court noticed that if these issues are not decided by the Chief Justice or his designate, there would be no question of proceeding with the arbitration. It held as under: 27 Thus, the Chief Justice has to decide about the territorial jurisdiction and also whether there exists an arbitration agreement between the parties and whether such party has approached the court for appointment of the arbitrator. The Chief Justice has to examine as to whether the claim is a dead one or in the sense whether the parties have already concluded the transaction and have recorded satisfaction of their mutual rights and obligations or whether the parties concerned have recorded their satisfaction regarding the financial claims. In examining this if the parties have recorded their satisfaction regarding the financial claims, there will be no question of any issue remaining. It is in this sense that the Chief Justice has to examine as to whether there remains anything to be decided betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide. 22.1. The issues (first category) which the Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. 22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long-barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 22.3. The issues (third category) which the Chief Justice/his designate should le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act are incapable of being reopened before the arbitral tribunal . Certainly the Bench dealing with the case of Shree Ram Mills (supra) did not intend to lay down any law in direct conflict with the Seven Judge Bench judgment in SBP Co. (supra). In the reasoning given in Shree Ram Mills case, the Court has clearly stated that matters of existence and binding nature of arbitration agreement and other matters mentioned therein are to be decided by the Chief Justice or his designate and the same is in line with the judgment of this Court in the case of SBP Co. (supra). It will neither be permissible nor in consonance with the doctrine of precedent that passing observations by the Bench should be construed as the law while completely ignoring the ratio decidendi of that very judgment. We may also notice that the judgment in Shree Ram Mills (supra) was not brought to the notice of the Bench which pronounced the judgment in the case of National Insurance Co. Ltd. (supra). 120. As far as the classification carved out by the Court in the case of National Insurance Co. Ltd. (supra) are concerned, it draws its origin from paragraph 39 of the judgment in the case of SBP Co. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Shin-Etsu Chemical Co. Ltd. v. M/s. Aksh Optifibre Ltd. Anr. [(2005) 7 SCC 234] was dealing with an application for reference under Section 45 of the 1996 Act and consequently, determination of validity of arbitration agreement which contained the arbitration clause governed by the ICC Rules in Tokyo, Japan. The appellant before this Court had terminated the agreement in that case. The respondent filed a suit claiming a decree of declaration and injunction against the appellant for cancellation of the agreement which contained the arbitration clause. In that very suit, the appellant also prayed that this long term sale and purchase agreement, which included the arbitration clause be declared void ab initio, inoperative and incapable of being performed on the ground that the said agreement contained unconscionable, unfair and unreasonable terms; was against public policy and was entered into under undue influence. The appellant had also filed an application under Section 8 of the 1996 Act for reference to arbitration. Some controversy arose before the Trial Court as well as before the High Court as to whether the application was one under Section 8 or Section 45 but when the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that under Section 45 of the Act, the determination has to be on merits, final and binding and not prima facie. 125. However, Srikrishna, J. took a somewhat different view and noticing the truth that there is nothing in Section 45 to suggest that a finding as to the nature of the arbitration agreement has to be ex facie or prima facie, observed that if it were to be held that the finding of the court under Section 45 should be a final, determinative conclusion, then it is obvious that until such a pronouncement is made, the arbitral proceedings would have to be in limbo. So, he held as follows : 105. I fully agree with my learned Brother's view that the object of dispute resolution through arbitration, including international commercial arbitration, is expedition and that the object of the Act would be defeated if proceedings remain pending in the court even after commencing of the arbitration. It is precisely for this reason that I am inclined to the view that at the pre-reference stage contemplated by Section 45, the court is required to take only a prima facie view for making the reference, leaving the parties to a full trial either before the Arbitral T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment which reads as under : 12. Section 16 of the Act only makes explicit what is even otherwise implicit, namely, that the Arbitral Tribunal constituted under the Act has the jurisdiction to rule on its own jurisdiction, including ruling on objections with respect to the existence or validity of the arbitration agreement. Sub-section (1) also directs that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. It also clarifies that a decision by the Arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. Sub-section (2) of Section 16 enjoins that a party wanting to raise a plea that the Arbitral Tribunal does not have jurisdiction, has to raise that objection not later than the submission of the statement of defence, and that the party shall not be precluded from raising the plea of jurisdiction merely because he has appointed or participated in the appointment of an arbitrator. Sub- section (3) lays down that a plea that the Arbitral Tribunal is exceeding the scope of its authority, shall be raised as soon as the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration agreement would be binding on the parties when the matter goes to the Arbitral Tribunal and at subsequent stages of the proceeding except in an appeal in the Supreme Court in the case of the decision being by the Chief Justice of the High Court or by a Judge of the High Court designated by him. (Emphasis supplied) 128. We are conscious of the fact that the above dictum of the Court is in relation to the scope and application of Section 11 of the 1996 Act. It has been held in various judgments of this Court but more particularly in the case of SBP (supra) which is binding on us that before making a reference, the Court has to dispose of the objections as contemplated under Section 8 or Section 45, as the case may be, and wherever needed upon filing of affidavits. Thus, to an extent, the law laid down by this Court on Section 11 shall be attracted to an international arbitration which takes place in India as well as domestic arbitration. This, of course, would be applicable at pre- award stage. Thus, there exists a direct legal link, limited to that extent. 129. We are not oblivious of the principle Kompetenz kompetenz . It requires the arbitral tribunal to rule on its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 45 of the 1996 Act. Since, the categorization referred to by this Court in the case of National Insurance Company Ltd. (supra) is founded on the decision by the larger Bench of the Court in the case of SBP Co. (supra), we see no reason to express any different view. The categorization falling under para 22.1 of the National Insurance Company case (supra) would certainly be answered by the Court before it makes a reference while under para 22.2 of that case, the Court may exercise its discretion and decide the dispute itself or refer the dispute to the arbitral tribunal. Still, under the cases falling under para 22.3, the Court is expected to leave the determination of such dispute upon the arbitral tribunal itself. But wherever the Court decides in terms of categories mentioned in paras 22.1 and 22.2, the decision of the Court is unreviewable by the arbitral tribunal. 131. Another very significant aspect of adjudicating the matters initiated with reference to Section 45 of the 1996 Act, at the threshold of judicial proceedings, is that the finality of the decision in regard to the fundamental issues stated under Section 45 would further the cause of justice and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us on the correctness of the judgment of this Court in Sukanya Holdings Pvt. Ltd. (supra), Mr. Salve vehemently tried to persuade us to hold that this judgment does not state the correct exposition of law and to that effect it needs to be clarified by this Court in the present case. On the contrary, Mr. Nariman argued that this judgment states the correct law and, in fact, the principles stated should be applied to the present case. 133. The ambit and scope of Section 45 of the 1996 Act, we shall be discussing shortly but at this stage itself, we would make it clear that it is not necessary for us to examine the correctness or otherwise of the judgment in the case of Sukanya (supra). This we say for varied reasons. Firstly, Sukanya was a judgment of this Court in a case arising under Section 8 Part I of the 1996 Act while the present case relates to Section 45 Part II of the Act. As such that case may have no application to the present case. Secondly, in that case the Court was concerned with the disputes of a partnership concern. A suit had been filed for dissolution of partnership firm and accounts also challenging the conveyance deed executed by the partnership firm in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Water Purification Inc. on the other, and the disputes were mainly with regard to Capital Control (India) Pvt. Ltd. Inc. Now, we must note, even at the cost of repetition, the parties signatory to each of these agreements and we must also note which of these agreements did not contain arbitration clause. Shareholders Agreement dated 16th November, 1995 was executed between the Capital Control (Delaware) Company Inc. and Chloro Control India Private Ltd. Capital Control Delaware Company Inc. was a subsidiary of Severn Trent Services (Delaware) Inc. and was formed on 21st September, 1994. Capital Control Company Inc. came to be merged with Capital Control (Delaware) Company Inc. in March 1994. As a result the Capital Control Delaware Company was no more in existence. Thus, the reference to Capital Control Company Inc. includes reference to Capital Control Company Inc. as well as Capital Control (Delaware) Company Inc. 136. The corporate structure of the Companies involved in the present litigation clearly shows that name of Capital Control Company Inc., incorporated in the year 1994, was changed to Severn Trent Water Purification Inc. with effect from April, 2002. Thus, both these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or be financially interested in the manufacture, sale or distribution of chlorination equipment and related products, which is similar to those manufactured or sold by the company during the term of the agreement. Similarly, a restriction was also placed upon Capital Controls and even its holding companies to not directly or indirectly engage in or to be financially interested in the manufacture, sale or distribution in India of products manufactured or sold by the company, during the term of the agreement. 137. The Principal Agreement specifically referred to various agreements or even terms and conditions thereof. Clause 7 of the agreement provided for execution of the International Distributor Agreement which was Appendix II to this Agreement. The Financial and Technical Know-how Licence Agreement was executed in furtherance to clause 14 thereof. Similarly, the Trademark Registered User License Agreement was required to be executed between the parties in terms of clause 15 of this Agreement. Other terms and conditions of the Principal Agreement referred to management of the company by appointment or reappointment of Directors or Managing Directors inasmuch as Clause 8.6 contem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear that all these agreements were being executed as integral parts of a composite transaction. It can safely be covered under the principle of agreements within an agreement . For instance, the Financial and Technical Know-How License Agreement not only finds a specific mention in the Principal Agreement but its contents also are referable to the clauses of the Principal Agreement. The Financial and Technical Know- How License Agreement was Appendix III to the Principal Agreement and the details of the goods which were contemplated to be manufactured, distributed and sold under the Principal Agreement had been specified in Appendix I of the Financial and Technical Know-How Agreement. If the latter agreement was not there, the Principal Agreement between the parties would have remained incomplete and the parties would have been at a disadvantage to know as to what goods were to be manufactured and what goods could not have been manufactured. The Principal Agreement referred either specifically or by necessary implication to all other agreements. They were inter-dependent for their performance and one could not be read and understood completely without the aid of the other. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. This agreement came to be signed between the joint venture company and the Kocha Group. 141. Other aspect of performance of the Principal Agreement was the Financial and Technical Know-How License Agreement. This agreement had been signed between the Capital Control Company Inc., subsequently known as Severn Trent Water Purification, respondent No. 1, one the one hand and the joint venture company, respondent No. 5. Severn Trent Water Purification Inc. is the holding company of the joint venture to the extent of its share holding and is the company into which Capital Control (Del.) Co. Inc. had merged. Severn Trent Water Purification Inc. is thus, the resultant product of Capital Control (Del.) Company Inc. being merged into Capital Control Company Inc. and its name was changed with effect from 1st April, 2002. All these three companies had at the relevant time been or when came into existence were and are subsidiaries of Severn Trent (Del.) Inc. The requisite technical know-how was possessed by these companies and was agreed to be imparted in favour of the joint venture company, in furtherance to and as per the terms and conditions contained in the Principal Agreement. 142. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the Rules of ICC. This clause is widely worded. It is comprehensive enough to include the disputes arising under and in connection with the agreement. The word connection has been added by the parties to expand the scope of the disputes under the agreements. The intention to make it more comprehensive is writ large from the language of the agreement and particularly clause 30 of the Mother Agreement. It is useful to notice that the agreement has to be construed and interpreted in accordance with laws of the Union of India, as consented by the parties. 145. The expression connection means a link or relationship between people or things or the people with whom one has contact (Concise Oxford Dictionary (Indian Edition). Connection means act of uniting; state of being united; a relative; relation between things one of which is bound up with (Law Lexicon 2nd Edn. 1997). 146. Thus, even the dictionary meaning of this expression is liberally worded. It implies expansion in its operation and effect both. Connection can be direct or remote but it should not be fanciful or marginal. In other words, there should be relevant connection between the dispute and the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the Supplementary Collaboration Agreement, the parties re- confirmed the existence of the joint venture agreement dated 16th November, 1995 and made a specific stipulation that both the parties confirmed to adhere by the terms and conditions stipulated by the Government of India in its letters dated 11th October, 1996, amended on 21st April, 1997. This was signed by Madhusudan B. Kocha, member of the Kocha group on behalf of the joint venture company and Capital Controls (Delaware) Inc. The necessity for executing this agreement was in face of the condition of Government approval as well as the subsequent amendment of clause 2, 3 and 4 of the approval letter dated 11th October, 1996 i.e. items of manufacture, proposed location and foreign equity. 149. The conduct of the parties and even the subsequent events leave no doubt in the mind of the Court that the parties had executed, intended and actually implemented the composite transaction contained in the Principal Agreement. The Courts have also applied the Group of Companies Doctrine in such cases. As already noticed, this Court in the case of Olympus Superstructure Pvt. Ltd. (supra) permitted reference to arbitration where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rican Arbitration Association. It also provides that the judgment upon the Award rendered could be entered in any court of competent jurisdiction. Still, clause 21 of the International Distributor Agreement required the construction, interpretation and performance of the agreement to be governed by and interpreted under the laws of the State of Pennsylvania, USA. Any litigation thereunder was to be brought in any federal or State Court located in the Eastern District of the Commonwealth of Pennsylvania, which was to be binding upon the parties. 153. As already noticed, two of the agreements did not contain any arbitration clause, but they also did not subject the parties even for litigative jurisdiction. They are the Managing Directors Agreement and the Trademark Registered User Agreement. These two agreements had been executed in furtherance to and for compliance of the terms and conditions of the mother agreement which contained the arbitration clause. They were, thus, intrinsically inter-connected with the mother agreement. 154. All these agreements were signed on the same day and in furtherance to the mother agreement. None of the parties have invoked the jurisdiction of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted principle that jurisdiction of the court can be excluded. In the case of Dhulabhai v. State of M.P. and Anr. [AIR 1969 SC 78], this Court has settled the principle that jurisdiction of the Civil Court is all embracing, except to the extent it is excluded by law or by clear intendment arising from such law. In Nahar Industrial Enterprises Ltd. v. Hong Kong Shanghai Banking Corporation [(2009) 8 SCC 646], this Court has even stated the conditions for exclusion of jurisdiction. They are, (a) whether the legislative intent to exclude is expressed explicitly or by necessary implication, and (b) whether the statute in question provides for an adequate and satisfactory alternative remedy to a party aggrieved by an order made under it. 157. The provisions of Section 45 of the 1996 Act are to prevail over the provisions of the CPC and when the Court is satisfied that an agreement is enforceable, operative and is not null and void, it is obligatory upon the court to make a reference to arbitration and pass appropriate orders in relation to the legal proceedings before the court, in exercise of its inherent powers. 158. In the present case, the court can safely gather definite inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant before us. In that case, there were four parties, the seller of the land, the builder, purchaser of the flat and the bank. The bank had signed an agreement with the purchaser of the flat to finance the flat, but it referred to other agreement stating that it would provide funds directly to the builder. There was an agreement between the builder and the owner of the land and the purchaser of the land to sell the undivided share and that contained an arbitration clause. The question before the Court was whether while referring the disputes to the arbitration, the disputes between the bank on the one hand, and the purchaser of the flat on the other could be referred to arbitration. The Court, in reference to Section 8 of the 1996 Act, held that the bank was a non-party to the arbitration agreement, therefore, neither the reference was permissible nor they could be impleaded at a subsequent stage. This judgment on facts has no application. The distinction between Section 8 and Section 45 has elaborately been dealt with by us above and in view of that, we have no hesitation in holding that this judgment, on facts and law, is not applicable to the present case. 162. Thus, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proceedings before the Court. In the cases of group companies or where various agreements constitute a composite transaction like mother agreement and all other agreements being ancillary to and for effective and complete implementation of the Mother Agreement, the court may have to make reference to arbitration even of the disputes existing between signatory or even non-signatory parties. However, the discretion of the Court has to be exercised in exceptional, limiting, befitting and cases of necessity and very cautiously. 169. Having answered these questions, we do not see any reason to interfere with the judgment of the Division Bench of the Bombay High Court under appeal. We direct all the disputes arise in the suit and from the agreement between the parties to be referred to arbitral tribunal and be decided in accordance with the Rules of ICC. 170. The appeals are dismissed. However, in the facts and circumstances of the present case, we do not award costs. ORDER Upon pronouncement of the judgment Mr. F.S. Nariman, learned senior counsel appearing for the petitioner, mentioned that the petitioner had filed an application for injunction in the suit before the High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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