Montblanc Simplo GMBH v. Entrack International Trading Pvt. Ltd.
2015-01-23
HARSHA DEVANI
body2015
DigiLaw.ai
JUDGMENT : Harsha Devani, J. This appeal under section 50 of the Arbitration and Conciliation Act, 1996 is directed against the order dated 19th November, 2014 passed by the learned 13th Additional Senior Civil Judge, Rajkot below Exhibit-16 in Special Civil Suit No.188/2014 whereby the application filed by the appellants under section 45 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") has been rejected. 2. The present appeal arises in the backdrop of the following facts.
2. The present appeal arises in the backdrop of the following facts. The respondents No.1 to 6 herein instituted a suit in the court of the learned 13th Additional Senior Civil Judge at Rajkot being Special Civil Suit No.188/2014 seeking the following reliefs:- (A) That this Hon'ble Court be pleased to Order and Decree the Defendants, jointly and/or severally, to pay to Plaintiff No.1 an amount of Rs.217,96,00,000/- along with interest thereon at the rate of 18% per annum from the date hereof till payment and/or realization; (B) That this Hon'ble Court be pleased to Order and Direct the Defendants, jointly and severally, to return to the Plaintiffs the Confidential Information supplied by the Plaintiffs to the Defendants as per the Confidentiality Agreement annexed at Mark 4/12 to the Plaint and Confidentiality Clause contained in the Term Sheet dated 1st February 2011 including but not limited to business strategies, operational and purchasing policies, corporate, financial, accounting data and activities, details of wholesalers, retailers, customers and suppliers of the Plaintiffs; (C) That this Hon'ble Court be pleased to issue a Permanent Order and injunction restraining the Defendants, their Officers, servants, agents or any person claiming through or under them from in any manner using or utilising the Confidential Information supplied by the Plaintiffs to the Defendants as per the Confidentiality Agreement annexed at Mark 4/12 to the Plaint and Confidentiality Agreement contained in the Term Sheet dated 1st February 2011 including but not limited to business strategies, operational and purchasing policies, corporate, financial, accounting data and activities, details of wholesalers, retailers, customers and suppliers of the Plaintiffs; (D) That this Hon'ble Court be pleased to issue a Permanent Order and Injunction restraining the Defendants, their servants, agents or any person claiming through or under them from in any manner communicating with or contacting or dealing with or enticing any of the Wholesalers or Retailers or Shop in Shop of the Plaintiffs a list whereof is being separately handed over to the Hon'ble Court; (E) That this Hon'ble Court be pleased to issue a Permanent Order and Injunction restraining the Defendants, their servants, agents or any person claiming through or under them from in any manner communicating with or contacting or dealing with or enticing or offering employment to the Employees of the Plaintiffs a list whereof is being separately handed over to the Hon'ble Court; (F) That this Hon'ble Court be pleased to issue a Permanent Order and Injunction restraining the Defendants, their servants, agents or any person claiming through or under them from in any manner obstructing or interfering with the business being carried out by the Plaintiffs of Distribution, Wholesale and Retail of Montblanc products either directly or through the Boutiques or Wholesalers or Retailers or Shop-in Shops established by the Plaintiffs in any manner whatsoever; (G) That this Hon'ble Court be pleased to Order and Decree Defendants No.1 to 5, 7 and 8 to specifically perform the Term Sheet dated 1st February 2011, inter alia, by drawing up the Definitive Documents in terms of the Term Sheet dated 1st February 2011 and pay to Plaintiffs No.2 to 6 or such of them as may be directed by this Hon'ble Court an amount of Euro 7,500,000/- and to Plaintiff No.1 an amount of Euro 2,500,000/- and by directing Defendant No.9 to join in such specific performance; (H) That this Hon'ble Court be pleased to order and Direct parties to do such acts, deeds and things as are necessary for implementing the Agreement comprised in the Term Sheet dated 1st February 2011 as may be deemed fit and proper by this Hon'ble Court within such time and in such manner as may be directed by this Hon'ble Court; (I) That this Hon'ble Court be pleased to declare that the alleged Termination Letters dated 15th March 2014 being Mark 4/36/1 and 3/36/2 hereto are illegal, null and void and not binding upon the Plaintiffs; (J) That this Hon'ble Court be pleased to Order and Direct Defendants No.1 to 5, 7 and 8 to supply to the Plaintiffs the Montblanc products heretofore being supplied by them on the prices and on the terms and conditions as may be decided by this Hon'ble Court; (K) That this Hon'ble Court be pleased award cost and special exemplary cost to the Plaintiff's; (L) That this Hon'ble Court be pleased to pass a decree in favour of the Plaintiff's accordingly; (M) For such further and other reliefs as this Hon'ble Court may deem fit and proper in the circumstances of the case may require.
3. In the proceedings of the said suit, the appellants herein made an application (Exhibit-16) under section 45 of the Act seeking the following reliefs:- 31. In the circumstances, the said Defendants most humbly pray as under: (a) The disputes forming the subject matter of the present suit be referred to arbitration under the Distribution Agreements, the Franchise Agreements and the Term Sheet before granting any sort of interim or otherwise any relief/reliefs in favour of the plaintiffs since as per the arbitration law and arbitration clauses stated above, this Hon'ble Court has no jurisdiction to entertain the present matter; (b) The present suit be permanently stayed and/or dismissed and/or the plaint filed in the instant suit be rejected; (c) Stay all proceedings of the present suit till disposal of the present application under section 45 of Arbitration and Conciliation Act and before granting any sort of interim or otherwise any relief/reliefs in favour of the Plaintiffs; (d) Ad interim orders in terms of prayers above; (e) Costs of and/or incidental to this application be paid by the Plaintiff to the said Defendants. (f) Such further or other order or orders be passed and/or direction or directions be given as to this Hon'ble Court may seem fit and proper. By the impugned order, the application has been rejected which has given rise to the present appeal. 4. The respondents No.1 to 6 herein are the original plaintiffs No.1 to 6. The appellants herein are the original defendants No.1, 2 and 4. The respondents No.7 to 11 are the original defendants No.3 and 5 to 8. It is the case of the appellants in the application under section 45 of the Act that they and the respondents No.7 to 11 are part of the Richemont Group of Companies which are inter alia involved in the business of designing, manufacturing, distributing, marketing, selling (directly or indirectly) writing instruments, writing accessories, leather goods, watches and other luxury products under the trademark 'Montblanc' alongwith other well-known trademarks owned by the Richemont Group worldwide. That the defendant No.1 and the plaintiff No.1 had entered into a Distribution Agreement dated 1st April, 2007 and Franchise Agreements in relation to certain Montblanc boutiques, each of which contain an existing, valid and binding arbitration agreement.
That the defendant No.1 and the plaintiff No.1 had entered into a Distribution Agreement dated 1st April, 2007 and Franchise Agreements in relation to certain Montblanc boutiques, each of which contain an existing, valid and binding arbitration agreement. The defendant No.2 and plaintiff No.1 had entered into a Distribution Agreement dated 1st April, 2007 which contains an existing, valid and binding arbitration agreement. The defendant No.4 and plaintiff No.1 had entered into a Term Sheet dated 1st February, 2011 which also contains an existing, valid and binding arbitration agreement. Pursuant to the first Distribution Agreement and the second Distribution Agreement, the defendants No.1 and 2 had granted the first plaintiff the right to distribute as a wholesaler, certain 'Montblanc' branded products in India. It was the case of the appellants that the defendant No.1 had extensive rights under the Distribution Agreement as the principal, including the right to obtain the information on all the marketing activities conducted by the first plaintiff, list of local retailers, details of advertising expenditure etc. and that it was always the intention of the parties to the Distribution Agreements that if disputes under the Distribution Agreements arose between the parties thereto, such disputes should be settled by arbitration in terms of Article 10.7 of each of the Distribution Agreements which expressly provides as follows:- "10.7 Governing Law and Arbitration This Agreement shall be governed and interpreted in accordance with the Laws of Switzerland, to the exclusion of the United Nations Convention on Contracts for the International Sale of Goods (CISG). Any dispute, controversy or claim arising out of or in relation to this Agreement, including the validity, invalidity, breach or termination thereof, shall be resolved by arbitration in accordance with Swiss Rules of International Arbitration of the Swiss Chambers of Commerce ("the Rules") in force on the date when the notice of arbitration is submitted in accordance with these Rules. The arbitration will take place in Geneva, Switzerland and the language of the procedure shall be English. The arbitral tribunal will be composed of one (1) arbitrator who will be designated in accordance with the Rules. The expenses and fees of arbitration shall be determined in accordance with the Rules.
The arbitration will take place in Geneva, Switzerland and the language of the procedure shall be English. The arbitral tribunal will be composed of one (1) arbitrator who will be designated in accordance with the Rules. The expenses and fees of arbitration shall be determined in accordance with the Rules. The arbitration award shall be final and binding upon the parties, the parties renouncing to appeal against the arbitration award by any ordinary or extraordinary means, whatever the subject of the arbitration award is the arbitration award may be enforced by action before any court of competent jurisdiction. In accordance with section 26 of the Rules, each party is hereby expressly authorised and entitled to initiate any judicial action seeking any kind of interim relief before any competent jurisdiction. The initiation or pursuit of any action to seek such interim relief shall not be deemed to waive or preclude the right of such party to require arbitration as contemplated by the section above nor to seek such interim relief before the arbitral tribunal." 5. It was further the case of the appellants that the defendant No.1 and plaintiff No.1 are parties to separate Franchise Agreements entered into from time to time in relation to fourteen 'Montblanc' boutiques across India (hereinafter referred to as "the Franchise Agreements"). Pursuant to the Franchise Agreements, the defendant No.1 had granted the plaintiff No.1 the right to operate a 'Montblanc' boutique at specified locations and that the defendant No.1 had extensive rights under the Franchise Agreements as the Franchisor including the right to obtain information on all the marketing activities conducted by the plaintiff No.1, details of advertising expenditure, etc. That, it was always the intention of the parties to the Franchise Agreements that if any dispute under any franchise agreement arose between the parties thereto, such dispute would be settled by arbitration in terms of clause 20(a) of each of the Franchise Agreements, which expressly provides as follows:- "20. Miscellaneous Provisions (a) Governing Law and Arbitration This Agreement shall be governed and interpreted in accordance with the Laws of Switzerland, to the exclusion of the United Nations Convention on Contracts for the International Sale of Goods (CISG).
Miscellaneous Provisions (a) Governing Law and Arbitration This Agreement shall be governed and interpreted in accordance with the Laws of Switzerland, to the exclusion of the United Nations Convention on Contracts for the International Sale of Goods (CISG). Any dispute, controversy or claim arising out of or in relation to this Agreement, including the validity, invalidity, breach or termination thereof, shall be resolved by arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss chambers of Commerce ("the Rules") in force on the date when the notice of arbitration is submitted in accordance with these Rules. The arbitration will take place in Geneva, Switzerland and the language of the procedure shall be English. The arbitral tribunal will be composed of one (1) arbitrator who will be designated in accordance with the Rules. The arbitration award shall be final and binding upon the parties, the parties renouncing to appeal against the arbitration award by any ordinary or extraordinary means whatever the subject of the arbitration award is. The arbitration award may be enforced by action before any court of competent jurisdiction. In accordance with Article 26 of the Rules, each party is hereby expressly authorised and entitled to initiate any judicial action seeking any kind of interim relief before any competent jurisdiction. The initiation or pursuit of any action to seek such interim relief shall not be deemed to waive or preclude the right of such interim relief before the arbitral tribunal." 6. On 11th July, 2013, the defendant No.1, plaintiff No.1 and plaintiff No.2 entered into a Side Agreement ("First Side Agreement"), pursuant to which the defendant No.1, plaintiff No.1 and plaintiff No.2 agreed to renew the Franchise Agreements for a limited period expiring on 31st March, 2014 and the parties thereto agreed that any further renewal of the Franchise Agreements beyond 31st March, 2014 shall be subject to the prior written approval of the parties thereto. According to the appellants, it was always the intent of the parties to the First Side Agreement that if disputes arose thereunder between the parties thereto, such disputes would be settled by arbitration in terms of clause (6) of the said agreement, which provides as follows:- "Section 20(a) (Governing Law and Place of Jurisdiction) of each of the Franchise Agreements shall fully apply to this Side Agreement and to all the Franchise Agreements...
(a) Governing Law and Arbitration This Agreement shall be governed and interpreted in accordance with the Laws of Switzerland, to the exclusion of the United Nations Convention on Contracts for the International Sale of Goods (CISG). Any dispute, controversy or claim arising out of or in relation to this Agreement, including the validity, invalidity, breach or termination thereof, shall be resolved by arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss chambers of Commerce ("the Rules") in force on the date when the notice of arbitration is submitted in accordance with these Rules. The arbitration will take place in Geneva, Switzerland and the language of the procedure shall be English. The arbitral tribunal will be composed of one (1) arbitrator who will be designated in accordance with the Rules. The arbitration award shall be final and binding upon the parties, the parties renouncing to appeal against the arbitration award by any ordinary or extraordinary means whatever the subject of the arbitration award is. The arbitration award may be enforced by action before any court of competent jurisdiction. In accordance with Article 26 of the Rules, such party is hereby expressly authorised and entitled to initiate any judicial action seeking any kind of interim relief before any competent jurisdiction. The initiation or pursuit of any action to seek such interim relief shall not be deemed to waive or preclude the right of such interim relief before the arbitral tribunal." 7. On 15th March, 2014, pursuant to clause 8.1 of each of the Distribution Agreements, the defendants No.1 and No.2 issued separate letters to plaintiff No.1 terminating the said Distribution Agreements with effect from 30th September, 2014. The termination letter issued by the defendant No.1 also terminated each of the Franchise Agreements and the authorisation to operate the 'Montblanc' boutiques and later dates for the remaining two 'Montblanc' boutiques. It is the case of the appellants that the termination letters were acknowledged and accepted by the plaintiff No.2, for and on behalf of the plaintiff No.2 and plaintiff No.1 on 21st March, 2014 and as such, the termination in respect of the said twelve boutiques and the Distribution Agreement had already become effective.
It is the case of the appellants that the termination letters were acknowledged and accepted by the plaintiff No.2, for and on behalf of the plaintiff No.2 and plaintiff No.1 on 21st March, 2014 and as such, the termination in respect of the said twelve boutiques and the Distribution Agreement had already become effective. According to the appellants, the plaintiff No.1 and plaintiff No.2 were aware of the termination of the Distribution Agreements and the Franchise Agreements as early as on 15th March, 2014, that is, more than six months prior to the date of filing of the suit, viz., 26th September, 2014. 8. It is further the case of the appellants that on 21st March, 2014, the defendant No.1, plaintiff No.1 and plaintiff No.2 had entered into another Side Agreement ("Second Side Agreement") pursuant to which the defendant No.1 authorised the plaintiff No.1 to operate until 30th September, 2014, twelve out of the fourteen 'Montblanc' boutiques and the remaining two 'Montblanc' boutiques until a later date as specified therein. According to the appellants, it was always the intent of the parties to the Second Side Agreement that if disputes arose thereunder between the parties thereto, such disputes would be settled by arbitration in terms of clause (7) thereof which provides as follows:- "Section 20(a) (Governing Law and Place of Jurisdiction) of each of the Franchise Agreements shall fully apply to this Side Agreement and to all the Franchise Agreements... (a) Governing Law and Arbitration This Agreement shall be governed and interpreted in accordance with the Laws of Switzerland, to the exclusion of the United Nations Convention on Contracts for the International Sale of Goods (CISG). Any dispute, controversy or claim arising out of or in relation to this Agreement, including the validity, invalidity, breach or termination thereof, shall be resolved by arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss chambers of Commerce ("the Rules") in force on the date when the notice of arbitration is submitted in accordance with these Rules. The arbitration will take place in Geneva, Switzerland and the language of the procedure shall be English. The arbitral tribunal will be comprised of one (1) arbitrator who will be designated in accordance with the Rules.
The arbitration will take place in Geneva, Switzerland and the language of the procedure shall be English. The arbitral tribunal will be comprised of one (1) arbitrator who will be designated in accordance with the Rules. The arbitration award shall be final and binding upon the parties, the parties renouncing to appeal against the arbitration award by any ordinary or extraordinary means whatever the subject of the arbitration award is. The arbitration award may be enforced by action before any court of competent jurisdiction. In accordance with Article 26 of the Rules, each party is hereby expressly authorised and entitled to initiate any judicial action seeking any kind of interim relief before any competent jurisdiction. The initiation or pursuit of any action to seek such interim relief shall not be deemed to waive or preclude the right of such interim relief before the arbitral tribunal." 9. It is further the case of the appellants that the defendant No.4 had entered into a non-binding Term Sheet to explore a possible transaction, however, as early as in July, 2011, the first plaintiff was informed that the proposed transaction contemplated under the Term Sheet would not fructify and as such, any claims are hopelessly time barred. That it was always the intent of the parties to the Term Sheet that if disputes arose between the parties thereto, such disputes would be settled by arbitration. Any dispute, controversy or claim arising out of or in relation to the said Term Sheet including the validity or invalidity, breach or termination thereof, was to be resolved in terms of clause 26 thereof, by arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss Chambers of Commerce in force on the date when the notice of arbitration is submitted in accordance with the rules. Clause 26 of the Term Sheet reads as follows: "26. Governing Law and Dispute Resolution This Term Sheet is governed by and construed in accordance with the laws of India. Any disputes in relation to this Term Sheet and the Definitive Agreements shall be subject to binding arbitration in Switzerland in accordance with the Rules of Arbitration of the International Chamber of Commerce ("ICC Rules"). The dispute shall be resolved by an arbitral panel comprising of three (3) arbitrators.
Any disputes in relation to this Term Sheet and the Definitive Agreements shall be subject to binding arbitration in Switzerland in accordance with the Rules of Arbitration of the International Chamber of Commerce ("ICC Rules"). The dispute shall be resolved by an arbitral panel comprising of three (3) arbitrators. MB shall appoint one arbitrator, the Company and the Entrack Promoters shall jointly appoint one arbitrator and the third arbitrator who shall be the chairperson, shall be selected by the two so appointed arbitrators (and in case of failure by the two arbitrators to select the third arbitrator, such arbitrator shall be appointed in accordance with the ICC Rules)." The case of the applicants, as stated in the application under section 45 of the Act, is that the present dispute as set out in the plaint in relation to the defendants No.1 and 2 arises due to termination of the Distribution Agreements and the Franchise Agreements, each of which contain an arbitration agreement between the parties thereto. Further, the termination letters were issued under the Distribution Agreements and the Franchise Agreements read with the First Side Letter and the Second Side letter. That the dispute as set out in the plaint in relation to the defendant No.4 is in relation to the Term Sheet which also contains an arbitration agreement between the parties thereto. Any dispute under each of the above agreements/documents is expressly subject to the arbitration agreement as set out therein. Accordingly, any dispute arising out of or in relation to any of the above agreements or their termination in respect thereof or any matter connected thereto would also be subject to arbitration as set out in the respective Distribution Agreements, Franchise Agreements or the Term Sheet, as the case may be. It is in the aforesaid backdrop that the appellants moved the above referred application under section 45 of the Act seeking the reliefs noted hereinabove. By the impugned order dated 19th November, 2014, the trial court has rejected the said application. 10. Mr.
It is in the aforesaid backdrop that the appellants moved the above referred application under section 45 of the Act seeking the reliefs noted hereinabove. By the impugned order dated 19th November, 2014, the trial court has rejected the said application. 10. Mr. Mihir Joshi, senior advocate, learned counsel for the appellants assailed the impugned order by submitting that the trial court has failed to appreciate that in view of the Distribution/Franchise Agreements and Term Sheet having subsisting, valid and binding arbitration clauses in accordance with which all or any disputes under such agreements are mandatorily required to be referred to arbitration as per section 45 of the Arbitration Act. The attention of the court was invited to the arbitration clauses in the Distribution Agreements, the Franchise Agreements and the Term Sheet to point out that all the agreements provide for reference of any dispute between the parties to arbitration. It was pointed out that except for Confidentiality Agreement which specifically provides that the agreement shall be governed and enforced in accordance with the laws of Germany and expressly recognises the exclusive jurisdiction of the courts of Hamburg, all the other agreements contain an arbitration clause which provides for reference of any dispute between the parties to arbitration. The attention of the court was invited to the reliefs prayed for in the suit to submit that the reliefs claimed in the plaint relate principally to the Distribution Agreements, Franchise Agreements and the Term Sheet all of which contain an arbitration clause. It was submitted that therefore, unless the court comes to the conclusion that the arbitration agreement is null and void, inoperative and incapable of being performed, section 45 of the Act mandates that the disputes in respect of the subject matter of the suit be referred to arbitration. It was argued that in the present case, far from contending that the arbitration clause is null and void, inoperative and incapable of being performed, on the contrary the plaintiffs seek enforcement of the agreements. 10.1 It was pointed out that though all the defendants are not parties to the agreements, the plaintiffs have prayed for reliefs jointly and severally against all the defendants (except defendant No.9 Titan against whom no relief has been claimed) by considering them to be a group called the Richemont Group.
10.1 It was pointed out that though all the defendants are not parties to the agreements, the plaintiffs have prayed for reliefs jointly and severally against all the defendants (except defendant No.9 Titan against whom no relief has been claimed) by considering them to be a group called the Richemont Group. Reference was made to section 45 of the Act to point out that the same contemplates reference of disputes to arbitration at the request of one of the parties or any person claiming through or under him. Reliance was placed upon the decision of the Supreme Court in the case of Chloro Controls (India) Private Ltd. v. Severn Trent Water Purification Inc. and Others, (2013) 1 SCC 641 (hereinafter referred to as "Chloro Controls"), for the proposition that the language of section 45 is at substantial variance to the language of section 8. In section 45, the expression "any person" clearly refers to the legislative intent of enlarging the scope of the words beyond "the parties" who are signatory to the agreement. Of course such applicant should claim through or under the signatory party. Once this link is established, then the court shall refer them to arbitration. Normally arbitration takes place between the persons who have from the outset been parties to both the arbitration agreement as well as the substantive contract underlying that agreement. But it does occasionally 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 that, in fact and in law, it is claiming "through" or "under" the signatory party as contemplated under section 45 of the Act. Referring to the averments made in the plaint, it was submitted that as per the plaintiffs' own say in the plaint the business relates to the group and that the affairs are arranged for the purpose of business; that all parties are in some way or the other parties to the agreement; and that reference to the defendants is in general.
Thus, there was a legal relationship between the defendants and though the agreements have been entered into with defendants No.1, 2 and 4 all the defendants are jointly sued in connection with the said agreements, which goes to show that even according to the plaintiffs all the defendants are parties or connected with the said agreements. It was urged that none of the defendants say that they are not bound by the arbitration agreement and in fact all the defendants are ready to go for arbitration, whereas it is the plaintiffs who are taking a stand that the defendants are third parties. 10.2 The learned counsel further submitted that the plaintiffs have sought composite reliefs in a composite suit, whereas all contentions are related to the Term Sheet. It was argued that different causes of action and multiple agreements have been combined in the suit. However, unless the legislature makes it a fetter, reference of the disputes to arbitration under section 45 of the Act cannot be avoided on the ground of multiple arbitrations. It was submitted that each agreement operates in a different sphere and there is no question of inconsistency therein. It was contended that it was the clear intention of the parties to have the disputes covered under arbitration and that the parties have consciously and voluntarily selected the Arbitral Tribunals under the different agreements and as such it is not permissible for the plaintiffs to seek to avoid the arbitration clauses on the plea that going for arbitration causes undue hardship to them. 10.3 As regards the finding recorded by the trial court that the Confidentiality Agreement did not have an arbitration clause, Mr. Joshi submitted that the Term Sheet and the Confidentiality Agreement are integrally connected with each other. The alleged breach relating to any confidential information is also covered under the Term Sheet's relevant clause which deals with protection against disclosure of confidential information. The confidential information was purportedly supplied between the year 2008 to 2011 for the proposed JV which is comprehensively covered under the Term Sheet and has a similarly worded confidentiality clause protecting the first respondent's purportedly confidential information shared with the appellants during the course of discussions/negotiations in connection with the proposed JV.
The confidential information was purportedly supplied between the year 2008 to 2011 for the proposed JV which is comprehensively covered under the Term Sheet and has a similarly worded confidentiality clause protecting the first respondent's purportedly confidential information shared with the appellants during the course of discussions/negotiations in connection with the proposed JV. Hence, any information which may have been provided in the course of discussions/negotiations for the proposed JV is covered by the Term Sheet and any dispute in this regard has to be referred to arbitration as per the arbitration clause contained in the Term Sheet. Therefore, essentially, all the disputes are covered by arbitration. 10.4 Referring to the findings recorded by the trial court, it was pointed out that the trial court has come to the conclusion that the conduct of the appellants was not proper, inasmuch as, despite the fact that application under section 45 of the Act was pending before the trial court, the defendants did not wait for the outcome of the application and hurriedly initiated the arbitration proceedings. It was submitted that the trial court has wrongly assumed that there was a wrong and bad intention on the part of the defendants, inasmuch as, the cause of action for filing the arbitration proceedings on the part of the appellants arose only after the agreements came to an end. It was submitted that such observations are misconceived, inasmuch as, the plaintiffs moved the suit at the last moment and that by this logic, every injunctive relief would be out of arbitration. It was pointed out that the plaintiffs instituted the suit, just when the appellants' right to go for arbitration arose and upon their going for arbitration, their conduct has been questioned. It was pointed out that the trial court has failed to take into consideration the conduct of the plaintiffs, viz., though the termination notices terminating the agreements with effect from 30th September, 2014 were given on 15th March, the suit came to be instituted only four days before the deadline. 10.5 It was pointed out that on behalf of the plaintiffs, it has been contended that since the suit was based upon an allegation of fraud on the part of the defendants it was not possible to go for arbitration because, the Arbitral Tribunal cannot adjudicate upon the aspect of fraud.
10.5 It was pointed out that on behalf of the plaintiffs, it has been contended that since the suit was based upon an allegation of fraud on the part of the defendants it was not possible to go for arbitration because, the Arbitral Tribunal cannot adjudicate upon the aspect of fraud. It was emphatically argued that the aspect of fraud does not arise when the plaintiffs seek specific performance of the agreement. It was urged that while considering an application under section 45 of the Act, what the court is required to see is whether the action is in a matter in respect of which the parties have made an agreement. According to the learned counsel, the primary onus is on the plaintiff who resorts to instituting a suit to declare that the arbitration agreement is null and void, inoperative and incapable of being performed. However, no such relief is claimed in the suit. 10.6 It was argued that even on the averments made in the plaint and no role being attributed to the defendants, there was no need to invoke the 'Group of Companies' doctrine in the present case when on the pleadings in the plaint the appellants-defendants can show that the parties have a legal relation. According to the learned counsel, if on the averments made in the plaint no individual role has been ascribed to the defendants, there is no need to go to the group of companies doctrine. Referring to the contents of the plaint, the learned counsel pointed out that no separate cause of action has been made out in the suit qua different defendants to submit that none of the disputes raised fall outside the ambit of the Distribution Agreements, the Franchise Agreement and the Term Sheet and no separate cause of action has been made out qua different defendants. It was pointed out that insofar as defendant No.9 is concerned, he is an apprehended distributor and nothing has been stated in the plaint against the said defendant who is necessary only for the purpose of injunction.
It was pointed out that insofar as defendant No.9 is concerned, he is an apprehended distributor and nothing has been stated in the plaint against the said defendant who is necessary only for the purpose of injunction. 10.7 Referring to the findings recorded by the trial court with regard to the hardship that the parties would have to face if they are required to pursue the matters before different Arbitration Tribunals, it was submitted that these Tribunals are consciously and voluntarily selected by the parties and hence, mere hardship, without anything more, as recorded by the trial court is not sufficient for the purpose of turning down an application under section 45 of the Act. 10.8 Referring to the contents of the plaint, it was submitted that the plaintiffs have claimed damages, the genesis whereof is the Term Sheet. It was submitted that it has been contended in the plaint that fraud has been practiced upon the plaintiffs, however, the aspect of fraud does not arise in view of the fact that the plaintiffs seek specific performance of the agreement and the document is not sought to be set aside. It was submitted that the primary requirement of section 45 of the Act is satisfied in the present case on a reading of the plaint and the prayers. It was submitted that the trial court has erred in principle in not working towards arbitration. Reference was made to the decision of the Supreme Court in the case of Enercon (India) Ltd. v. Enercon Gmbh (supra) wherein it is held that when the parties have irrevocably agreed to resolve all the disputes through arbitration, they cannot be permitted to avoid arbitration, without satisfying the court that it would be just and in the interest of parties not to proceed with arbitration. Furthermore, in arbitration proceedings, the courts are required to aid and support the arbitral process and not to bring it to a grinding halt. It was submitted that in the facts of the present case, the trial court has erred in not following the principles laid down in the above decision and supporting the arbitral process. 11. Vehemently opposing the appeal, Mr.
It was submitted that in the facts of the present case, the trial court has erred in not following the principles laid down in the above decision and supporting the arbitral process. 11. Vehemently opposing the appeal, Mr. Kamal B. Trivedi, senior advocate, learned counsel for the respondent No.1 submitted that the defendants want a composite reference by invoking the group of companies doctrine, otherwise there was no need to place reliance on the decision of the Supreme Court in the case of Chloro Controls (supra) which would apply only when a joint reference is to be made to one forum. The attention of the court was invited to the facts involved in the case of Chloro Controls (supra) to point out that the same related to a joint venture and that the dispute that arose in the said case was within the members of the joint venture with reference to the joint venture itself. It was pointed out that the very agreement of the joint venture refers to various ancillary agreements forming part of the mother agreement. The performance of the mother agreement was dependent upon the execution of the ancillary agreements. The purpose of all the ancillary agreements was for the purpose of the mother agreement. The joint venture could not have carried on its activities without these supplementary agreements. It was in that backdrop, that the doctrine of 'Group of Companies' was recognised. It was pointed out that in the facts of the present case, there is no main/mother agreement and no agreement is ancillary to the main agreement. Each agreement stands on its own strength and binds only the parties to each agreement. Under the circumstances, the doctrine of 'Group of Companies' cannot be invoked in the present case and hence, there cannot be a reference to arbitration in respect of parties who are not parties to the arbitration agreement. The attention of the court was invited to various findings recorded in Chloro Controls (supra) reference to which shall be made at an appropriate stage in the judgment. It was 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.
It was 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. 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. 11.1 Next it was submitted that the provisions of section 45 of the 1996 Act are somewhat similar to Article II(3) of the New York Convention and the expression "parties" in that section would mean that "all parties to the action" before the court have to be the parties to the arbitration agreement. If some of them are parties to the agreement, while the others are not, section 45 does not contemplate the applicable procedure and the status of the non-signatories. The consequences of all parties not being common to the action and arbitration proceedings are 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 Code of Civil Procedure. However, where such parties cannot be struck off, there the proceedings must continue only before the court. Thus, it was contended that the provisions of section 45 cannot be effectively applied or even invoked. 11.2 Mr. Trivedi further submitted that under the provisions of section 45 of the Act, the applicants have a heavy burden to discharge, in fact and in law. The attention of the court was invited to the reliefs prayed for in the suit to submit that such reliefs would not be available before the Arbitration Tribunal. It was pointed out that the Confidentiality Agreement does not contain an arbitration clause and hence, any dispute in respect thereof cannot be referred to arbitration. The attention of the court was invited to the fact that under the Distribution Agreement, the Franchise Agreements and the Term Sheet, different Arbitration Tribunals are envisaged and hence, reference would be required to be made to different Arbitration Tribunals in respect of the reliefs claimed in the suit.
The attention of the court was invited to the fact that under the Distribution Agreement, the Franchise Agreements and the Term Sheet, different Arbitration Tribunals are envisaged and hence, reference would be required to be made to different Arbitration Tribunals in respect of the reliefs claimed in the suit. It was submitted that two of the reliefs claimed in the suit are not arbitrable but can be claimed by the plaintiffs only in a suit. It was submitted that 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 the 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 bifurcated or partial references of dispute or parties to arbitration. Bifurcation of the subject matter of the suit is, therefore, not permissible under section 45 of the Act. Reference was made to clause (h) of section 2 of the Arbitration Act which defines "party" to mean a party to an arbitration agreement. The attention of the court was invited to the provisions of section 44 and section 45 of the Act to submit that section 44 says that the agreement should be such to which the covenant set forth in the First Schedule applies. That under section 45, the agreement should be such as would satisfy the test of section 44 of the Act. Referring to section 8 and section 45 of the Arbitration Act, it was submitted that with a view to satisfy section 44 of the Act, the applicant is required to establish that an agreement has been arrived at between the parties who have a legal relation with each other. It was submitted that even if the provisions of section 44 are satisfied, nevertheless, the conditions under section 45 are also required to be satisfied namely, that the same should be at the request of one of the parties or any person claiming through or under him as developed by the Supreme Court in Chloro Controls (supra).
It was submitted that even if the provisions of section 44 are satisfied, nevertheless, the conditions under section 45 are also required to be satisfied namely, that the same should be at the request of one of the parties or any person claiming through or under him as developed by the Supreme Court in Chloro Controls (supra). It was submitted that a common reference as mandated by the Supreme Court can only be to one forum, the idea behind which is to see that there is one common reference to one forum for the convenience of the parties. It was argued that in the present case, the appellants have not established that they are a group of companies and hence, there can be no composite reference in this case, and there are matters in the suit that are not arbitrable. Since the reliefs claimed in the suit cannot be bifurcated, the question of referring any of the disputes to arbitration would not arise, inasmuch as, section 45 does not contemplate bifurcation of the subject matter of a suit. Reliance was placed upon the decision of the Supreme Court in the case of Sukanya Holdings Private Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531 , wherein the court has held that there is no provision in the Act that when the subject matter of the suit includes subject matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision of splitting the cause of parties and referring the subject matter of the suit to the Arbitrators. It was submitted that the observations made as regards bifurcation of subject matter which is not permissible under section 8 in paragraphs 15, 16 and 17 are applicable to section 45 of the Act and hence, the same would be applicable while deciding an application under section 45 of the Act. 11.3 Without prejudice to the above contention, it was also the argument that it would not be appropriate and even permissible to make reference to arbitration when the issues and parties in action are not covered by the arbitration agreement.
11.3 Without prejudice to the above contention, it was also the argument that it would not be appropriate and even permissible to make reference to arbitration when the issues and parties in action are not covered by the arbitration agreement. Referring to the consequences of all parties not being common to the action before the court and arbitration, it was pointed out that the disadvantages are: (a) There would be multiplicity of litigation; (b) Application of principle of one-stop action would not be possible; and (c) It will frustrate the application of the rule of mischief. The court can prevent the mischief by striking out unnecessary parties or causes of action. It would, it was submitted, thus, imply that a stranger or a third party cannot ask for arbitration. That the expression "claiming through or under" will have to be construed strictly and restricted to the parties to the arbitration agreement. 11.4 It was, accordingly, submitted that while seeking relief under section 45 of the Act, the burden upon the defendants is very heavy and cannot be discharged with reference to the averments made in the plaint. It was contended that in the facts of the present case, merely showing that there is a relationship between the parties is not sufficient, the appellants have to further show that they are part of a group of companies as envisaged in paragraph 71 to 73 of the decision of the Supreme Court in Chloro Controls (supra). It was submitted that for varied reasons, the decision of the Supreme Court in the case of Chloro Controls (supra) cannot be applied to the facts of the present case, inasmuch as, there is no joint venture in the present case, no mother agreement, no dispute between the constituents and no ancillary agreements. It was submitted that, in fact as well as in law, the appellants are required to show that all the ingredients of section 44 and section 45 are required to be satisfied and that they are required to show that how they are connected over and above a mere legal relationship. In support of such submission, reliance was placed upon paragraphs 70, 100 and 109 of Chloro Controls (supra).
In support of such submission, reliance was placed upon paragraphs 70, 100 and 109 of Chloro Controls (supra). It was argued that there is no need for the plaintiffs to challenge the arbitration agreement in the suit, a plea relating to arbitration agreement being null and void, inoperative or incapable of being performed is sufficient if raised in reply to the application under section 45 of the Act. It was submitted that if both the parties to the application under section 45 of the Act are parties to the suit, reference should be made to arbitration; however, if any non-party is a party to the suit, the test of group of companies must be satisfied. Reliance was placed upon the decision of the Supreme Court in the case of Vodafone International Holdings BV v. Union of India and Another, (2012) 6 SCC 613 . 11.5 The learned counsel further invited the attention of the court to the different arbitration clauses contained in different agreements. It was submitted that the Distribution Agreement No.1 though refers to the governing law as the law of Switzerland, does not provide for the exclusivity of jurisdiction of any court. While arbitration is contemplated in Geneva, no particular court is specified for exclusive jurisdiction. Similarly, in the second Distribution Agreement also, no particular court has been specified for exclusive jurisdiction. It was pointed out that in terms of clause (26) of the Term Sheet, no court has been vested with the exclusive jurisdiction to decide the dispute thereunder and that the Rules of Arbitration of the International Chamber of Commerce would be applicable. Reference was made to the Confidentiality Agreement to submit that while clauses (7) and (8) confer exclusivity of jurisdiction on courts in Hamburg, this agreement has no arbitration clause. It was submitted that in the absence of any exclusivity of jurisdiction to deal with the disputes raised in the suit having been conferred on any court under the various agreements, it is permissible for the plaintiffs to institute the suit at Rajkot for determination of the disputes under the said agreements. 11.6 Referring to the Term Sheet, Mr. Trivedi pointed out that this is an agreement between the defendant No.4 and the plaintiff No.1 and all the plaintiffs are parties to the agreement in terms of clause (4) thereof.
11.6 Referring to the Term Sheet, Mr. Trivedi pointed out that this is an agreement between the defendant No.4 and the plaintiff No.1 and all the plaintiffs are parties to the agreement in terms of clause (4) thereof. Referring to clause (8) of the Term Sheet, it was pointed out that the plaintiffs have complied with all the conditions precedent laid down therein. It was submitted that the Term Sheet is a non-binding agreement and in view thereof, the Arbitration Tribunal would not grant any relief to the plaintiffs, but the civil court can grant such relief. Reference was made to clause (22) of the Term Sheet whereby the parties had agreed to in good faith, negotiate, finalise and execute the Definitive Agreements stated thereunder, it was pointed out that the plaintiffs in the suit have alleged breach of good faith. It was pointed out that clause (24) of the Term Sheet which is the confidentiality clause, has nothing to do with the Confidentiality Agreement and hence, the disputes relating to the Confidentiality Agreement would not stand covered by the Term Sheet. It was argued that the plaintiffs have a civil right to tell the court that they have gone through the ordeal of the compliance of the terms of the agreement and that the defendants cannot resile from the same. It was contended that the court can go beyond the contract and adjudicate the civil rights of the plaintiffs on the principle of doctrine of 'legitimate expectation' which would not be possible in arbitral proceedings. 11.7 Referring to the reliefs prayed for in the suit, it was submitted that the law does not create an embargo from filing this kind of a suit. It was submitted that the suit seeks multiple reliefs with reference to multiple and multi-party agreements and unless the facts are available as in the case of Chloro Controls (supra), resort to section 45 of the Act will not be available to the appellants. It was submitted that the Distribution Agreement, the Franchise Agreements and the Term Sheet are independent of each other and there is no interlinking between them or between the Confidentiality Agreement and the Term Sheet. It was submitted that the respondents are not averse to arbitration but when the appellants invoke section 45 of the Act, what is contemplated is that all the disputes would go before one Tribunal.
It was submitted that the respondents are not averse to arbitration but when the appellants invoke section 45 of the Act, what is contemplated is that all the disputes would go before one Tribunal. If in terms of the decision of the Supreme Court in the case of Chloro Controls (supra), all these disputes are capable of being referred to the Arbitration Tribunal, the respondents would fail. It was submitted that there are some reliefs in respect of which there is no arbitral forum and hence, the Arbitration Tribunal would not be in a position to adjudicate the disputes and the reliefs qua the Term Sheet are beyond the agreement because the agreement is non-binding in nature. It was, accordingly, urged that the present dispute does not fall within the domain of arbitration agreement and can be decided only by a court and hence, the trial court was wholly justified in rejecting the application filed by the appellants under section 45 of the Act. It was contended that when there are multiple and multi-party agreements, unless the facts as available in Chloro Controls (supra) are available, resort cannot be made to section 45 because these arbitration agreements are not capable of being adjudicated by one forum as contemplated for the purpose of adjudication under section 45 of the Act. 12. Mr. S.N. Shelat, Senior Advocate, learned counsel for the respondent No.2 invited the attention of the court to the plaint to point out that all the parties to the plaint are parties to the Term Sheet. Referring to the First Distribution Agreement as well as the communication between the parties, it was submitted that the defendant No.3 is directly associated with the defendant No.1. Therefore, the role of each of the defendants is clear before the court and that when the plaintiffs sue the defendant No.1, the defendants No.3 and 7 are covered by the Distribution Agreement. It was submitted that each of the defendants is not only a proper party but is a necessary party to the suit and, therefore, the relief claimed from the defendants is to protect the Confidentiality Agreement; to enforce the Confidentiality Agreement; to cover up the expenses incurred due to inducement given by them and for specific performance of the Term Sheet. It was pointed out that this is how the composite relief is claimed in the plaint.
It was pointed out that this is how the composite relief is claimed in the plaint. It was submitted that there is an inherent right conferred on every person under section 9 of the Code of Civil Procedure to bring a suit of a civil nature unless it is barred by a statute or there is an agreement restricting the exercise of such right. The plaintiffs have exercised such right and instituted a suit before the court of competent jurisdiction and there is no bar under any statute to such suit. The plaintiffs being the dominus litis have included all the respondents who were necessary parties and have claimed different and distinct reliefs. Reference was made to the decision of the Supreme Court in the case of Smt. Ganga Bai v. Vijay Kumar and Others, AIR 1974 SC 1126 , for the proposition that there is an inherent right in every person to bring a suit of a civil nature and unless the suit is barred by statute, one may, at one's peril, bring a suit of one's choice. It is no answer to a suit, howsoever frivolous the claim, that the law confers no such right to sue. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit. The learned counsel also placed reliance upon the decision of the Supreme Court in the case of Jihal Tanti v. Nageshwar Singh, AIR 2013 SC 2235 , wherein the court has held that just because an objection to the jurisdiction is raised, the court does not become hopelessly forthwith nor does it become incompetent to grant the interim relief. It was submitted that interim relief can be granted to the plaintiffs even where a question of jurisdiction is raised. 12.1 Mr. Shelat further submitted that the next aspect that the plaintiffs have to satisfy is whether such a suit with multiple causes of action is justified.
It was submitted that interim relief can be granted to the plaintiffs even where a question of jurisdiction is raised. 12.1 Mr. Shelat further submitted that the next aspect that the plaintiffs have to satisfy is whether such a suit with multiple causes of action is justified. In this regard, the attention of the court was drawn to the provisions of rule 3 of Order I of the Code which bears the heading "Who may be joined as defendants" and lays down that all persons may be joined in one suit as defendants where - (a) any right to relief in respect of, or arising out of, the same act or transaction or series of acts or transactions is alleged to exist against such persons, whether jointly, severally or in the alternative; and (b) if separate suits were brought against such persons, any common question of law or fact would arise, to submit that in view thereof, it was permissible for the plaintiffs to join all the defendants under Rule 3 Order 1 of the Code. It was submitted that for this purpose, the plaintiffs are required to satisfy two things firstly, that the right to relief arises out of the same act and secondly, there are common questions of law and fact. Reference was also made to Rule 3 Order 2 of the Code which provides for "Joinder of causes of action" and lays down that save as otherwise provided, a plaintiff may unite in the same suit several causes of action against the same defendant, or the same defendants jointly; and any plaintiffs having causes of action in which they are jointly interested against the same defendant or the same defendants jointly may unite such causes of action in the same suit. It was submitted that thus, joinder of causes of action is also permissible and, therefore, it was permissible for the plaintiffs to join all the defendants. Reference was made to Rule 2 Order 2 of the Code to submit that if the plaintiffs had not raised all the claims in the suit, by operation of the provisions of Rule 2 Order 2, the plaintiffs would have lost their right to make such claims.
Reference was made to Rule 2 Order 2 of the Code to submit that if the plaintiffs had not raised all the claims in the suit, by operation of the provisions of Rule 2 Order 2, the plaintiffs would have lost their right to make such claims. Referring to Rule 6 Order 2 of the Code, it was submitted that where it appears to the court that the joinder of causes of action in one suit may embarrass or delay the trial or is otherwise inconvenient, it can order separate trials or make such other order as may be expedient in the interests of justice. Thus, it is permissible for the court to order separate trials, if it so deems fit. Reference was also made to Rule 7 Order 2 of the Code which lays down that all objections on the ground of misjoinder of causes of action shall be taken at the earliest possible opportunity. Reliance was placed upon the decision of the Punjab & Haryana High Court in the case of Amar Singh v. Jagdish and others, AIR 1970 Punjab & Haryana 276, wherein it has been held that the object of rule 3 of Order I is to avoid multiplicity of suits and needless expense to the parties if it could be avoided without embarrassment to the litigants concerned and the court. In order to justify the joining of more than one person as defendants, it is not necessary to show that all the defendants are interested in all the reliefs and transactions comprised in the suit. Nor can it be said that no one can be joined as a defendant unless some specific relief is claimed against him. Joining of pro forma parties as defendants is well known. The decision of the Madhya Pradesh High Court in the case of Kanhaiyalal v. Keshodas, AIR 1961 Madhya Pradesh 46, was cited for the proposition that two conditions must be satisfied before two or more defendants can be joined in the same suit, (1) a right to relief against them arises in respect of some act or transaction or series of acts or transactions; and (2) if separate suits were instituted against the defendants any common questions of law or fact would arise. Both these conditions must exist together. There must be some nexus or common link.
Both these conditions must exist together. There must be some nexus or common link. This condition is not fulfilled if the case against each defendant is entirely distinct and separate in its subject matter from that of the other defendants. If no connection or conspiracy is alleged to exist between the various persons joined as defendants, the suit will be bad for multifariousness. Otherwise, if a common suit is permitted against two or more defendants when there is no nexus inter se, it will only lead to obscurity and confusion. The decision of the Madras High Court in the case of In re, D. Lakshminarayana Chettiar, AIR 1954 Madras 594, was cited wherein the court had observed that section 9 of the Code of Civil Procedure corresponds to Order 2, Rule 6 of the Code of Civil Procedure under which, where it appears to the court that any causes of action joined in one suit cannot be conveniently tried or disposed of together, the court may order separate trials or make such other order as may be expedient. This also implies that the first part of the section applies to a case where two causes of action are clubbed up together in one suit and, therefore, the clause expressly saves the power of the court conferred on it under Order 2, Rule 6 to order separate trials. Under Order 2, Rule 3, a plaintiff may unite in the same suit several causes of action against the same defendant, or the same defendants jointly; and two or more plaintiffs have causes of action in which they are jointly interested against the same defendant or the same defendants jointly may unite such causes of action in the same suit. Ordinarily, every cause of action must be a basis for a single suit. But by reason of the above rules, subject to the provisions mentioned therein, several causes of action may be united in one action.
Ordinarily, every cause of action must be a basis for a single suit. But by reason of the above rules, subject to the provisions mentioned therein, several causes of action may be united in one action. Reliance was also placed upon the decision of the Calcutta High Court in the case of Anukul Chandra Chakravarty v. Province of Bengal, Pabna Collectorate and others, AIR 1947 Calcutta 374, wherein the court in the context of the provisions of Order I rule 3, Order I rule 5 and Order 2, Rule 3 (1) of the Code observed that from these rules, it appears that there may in one suit be a number of defendants; and a diversity of reliefs claimed in the suit. But there must at the same time, be some nexus, and what is required in that respect has been specified; there must be one act or transaction or one series of acts or transactions in respect of or arising out of which the right to relief against the several defendants is alleged to exist. There must also be present the further circumstance that if separate suits were brought against the defendants, some common questions of law or fact would arise. It is now well-settled that having regard to the provisions of Order I rule 2 when common questions of law and fact are involved in a suit impleading several defendants will not be multifarious only because the plaintiff's causes of action against the several defendants he has joined are different. The decision of the Calcutta High Court in the case of Shew Narayan Singh v. Brahmanand Singh, AIR 1950 Calcutta 479, was cited for the proposition that Order I rule 3 of the Code is not confined to joinder of parties only but that it also embraces joinder of causes of action against different parties and that Order 2, Rule 3 must not be interpreted so as to override or render nugatory the provisions of Order I rule 3. It is, therefore, permissible to join different causes of action against different defendants in one suit as long as the stipulations set out in Order I rule 3 are complied with. It was submitted that in the light of the above referred provisions of the Code and principles enunciated in the above decisions, the suit instituted by the plaintiffs with multiple causes of action is wholly justified.
It was submitted that in the light of the above referred provisions of the Code and principles enunciated in the above decisions, the suit instituted by the plaintiffs with multiple causes of action is wholly justified. 12.2 Reference was made to section 2(a) of the Specific Relief Act which defines "obligation" to include every duty enforceable by law to submit that once the plaintiffs have spent monies on behalf of the defendants, the defendants are trustees to the extent of the amount spent and cannot wriggle out of such obligation and hence, a suit for specific performance of the agreement has rightly been instituted. 12.3 Reliance was placed upon the decision of the Supreme Court in the case of Roop Lal Sathi v. Nachhattar Singh, AIR 1982 SC 1559 , for the proposition that under Order 6, Rule 5, particulars will be ordered of the material facts on which the party pleading relies for his claim or defence. If a party's pleading is defective, he can also seek to alter and amend his own defective pleading under Order 6, Rule 17. There is no express rule providing for the consequence of a party failing to deliver particulars required by order of court, but the decisions are to the effect that either by the order calling for the particulars or by a later order the court can direct the claim of the defence to be struck out under Order 6, Rule 16 of the Code. Reference was made to the Commentary on Code of Civil Procedure, 1908 by Justice C.K. Thakkar, wherein it has been observed that the underlying object of rule 3 of Order I is to avoid multiplicity of suits and needless expenses, which can be avoided without embarrassment to the parties to the suit and also to the court. The provision, therefore, should receive liberal construction. All persons may be joined in one suit as defendants, if the following two conditions are satisfied: (a) the right to relief against each defendant must arise out of the same act or transaction or series of acts or transactions; and (b) if separate suits were brought against such persons, common questions of law or fact would arise. The word "and" between clauses (a) and (b) make it clear that both the conditions must be satisfied. In other words, the requirements in clauses (a) and (b) are cumulative and not alternative.
The word "and" between clauses (a) and (b) make it clear that both the conditions must be satisfied. In other words, the requirements in clauses (a) and (b) are cumulative and not alternative. It is, however, not necessary that all the defendants should be interested in all the reliefs and transactions comprised in the suit or the liability of all the defendants should be the same. It is also not necessary that the cause of action against each of the defendants be the same, nor the evidence common. It is also not necessary that all the questions of fact or law arising in the suit should be common to each and every defendant. It is sufficient if there is one question common to all the defendants. 12.4 On the question as to whether such a suit can be split up by referring the matters containing an arbitration clause to arbitration and retaining the subject matter in respect of which there is no arbitration clause, the attention of the court was invited to the provisions of Rule 6 Order 6 and Rule 11 Order 7 of the Code. Reference was made to the decision of the Supreme Court in the case of D. Ramachandran v. R.V. Jankiraman and others, AIR 1999 SC 1128 , for the proposition that Rule 11 Order 7 enjoins the court to reject the plaint where it does not disclose a cause of action. There is no question of striking out any portion of the pleading under this rule. It is elementary that under Order 7, Rule 11 (a) CPC, the court cannot dissect the pleading into several parts and consider whether each one of them discloses a cause of action. Under the rule, there cannot be a partial rejection of the plaint or a petition. The decision of the Punjab & Haryana High Court in the case of ABN-AMRO Bank v. the Punjab Urban Planning and Development Authority, AIR 2000 Punjab & Haryana 44, was cited wherein the court has held that what will be the merit of the claim is again a question to be gone into by the court at the appropriate stage and upon conclusion of evidence. Partial rejection of a plaint is again not permissible.
Partial rejection of a plaint is again not permissible. The concept of partial rejection is apparently inapplicable to the provisions of Order 7, Rule 11 of the Code of Civil Procedure, it would have its limited application in regard to the provisions of Order 6, Rule 16 of the Code. There could be partial striking out of pleadings but not rejection of plaint. To bring out the cause of action, a plaint must state necessary conditions to maintain a suit. The merit of those conditions and/or terms is inconsequential at the stage, for consideration of such application. What evidence the plaintiff would lead to prove his case or what probable defence the defendant would raise is not the concern of the court at that initial stage of proceedings. Cause is the proper generic term. Its construction must and has to be decided keeping in mind the facts and circumstances of each case. 12.5 Reference was made to the decision of the Supreme Court in the case of Sukanya Holdings Private Ltd. (supra) for the proposition that there is no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitrators. The decision of the Supreme Court in the case of India Household and Healthcare Limited v. LG Household and Healthcare Ltd., (2007) 5 SCC 510 , was cited wherein the Supreme Court had followed its previous decision in the case of Sukanya Holdings Private Ltd. (supra) and held that the prayers fall outside the arbitration agreement since LG Logo belongs to LG Corporation which was the owner of the trademark. It was not a party to the arbitration agreement and had allegedly filed a separate suit. Mr. Shelat submitted that neither the Code of Civil Procedure, nor section 45 or section 8 of the Arbitration Act contemplate bifurcation of a suit. Section 45 does not contemplate a situation where only part of the reliefs can be considered by the arbitrator and the rest of the reliefs can be considered by other forums such as the Civil Court or the Arbitrator appointed under the ICC Rules.
Section 45 does not contemplate a situation where only part of the reliefs can be considered by the arbitrator and the rest of the reliefs can be considered by other forums such as the Civil Court or the Arbitrator appointed under the ICC Rules. It was submitted that the disputes raised by the plaintiffs also relate to the Confidentiality Agreement which does not have an arbitration clause and also claim reliefs against defendants No.3 and 5 and 6 to 9, who are not parties to the arbitration agreements, and hence, the request to refer the matter to arbitration cannot be acceded to as defendants No.8 and 9 are not at all subject to the arbitration clause and hence, the claim against them has to be decided by the civil court. It was argued that before defendants No.8 and 9 are fastened with any liability, the civil court will have to look at all the agreements including those containing the arbitration clause. This exercise may render its decision in conflict with the decision rendered by the arbitrator. Therefore, before the Arbitration Tribunal, all these claims cannot be decided and the civil court can decide all such controversies. It was, accordingly, submitted that the initiation of legal proceedings is, therefore, just and the only course of action available to the plaintiffs. It was contended that the arbitration clause in the agreement becomes inoperative when different agreements contain different clauses in respect of which reference cannot be made to a common forum as contemplated in the case of Chloro Controls (supra). It was pointed out that two of the agreements mandate arbitration before the Swiss Arbitration Tribunal, one mandates arbitration under the ICC Rules and the third does not provide for an arbitration clause. Therefore, on a joint reading of all the agreements, it is apparent that the parties never intended to have arbitration between them. It was submitted that in such a situation, the arbitration clause must become inoperative. It was submitted that the consequence of separate arbitration proceedings would be that the sole arbitrator adjudicating the claim under the Distribution and Franchise Agreements will decide the claims raised in the suit but he may have to refer to the Term Sheet to decide the claims effectively.
It was submitted that the consequence of separate arbitration proceedings would be that the sole arbitrator adjudicating the claim under the Distribution and Franchise Agreements will decide the claims raised in the suit but he may have to refer to the Term Sheet to decide the claims effectively. The Arbitral Tribunal of three members would have to refer to the Distribution Agreement, the Franchise Agreement and the Side Agreement while adjudicating the claims under the Term Sheet. It would not be open to do so and such an award would become invalid. It was argued that the 'Group of Companies" doctrine can only be applied if the whole of the subject matter of the suit can be adjudicated by the Arbitrator namely, one single forum. It cannot be made applicable where there are alternative forums. It was also submitted that the Arbitrator does not have the power to consolidate different causes of action. Reference was made to the Commentary by Russell on Arbitration, 23rd Edition, wherein it is stated that the position of third parties who have not entered into any binding agreement to refer the disputes to arbitration is rather different. In the ordinary course, they would not be permitted to join in the arbitration proceedings unless the parties and, if already appointed, the tribunal agree. The parties may, however, make provision in their arbitration agreements for third parties to be allowed to join in the proceedings. According to the learned counsel, the 'Group of Companies' doctrine would apply only where there is a single Arbitrator and that none of the facts required in terms of the decision of the Supreme Court in the case of Chloro Controls (supra) are satisfied in the facts of the present case. 13. Mr. B.B. Naik, Senior Advocate, learned counsel appearing on behalf of the respondents No.3 to 6, submitted that the burden is upon the appellants to satisfy the court that the requirements of section 45 of the Arbitration Act are complied with. It was submitted that while claiming a right under section 45 of the Act for sending the matter to Arbitration, the appellants are required to satisfy the court on certain aspects. It was submitted that the Supreme Court in Chloro Controls (supra) has basically held on the aspect that if all the disputes can be resolved by one Arbitration Tribunal, it is permissible to make a reference.
It was submitted that the Supreme Court in Chloro Controls (supra) has basically held on the aspect that if all the disputes can be resolved by one Arbitration Tribunal, it is permissible to make a reference. If it is not possible for one Tribunal to resolve all the disputes, then section 45 will not be applicable. It was submitted that such burden has not been discharged by the appellants namely, that the disputes can be resolved by one Arbitration Tribunal. Reference was made to paragraph 130 of the decision of the Supreme Court in the case of Chloro Controls (supra) wherein it has been held that section 16 contemplates that the Arbitrator may determine his own jurisdiction. Absence of such a provision in Part II of Chapter I, is suggestive of the requirement of the court to determine the ingredients of section 45 at the threshold itself. It is expected of the court to answer the question of validity of the arbitration agreement, if a plea is raised that the agreement containing the arbitration clause or the arbitration clause itself is null and void, inoperative or incapable of being performed. Such determination by the court in accordance with law would certainly attain finality and would not be open to question by the Arbitral Tribunal even as per the principle of prudence. It will prevent multiplicity of litigation and reagitating of the same issues over and over again. It was submitted that, therefore, the question of jurisdiction of the Arbitral Tribunal has to be decided by the court. In the present case, there are different companies and different agreements. Looking to the nature of the disputes between the parties, it is not possible for one Arbitral Tribunal to decide the disputes raised in the suits. It was pointed out that the 'Group of Companies' doctrine is not accepted by the Swiss Government and hence, it is not possible to have a consolidated arbitration in this case. It was submitted that in Chloro Controls (supra), it has been held that if the parties to the agreement are interconnected, section 45 would be applicable provided the disputes can be decided by one Arbitral Tribunal. It was urged that the appellants have failed to satisfy that sufficient relief could be granted by the Arbitral Tribunal to different parties.
It was submitted that in Chloro Controls (supra), it has been held that if the parties to the agreement are interconnected, section 45 would be applicable provided the disputes can be decided by one Arbitral Tribunal. It was urged that the appellants have failed to satisfy that sufficient relief could be granted by the Arbitral Tribunal to different parties. It was submitted that assuming that it was permissible for the court to refer the disputes in respect of the agreement containing arbitration clauses to the Arbitration Tribunal, the dispute in relation to the Confidentiality Agreement would still remain with the civil court to decide. Therefore, if different forums decide the disputes, there is every likelihood of conflicting orders. Therefore, the application under section 45 of the Act has rightly been rejected by the trial court. According to the learned counsel a composite reference is not possible in the facts of the present case. Referring to the application under section 45 of the Act, it was submitted that it is nowhere claimed by the appellants that the disputes under the three agreements can be referred to one Tribunal and can be governed by the same law. It was submitted that no contention has been raised that one of the agreements is a principal agreement and the other agreements are ancillary dependent upon the principal. That it has also not been contended that these are a group of companies and that the order of the Arbitral Tribunal would be binding upon all of them. It was submitted that having failed to satisfy the above referred conditions, the appellants cannot claim the benefit of section 45 of the Act based on the decision of the Supreme Court in the case of Chloro Controls (supra). It was submitted that on the basis of the principles laid down in the case of Chloro Controls (supra), the dispute can be referred to a single Arbitral Tribunal and all the parties should be parties to the arbitration agreement whereas all these aspects are completely absent in the facts of the present case and the appellants having failed to discharge the burden under section 45 of the Act, the application under section 45 has rightly been rejected. 14. In rejoinder, Mr.
14. In rejoinder, Mr. Mihir Joshi, learned counsel for the plaintiffs submitted that the plaint is (a) based on a fraud perpetrated by the defendants; (b) composite in the sense of raising claims against different or all defendants under different agreements; (c) filed against defendants some of whom are not parties to the arbitration agreement. Therefore, it is the case of the plaintiffs that - (a) in the absence of a single agreement covering all the issues of the defendant, or (b) since a composite reference cannot be made by invoking the mother agreement or interlinking documents of 'Group of Companies' doctrine explained in Chloro Control (supra), action cannot be referred to arbitration also since this would involve splitting up the cause of action, fracturing the suit and would result in multiplicity of proceedings. It was submitted that what the court has to see is whether there is a valid arbitration agreement. How it has to be worked out is a machinery provision. Mechanics cannot defeat the intention of making the parties abide by their contract. The court should encourage and interpret in a manner which supports the arbitration. Once the court finds that there is an agreement, there is no discretion not to refer the matter to arbitration. It was argued that once the defendants establish a valid and subsisting arbitration agreement, then the other issues are secondary. In business transactions, there are bound to be difficulties. 14.1 It was submitted that the plaint is based upon a fraud allegedly perpetrated by the defendants. It was submitted that the position under the old Act was different. But after 1996, that is, after the coming into force of the Arbitration and Conciliation Act, 1996, an allegation of fraud does not take the matter out of arbitration. In support of such submission the learned counsel placed reliance upon the decision of the Supreme Court in the case of World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd., AIR 2014 SC 968 , wherein a contention had been raised that the arbitration agreement was inoperative or incapable of being performed as allegations of fraud can be inquired into by the court and not by the arbitrator.
Ltd., AIR 2014 SC 968 , wherein a contention had been raised that the arbitration agreement was inoperative or incapable of being performed as allegations of fraud can be inquired into by the court and not by the arbitrator. The Supreme Court held that the arbitration agreement does not become "inoperative or incapable of being performed" where allegations of fraud have to be inquired into and the court cannot refuse to refer the parties to arbitration as provided in section 45 of the Act on the ground that allegations of fraud have been made by the party which can only be inquired into by the court and not by the arbitrator. The court held that its decisions in the case of N. Radhakrishnan v. Maestro Engineers and Others, (2010) 1 SCC 72 and Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406 , were decisions rendered in the context of domestic arbitration and not in the context of arbitration under the New York Convention to which section 45 of the Act applies. In case of such arbitrations covered by the New York Convention, the court can decline to make a reference of a dispute covered by the arbitration agreement only if it comes to the conclusion that the arbitration agreement is null and void, inoperative or incapable of being performed and not on the ground that allegations of fraud and misrepresentation have to be inquired into while deciding the disputes between the parties. Mr. Joshi accordingly, submitted that the test for deciding whether an application under section 45 of the Act is to be granted is whether or not the arbitration agreement is capable of being performed. It was submitted that the allegations of fraud which the plaintiffs have made relate to Montblanc's representation of that it would invest in and buy shares of the plaintiff company and then backing out. It was submitted that the only inducement was made to invest in the plaintiffs' company. It was submitted that the allegation of fraud is inextricably linked with the Term Sheet and, therefore, the dispute is in relation to the Term Sheet.
It was submitted that the only inducement was made to invest in the plaintiffs' company. It was submitted that the allegation of fraud is inextricably linked with the Term Sheet and, therefore, the dispute is in relation to the Term Sheet. It was argued that the plaint alleges that fraud and inducement was made without any intention of performing the agreement under the Term Sheet, however, on the basis of such fraud, no agreement is sought to be avoided and damages have been claimed for breach of representation or assurances. It was submitted that the case of the plaintiffs is that the defendants have fraudulently backed out of their obligation under the Term Sheet. Whether there is a breach is clearly a matter of arbitration, wherein if the plaintiffs succeed, the plaintiffs would be entitled to a claim for damages. 14.2 Dealing with the contention raised on behalf of the respondents that the Term Sheet being a non-binding agreement, the Arbitral Tribunal would not adjudicate the disputes between the parties and that it would be the civil court which would adjudicate such disputes, it was submitted that this is a classic interpretation of the Term Sheet and one fails to understand how the scope before the Arbitral Tribunal and the court would be different. It was submitted that it is not the case of the plaintiffs that the clause in the agreement be declared to be void but that fraud is alleged in relation to the performance of the Term Sheet. It was urged that the present case would be squarely covered by the decision of the Supreme Court in World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd. (supra) and that the Arbitral Tribunal would be competent to decide all the disputes under the Term Sheet, including the allegations of fraud. 14.3 As regards the contention that in view of Chloro Controls (supra) if a composite reference of all the disputes is not possible, the parties cannot be referred to arbitration under section 45 of the Act, the learned counsel submitted that the fact that the plaint is a composite one in respect of different subject matters and different agreements is hardly relevant for the purpose of reference of the dispute under section 45.
It was submitted that the fact that the plaint is composite is hardly relevant and is not a magic mantra to take the matter out of the ambit of section 45 of the Act. According to the learned counsel an application under section 45 of the Act cannot be resultant on the manner in which the arbitration would proceed. If the entire matter of the suit is subject matter of the arbitration agreement, two different results cannot flow. Section 45 of the Act itself does not contemplate that reference to arbitration should be only under one agreement and the same depends upon the facts and circumstances of the case. It was submitted that merely because the plaintiffs have filed a combined suit, it cannot be said that there should also be a combined agreement. It was contended that reference of multi-party and multiple agreements to arbitration cannot be denied merely because the plaintiffs have deliberately filed a combined suit in relation to multiple agreements. Reference was made to the decision of the Supreme Court in the case of Chloro Controls (supra) and more particularly, paragraphs 87, 88 and 89 thereof to submit that once the agreement is there and the court is seized of an action in relation to such subject matter, then on the request of one of the parties, it would refer the parties to arbitration unless the agreement is null and void, inoperative or incapable of performance. It was submitted that in the facts of the case, it is not even the case of the plaintiffs that the agreement is null and void, inoperative or incapable of performance. Insofar as the contention raised on behalf of the respondents - plaintiffs that multiple and multi-party arbitrations are impractical or impermissible is concerned, the attention of the court was invited to paragraph 106 of the decision in the case of Chloro Controls (supra) wherein the court has held that 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. It was submitted that the test is whether the matter is covered by the parties' intention to arbitrate.
It was submitted that the test is whether the matter is covered by the parties' intention to arbitrate. It was pointed out that in the facts of the present case there is no agreement with nonparties, whereas in Chloro Controls (supra), though there were agreements with some parties having arbitration clause, agreements with other parties did not have such clause. But in all cases, there are agreements. Reference was made to paragraph 135.2 of the said decision wherein the court has noted the names of the parties who were signatory to each of the agreements as also which of the agreements did not contain an arbitration clause. Referring to paragraph 162 of Chloro Controls (supra), it was pointed out that there were only two parties who were not parties to any of the agreements entered into between the parties and their rights were controlled by the Distribution Agreement executed by the respondents No.1 and 2 therein in their favour. It was contended that once multiple agreements and multi-party agreements are permissible, there is no need to invoke the 'Group of Companies' doctrine. It was submitted that the suit has been instituted against the defendants some of whom are not parties to the arbitration agreement but section 45 of the Act itself permits parties other than those who are parties to the arbitration agreement to invoke the said section. It matters little whether he is an applicant or a respondent. It was submitted that 'Group of Companies' doctrine is one of the many doctrines which can be used to combine more than one party and that when it is the plaintiffs' own case that nonparties are being sued through those who are parties to the agreement and non-signatories are not disputing the same, there is no onus on the applicants - defendants. It was submitted that it is the plaintiffs' case that non-signatories are bound through and under the signatories and that the signatories are their link to others. The plaintiffs, therefore, cannot be heard to say that they are referring to others through the agreement but for the purpose of arbitration, they are excluded. It is the plaintiffs' own case that the others are sued through and under the signing parties.
The plaintiffs, therefore, cannot be heard to say that they are referring to others through the agreement but for the purpose of arbitration, they are excluded. It is the plaintiffs' own case that the others are sued through and under the signing parties. Pointing out as to how a third party comes in apart from the 'Group of Companies' doctrine, it was stated that the third party comes in firstly by virtue of section 45 of the Act and the Indian law; secondly, the primary test being the intent of the parties to combine third parties (with reference to paragraph 72 of the decision of the Supreme Court in the case of Chloro Controls); thirdly, the aspect of implied and express consent; fourthly, the plaintiffs' own case that other non-signatories are being sued through and under the signatories and under the covenants under various agreements and lastly, that the agreements would indicate that it was also understood that the agreement was with the group though each component may not be named. As regards the contention that in the absence of a single agreement or agreements in the nature of mother agreement and other ancillary agreements, a composite reference is not possible and hence, the dispute cannot be referred to arbitration, it was submitted that there is no such requirement under section 45 of the Act. According to the learned counsel, the test for referring the matter to arbitration is not as to whether a composite reference is possible but in terms of the requirements of the said section namely, that the action is in respect of a matter wherein the parties have made an agreement referred to in section 44 in which case, unless the court finds that the said agreement is null and void, inoperative or incapable of being performed, it is mandatory for the court to refer the matter to arbitration. It was submitted that the test is as to whether the dispute falls within the term "in respect of which" as envisaged in section 45 of the Act namely, whether the matter is one in respect of which there is an arbitration agreement. It was submitted that the test boils down to facts as to whether the action which is brought before the court is covered by the arbitration agreement.
It was submitted that the test boils down to facts as to whether the action which is brought before the court is covered by the arbitration agreement. Referring to the contents of the plaint, it was submitted that the respondents - plaintiffs are praying for damages. Damages are not foreign to arbitration. It was submitted that it is the case of the plaintiffs that the Term Sheet was not acted upon and consequently they have suffered loss in respect of which they can claim damages so suffered. It was submitted that in respect of the claim for payment of goodwill, both the Franchise Agreements as well as the Distribution Agreement bar a claim of goodwill. Therefore, the dispute with regard to claim of goodwill is a dispute under the agreements and on the plaintiffs' own pleadings, if all the defendants are liable, they would all be parties under all the three agreements. It was submitted that the issues regarding third parties do not arise in the present case because it was the plaintiffs' own case that all the defendants are bound to perform the agreement. Therefore, the plaintiffs cannot raise the contention that some of the defendants are not bound by the agreement. Referring to the relief claimed vide paragraph 77(G) of the plaint, it was submitted that the said relief on facts obviates the case of the appellants, inasmuch as, it is the plaintiffs' own case that all the defendants are bound by the Term Sheet and, therefore, the appellants do not have to resolve the ghost raised by the plaintiffs when they say that it is for the appellants to establish that there is a legal relationship between the parties. Referring to the relief prayed for vide paragraph 77(J), it was submitted that even on this ground, the plaintiffs cannot be heard to say that the other defendants are third parties. Referring to clause (26) of the Term Sheet, it was submitted that the same is couched in wide terms, inasmuch as, the same says that any dispute in relation to the Term Sheet and Definitive Agreements shall be subject to binding arbitration in Switzerland in accordance with the Rules of Arbitration of the International Chamber of Commerce. It was submitted that all the agreements read with the plaint show that the action is in a matter in respect of which parties have made an arbitration agreement.
It was submitted that all the agreements read with the plaint show that the action is in a matter in respect of which parties have made an arbitration agreement. Referring to the contents of the Term Sheet, it was pointed out that the same includes Montblanc and any of its affiliates; the term "affiliates" used in the Term Sheet denotes that third parties are covered and hence, all the defendants can be parties to the arbitration proceedings. Insofar as the other two kinds of agreements namely, the Distribution Agreement and the Franchise Agreements are concerned, it was submitted that Swiss Rules specifically permit joinder of third parties. Reference was made to Article 4 of Swiss Rules of International Arbitration which provided that where a Notice of Arbitration is submitted between parties already involved in other arbitral proceedings pending under those rules, the Court may decide, after consulting with the parties and any confirmed arbitrator in other proceedings, that the new case shall be consolidated with the pending arbitral proceedings. Referring to clause (2) of Article 4, it was pointed out that the same provides that where one or more third persons request to participate in arbitral proceedings already pending under those rules or where a party to pending arbitral proceedings under those rules requests that one or more third persons participate in the arbitration, the Arbitral Tribunal shall decide on such request, after consulting with all of the parties, including the person or persons to be joined, taking into account all relevant circumstances. It was submitted that under the circumstances, if the plaintiffs so deem fit, they can always request for consolidation before the Swiss Arbitral Tribunal. It was emphatically argued that every party of the suit is covered by the arbitration agreement and all defendants are covered by each of the arbitration agreements, the Swiss Rules contemplate addition of third parties and hence, there is no requirement for a composite reference. 14.4 Dealing with the contention that splitting up all the causes of action would amount to fracturing the suit and is not permissible, it was submitted that such contention is not available to the respondents - plaintiffs in view of the decision of the Supreme Court in the case of Sukanya Holdings (supra).
14.4 Dealing with the contention that splitting up all the causes of action would amount to fracturing the suit and is not permissible, it was submitted that such contention is not available to the respondents - plaintiffs in view of the decision of the Supreme Court in the case of Sukanya Holdings (supra). Referring to paragraph 17 of the said decision wherein the court has held that bifurcation of suit into two parts, one to be decided by Arbitral Tribunal and the other to be decided by the civil court would inevitably delay the proceedings, it was submitted that insofar as bifurcation of suit in two parts is concerned, it is this kind of splitting that is prohibited. It was further submitted that splitting up of causes of action under different arbitration agreements is not prohibited by Sukanya Holdings (supra) or in law and in fact, is approved by the Supreme Court in the case of Chloro Controls (supra). It was submitted that the plaintiffs have clubbed multiple causes of action and hence, they cannot now be heard to say that splitting up of causes of action is not permissible. 14.5 Reliance was placed upon the decision of the Delhi High Court in the case of Usha Drager Private Limited & Another v. Draegerwerk Aktiengesellschaft and Others, 2006 (1) R.A.J. 498 (Del), wherein it was submitted before the court that in case the disputes involved both arbitrable and non-arbitrable matters between the parties, then the dispute should not be referred to arbitration but should be determined by the court itself. The court did not agree with this contention by holding that the question was whether the matter can be kept with the court even on the face of the explicit provisions of section 45 of the Act which make it clear that unless and until the court finds that the said agreement is null and void or is inoperative or is, for any other reason, incapable of being performed, the court is duty bound to refer the disputes to arbitration.
The court did not find it possible to agree with the statement of the learned counsel for the applicant therein more particularly, in view of the fact that the decision relied upon by him [Sukanya Holdings Private Ltd. (supra)] was one rendered in respect of an arbitration agreement to which Part I of the Act applied whereas the said case was one governed not by Part I but Part II of the Act. The court was of the view that the said decision was rendered on a different fact situation and upon the interpretation of section 8, which was not applicable to the said case. The court observed that in the said case, it was section 45 of the Act which falls in Part II of the said Act which needed to be considered. The requirements were different and, therefore, needed a different approach altogether. Reference was made to the decision of the Bombay High Court in the case of Olive Healthcare v. Lannett Company Inc., 2012 (2) Arb LR 259, wherein the court held that the judgment in the case of Shin-etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234 , leaves no scope for doubt as regards the nature of the determination under section 45 of the Arbitration Act. In the said judgment, it is held that the determination under section 45 of the said Act is only prima facie determination in contrasted with a determination by a judicial authority under Part I. The judgment in the case of Shin-etsu (supra), therefore, is a clear precedent for the proposition which squarely fell for consideration therein that while exercising jurisdiction under section 45, a judicial authority is only required to prima facie satisfy itself on the existence/validity of the arbitration agreement. The final decision in this respect is to be taken by the Arbitral Tribunal which will consider evidence and proof of applicable law. Therefore, at the stage of section 45, there is no room for the judicial authority determining the issue of existence and/or validity and/or arbitrability of disputes.
The final decision in this respect is to be taken by the Arbitral Tribunal which will consider evidence and proof of applicable law. Therefore, at the stage of section 45, there is no room for the judicial authority determining the issue of existence and/or validity and/or arbitrability of disputes. The court further observed that since much store was laid on the judgment of the Apex Court in the case of Sukanya Holdings Private Ltd. (supra) to contend that the parties could not be referred to arbitration in view of the fact that the cause of action against the respondent No.1 and the respondent No.2 therein was joint and several; that the case of the plaintiff against both the respondents who are the defendants in the suit is inextricably linked and granting an order under section 45 of the Act would tantamount to splitting one single action into two parts. The court held that the issue as to whether parties could be referred to arbitration would, therefore, have to be considered in the context of the judgment of the Apex Court in the case of Sukanya Holdings (supra). The court further held that the application of law laid down in the case of Sukanya Holdings Private Ltd. (supra) can also be looked at from another angle. In the case of Sukanya Holdings (supra), the court was concerned with section 8 whereas in the said case, the section in question was section 45 which is in Part II of the said Act. Whereas in so far as section 8 is concerned, the defining aspect as it were is "subject matter". The said words are absent in section 45. The words used in section 45 are "in respect of which the parties have made an agreement referred to in section 44". Hence, for the applicability of section 45, the subject matter concept is completely alien. The court, accordingly, held that the judgment in Sukanya Holdings (supra) cannot be used as a proposition for section 45 of the Act. Mr. Joshi emphatically argued that at no stage of the proceedings have the plaintiffs explained as to how one suit has been instituted, how there was a fraudulent misrepresentation, and how the causes of action can be interlinked. It was submitted that all the causes of action are quite distinct and the claims are also distinct.
Mr. Joshi emphatically argued that at no stage of the proceedings have the plaintiffs explained as to how one suit has been instituted, how there was a fraudulent misrepresentation, and how the causes of action can be interlinked. It was submitted that all the causes of action are quite distinct and the claims are also distinct. 14.6 As regards the contention that referring the matter to arbitration would result into multiplicity of proceedings, it was submitted that separate agreements have been entered into by the parties consciously and with open eyes. It was known to the parties that there were to be separate arbitration proceedings. Therefore, it is not open for the plaintiffs to contend that there would be multiple proceedings. It was submitted that multiplicity by itself is not contemplated under section 45 as debarring a reference thereunder. It was submitted that multiplicity of proceedings has nothing to do with an arbitration agreement per se and what the plaintiffs actually mean is that multiple proceedings are convenient. It was submitted that in the facts of the present case, the plaintiffs are signatories to the arbitration agreements and hence, they cannot be permitted to walk out of the bargain. Reliance was placed upon the decision of the Delhi High Court in the case of W.P.I.L. v. NTPC Ltd. and Ors., (2009) 1 ARBLR 378 (Delhi), wherein the court had held that the plaintiff's contentions were not that the arbitration agreement is "null and void, inoperative or incapable of being performed". It raises what can be termed as a bogey of "unworkability" due to separate arbitration clauses embedded in two different agreements. The court observed that there could be a certain element of overlapping in the disputes, which it may raise, and the allegations in one arbitration may constitute evidence in the other; yet, that does not result in the agreement being "null and void" or rendering the agreement incapable of performance. It was submitted that unworkability is not a ground afforded by law makers to thwart obligations characterised by the Supreme Court as "indefeasible" rights to arbitral proceedings nor can the court, through an interpretive mechanism create exceptions (from the obligation to relegate parties to arbitration) when no explicit ground exists. Doing so would not only distort the statute but eventually undermine obligations accepted by parties to international agreements, with open eyes.
Doing so would not only distort the statute but eventually undermine obligations accepted by parties to international agreements, with open eyes. As observed by the Supreme Court "incapacity" is not inconvenience. The learned counsel submitted that the above decision squarely answers the contention with regard to multiplicity of proceedings. 14.7 It was submitted that the second important aspect of the matter is that according to the plaintiffs, two issues are not covered under the arbitration agreement. Firstly, the obligations under the Confidentiality Agreement and secondly, on the ground that the nature of the reliefs is beyond the scope of arbitration because the plaintiffs are seeking specific performance of the Term Sheet which an Arbitration Tribunal cannot give and the court can. Elaborating upon the said aspects, it was submitted that the obligations under the Confidentiality Agreement are covered by the obligations of confidentiality under the Term Sheet which clearly indicates the parties' intent to resort to arbitration to resolve such disputes. It was submitted that the Term Sheet can be considered to include Montblanc and its affiliates to be covered under the Confidentiality Agreement as it is wide and comprehensive. It was submitted that on a perusal of the reliefs claimed in the suit, it is apparent that the Confidentiality Agreement and the confidentiality clause in the Term Sheet are integral and interlinked and that the action is in respect of a matter which the parties have agreed to arbitrate. As regards the contention that since the Term Sheet is not binding and only a court can grant relief on the principle of legitimate expectation or the like, reference was made to the averments made in paragraphs 31 to 33 of the plaint to submit that the dispute relates to the interpretation of the Term Sheet and that the Arbitration Tribunal can always interpret the clauses of the Term Sheet and the rights and obligations flowing therefrom. 14.8 It was submitted that every aspect of the plaint read with the relief reveals that the action is in respect of a matter which parties have agreed to arbitrate. The contention that there are third parties is contrary to their own case in the plaint, inasmuch as, the intent of the parties is clear that business was arranged through various entities all of whom were obliged to perform. Therefore, all the parties can be referred to arbitration.
The contention that there are third parties is contrary to their own case in the plaint, inasmuch as, the intent of the parties is clear that business was arranged through various entities all of whom were obliged to perform. Therefore, all the parties can be referred to arbitration. Reference was made to the decision of the Chancery Division in Fulham Football Club (1987) Ltd. v. Richards and another, (2011) 2 ALL ER 112 and more particularly, paragraph 82 thereof. It was submitted that in the facts of the present case, there is no option for the court but to refer the matter to arbitration. Insofar as the contention that the appellants have not discharged the onus under section 45 of the Act, it was submitted that the appellants cannot prove the negative and it is for the person who asserts that the arbitration agreement is null, void, inoperative and incapable of being performed, to prove the same as he is the one who is opposing the reference. Referring to paragraph 63 of the decision of the Supreme Court in the case of Chloro Controls (supra), it was submitted that it is for the non-applicant to take a plea that the arbitration agreement is null and void or inoperative or incapable of being performed. Referring to the reply filed by the respondents - plaintiffs in response to the application under section 45 of the Act, it was submitted that no plea has been taken therein that the agreement was null and void, inoperative and incapable of being performed, and despite that to contend that there is such an obligation cannot be accepted. It was submitted that the decision of the Supreme Court in the case of Enercon (India) Ltd. v. Enercon Gmbh (supra) would be squarely applicable to the facts of the present case.
It was submitted that the decision of the Supreme Court in the case of Enercon (India) Ltd. v. Enercon Gmbh (supra) would be squarely applicable to the facts of the present case. Insofar as the contention that only a composite reference can be made in relation to a suit where there are a number of causes of action, reference was made to paragraph 96 of the decision of the Supreme court in the case of Chloro Controls (supra) wherein the court has held that examining from the point of view of the legislative intent and the intent of the framers of the Statute, that is, the necessity to encourage arbitration, the court is required to exercise its jurisdiction in a pending action, to hold the parties to the arbitration clause and not to permit them to avoid their bargain of arbitration by bringing civil action involving multifarious causes of action, parties and prayers. It was submitted that the said decision completely answers the contention that there has to be a composite reference only. It was submitted that on facts, the pleadings in the plaint are hazy and the plaintiffs seek to derive advantage without clarifying or establishing the ouster of section 45 on the facts of the case. In conclusion, it was submitted that the plaintiffs have jumped through causes of action and stated that they are interlinked. Simply because there are non-parties, section 45 cannot be ousted. Merely because there are other parties, the same would not involve splitting up of causes of action. That there are no independent claims or agreements and hence, there is no legal sequiter. It was submitted that the entire case of the plaintiffs is that their agreements are with the Richemont Group. Thus, they were always parties though not named and have such an interlinking relationship with the claim as against them and the signatories to the agreement and that they are liable because of the legal relations of the parties inter se. It was submitted that under the circumstances, all the defendants would be parties to the arbitration agreement and hence, there is no bar to referring the matter to arbitration.
It was submitted that under the circumstances, all the defendants would be parties to the arbitration agreement and hence, there is no bar to referring the matter to arbitration. It was, accordingly, urged that in the absence of it being established that the arbitration agreements are null and void, inoperative and incapable of being performed, the disputes are required to be referred to arbitration in terms of the arbitration clause contained in the respective agreements. 15. Dealing with the decisions on which reliance had been placed by the learned counsel for the appellants, Mr. Kamal B. Trivedi, learned counsel for the respondent No.1 submitted that in an application under section 45 of the Act, the burden is on the applicant to show that the third party is a party who is a non-signatory and is a party by showing the interlinking of relationship. Unless the same is complied with, section 45 of the Act cannot be invoked. It was submitted that all previous decisions of the Supreme Court have to fall in line with the decision of the Supreme Court in Chloro Controls (supra). It was submitted that the Supreme Court in paragraphs 90 and 93 of the said decision deals with the theory of doctrine of 'Group of Companies'. That in paragraph 157, the court has held that there may be one composite arbitration and this can be done only if it is demonstrated that there is a mother agreement and all other ancillary agreements are intrinsically linked therewith. It was submitted that complete guidelines have been given by the Supreme Court in paragraph No.99 and 165.2 of the said decision as to how section 45 of the Act can be complied with and how the burden is to be discharged. It was submitted that the appellants have failed to fall within the four corners of the decision of the Supreme Court in the case of Chloro Controls (supra) and hence, no reference can be made under section 45 of the Act and the appeal deserves to be dismissed. Insofar as the other decisions on which reliance had been placed by the learned counsel, it was submitted that the same have no applicability to the facts of the present case. 16. Mr.
Insofar as the other decisions on which reliance had been placed by the learned counsel, it was submitted that the same have no applicability to the facts of the present case. 16. Mr. S.N. Shelat, learned counsel appearing on behalf of the respondent No.2 countered the decision of the Chancery Bench in Fulham Football Club (supra) by placing reliance upon the decision of the Singapore High Court in the case of Silica Investors Ltd. v. Tomolugen Holdings Ltd and others, (2014) SGHC 101, wherein it has been held that the inherent consensual nature of arbitration, resting on an agreement between the parties, necessarily limits its application to third parties. Consistent with this theory is the confidential nature of arbitration - it only involves the parties to the agreement, the public and third parties are not entitled to witness the proceedings nor are they, subject to certain exceptions, entitled to the documents generated by the process. In theory, the decision of the Arbitral Tribunal can only bind the parties to the arbitration agreement. What an Arbitral Tribunal has no power to do is to make orders that are binding on third parties. The court held that in the absence of a contractual agreement to refer matters to adjudication by a Tribunal other than a court, the plaintiff is entitled to avail itself of the court's processes. The court observed that under the Singapore law, the referral of matters to an arbitrator is purely consensual process. There is no power to otherwise order that the parts of the dispute not caught by the arbitration clause and those against the other defendants not party to it to also be heard at an arbitration or by the arbitrator as part of the court's process. 17. The facts have already been noted hereinabove. The plaintiffs namely, the respondents No.1 to 6 herein instituted the above referred suit seeking the reliefs which have been set out extensively hereinabove. In the proceedings of the said case, the appellants herein moved an application under section 45 of the Arbitration Act for referring the disputes forming the subject matter of the suit to arbitration under the Distribution Agreements, the Franchise Agreements and the Term Sheet before granting any sort of interim or final reliefs in favour of the plaintiffs.
In the proceedings of the said case, the appellants herein moved an application under section 45 of the Arbitration Act for referring the disputes forming the subject matter of the suit to arbitration under the Distribution Agreements, the Franchise Agreements and the Term Sheet before granting any sort of interim or final reliefs in favour of the plaintiffs. The trial court after hearing the learned advocates for the respective parties has rejected the application filed by the appellants on the following grounds: The two Distribution Agreements, Franchise Agreements, Term Sheet, First Side Agreement and the Second Side Agreement have an arbitration clause whereas the Confidentiality Agreement does not have an arbitration clause; the arbitration clause under the Term Sheet is under the ICC Rules, the arbitration initiated by the defendants is at Geneva under the Swiss Arbitration Rules; in view of section 45 of the Act and the facts and circumstances, all the defendants and plaintiffs are not parties to each and every agreement; the plaintiffs have prayed against the defendants jointly and severally and there are different causes of action against different defendants; the court has to see the role of each defendant which can be decided only after leading evidence; the defendants No.1, 2 and 4 have filed the application under section 45 of the Act and have initiated arbitration proceedings, whereas the other defendants are not parties in the said arbitration proceedings; the plaintiffs may appear in the arbitration proceedings but in the absence of the other defendants, the Arbitration Tribunal would not be in a position to decide the claims of the plaintiffs; Defendants No.5 and 6 appeared in the suit but did not support the application of the defendants No.1, 2 and 4; though the fact that the application under section 45 of the Act is pending before the court, the defendants have, without waiting for its outcome, initiated arbitration proceedings which shows the bad intention of the defendants; the Term Sheet has an arbitration clause which is governed by the Indian law as per the ICC Rules whereas the proceedings have been initiated by the defendants under the Swiss Rules, therefore, different arbitration rules would be applicable to different agreements which cannot be decided by one and the same Tribunal; if the parties go for arbitration in respect of different agreements, they would have to go before different Tribunals and would suffer monetary loss, witnesses would have to remain present before different Arbitration Tribunals and the parties would be subjected to harassment; the plaintiffs have filed the suit against the defendants seeking various remedies and the defendants have an opportunity to defend the same and can raise counter claim in respect of the remedy claimed before the Tribunal, consequently, both the plaintiffs and the defendants would get equal opportunity without any difficulty or harassment and get substantial justice from the same forum; the Arbitrator cannot go beyond the arbitration agreement but the civil court has a right to decide and resolve disputes arising out of the terms and conditions of the agreements as well as the other disputes which do not come within the purview of the agreements.
The trial court has further found that the Confidentiality Agreement does not have an arbitration clause and hence, the dispute in respect thereof cannot be referred to arbitration. Therefore, merely because some of the agreements have arbitration clauses, it would not be proper to refer the matter to arbitration. While deciding the disputes between the parties, the court must see which forum is better and workable to decide all issues and disputes in one place without any hardship to the respective parties. The plaintiffs filed the suit first and the defendants initiated arbitration proceedings thereafter. All the issues raised by the defendants before the Arbitration Tribunal can also be raised in the suit and remedy can be asked for in which case no party will suffer any hardship for presenting their case. These, in essence and substance, are the findings recorded by the trial court while rejecting the application made by the appellants under section 45 of the Act. 18.
These, in essence and substance, are the findings recorded by the trial court while rejecting the application made by the appellants under section 45 of the Act. 18. In the backdrop of the facts and contentions noted hereinabove, it emerges that the application made by the appellants under section 45 of the Act has been resisted by the respondents No.1 to 6 - original plaintiffs on the ground that the plaint is based on a fraud perpetrated by the defendants and the Arbitral Tribunal would not be in a position to adjudicate the plea of fraud while a civil court can do so; the reliefs claimed in the suit are composite viz., the claims have been raised against different or all defendants under different agreements and unless a common reference is possible in respect of the disputes raised in the plaint, in the light of the decision of the Supreme Court in the case of Chloro Controls (supra) reference of the disputes to arbitration under section 45 of the Act is not permissible; reliefs have been claimed against defendants some of whom are not parties to the arbitration agreement and, hence, in the absence of a single agreement covering all the issues and since a composite reference cannot be made by invoking the mother agreement or interlinking documents or 'Group of Companies' doctrine as explained in Chloro Controls (supra), the action cannot be referred to arbitration since it would amount to splitting up causes of action and fracturing the suit which would result in multiplicity of proceedings; and the Term Sheet being a nonbinding agreement, the Arbitral Tribunal would not grant reliefs under such Term Sheet; and in view of various inconsistencies in the different agreements, the arbitration clause has become inoperative and incapable of performance. 19. The first contention raised, therefore, is that the prayers in the suit being based upon allegations of fraud, the same cannot be referred to arbitration as such disputes are not arbitrable. In this connection, reference may be made to the decision of the Supreme Court in the case of Swiss Timing Limited v. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677 , on which reliance has been placed by the learned counsel for the appellants, wherein it has been held thus: "19. In my opinion, the observations in Hindustan Petroleum Corpn. Ltd. (2003) 6 SCC 503 , lay down the correct law.
In my opinion, the observations in Hindustan Petroleum Corpn. Ltd. (2003) 6 SCC 503 , lay down the correct law. Although, reference has been made to the aforesaid observations in N. Radhakrishan, (2010) 1 SCC 72 , but the same have not been distinguished. A two- Judge Bench of this Court in P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539 had earlier considered the scope of the provisions contained in Section 8 and observed as follows: "8. In the matter before us, the arbitration agreement covers all the disputes between the parties in the proceedings before us and even more than that. As already noted, the arbitration agreement satisfies the requirements of Section 7 of the new Act. The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom. There is no question of stay of the proceedings till the arbitration proceedings conclude and the award becomes final in terms of the provisions of the new Act. All the rights, obligations and remedies of the parties would now be governed by the new Act including the right to challenge the award. The court to which the party shall have recourse to challenge the award would be the court as defined in clause (e) of Section 2 of the new Act and not the court to which an application under Section 8 of the new Act is made. An application before a court under Section 8 merely brings to the court's notice that the subject-matter of the action before it is the subject-matter of an arbitration agreement. This would not be such an application as contemplated under Section 42 of the Act as the court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent court within the meaning of Section 2(e) of the new Act." 20. This judgment in P. Anand Gajapathi case was not even brought to the notice of the Court in N. Radhakrishnan. In my opinion, the judgment in N. Radhakrishnan is per incuriam on two grounds: firstly, the judgment in Hindustan Petroleum Corpn. Ltd. though referred to has not been distinguished but at the same time is not followed also.
This judgment in P. Anand Gajapathi case was not even brought to the notice of the Court in N. Radhakrishnan. In my opinion, the judgment in N. Radhakrishnan is per incuriam on two grounds: firstly, the judgment in Hindustan Petroleum Corpn. Ltd. though referred to has not been distinguished but at the same time is not followed also. The judgment in P. Anand Gajapathi Raju was not even brought to the notice of this Court. Therefore, the same has neither been followed nor considered. Secondly, the provisions contained in Section 16 of the Arbitration Act, 1996 were also not brought to the notice by this Court. Therefore, in my opinion, the judgment in N. Radhakrishnan does not lay down the correct law and cannot be relied upon. 25. As noticed above, the concept of separability of the arbitration clause/agreement from the underlying contract has been statutorily recognised by this country under Section 16 of the Arbitration Act, 1996. Having provided for resolution of disputes through arbitration, parties cannot be permitted to avoid arbitration, without satisfying the Court that it will be just and in the interest of all the parties not to proceed with the arbitration. Section 5 of the Arbitration Act provides that the Court shall not intervene in the arbitration process except in accordance with the provisions contained in Part I of the Arbitration Act. This policy of least interference in arbitration proceedings recognises the general principle that the function of courts in matters relating to arbitration is to support arbitration process. A conjoint reading of Section 5 and Section 16 would make it clear that all matters including the issue as to whether the main contract was void/voidable can be referred to arbitration. Otherwise, it would be a handy tool available to the unscrupulous parties to avoid arbitration, by raising the bogey of the underlying contract being void." Thus, the court in the above case has held that the previous decision of the Supreme Court in the case of N. Radhakrishnan (supra) does not lay down the correct law and cannot be relied upon. That having provided for resolution of disputes through arbitration, parties cannot be permitted to avoid arbitration without satisfying the court that it will be just and in the interest of all the parties not to proceed with the arbitration.
That having provided for resolution of disputes through arbitration, parties cannot be permitted to avoid arbitration without satisfying the court that it will be just and in the interest of all the parties not to proceed with the arbitration. That on a conjoint reading of section 5 and section 16 of the Arbitration Act, it is clear that all matters including the issue as to whether the main contract was void or voidable can be referred to arbitration. 19.1 In World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd. (supra), a similar contention was raised before the Supreme Court that the arbitration agreement was inoperative or incapable of being performed as allegations of fraud could be inquired into by the court and not by the Arbitrator. The court held that the authorities on the meaning of the words "inoperative or incapable of being performed" do not support such contention. The words "inoperative or incapable of being performed" in section 45 of the Act have been taken from Article II(3) of the New York Convention. The court referred to the meaning of the words "inoperative or incapable of being performed" used in the New York Convention as explained by Redfern and Hunter on International Arbitration (Fifth Edition) published by the Oxford University Press wherein it has been stated thus: "At first sight, it is difficult to see a distinction between the terms "inoperative" and "incapable of being performed". However, an arbitration clause is inoperative where it has ceased to have effect as a result, for example, of a failure by the parties to comply with a time limit, or where the parties have by their conduct impliedly revoked the arbitration agreement. By contrast, the expression "incapable of being performed" appears to refer to more practical aspects of the prospective arbitration proceedings. It applies, for example, if for some reason it is impossible to establish the arbitral tribunal." The court further referred to an article titled "The New York Convention, 1958 - An Overview" published by Albert Jan Van Den Berg wherein it has been stated that the words "null and void" may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue influence.
The word "inoperative" can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties. The words "incapable of being performed" would seem to apply to those cases where the arbitration cannot be effectively set into motion. This may happen where the arbitration clause is too vaguely worded or other terms of the contract contradict the parties' intention to arbitrate, as in the case of the so-called forum selection clauses. Even in these cases, the courts interpret the contract provisions in favour of arbitration. Reference was also made to the book "Recognition and Conferment of Foreign Arbitral Awards: A Global Commentary on the New York Convention" wherein it has, inter alia, been stated that the term "inoperative" refers to cases where the arbitration agreement has ceased to have effect by the time the court is asked to refer the parties to arbitration. For example, the arbitration agreement ceases to have effect if there has already been an arbitral award or a court decision with res judicata effect concerning the same subject matter and parties. However, the mere existence of multiple proceedings is not sufficient to render the arbitration agreement inoperative. Additionally, the arbitration agreement can cease to have effect if the time limit for initiating the arbitration or rendering the award has expired, provided that it was the parties' intent no longer to be bound by the arbitration agreement due to the expiration of its time limit. The court, accordingly, held that the arbitration agreement does not become "inoperative or incapable of being performed" where allegations of fraud have to be inquired into and that the court cannot refuse to refer the parties to arbitration as provided in section 45 of the Act on the ground that allegations of fraud have been made by the party which can only be inquired into by the court and not by the arbitrator. The court observed that N. Radhakrishan v. Maestro Engineers & Ors., AIR 2010 SC (Supp) 307 and Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406 , were decisions rendered in the context of domestic arbitration and not in the context of arbitration under the New York Convention to which section 45 of the Act applies.
The court observed that N. Radhakrishan v. Maestro Engineers & Ors., AIR 2010 SC (Supp) 307 and Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, AIR 1962 SC 406 , were decisions rendered in the context of domestic arbitration and not in the context of arbitration under the New York Convention to which section 45 of the Act applies. In case of such arbitrations covered by the New York Convention, the court can decline to make a reference of a dispute covered by the arbitration agreement only if it comes to the conclusion that the arbitration agreement is null and void, inoperative or incapable of being performed, and not on the ground that allegations of fraud or misrepresentation have to be inquired into while deciding the disputes between the parties. 19.2. In the facts of the above case, the Division Bench of the High Court of Bombay had also held that as allegations of fraud and serious malpractices on the part of the appellant therein were in issue, it is only the court which can decide these issues through furtherance of judicial evidence by either party and these issues cannot be gone into by the arbitrator. The Supreme Court held that section 45 of the Act does not provide that the court will not refer the parties to arbitration if the allegations of fraud have to be inquired into. Section 45 provides that it is only if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed, it will decline to refer the parties to arbitration. 19.3 Adverting to the facts of the present case, a perusal of the averments made in the plaint shows that the allegations of fraud relates to Montblanc's representation of investment and buying shares and then backing out. According to the plaintiffs, on account of such inducement on the part of the defendants, the plaintiffs were required to spend huge advertisement and promotional expenses though they did not have the requisite funds to incur such expenses. On a reading of the allegations made in the plaint, it appears that the allegation of fraud is inextricably linked with the Term Sheet of which specific performance is sought. Essentially therefore, the dispute raised in the suit relates to the Term Sheet.
On a reading of the allegations made in the plaint, it appears that the allegation of fraud is inextricably linked with the Term Sheet of which specific performance is sought. Essentially therefore, the dispute raised in the suit relates to the Term Sheet. It may be noted that while fraud is alleged in respect of the Term Sheet, the agreement is not sought to be avoided but damages for breach of representation and assurances have been sought. The question as to whether there is a breach of the conditions of the Term Sheet is clearly a matter of arbitration. The case of the plaintiffs that the defendants have fraudulently backed out from the conditions of the Term Sheet can be examined by the Arbitral Tribunal and it cannot be said that on account of the allegations made in the plaint relating to fraud, it is not possible to refer the matter to arbitration. 20. The next ground raised on behalf of the plaintiffs is that the reliefs claimed in the suit are composite viz., the claims have been raised against different defendants or all defendants under different agreements and that all the defendants are not parties to the arbitration agreements and hence, since composite reliefs have been claimed against nonparties to the arbitration agreement, the dispute cannot be referred to arbitration. Before entering into the merits of the contention, it may be germane to refer to the reliefs claimed in the suit which have already been set out extensively hereinabove. A perusal of the reliefs claimed shows that the first prayer is for damages of Rs.217,96,00,000/- with interest at the rate of 18% per annum. The second relief is for returning the confidential information supplied under the Confidentiality Agreement as well as the confidentiality clause contained in the Term Sheet and, therefore, relates to two agreements namely, the Confidentiality Agreement and the Term Sheet. The third relief is to restrain the defendants from using the confidential information supplied under the Confidentiality Agreement as well as the confidentiality clause contained in the Term Sheet. This relief also, therefore, relates to both, the Confidentiality Agreement as well as the Term Sheet. The fourth relief sought for is to restrain the defendants from dealing with the wholesalers, retailers or shop-in-shop of the plaintiffs which arises out of and in relation to the various agreements entered into between the parties.
This relief also, therefore, relates to both, the Confidentiality Agreement as well as the Term Sheet. The fourth relief sought for is to restrain the defendants from dealing with the wholesalers, retailers or shop-in-shop of the plaintiffs which arises out of and in relation to the various agreements entered into between the parties. The fifth relief is to restrain the defendants from dealing with the employees. This dispute is not independent of the relationship between the parties which arise out of the various agreements entered into between them. The sixth relief prayed for is not to obstruct the business being carried on by the plaintiffs of distribution, wholesale and retail of Montblanc products. This relief, therefore, relates to the Distribution Agreements and the Franchise Agreements. The seventh relief prayed for is to order the defendants No.1 to 5 and 7 and 8 to specifically perform the Term Sheet and to pay an amount of Euro 7,500,000/- to the plaintiffs No.2 to 6 and Euro 2,500,000/- to the plaintiff No.1 and to direct defendant No.9 to join in such specific performance. This relief, therefore, specifically relates to the Term Sheet. The eighth relief is for implementation of the agreement comprised in the Term Sheet. The ninth relief is to declare the termination letters dated 15th March, 2014 being Mark 4/36/1 and 3/36/2 to be illegal, null and void and not binding upon the plaintiffs. This relief relates to the Distribution and Franchise Agreements. The tenth relief is to order the defendants No.1 to 5, 7 and 8 to supply to the plaintiffs Montblanc products. The continuance of supply of Montblanc products, therefore, depends upon the preceding prayer namely, that if the termination is set aside, such relief would follow, therefore, the same also relates to the Distribution and Franchise Agreements. 20.1 On a plain reading of the reliefs claimed in the suit, it is apparent that by and large, the reliefs claimed arise out of the Distribution Agreements, the Franchise Agreements and principally from the Term Sheet. Two of the reliefs claimed, partly arise out of the Confidentiality Agreement which does not contain an arbitration clause. The reliefs prayed for clearly indicate that while the plaintiffs have not entered into any agreement with the defendants No.3 and 5 to 8, they have claimed reliefs against all of them based on the Distribution Agreements, Franchise Agreements and the Term Sheet.
The reliefs prayed for clearly indicate that while the plaintiffs have not entered into any agreement with the defendants No.3 and 5 to 8, they have claimed reliefs against all of them based on the Distribution Agreements, Franchise Agreements and the Term Sheet. Therefore, the reliefs claimed against these parties are also referable to the said agreements. 20.2 At this juncture, reference may be made to the contents of the plaint and more particularly, paragraph (2) thereof wherein it has been stated thus: 2. Defendant No.7 is a Switzerland based holding Company. Defendant No.8 is a major shareholder of Defendant No.7. Defendant No.7 through its various subsidiaries including Defendants No.1 to 5 designs, manufactures, distributes and sells, inter alia, jewellery, watches, leather goods, jewellery, writing instruments and accessories. Defendant No.7 has organised its business activities in to various groups. Defendant No.7 and subsidiaries or holding companies are called 'the Richemont Group'. (Reference in the Plaint to the Richemont Group means reference to Defendants No.1 to 7, their holding companies and/or subsidiaries unless the context otherwise requires). The Richemont Group carries on businesses and owns various brands, inter alia, Montblanc, Raume and Mercier, Cartier, Piaget, Alfred Dunhill and more." Thus, though the plaintiffs have entered into agreements only with the defendants No.1, 2 and 4, the suit has been instituted against the respondents No.1 to 8 considering them to be a group called the Richemont Group. Though it has been contended that except for defendants No.1, 2 and 4, the plaintiffs have not entered into any agreement with the remaining defendants and hence, no reference can be made to arbitration qua the said defendants, the suit has been instituted against all the said defendants based on the very same agreements to which they are not signatories and which, except for Confidentiality Agreement, contain arbitration clauses. 20.3 Thus, the legal relationship between the parties has been set out by the plaintiffs in the plaint itself. While the plaintiffs on the basis of the very agreements which contain an arbitration clause have instituted a composite suit against all the defendants as a group called the Richemont Group, insofar as the invocation of the provisions of section 45 of the Act for referring the dispute to arbitration is concerned, they have contended that all the defendants are not parties to the arbitration agreement and as such, the dispute cannot be referred to arbitration.
The validity of such contention is what arises for consideration before this court. 20.4 At this juncture, reference may be made to certain observations of the Supreme Court in the case of Chloro Controls (supra) wherein it has been held thus:- Legal Relationship 97. Now, we should examine the scope of the concept of 'legal relationship' as incorporated in Article II(1) of the New York Convention vis-a-vis the expression "any person 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 Law and Practice of International Commercial Arbitration, Alan Redfern and Martin Hunter, 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 or tortious liability rather than by the law of contract. 99. Having examined both the abovestated views, we are of the considered opinion that it will be the facts of a given case that would act as precept to the jurisdictional forum as to whether any of the stated principles should be adopted or not.
99. Having examined both the abovestated views, we are of the considered opinion that it will be the facts of a given case that would act as precept to the jurisdictional forum as to whether any of the stated 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. 100. 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. 102. Joinder of non signatory parties to arbitration is not unknown to the arbitration jurisprudence. Even the ICCA's Guide to the Interpretation of the 1958 New York Convention also provides for such situation, stating that when the question arises as to whether binding a non-signatory to an arbitration agreement could be read as being in conflict with the requirement of written agreement under Article I of the Convention, the most compelling answer is "no" and the same is supported by a number of reasons. 103. Various legal bases may be applied to bind a nonsignatory to an arbitration agreement: 103.1 The first theory is that of implied consent, third-party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities. 103.2 The second theory includes the legal doctrines of agent-principal relations, apparent authority, piercing of veil (also called the "alter ego"), joint venture relations, succession and estoppel. They do not rely on the parties' intention but rather on the force of the applicable law.
They apply to private as well as public legal entities. 103.2 The second theory includes the legal doctrines of agent-principal relations, apparent authority, piercing of veil (also called the "alter ego"), joint venture relations, succession and estoppel. They do not rely on the parties' intention but rather on the force of the applicable law. Thus, the Supreme Court has held that joinder of non-signatory parties to arbitration is not unknown to arbitration jurisprudence and that various legal bases may be applied to bind a non-signatory to an arbitration agreement. Before the Supreme Court, it had been contended that reference, even of non-signatory party could be made to arbitration and upon such reference, the proceedings of an action before the court should be stayed. The principle of bifurcation of cause of action, as contemplated under CPC, cannot stricto sensu apply to section 45 of the 1996 Act in view of the non-obstante language of the section. It was also contended that parties or issues, even if outside the scope of arbitration agreement, would not per se render the arbitration clause inoperative. The court referred to its previous decision in the case of Sumitomo Corporation v. CDS Financial Services (Mauritius) Ltd. and Others, (2008) 4 SCC 91 , and observed that it was a case dealing with the matter where the proceedings under sections 397 and 398 of the Companies Act had been initiated and the Company Law Board had passed an order. The denial of arbitration reference was based upon the reasoning that disputes related to joint venture agreement to which parties were not signatory and the said agreement did not even contain the arbitration clause. On the other hand, it was the other agreement entered into by different parties which contained the arbitration clause. The court took notice of the fact that in paragraph 20 of the said decision, the court had observed that a party to an arbitration agreement has to be a party to the judicial proceedings and then alone it will fall within the ambit of section 2(h) of the 1996 Act. The court (in Chloro Controls) was of the view that the observations made in Sumitomo Corporation do not appear to be correct. Section 2(h) only says that "party" means a party to the arbitration agreement.
The court (in Chloro Controls) was of the view that the observations made in Sumitomo Corporation do not appear to be correct. Section 2(h) only says that "party" means a party to the arbitration agreement. This expression falls in the Chapter dealing with definitions and would have to be construed along with the other relevant provisions of the Act. The court held that when one reads section 45 in the light of section 2(h), the interpretation given by the court in Sumitomo Corporation does not stand the test of reasoning. Section 45 in explicit language permits the parties who are claiming through or under a main party to the arbitration agreement to seek reference to arbitration. This is so, by fiction of law, contemplated in the provision of section 45 of the 1996 Act. The court observed that the language of section 45 is incapable of being construed narrowly 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. The court, accordingly, held that the statement made in para 20 of its decision in Sumitomo Corporation does not enunciate the correct law. In the aforesaid premises, the contention that since some of the defendants in the suit are not parties to the arbitration agreement and the parties cannot be referred to arbitration does not merit acceptance. 21. The next question that arises for consideration is as to whether on facts, it can be stated that all the defendants herein fall within the ambit of section 45 of the Act so as to warrant reference of the disputes to arbitration. In this regard, reference may be made to the pleadings and more particularly, paragraph 31 of the plaint, wherein it has been stated thus: "All conditions precedent of the Term Sheet was complied with to the satisfaction of the Richemont Group. The Definitive Agreements were required to be drawn up by the Richemont Group. The plaintiffs were ready and willing to execute the Definitive Agreements.
The Definitive Agreements were required to be drawn up by the Richemont Group. The plaintiffs were ready and willing to execute the Definitive Agreements. At this juncture, it is pertinent to note that though Term Sheet provided a clause prescribing it as non-binding, but at the same time, it casts an obligation upon the parties to execute the Definitive Agreements once the conditions precedent are complied with. It is submitted that the parties have always abided by it in letter and spirit and have adhered in giving the Term Sheet its fullest effect. It may further be noted that subsequent conduct and representations of Richemont Group, pursuant to execution Term Sheet, induced the Plaintiff to even alter its position irrevocably. Under the circumstances, it is submitted that Term Sheet was duly complied with and execution of Definitive Agreements was merely a formality. It is submitted that there is no reason for the Richemont Group not to enter and execute the Definitive Agreement, after advancing and inducing the plaintiffs to the stage of no return." Thus, the prayer for executing the Definitive Agreement is sought to be made qua the entire group as a whole. Indisputably, such prayer relates to the Term Sheet to which all the plaintiffs and the defendant No.4, are parties. On a reading of the contents of the plaint as a whole, it is apparent that all the averments made in the plaint refer to the Richemont Group as a whole and there is no reference to any individual defendant nor has any independent role been ascribed to any of them.
On a reading of the contents of the plaint as a whole, it is apparent that all the averments made in the plaint refer to the Richemont Group as a whole and there is no reference to any individual defendant nor has any independent role been ascribed to any of them. 21.1 In the opinion of this court, while it is true that the Supreme Court in the case of Chloro Controls (supra) was dealing with a case where there was a joint venture under a mother agreement and all other agreements were ancillary and for the purpose of the mother agreement, the said decision cannot be read as laying down any proposition of law to the effect that section 45 of the Act can be invoked in case of multi-party and multiple agreements only when there is a mother agreement and all other agreements are ancillary to such agreements and that in all cases where there are multiple and multi-party agreements involved in a suit, a composite reference for deciding all the disputes has to be made to a single Arbitral Tribunal as is sought to be contended on behalf of the respondents - plaintiffs. What the Supreme Court has laid down in Chloro Controls (supra), to the extent the same is relevant for the present purpose, can be extracted thus: "69. We have already noticed that the language of Section 45 is at a substantial variance to the language of Section 8 in this regard. In Section 45, the expression "any person" clearly refers to the legislative intent of enlarging the scope of the words beyond" the parties" who are signatory to the arbitration agreement. Of course, such applicant should claim through or under the signatory party. Once this link is established, then the court shall refer them to arbitration. The use of the word "shall" would have to be given its proper meaning and cannot be equated with the word "may", as liberally understood in its common parlance. The expression "shall" in the language of the Section 45 is intended to require the Court to necessarily make a reference to arbitration, if the conditions of this provision are satisfied. To that extent, we find merit in the submission that there is a greater obligation upon the judicial authority to make such reference, than it was in comparison to the 1940 Act.
To that extent, we find merit in the submission that there is a greater obligation upon the judicial authority to make such reference, than it was in comparison to the 1940 Act. However, the right to reference cannot be construed strictly as an indefeasible right. One can claim the reference only upon satisfaction of the prerequisites stated under Sections 44 and 45 read with Schedule I of the 1996 Act. Thus, it is a legal right which has its own contours and is not an absolute right, free of any obligations/limitations. 70. Normally, arbitration takes place between the persons who have, from the outset, been parties to both the arbitration agreement as well as the substantive contract underlining (sic underlying) that agreement. But, it does occasionally 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. xxxxxxx" "71. Though the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the courts under the English Law have, in certain cases, also applied the "group of companies doctrine". This doctrine has developed in the international context, whereby an arbitration agreement entered into by a company, being one within a group of companies, can bind its non-signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates. This theory has been applied in a number of arbitrations so as to justify a tribunal taking jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement. [Russell on Arbitration (23rd Edn.)] 72. This evolves the principle that a non-signatory party could be subjected to arbitration provided these transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non-signatory parties.
[Russell on Arbitration (23rd Edn.)] 72. This evolves the principle that a non-signatory party could be subjected to arbitration provided these transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non-signatory parties. In other words, "intention of the parties" is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties. 73. A non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court answers the same in the affirmative, the reference of even non-signatory parties would fall within the exception afore-discussed. 74. In a case like the present 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 interlinked with the other agreements that they are incapable of being beneficially performed without performance of the others or severed from the rest.
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 interlinked 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 factors. 75. We may notice that this doctrine does not have universal acceptance. Some jurisdictions, for example, Switzerland, have refused to recognise the doctrine, while others have been equivocal. The doctrine has found favourable consideration in the United States and French jurisdictions. The US Supreme Court in Ruhrgas AG v. Marathon Oil Co., 526 US 574 (1999), discussed this doctrine at some length and relied on more traditional principles, such as, the non signatory being an alter ego, estoppel, agency and third-party beneficiaries to find jurisdiction over the non-signatories. 76. The Court will have to examine such pleas with greater caution and by definite reference to the language of the contract and intention of the parties. In the case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of non-signatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or interdependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties to refer signatory as well as non-signatory parties to arbitration. The principle of "composite performance" would have to be gathered from the conjoint reading of the principal and supplementary agreements on the one hand and the explicit intention of the parties and the attendant circumstances on the other." "82. The Court in Olympus Superstructures case, (1999) 5 SCC 651 , also took the view that a dispute relating to specific performance of a contract in relation to immovable property could be referred to arbitration and Section 34(2) (b)(i) of the 1996 Act was not attracted.
The Court in Olympus Superstructures case, (1999) 5 SCC 651 , also took the view that a dispute relating to specific performance of a contract in relation to immovable property could be referred to arbitration and Section 34(2) (b)(i) of the 1996 Act was not attracted. This finding of the Court clearly supports the view that where the law does not prohibit the exercise of a particular power, either the Arbitral Tribunal or the Court could exercise such power. The Court, while taking this view, has obviously rejected the contention that a contract for specific performance was not capable of settlement by arbitration under the Indian law in view of the statutory provisions. Such contention having been rejected, supports the view that we have taken. 83. Where the Court which, on its judicial side, is seized of an action in a matter in respect of which the parties have made an arbitration agreement, once the required ingredients are satisfied, it would refer the parties to arbitration but for the situation where it comes to the conclusion that the agreement is null and void, inoperative or incapable of being performed. These expressions have to be construed somewhat strictly so as to ensure that the court returns a finding with certainty and on the correct premise of law and fact as it has the effect of depriving the party of its right of reference to arbitration. But once the court finds that the agreement is valid then it must make the 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." "85. ... ... as far as the Indian Law is concerned, Section 45 is a legislative mandate and does not admit of any ambiguity. We must take note of the aspect of Indian law that Chapter I of Part II of the 1996 Act does not contain any provision analogous to Section 8(3) under Part I of the Act. In other words, under the Indian Law, greater obligation is cast upon the courts to determine whether the agreement is valid, operative and capable of being performed at the threshold itself.
In other words, under the Indian Law, greater obligation is cast upon the courts to determine whether the agreement is valid, operative and capable of being performed at the threshold itself. Such challenge has to be a serious challenge to the substantive contract or to the agreement, as in the absence of such challenge, it has to be found that the agreement was valid, operative and capable of being performed; the dispute would be referred to arbitration. (State of Orissa v. Klockner and Co., (1996) 8 SCC 377 )." "93. 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 settlement by arbitration. Once the agreement is there and the Court is seized of an action in relation to such subject-matter, then on the request of one of the parties, it would refer the parties to arbitration unless the agreement is null and void, inoperative or incapable of performance. 94. Still, the legislature opted to word Section 45 somewhat dissimilarly. Section 8 of the 1996 Act also uses the expression "parties" simpliciter without any extension. In significant contradistinction, Section 45 uses the expression "one of the parties or any person claiming through or under him" and "refer the parties to arbitration", whereas the rest of the language of Section 45 is similar to that of Article II(3) of the New York Convention. The court cannot ignore this aspect and has to give due weightage to the legislative intent. It is a settled rule of interpretation that every word used by the legislature in a provision should be given its due meaning. To us, it appears that the legislature intended to give a liberal meaning to this expression. 95. The language of Section 45 has wider import.
It is a settled rule of interpretation that every word used by the legislature in a provision should be given its due meaning. To us, it appears that the legislature intended to give a liberal meaning to this expression. 95. The language of Section 45 has wider import. It refers to the request of a party and then refers to an Arbitral tribunal, while under Section 8(3) it is upon the application of one of the parties that the court may refer the parties to arbitration. There is some element of similarity in the language of Section 8 and Section 45 read with Article II(3). The language and expressions used in Section 45, "any person claiming through or under him" including in legal proceedings may seek reference of all parties to arbitration. Once the words used by the legislature are of wider connotation or the very language of the section is structured with liberal protection then such provision should normally be construed liberally. 96. Examined from the point of view of the legislative object and the intent of the framers of the statute, i.e., the necessity to encourage arbitration, the court is required to exercise its jurisdiction in a pending action, to hold the parties to the arbitration clause and not to permit them to avoid their bargain of arbitration by bringing civil action involving multifarious causes of action, parties and prayers." 21.2 Adverting to the facts of the case, the plaintiffs have sought composite reliefs in a composite suit whereas all contentions in the plaint primarily relate to the Term Sheet. Different causes of action and multiple agreements have been combined in the suit and it has been contended that unless a composite reference is possible, the disputes cannot be referred to arbitration under section 45 of the Act. The facts as emerging from the record reveal that though the Distribution Agreements and the Franchise Agreements have been entered into only between the defendants No.1 and 2 and the plaintiff No.1, the Term Sheet between defendant No.4 and all the plaintiffs and the Confidentiality Agreement between the plaintiff No.1 and the defendant No.1, consolidated reliefs have been prayed by all the plaintiffs against the Richemont Group as a whole without ascribing any definite role to any of the defendants.
Thus, as per the say of the plaintiffs themselves, as evidenced by the pleadings contained in the plaint, all the agreements relate to all the plaintiffs and all the defendants. If in relation to each of the agreements, the plaintiffs seek relief against each of the defendants, in the opinion of this court, the plaintiffs cannot be heard to say that for the purpose of reference of the disputes to arbitration, such parties are third parties and the differences in the arbitration agreements cannot be referred to arbitration. 22. It has been contended on behalf of the plaintiffs with reference to rule 3 of Order I of the Code which makes provision for "who may be joined as defendants" as well as Rule 3 Order 2 of the Code which provides for "joinder of causes of action" and lays down that save as otherwise provided, a plaintiff may unite in the same suit several causes of action against the same defendant or the same defendants jointly, or any plaintiff having causes of action in which they are jointly interested against the same defendant or the same defendants may unite the causes of action in the same suit that it is permissible for the plaintiffs to combine different causes of action against different defendants in one suit. Reliance has been placed upon the decision of the Supreme Court in the case of Smt. Ganga Bai v. Vijay Kumar (supra) for the proposition that there is an inherent right in every person to bring a suit of a civil nature and unless the suit is barred by statute, one may, at one's peril, bring a suit of one's choice. It has been submitted that it is, therefore, permissible for the plaintiffs to claim diverse reliefs in a suit instituted by them against different defendants and that there is no bar against institution of such suit under the Code.
It has been submitted that it is, therefore, permissible for the plaintiffs to claim diverse reliefs in a suit instituted by them against different defendants and that there is no bar against institution of such suit under the Code. True it is, that there is no bar against institution of such suit under the Code, but it is equally true that merely because the plaintiffs have combined various causes of action against different parties in one suit, in the absence of a plea that the arbitration agreement is null and void, inoperative or incapable of being performed, the same would not be a bar against referring the disputes to arbitration in terms of the arbitration clauses contained in the different agreements in respect of which reliefs have been claimed in the suit. In the opinion of this court, as rightly submitted by the learned counsel for the appellants, unless the Legislature makes it a fetter, the mere fact that allowing the application under section 45 of the Act would result in multiple arbitrations would not bar reference of the disputes to arbitration, if the arbitration agreements in question are not found to be null and void, inoperative or incapable of performance. 23. It has been contended that since the suit is composite, one composite reference is required to be made to one single Arbitral Tribunal and, therefore, unless it is possible to refer the matter to one single Arbitral Tribunal, it is not permissible to make a reference in respect of the subject matter of a composite suit. It has also been contended that in the light of the decision of the Supreme Court in the case of Chloro Controls (supra) wherein there was a mother agreement and all the other agreements were ancillary thereto for the purpose of the mother agreement, it is only in such cases that a composite reference can be made in respect of multi-party and multiple agreements. Reference has been made to paragraph 76 of the said decision wherein it has been observed that the court will have to examine such pleas with greater caution and by definite reference to the language of the contract and the intention of the parties. In case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of non-signatory parties for reference to arbitration.
In case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of non-signatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or interdependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties to refer signatory as well as non-signatory parties to arbitration. The principle of "composite performance" would have to be gathered from the conjoint reading of the principal and supplementary agreements on the one hand and the explicit intention of the parties and the attendant circumstances on the other. On behalf of the plaintiffs it has been vehemently contended that in the facts of the present case, there is no mother agreement and no supplementary agreement and that each agreement is an independent agreement executed at different points of time and the agreements are not intrinsically linked with each other and hence, no composite reference can be made in respect of such agreements and, therefore, no reference can be made under section 45 of the Act in the present case. In the opinion of the court, as discussed hereinabove, the Supreme Court in the case of Chloro Controls (supra) does not lay down any absolute proposition of law that in case of multiple and multi-party agreements which contain different arbitration clauses, the parties can be referred to arbitration only where a composite reference is possible and where the agreements are intrinsically intermingled and interdependent upon each other. In the opinion of this court, it is only if the agreements are intrinsically interwoven and intermingled and there is one principal agreement and the other agreements are ancillary thereto, that the question of a composite reference arises. But when different agreements have been entered into at different points of time providing for different arbitral proceedings, the question of a composite reference would not arise and reference has to be made in terms of the arbitration clauses contained in the relevant agreements.
But when different agreements have been entered into at different points of time providing for different arbitral proceedings, the question of a composite reference would not arise and reference has to be made in terms of the arbitration clauses contained in the relevant agreements. On a plain reading of section 45 of the Act, there is nothing to indicate any requirement that the parties can be referred to arbitration only when there is a single agreement containing a single arbitration clause and not where there are different agreements having different arbitration clauses. Merely because the plaintiffs seek to file a combined suit in relation to various agreements containing different arbitration clauses, the same would not in any manner affect the applicability of section 45 of the Act which mandates that when an adjudicating authority is seized of an action in a matter in respect of which parties have made an agreement referred to in section 44, it shall at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the agreement is null and void, inoperative or incapable of being performed. In the facts of the present case, it is not even the case of the plaintiffs that the agreements which contain the arbitration clauses are null and void, inoperative or incapable of being performed. Under the circumstances, unless the court finds that the agreements are null and void, inoperative or incapable of being performed, the mandate of section 45 of the Act is that the parties have to be referred to arbitration in terms of the arbitration clause contained in the agreements. 24. The next question that arises for consideration is whether on the facts of this case, the parties are required to be referred to arbitration under the various arbitration agreements. To answer the said question, several contentions will be required to be addressed. (a) Whether the disputes can be referred to arbitration when some of the parties are not parties to the arbitration agreement? (b) In the absence of any arbitration clause, whether the claim relating to the Confidentiality Agreement can be referred to arbitration? (c) Whether reference to different Arbitral Tribunals under the respective agreements would amount to splitting up the cause of action and fracturing the suit?
(b) In the absence of any arbitration clause, whether the claim relating to the Confidentiality Agreement can be referred to arbitration? (c) Whether reference to different Arbitral Tribunals under the respective agreements would amount to splitting up the cause of action and fracturing the suit? (d) The Term Sheet being a non-binding agreement, whether the Arbitral Tribunal would grant any relief? (e) Since the suit instituted by the plaintiffs is for specific performance of the Term Sheet, whether such relief can be granted by the Arbitral Tribunal? (f) Whether the arbitration agreements are inoperative or incapable of being performed? (g) Whether the conduct of the appellants disentitles them to the grant of the relief prayed for? (h) Whether reference of disputes to arbitration can be denied on the ground of hardship to the parties? 25. The first question that arises for consideration in the aforesaid context is whether the disputes can be referred to arbitration when some of the parties are not parties to the arbitration agreement? On behalf of the plaintiffs it has been contended that a mere legal relationship between the parties, that is, the defendants is not sufficient and that the "Group of Companies" doctrine as envisaged by the Supreme Court in the case of Chloro Controls (supra) is required to be satisfied for the purpose of making a reference to arbitration in an action involving multiple agreements and multi-party agreements wherein some of the parties are not parties to the arbitration agreements. Reference was made to paragraph 71 of the above decision wherein the court has observed that the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the courts under the English law have, in certain cases, also applied the 'Group of Companies' doctrine. This doctrine has developed in the international context, whereby an arbitration agreement entered into by a company, being one within a group of companies, can bind its non-signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates. This theory has been applied in a number of arbitrations so as to justify a tribunal taking jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement.
This theory has been applied in a number of arbitrations so as to justify a tribunal taking jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement. It has been contended that heavy onus lies on that party which invokes the 'Group of Companies' doctrine 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. It has been emphatically argued that the appellants have miserably failed to discharge such onus to show that the other defendants who are non-signatories to the arbitration agreement are claiming through or under a signatory party as contemplated under section 45 of the Act and that in the absence of the appellants having discharged the onus, it is not permissible to refer the parties to arbitration. In the opinion of this court, the 'Group of Companies' doctrine is required to be invoked in a case where a composite reference is sought, but in a case like the present one, where there are multiple arbitration agreements containing distinct arbitration clauses and reference is sought in terms of the arbitration clauses, and not a composite reference to a single Arbitral Tribunal, it is not necessary to invoke the 'Group of Companies' doctrine. The 'Group of Companies' doctrine is one of many doctrines which can be used to combine more than one party. Even in paragraph 71 of Chloro Controls (supra) what has been observed by the Supreme Court is that though the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the courts under the English law have, in certain cases, also applied the 'Group of Companies' doctrine. In the facts of the present case, it is the case of the appellants that the non-parties are parties who are claiming under or through them and hence, the present case falls within the first part of the above observation namely, the scope of arbitration agreement is limited to the parties who entered into it and those claiming under or through them. Of course, it is for the appellants to establish that the non-parties are parties who are claiming under or through them for the purpose of bringing them within the ambit of section 45 of the Act.
Of course, it is for the appellants to establish that the non-parties are parties who are claiming under or through them for the purpose of bringing them within the ambit of section 45 of the Act. 25.1 While it has been contended on behalf of the respondents - plaintiffs that the appellants have not discharged the onus under section 45 of the Act as laid down by the Supreme Court in the above decision, in the opinion of this court, when it is the plaintiffs' own case that the nonparties are being sued through those who are parties to the agreement and the non-signatories are not disputing the same, there is no onus on the appellants/defendants. The plaintiffs, therefore, cannot be heard to say that they are referring to others through the agreement but for the purpose of arbitration, they must be excluded. As rightly submitted by the learned counsel for the appellants, apart from the doctrine of 'Group of Companies', the third party comes in (a) by virtue of section 45 of the Act; (b) the intention of the parties to bind both, the signatories as well as the non-signatories as envisaged in paragraph 72 of the decision in Chloro Controls (supra); (c) implied and express consent; (d) the plaintiffs' own case that the other non-signatories are being sued through or under the signatories and under the covenants of various agreements; and (e) the agreements would indicate that it was also understood that the agreement was with the group though each component may not be named. 26. The next question is whether in the absence of any arbitration clause, the claim relating to the Confidentiality Agreement can be referred to arbitration? The learned counsel for the plaintiffs, have vehemently contended that some of the reliefs claimed in the suit relate to the Confidentiality Agreement which does not contain an arbitration clause and hence, the dispute relating to the Confidentiality Agreement cannot be referred to arbitration. In this context, reference may be made to the Term Sheet as well as the Confidentiality Agreement. A perusal of the Confidentiality Agreement dated 28th January, 2010 shows that the same has been arrived at so that the parties to the agreement may have an opportunity to discuss matters concerning the plaintiff No.1 in particular, in view of the possible acquisition of the minority interest by the respondent namely, Montblanc Simplo GMBH.
A perusal of the Confidentiality Agreement dated 28th January, 2010 shows that the same has been arrived at so that the parties to the agreement may have an opportunity to discuss matters concerning the plaintiff No.1 in particular, in view of the possible acquisition of the minority interest by the respondent namely, Montblanc Simplo GMBH. Clause (7) of the agreement says that the agreement shall be governed by, and enforced in accordance with, the laws of Germany. Clause (8) says that the parties thereto recognise expressly the exclusive jurisdiction of the courts of Hamburg. The Term Sheet dated 1st February, 2011 has been entered into between the defendant No.4-Montblanc International GmbH and Entrack International Trading Pvt. Ltd. namely, the plaintiff No.1. As per the clauses of the Term Sheet, MB means Montblanc International GmbH or any other entity designated by it under the terms of the Definitive Agreements. The expression "parties" means the Company (plaintiff No.1), MB and the Entrack Promoters (i.e. Mr. Dilip Doshi and his relatives) whose identities are set out in Schedule I who are individually referred to as Party and collectively as parties. The Term Sheet is signed by the defendant No.4 and the plaintiff No.1 and the plaintiff No.2 on behalf of the Entrack Promoters. Clause (6) thereof which relates to "Intellectual Property" says that the Company agrees and acknowledges that all rights, title and interest in the brand "MONTBLANC" is the exclusive property of Montblanc Simplo GmbH. The Confidentiality Agreement with Montblanc Simplo GMBH and the plaintiff No.1 was entered into in view of the possible acquisition of a minority interest by the defendant No.1 in the plaintiff No.1. Subsequently, it appears that instead of acquiring a minority interest, the parties proposed to enter into a joint venture and hence, the Term Sheet came to be executed in relation to a proposed business venture with defendant No.4 or its affiliates. On a conjoint reading of the Confidentiality Agreement and the confidentiality clause in the Term Sheet, it appears that the obligations covered in the Confidentiality Agreement are covered by the obligations under the Term Sheet. The alleged breach relating to any confidential information is also covered under the Term Sheet's relevant clause which deals with protection against disclosure of confidential information.
The alleged breach relating to any confidential information is also covered under the Term Sheet's relevant clause which deals with protection against disclosure of confidential information. The confidential information which was purportedly supplied between the years 2008 to 2011 for the proposed joint venture is comprehensively covered under the Term Sheet and has a similarly worded confidentiality clause protecting the first respondent's purportedly confidential information shared with the appellants during the course of discussion/negotiations in connection with the proposed joint venture. Hence, any information which may have been provided in the course of discussions/negotiations for the joint venture is covered by the Term Sheet and any dispute in this regard has to be referred to arbitration as per the arbitration clause contained in the Term Sheet. The Term Sheet and the Confidentiality Agreement are, therefore, integrally connected with each other. Essentially, therefore, all the disputes are covered by arbitration. 27. The next question that arises for consideration is whether reference to different Arbitral Tribunals under the respective agreements would amount to splitting up the cause of action and fracturing the suit. The contention raised on behalf of the plaintiffs is that it is not permissible to bifurcate the subject matter of the suit as the same would amount to splitting up and fracturing the suit. In this regard, reliance has been placed upon the decision of the Supreme Court in the case of Sukanya Holdings (supra) for the proposition that there is no provision in the Act that when the subject matter of the suit includes subject-matter of arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitrators. Much emphasis has been laid on the above decision to contend that parties cannot be referred to arbitration in view of the fact that the cause of action against parties to the arbitration and non-parties is joint and several; the case of the plaintiffs against all the defendants is inextricably linked and granting an order under section 45 of the Act would tantamount to splitting up the cause of action and fracturing the suit.
The issue as to whether parties can be referred to arbitration is, therefore, also required to be considered in the context of the decision of the Supreme Court in the case of Sukanya Holdings (supra). 27.1 In Sukanya Holdings (supra), the prayer for splitting up the cause of action between the parties to the arbitration agreement and the non-parties was rejected by the Supreme Court as such a course was not contemplated under section 8 of the Act. The court in paragraph 13 of the said decision held that there is no provision in the Act that when the subject matter of the suit includes subject matter of arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. It was also held that there is also no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitrators. It may be noticed that the decision in Sukanya Holdings was rendered in the context of section 8 of the Act which falls within Part I of the Act. The language and ambit of section 8 and section 45 are different. Section 8 says that a judicial authority before which an action is brought in a matter which is subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the subsistence of the dispute, refer the parties to arbitration. Sub-section (2) thereof says that 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. Thus, if a party applies later than when submitting his first statement on the subsistence of the dispute to refer the parties to arbitration or the application is not accompanied by the original arbitration agreement or a duly certified copy thereof, the court is not required to refer the matter to arbitration. Whereas, under section 45 of the Act, unless the court renders a finding that the arbitration agreement is null and void, inoperative or incapable of performance, there is no discretion vested in the court not to refer the parties to arbitration. Once there is a valid arbitration agreement and a request is made by one of the parties or any person claiming through or under him, there is a mandate to refer the matter to arbitration.
Once there is a valid arbitration agreement and a request is made by one of the parties or any person claiming through or under him, there is a mandate to refer the matter to arbitration. Moreover, as discussed hereinabove, in the present case, the subject matter of the suit is covered by different arbitration agreements which the parties have voluntarily and consciously entered into. Hence, as held by the Supreme Court in paragraph 96 of Chloro Controls (supra), examined from the point of view of the legislative object and the intent of the framers of the statute, that is, the necessity to encourage arbitration, the court is required to exercise its jurisdiction in a pending action, to hold the parties to the arbitration clause and not to permit them to avoid their bargain of arbitration by bringing civil action involving multifarious causes of action, parties and prayers. Therefore, by merely clubbing up different causes of action under different arbitration agreements, the plaintiffs cannot be permitted to avoid their bargain of arbitration. Moreover, the causes of action under each arbitration agreement being different, reference to different Arbitral Tribunals under the relevant arbitration clauses cannot be said to amount to splitting up the causes of action or parties. This court is in agreement with the view taken by the Delhi High Court in Usha Drager Private Limited (supra) wherein it has been held that the decision of the Supreme Court in Sukanya Holdings (supra) was rendered in respect of an arbitration agreement to which Part I of the Act applied, whereas the case before it was one governed not by Part I, but, Part II of the said Act. The court held that the said decision was rendered on a different fact situation and upon an interpretation of section 8, which was inapplicable to the said case. Here, it is section 45 of the Act, which falls in Part II of the Act which needs to be considered. The requirements are different and, therefore, need a different approach altogether. 27.2 Mr.
Here, it is section 45 of the Act, which falls in Part II of the Act which needs to be considered. The requirements are different and, therefore, need a different approach altogether. 27.2 Mr. Kamal Trivedi, learned counsel for the first respondent has submitted that paragraphs 15 to 17 of Sukanya Holdings (supra) would be applicable to the facts of the present case namely, that the suit should be in respect of a matter which the parties have agreed to refer a dispute which comes within the ambit of the arbitration agreement, and that where a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of section 8. The words "a matter" indicate that the entire subject matter of the suit should be subject to arbitration. It was submitted that the expression "in a matter which is subject matter of an arbitration agreement" is common to both section 8 as well as section 45 of the Act and hence, the dictum of paragraphs 15 and 16 would apply even under section 45. In this regard, it may be noted that section 8 of the Act refers to an action which is brought in a matter which is the subject matter of arbitration whereas section 45 of the Act refers to an action in a matter in respect of which parties have made an agreement referred to in section 44, that is, to submit to arbitration all differences which have arisen between them in respect of a defined legal relationship and whether contractual or not, concerning a subject matter capable of settlement by arbitration. Thus, there is no commonality in the language employed under section 8 and section 45 of the Act as is sought to be suggested. The decision in the case of Sukanya shall, therefore, have to be read as being applicable in the context of section 8 of the Act alone. 28.
Thus, there is no commonality in the language employed under section 8 and section 45 of the Act as is sought to be suggested. The decision in the case of Sukanya shall, therefore, have to be read as being applicable in the context of section 8 of the Act alone. 28. Another argument that has been advanced on behalf of the plaintiffs is that the Term Sheet being a nonbinding agreement, the Arbitral Tribunal would consider the agreement to be a non-binding one and not grant any relief but they can go to the civil court and ask for such relief and that since the Term Sheet is not binding, only a court can grant relief on the principle of legitimate expectation or the like. It has also been contended that the plaintiffs have a civil right to tell the court that they have gone through the ordeal of compliance of the terms of the agreement and the defendants cannot resile from the same. According to the learned counsel for the plaintiffs, the court can go beyond the contract and adjudicate the civil rights of the plaintiffs on the principle of legitimate expectation which would not be possible in arbitral proceedings. In this regard it may be noted that the relevant averments as regards the existence of a clause in the Term Sheet providing that the agreement is a non-binding one and the submissions in that regard are found in paragraph 31 of the plaint which reads as follows: "31. All conditions precedent of the Term Sheet was complied with to the satisfaction of the Richemont Group. The Definitive Agreements were required to be drawn up by the Richemont Group. The Plaintiffs were ready and willing to execute the Definitive Agreement. At this juncture it is pertinent to note that, though Term Sheet provided a clause prescribing it as not binding but at the same time it casts an obligation upon the parties to execute the Definitive Agreements once the conditions precedent are complied with. It is submitted that the parties have always abided by it in letter and spirit and have adhered in giving the Term Sheet its fullest effect. It may further be noted that subsequent conduct and representation of the Richemont Group, pursuant to execution Term Sheet, induced Plaintiff to even alter its position irrevocably.
It is submitted that the parties have always abided by it in letter and spirit and have adhered in giving the Term Sheet its fullest effect. It may further be noted that subsequent conduct and representation of the Richemont Group, pursuant to execution Term Sheet, induced Plaintiff to even alter its position irrevocably. Under the circumstances, it is submitted that there is no reason for Richemont Group not to enter and execute the Definitive Agreement, after advancing and inducing the Plaintiffs to a stage of no return." 28.1 On a plain reading of the contents of the plaint, it is apparent that the disputes raised relate to the interpretation of the Term Sheet and therefore, the Arbitral Tribunal can always interpret the clauses of the Term Sheet and the rights and obligations flowing therefrom. Insofar as the Term Sheet not being a binding agreement is concerned, the scope of the matter whether it be before the Arbitral Tribunal or the civil court would still be the same, namely, what relief can be granted to the plaintiffs under the non-binding agreement. Therefore, the contention that a claim in respect of the non binding agreement can be made before the civil court and not before the Arbitral Tribunal despite there being an arbitration clause which is not covered by the non-binding clause, does not merit acceptance. It may further be reiterated that the overriding principle for the court in arbitration is to see whether there is an intention to arbitrate. The court is not required to see whether the agreement is binding or not. What the court is required to see is whether there is a valid arbitration agreement. The intention of the parties has to be determined on the basis of the clauses contained in the arbitration agreement. The above view is fortified by the view taken by the Supreme Court in the case of Enercon (India) Ltd. v. Enercon Gmbh (supra) wherein it has been held thus:- 77. We find considerable merit in the submissions made by Dr. Singhvi. It cannot be disputed that there is a legal relationship between the parties of a long standing. Section 44 of the Indian Arbitration Act, 1996 applies to arbitral awards on differences between persons arising out of legal proceedings (sic relationships).
We find considerable merit in the submissions made by Dr. Singhvi. It cannot be disputed that there is a legal relationship between the parties of a long standing. Section 44 of the Indian Arbitration Act, 1996 applies to arbitral awards on differences between persons arising out of legal proceedings (sic relationships). Such a relationship may be contractual or not, so long as it is considered as commercial under the laws in force in India. Further, that legal relationship must be in pursuance of an agreement, in writing, for arbitration, to which the New York Convention applies. The court can decline to make a reference to arbitration in case it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. There are no pleadings to that effect in the plaint. The Daman Trial Court findings that the contract is null and void and not based on free consent were rendered in the absence of relevant pleadings. There is a mention in one of the e-mails that Dr Wobben has taken advantage of his friendship with Mr Yogesh Mehra. But that seems to be more of a sulk than a genuine grievance. Even if one accepts the truth of such a statement, the same is not reflected in the pleadings. Therefore, no serious note could be taken of that statement at this stage. 78. The Daman Appellate Court upon reconsideration of the pleadings found that there is no plea to the effect that the agreement is null, void or incapable of being performed. Savant, J. has not examined the pleadings as the issue with regard to the underlying contract has been left to be examined by the Arbitral Tribunal. Before us also, it is not the plea of the appellants that the arbitration agreement is without free consent, or has been procured by coercion, undue influence, fraud, misrepresentation or was signed under a mistake. In other words, it is not claimed that the agreement is null and void, inoperative and incapable of being performed as it violates any of the provisions under Sections 14, 15, 16, 17, 18, 19, 19-A and 20 of the Indian Contract Act, 1872. The submission is that the matter cannot be referred to arbitration as the IPLA, containing the arbitration clause/agreement, is not a concluded contract.
The submission is that the matter cannot be referred to arbitration as the IPLA, containing the arbitration clause/agreement, is not a concluded contract. This, in our opinion, would not fall within the parameters of an agreement being "null and void, inoperative or incapable of being performed", in terms of Sections 14, 15, 16, 17, 18, 19 and 20 of the Indian Contract Act, 1872. These provisions set out the impediments, infirmities or eventualities that would render a particular provision of a contract or the whole contract void or voidable. Section 14 defines free consent; Section 15 defines coercion in causing any person to enter into a contract. Section 16 deals with undue influence. Fraud in relation to a contract is defined under Section 17; whereas misrepresentation is defined and explained under Section 18. Section 19 states that: "19. Voidability of agreements without free consent - When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused." Section 19-A gives the party who was unduly influenced to enter into a contract an option similar to the one provided by the preceding section. Section 20 makes an agreement void where both the parties thereto are under a mistake as to a matter of fact. In our opinion, all the aforesaid eventualities refer to fundamental legal impediments. These are the defences to resist a claim for specific performance of a concluded contact; or to resist a claim for damages for breach of a concluded contract. We agree with Savant, J. that the issue as to whether there is a concluded contract between the parties can be left to the Arbitral Tribunal, though not for the same reasons. 79. In our opinion, all the issues raised by the appellants about the non-existence of a concluded contract pale into insignificance in the face of "Heads of Agreement on the proposed IPLA dated 23-5-2006". Clause 3 of the Heads of Agreement provides as under: "3. Governing law and jurisdiction 3.1 This paragraph is legally binding. 3.2 This Heads of Agreement is (and all negotiations and any legal agreements prepared in connection with the IPLA shall be) governed by and construed in accordance with the law of Germany.
Clause 3 of the Heads of Agreement provides as under: "3. Governing law and jurisdiction 3.1 This paragraph is legally binding. 3.2 This Heads of Agreement is (and all negotiations and any legal agreements prepared in connection with the IPLA shall be) governed by and construed in accordance with the law of Germany. 3.3 The parties irrevocably agree that Clause 18 of the proposed draft IPLA shall apply to settle any dispute or claim that arises out of or in connection with this memorandum of understanding and negotiations relating to the proposed IPLA." A bare perusal of this clause makes it abundantly clear that the parties have irrevocably agreed that Clause 18 of the proposed IPLA shall apply to settle any dispute or claim that arises out of or in connection with this memorandum of understanding and negotiations relating to IPLA. 80. It must also be noticed here that the relationship between the parties formally commenced on 12-1-1994 when the parties entered into the first SHA and TKHA. Even under that SHA, Article XVI inter alia provided for resolution of disputes by arbitration. The TKHA also contained an identically worded arbitration clause, under Article XIX. This intention to arbitrate has continued without waiver. In the face of this, the question of the concluded contract becomes irrelevant, for the purposes of making the reference to the Arbitral Tribunal. It must be clarified that the doubt raised by the appellant is that there is no concluded IPLA i.e. the substantive contract. But this can have no effect on the existence of a binding arbitration agreement in view of Clause 3. The parties have irrevocably agreed to resolve all the disputes through arbitration. Parties cannot be permitted to avoid arbitration, without satisfying the Court that it would be just and in the interest of all the parties not to proceed with arbitration. Furthermore in arbitration proceedings, the courts are required to aid and support the arbitral process, and not to bring it to a grinding halt. If we were to accept the submissions of Mr. Nariman, we would be playing havoc with the progress of the arbitral process. This would be of no benefit to any of the parties involved in these unnecessarily complicated and convoluted proceedings. 81. In the facts of this case, we have no hesitation in concluding that the parties must proceed with the arbitration.
Nariman, we would be playing havoc with the progress of the arbitral process. This would be of no benefit to any of the parties involved in these unnecessarily complicated and convoluted proceedings. 81. In the facts of this case, we have no hesitation in concluding that the parties must proceed with the arbitration. All the difficulties pointed out by Mr Rohinton Nariman can be addressed by the Arbitral Tribunal. 82. Further, the arbitration agreement contained in Clauses 18.1 to 18.3 of IPLA is very widely worded and would include all the disputes, controversies or differences concerning the legal relationship between the parties. It would include the disputes arising in respect of the IPLA with regard to its validity, interpretation, construction, performance, enforcement or its alleged breach. Whilst interpreting the arbitration agreement and/or the arbitration clause, the court must be conscious of the overarching policy of least intervention by courts or judicial authorities in matters covered by the Indian Arbitration Act, 1996. In view of the aforesaid, it is not possible for us to accept the submission of Mr Nariman that the arbitration agreement will perish as the IPLA has not been finalised. This is also because the arbitration clause (agreement) is independent of the underlying contract i.e. the IPLA containing the arbitration clause. Section 16 provides that the arbitration clause forming part of a contract shall be treated as an agreement independent of such a contract. 88. In our opinion, the courts have to adopt a pragmatic approach and not a pedantic or technical approach while interpreting or construing an arbitration agreement or arbitration clause. Therefore, when faced with a seemingly unworkable arbitration clause, it would be the duty of the court to make the same workable within the permissible limits of the law, without stretching it beyond the boundaries of recognition. In other words, a common sense approach has to be adopted to give effect to the intention of the parties to arbitrate. In such a case, the court ought to adopt the attitude of a reasonable business person, having business common sense as well as being equipped with the knowledge that may be peculiar to the business venture. The arbitration clause cannot be construed with a purely legalistic mindset, as if one is construing a provision in a statute. 90.
In such a case, the court ought to adopt the attitude of a reasonable business person, having business common sense as well as being equipped with the knowledge that may be peculiar to the business venture. The arbitration clause cannot be construed with a purely legalistic mindset, as if one is construing a provision in a statute. 90. It is a well-recognised principle of arbitration jurisprudence in almost all the jurisdictions, especially those following the UNCITRAL Mode Law, that the courts play a supportive role in encouraging the arbitration to proceed rather than letting it come to a grinding halt. Another equally important principle recognised in almost all jurisdictions is the least intervention by the courts. Under the Indian Arbitration Act, 1996, Section 5 specifically lays down that: "5. Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part." Keeping in view the aforesaid, we find force in the submission of Dr Singhvi that the arbitration clause as it stands cannot be frustrated on the ground that it is unworkable. 96. Similarly, other provisions contained in Sections 8, 11 and 45 of the Indian Arbitration Act, 1996 are machinery provisions to ensure that parties can proceed to arbitration provided they have expressed the intention to arbitrate. This intention can be expressed by the parties, as specifically provided under Section 7 of the Indian Arbitration Act, 1996 by an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement. Such intention can even be expressed in the pleadings of the parties such as statements of claim and defence, in which the existence of the agreement is alleged by one party and not denied by the other. In view of the above, we are of the opinion that the parties can be permitted to proceed to arbitration." 28.2 Thus, the Supreme Court, in the above decision has held that the submission that the matter cannot be referred to arbitration as IPLA, containing the arbitration clause/agreement, is not a concluded agreement, would not fall within the parameters of an agreement being "null and void, inoperative or incapable of being performed" in terms of sections 14, 15, 16, 17, 18, 19 and 20 of the Indian Contract Act, 1872.
It has been held that when parties have irrevocably agreed to resolve all disputes through arbitration, they cannot be permitted to avoid arbitration, without satisfying the court that it would be just and in the interest of all the parties not to proceed with arbitration. Furthermore, in arbitration proceedings, the courts are required to aid and support the arbitral proceedings and not bring it to a grinding halt. Moreover, as discussed earlier, it is difficult to comprehend as to how the nature of proceedings in respect of a non-binding agreement before an Arbitral Tribunal and before a civil court would be different. In the opinion of this court, the scope of a non-binding agreement either, before an Arbitral Tribunal or before a civil court, would remain the same. 29. The next question that arises for consideration is that when the suit instituted by the plaintiffs is for specific performance of the Term Sheet, whether the Arbitral Tribunal can grant such relief? On behalf of the respondents - plaintiffs, it has been contended that the plaintiffs have instituted an action before the civil court seeking specific performance of the Term Sheet and that such reliefs cannot be granted by the Arbitral Tribunal and can be granted only by the civil court. In this regard, reference may be made to paragraph 82 of the decision of the Supreme Court in the case of Chloro Controls (supra) wherein the court has held thus: 82. The Court in Olympus Superstructures case, (1999) 5 SCC 651 , also took the view that a dispute relating to specific performance of a contract in relation to immovable property could be referred to arbitration and Section 34(2) (b)(i) of the 1996 Act was not attracted. This finding of the Court clearly supports the view that where the law does not prohibit the exercise of a particular power, either the Arbitral Tribunal or the Court could exercise such power. The Court, while taking this view, has obviously rejected the contention that a contract for specific performance was not capable of settlement by arbitration under the Indian law in view of the statutory provisions. Such contention having been rejected, supports the view that we have taken.
The Court, while taking this view, has obviously rejected the contention that a contract for specific performance was not capable of settlement by arbitration under the Indian law in view of the statutory provisions. Such contention having been rejected, supports the view that we have taken. Thus, the Supreme Court has reiterated its view in Olympics Superstructures (P) Ltd. v. Meena Vijay Khetan (supra) by rejecting the contention that a contract for specific performance was not capable of settlement by arbitration under the Indian law and in view of the statutory provisions. Therefore, the contention that since relief of specific performance has been claimed, the Arbitral Tribunal would not be competent to decide the dispute also does not merit acceptance. 30. The next question that arises for consideration is as to whether the arbitration agreements are inoperative or incapable of being performed as contended by Mr. S. N. Shelat, learned counsel for the respondent No.2 on the ground that section 45 of the Act does not contemplate a situation where only part of the relief can be considered by the Arbitral Tribunal and the rest of the reliefs can be considered by other forum such as civil courts or arbitrator appointed under ICC Rules. According to the learned counsel, the disputes raised by the plaintiffs also relate to the Confidentiality Agreement and against defendants No.3 and 5 and 6 to 9 who are not parties to the agreement and as such, no relief can be acceded to or granted by the arbitrator. The defendants No.8 and 9 are not at all subject to arbitration clause and that the claim against them has to be decided by the civil court. That before the defendants No.8 and 9 are fastened with any liability, the civil court will have to look at the agreements including those containing arbitration clause which exercise may render its decision in direct conflict with the decision rendered by the arbitrator. Therefore, before the Arbitrator, all these claims cannot be decided while the civil court can decide all these controversies. 30.1 For the purpose of examining the merits of the above contention, reference may be made to the decision of the Delhi High Court in the case of W.P.I.L. v. NTPC Ltd. (supra) wherein the court has held thus: "29.
Therefore, before the Arbitrator, all these claims cannot be decided while the civil court can decide all these controversies. 30.1 For the purpose of examining the merits of the above contention, reference may be made to the decision of the Delhi High Court in the case of W.P.I.L. v. NTPC Ltd. (supra) wherein the court has held thus: "29. The plaintiff's contentions are not that the arbitration agreement is "null and void, inoperative or incapable of being performed"; it raises what can be termed as a bogey of "unworkability" due to separate arbitration Clauses embedded in two different agreements. True, there could be a certain element of overlapping in the disputes, which it may raise, and the allegations in one arbitration may constitute evidence in the other; yet, that does not result in the agreement being "null and void" or rendering the agreement incapable of performance. Unworkability is not a ground afforded by law makers to thwart obligations characterised by the Supreme Court as "indefeasible" rights to arbitral proceedings. Nor can the court, through an interpretive mechanism create exceptions (from the obligation to relegate parties to arbitration) when no explicit ground exists. Doing so would not only distort the statute, but eventually undermine obligations accepted by parties to international agreements, with open eyes. As explained by the Supreme Court, "incapacity" is not inconvenience. In a similar vein, while interpreting the expression "incapacity", urged by a party seeking to be excused from arbitration, while insisting on maintaining civil action, it was held, in Janos Paczy v. Haendler & Natermann GmbH 1981 (1) Lloy LR 302, by the Court of Appeal, that: In my judgment, on the true construction of these words, "incapable of being performed" relates to the arbitration agreement under the consideration. The incapacity of one party to that agreement to implement his obligations under the agreement does not, in my judgment, render the agreement one which is incapable of performance within the Section any more than the inability of a purchaser under a contract for purchase of land to find the purchase price when the time comes to complete the sale could be said to render the contract for sale incapable of performance. The agreement may becomes incapable of performance in my view if the circumstances are such that it could no longer be performed, even if both parties were ready, able and willing to perform it.... 30.
The agreement may becomes incapable of performance in my view if the circumstances are such that it could no longer be performed, even if both parties were ready, able and willing to perform it.... 30. Russel on Arbitration (twenty first Edn, Sweet & Maxwell), in Para 7-014 states this: 7-014. Third parties involved. There is no longer any scope for the court refusing a stay of proceedings on the ground that third parties are involved and that it would be preferable for the dispute to be dealt with by one tribunal (i.e. the court) in order to avoid the possibility of inconsistent decisions. This court is in agreement with the view adopted by the Delhi High Court in the above decision namely, that unworkability is not a ground afforded by law makers to thwart obligations characterised by the Supreme Court as indefeasible rights to arbitral proceedings nor can the court, through an interpretive mechanism create exceptions (from the obligation to relegate parties to arbitration) when no explicit ground exists. Doing so would not only distort the statute but eventually undermine obligations accepted by parties to international agreements with open eyes. Insofar as the reliefs claimed against defendants No.8 and 9 are concerned, a perusal of the averments made in the plaint reveal that defendant No.8 has been joined as being a major shareholder of the defendant No.7 company, whereas insofar as the defendant No.9 is concerned, no relief has been claimed against it and it has only been impleaded as a defendant on the ground of a proposed joint venture being executed with it. Therefore, the fact that defendants No.8 and 9 are not parties to the arbitration clause would not come in the way of the court in referring the parties to arbitration under section 45 of the Act once it finds that the arbitration agreements are valid and subsisting. 31. Another question that arises for consideration is as to whether the conduct of the appellants disentitles them from the grant of the reliefs prayed for in the application. In this regard, a perusal of the findings recorded by the trial court reveals that the trial court has commented upon the conduct of the defendants in hurriedly initiating arbitration proceedings without waiting for the outcome of the application or result of the application indicating the wrong and bad intention of the defendants.
In this regard, a perusal of the findings recorded by the trial court reveals that the trial court has commented upon the conduct of the defendants in hurriedly initiating arbitration proceedings without waiting for the outcome of the application or result of the application indicating the wrong and bad intention of the defendants. In the context of the above findings recorded by the trial court, it may be noted that by a termination letter dated 15th March, 2014, the defendant No.1 had informed the plaintiff No.1 that pursuant to section 8.1 of the Distribution Agreement with the plaintiff No.1 effective 1st April, 2007, the defendant No.1 formally terminates the said Distribution Agreement with effect from 30th September, 2014 (the "Termination Date"). Similarly by another letter dated 15th March, 2014, the defendant No.1 terminated the second Distribution Agreement with effect from 30th September, 2014 and also terminated each of the franchise agreements signed with the company and the authorisation to operate Montblanc boutiques as set forth in the Side Agreement signed with the company dated 11th July, 2013 with effect from the dates set out in table below the said letter. Evidently, therefore, the plaintiffs were informed of the impending termination by the communications dated 15th March, 2014 and were well aware of the same. The record of the case further reveals that by a communication dated 18th June, 2014 of the plaintiff No.2, it was stated that they are prepared to hand over the Montblanc business in India to them by 30th September, 2014 as per the letter of termination given to them. The letter also refers to break off with them from the joint venture by Montblanc and that they are merely holding the position for them till they sort out their proposed joint venture with Titan. Subsequently, by a second communication dated 19th September, 2014, the defendants No.1 and 2 informed the plaintiff No.1 that as a consequence and pursuant to the termination letters dated March, 15, 2014 and the Side Agreement dated March 21, 2014, they remind and request that Entrack ceased to operate the Montblanc boutiques enumerated thereunder on September 30, 2014.
Subsequently, by a second communication dated 19th September, 2014, the defendants No.1 and 2 informed the plaintiff No.1 that as a consequence and pursuant to the termination letters dated March, 15, 2014 and the Side Agreement dated March 21, 2014, they remind and request that Entrack ceased to operate the Montblanc boutiques enumerated thereunder on September 30, 2014. The facts reveal that the plaintiffs instituted the suit just when the appellants' right for arbitration arose and subsequently, when the appellants have filed appropriate proceedings before the Swiss Arbitral Tribunal in respect of the disputes raised by them, the plaintiffs have questioned their conduct. As noticed hereinabove, though the termination notices terminating the above referred agreements with effect from 30th September, 2014 were given on 15th March, 2014, the suit came to be instituted only four days before the deadline. Therefore, the observations made by the trial court deprecating the conduct of the defendants in filing arbitration proceedings on the ground that the same indicated wrong and bad intention on the part of the defendants do not appear to be justified. 32. Lastly, it has been contended before the trial court as well as before this court that undue hardship would be caused to the parties if they are referred to different Arbitral Tribunals under different agreements. The trial court, in the impugned judgment, has held that the Term Sheet has an arbitration clause but is governed by the Indian law and as per the ICC Rules, whereas the arbitration proceedings initiated by the defendants are under the Swiss rules and, therefore, two different arbitration rules are applicable to different agreements. So one Tribunal cannot decide all the disputes between the parties and if the parties go for arbitration, they have to move or apply before different arbitration tribunals, which goes to suggest that the parties will have to suffer monetary loss as well as keep their witnesses present before two Tribunals and get themselves harassed. Whereas the plaintiffs have filed the suit against the defendants before the court and prayed for various remedies and at the same time, the defendants have equal opportunity to defend themselves and whatever is the remedy claimed before the Tribunal has been asked for in the present suit as a counter-claim. So the plaintiffs and the defendants will get equal opportunity without any difficulty or harassment and get substantial justice from the same forum.
So the plaintiffs and the defendants will get equal opportunity without any difficulty or harassment and get substantial justice from the same forum. The question that arises for consideration in the light of the above findings recorded by the trial court is whether reference of the disputes to arbitration can be denied on the ground of hardship to the parties. 32.1 On the question of hardship, if the parties are referred to different Arbitral Tribunals under the different agreements, the Supreme Court in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. (supra) has in paragraph 106 of the judgment, held thus:- "106. Undoubtedly, an international commercial arbitration involves huge expenses, particularly where the parties have subjected the contract to a foreign law. But, that cannot be a deterrent to this Court from pronouncing on the correct approach to be adopted under Section 45 of the Act. In fact, as I have pointed out, adopting a final and determinative approach under Section 45 may not only prolong proceedings at the initial stage but also correspondingly increase costs and uncertainty for all the parties concerned. Finally, having regard to the structure of the Act, consequences arising from particular interpretations, judgments in other jurisdictions, as well as the opinion of learned authors on the subject, I am of the view that, the correct approach to be adopted under Section 45 at the pre-reference stage, is one of a prima facie finding by the trial court as to the validity or otherwise of the arbitration agreement." Thus, the court has held that the fact that international commercial arbitration involves huge expenses, particularly where the parties have subjected the contract to a foreign law, cannot be a deterrent to the court from pronouncing on the correct approach to be adopted under section 45 of the Act and that the main consideration is whether or not the arbitration agreement is valid. This court is also in agreement with the view adopted by the Delhi High Court in Usha Drager Private Ltd. (supra), wherein the court after referring to the above observations of the Supreme Court in Shin-Etsu Chemicals has held that it is apparent from a reading of the extracted version that the question of prohibitive costs would not come in the way of a reference being made under section 45.
As observed hereinabove, once the pre-requisites of section 45 of the Act have been satisfied and the court does not hold that the arbitration agreement is null and void, inoperative or incapable of being performed, there is no option for the court but to refer the matter to arbitration. 33. In the aforesaid backdrop, in the present case, what has to be established is that the requirements of section 45 read with section 44 of the Act are duly complied with. Section 45 requires that a judicial authority should be seized with an action in a matter in respect of which the parties have made an agreement referred to in section 44 of the Act. Section 44 refers to an agreement in writing for arbitration to which the convention set forth in the First Schedule applies. The First Schedule bears the heading "Convention on the Recognition and Enforcement of Foreign Arbitration Awards". Clause (1) of Article II thereof says that each contracting State shall recognise an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration. If the above requirements are satisfied, the judicial authority shall refer the parties to arbitration unless it finds that the said agreement is null and void, inoperative or incapable of being performed. 33.1 Therefore, what has to be examined is whether the arbitration agreement is in writing; whether the parties have undertaken to refer the differences which have arisen between them in respect of a defined legal relationship, whether contractual or not, to arbitration; and whether the differences relate to a subject matter which is capable of settlement by arbitration. Section 45 of the Act also provides that the judicial authority, at the request of one of the parties or any person claiming through or under him may refer the parties to arbitration. The Supreme Court in Chloro Controls (supra), has held that the expression "any person" in section 45, clearly refers to the legislative intent of enlarging the scope of the words beyond "the parties" who are signatory to the arbitration agreement. Of course, the applicant should claim through, or under the signatory. Once this link is established, then the court shall refer them to arbitration.
Of course, the applicant should claim through, or under the signatory. Once this link is established, then the court shall refer them to arbitration. The test for referring the matter to arbitration is not as to whether a composite reference is possible but whether the requirements of section 45 of the Act stand satisfied. Once the requirements of section 45 of the Act namely, that the action is in respect of a matter where parties have made an agreement as referred to in section 44 are satisfied, then unless the court finds that the agreement is null and void, inoperative or incapable of being performed, the court has no discretion but to refer the matter to arbitration. In the present case, as discussed hereinabove, there are valid and subsisting arbitration agreements in respect of the action with which the trial court is seized. The agreements are in writing and the parties have undertaken to submit to arbitration all or any of the differences which have arisen or which may arise between them in respect of the legal relationship. Each agreement operates in a different sphere and there is no inconsistency between the agreements. Though non-parties to the arbitration agreements are parties to the suit, for the reasons stated hereinabove, the intention of the parties was to bind the signatories as well as the non- signatories who are party to the suit (except defendant No.8 and 9). Insofar as defendant No.8 is concerned he has been impleaded as being a major shareholder and no specific relief has been claimed qua him and defendant No.9 has been impleaded merely on the ground of a proposed joint venture being executed with it. Section 45 of the Act does not bar reference to different Arbitral Tribunals in terms of the arbitration clauses contained in the respective agreements which the parties have voluntarily and consciously entered into and hence, it is permissible to refer the parties to arbitration under the relevant arbitration clauses under the respective agreements. The entire subject matter of the suit is covered by the arbitration agreements and hence, all the requirements for invoking section 45 of the Act stand satisfied. Under the circumstances, in the absence of any finding to the effect that the arbitration agreements are null and void, inoperative or incapable of performance, section 45 of the Act mandates that the parties be referred to arbitration.
Under the circumstances, in the absence of any finding to the effect that the arbitration agreements are null and void, inoperative or incapable of performance, section 45 of the Act mandates that the parties be referred to arbitration. The trial court was, therefore, not justified in rejecting the application made by the appellants under section 45 of the Act. 34. It may be noted that the trial court has also held that merely because some of the agreements have an arbitration clause does not mean that the matter should be referred to arbitration; that while deciding the disputes between the parties the court must see as to which forum is better and workable to decide all the issues or disputes at one place without any hardship to the respective parties. The aforesaid view of the trial court is not in consonance with the provisions of section 45 of the Act. Besides, while deciding an application under section 45 of the Act, what the court has to see is whether there is a valid and subsisting arbitration agreement. The question as to which forum is better or workable does not fall within the scope or ambit of an application under section 45 of the Act. 35. TO SUMMARISE: The contention of the plaintiffs that the defendants have fraudulently backed out from the conditions of the Term Sheet can be examined by the Arbitral Tribunal and it cannot be said that on account of the allegations made in the plaint relating to fraud, it is not possible to refer the matter to arbitration. Having regard to the fact that composite reliefs in relation to the various agreements which form the basis of the suit have been prayed against all the defendants without ascribing any definite role to any defendant, and according to the plaintiffs themselves all the parties are governed by the said agreements, the contention that since some of the defendants in the suit are not parties to the arbitration agreement, the parties cannot be referred to arbitration does not merit acceptance. Unless the legislature makes it a fetter, the mere fact that allowing the application under section 45 of the Act would result in multiple arbitrations would not bar reference of the disputes to arbitration, if the arbitration agreements in question are not found to be null and void, inoperative or incapable of performance.
Unless the legislature makes it a fetter, the mere fact that allowing the application under section 45 of the Act would result in multiple arbitrations would not bar reference of the disputes to arbitration, if the arbitration agreements in question are not found to be null and void, inoperative or incapable of performance. The Supreme Court in the case of Chloro Controls (supra) does not lay down any absolute proposition of law that in case of multiple and multi-party agreements which contain different arbitration clauses, the parties can be referred to arbitration only where a composite reference is possible and where the agreements are intrinsically intermingled and interdependent upon each other. It is only if the agreements are intrinsically interwoven and intermingled and there is one principal agreement and the other agreements are ancillary thereto, that the question of a composite reference arises. But when different agreements have been entered into at different points of time providing for different arbitral proceedings, the question of a composite reference would not arise and reference has to be made in terms of the arbitration clauses contained in the relevant agreements. The 'Group of Companies' doctrine is required to be invoked in a case where a composite reference is sought, but in a case like the present one, where there are multiple arbitration agreements containing distinct arbitration clauses and reference is sought in terms of the arbitration clauses, and not a composite reference to a single Arbitral Tribunal, it is not necessary to invoke the 'Group of Companies' doctrine. The Term Sheet and the Confidentiality Agreement are integrally connected with each other. Essentially, therefore, all the disputes are covered by arbitration agreements. By merely clubbing up different causes of action under different arbitration agreements, the plaintiffs cannot be permitted to avoid their bargain of arbitration. The causes of action under each arbitration agreement being different, reference to different Arbitral Tribunals under the relevant arbitration clauses cannot be said to amount to splitting up the causes of action or parties. Insofar as the Term Sheet not being a binding agreement is concerned, the scope of the matter whether it be before the Arbitral Tribunal or the civil court would still be the same, namely, what relief can be granted to the plaintiffs under the non-binding agreement.
Insofar as the Term Sheet not being a binding agreement is concerned, the scope of the matter whether it be before the Arbitral Tribunal or the civil court would still be the same, namely, what relief can be granted to the plaintiffs under the non-binding agreement. A contract for specific performance is capable of settlement by arbitration as observed by the Supreme Court in Chloro Controls (supra) wherein it has reiterated its view in Olympics Superstructures (P) Ltd. v. Meena Vijay Khetan (supra). Unworkability is not a ground afforded by law makers to thwart obligations characterised by the Supreme Court as indefeasible rights to arbitral proceedings nor can the court, through an interpretive mechanism create exceptions (from the obligation to relegate parties to arbitration) when no explicit ground exists. Doing so would not only distort the statute but eventually undermine obligations accepted by parties to international agreements with open eyes. Hardship is not a ground on which parties can seek to avoid agreements which they have voluntarily and consciously entered into. The sole ground on which arbitration can be avoided under section 45 of the Act is when the agreement is found to be null and void, inoperative or incapable of performance. Once the pre-requisites of section 45 of the Act have been satisfied and the court does not hold that the arbitration agreement is null and void, inoperative or incapable of being performed, there is no option for the court but to refer the matter to arbitration. The question as to which forum is better or workable does not fall within the scope or ambit of an application under section 45 of the Act. 36. In the light of the above discussion, the appeal succeeds and is accordingly allowed. The impugned order dated 19th November, 2014 passed by the 13th Additional Senior Civil Judge, Rajkot below Exhibit-16 in Special Civil Suit No.188/2014 is hereby quashed and set aside. The application (Exhibit-16) made by the appellants under section 45 of the Arbitration and Conciliation Act, 1996 is hereby allowed and the parties are referred to arbitration in accordance with the arbitration clauses contained in the respective agreements. The disputes raised in the suit shall accordingly be decided by the respective Arbitral Tribunal in accordance with the relevant rules.
The application (Exhibit-16) made by the appellants under section 45 of the Arbitration and Conciliation Act, 1996 is hereby allowed and the parties are referred to arbitration in accordance with the arbitration clauses contained in the respective agreements. The disputes raised in the suit shall accordingly be decided by the respective Arbitral Tribunal in accordance with the relevant rules. The disputes raised in the Confidentiality Agreement being covered by the Term Sheet shall be decided by the Arbitral Tribunal under the arbitration clause contained therein. 37. At this stage, Mr. Kamal B. Trivedi as well as Mr. S.N. Shelat, learned senior advocates have requested that this judgment be stayed for a period of six weeks so as to enable the respondents to approach the higher forum. The request is strongly opposed by the learned counsel for the appellants. 38. Having regard to the controversy involved in the present case, the operation of this judgment shall remain stayed for a period of eight weeks from today. The learned counsel for the respondents - original plaintiffs state that the respondents shall not press for hearing of the suit in the meanwhile. Appeal allowed.