Summary
The Supreme Court referred disputes under four interlinked solar-project agreements, and their parties, to arbitration. The equipment lease was the principal agreement; its arbitration clause covered the integrated commercial transaction even though the ancillary sale agreement lacked a clause. The alleged fraud was not sufficiently serious to defeat referral on the case’s facts. Pending arbitration, the appellants were jointly and severally directed to pay rent arrears and future monthly rent of Rs.28,26,000, without prejudice and subject to the final award.
Issues
- Whether an integrated transaction under four agreements could be referred to arbitration despite one agreement lacking an arbitration clause.
- Whether the pleaded fraud justified refusing referral.
- What interim protection was required pending arbitration.
Provisions considered
- Section 8, as amended in 2015, Arbitration and Conciliation Act, 1996The amended referral provision extends to persons claiming through or under a party and requires prima facie examination of the arbitration agreement. The Court referred the integrated agreements and parties, rejecting the refusal founded on treating the ancillary sale contract as the principal agreement. (¶¶ 24, 25, 26, 27, 33, 35, 37)
Held
- The supply, installation, sale and equipment-lease agreements pursued the common objective of commissioning the same solar plant. Their cross-references and allocation of obligations demonstrated an integrated transaction, with the equipment lease as the principal agreement. (¶¶ 12, 13, 14, 15, 16, 17, 21, 22, 23)
- In those circumstances, all four agreements and their parties could be covered by the arbitration clause in the principal lease, notwithstanding the sale contract’s lack of its own arbitration clause and the non-signatory position of some participants to the lease. The conclusion rested on the identified composite transaction. (¶¶ 20, 21, 22, 23, 35)
- Applying Ayyasamy as understood in this 2018 decision, mere fraud allegations did not automatically defeat arbitration. The alleged inducement to pay an excessive equipment price was not so serious as to preclude referral, and the arbitrator could examine it. The Court expressed no view on the separately pending criminal case or its quashing petition. (¶¶ 28, 29, 30, 31, 32, 33, 34)
- The parties remained free to agree on the arbitrator; failing consensus, they could approach the appropriate High Court for appointment. The Court did not itself appoint the arbitrator nominated earlier by the appellants. (¶ 37)
- To protect the respondents pending resolution, the appellants were jointly and severally liable for rent arrears and continuing rent of Rs.28,26,000 per month until disposal of arbitration. Payment was without prejudice to both sides’ contentions and subject to the arbitration outcome. (¶¶ 36, 37)
Result
Appeal allowed; High Court order set aside and all four agreements and their parties referred to arbitration. Commercial suit disposed of. Interim arrears and future-rent directions imposed subject to the arbitration outcome. No costs.