Author: Dhruv Khurana, student at ICFAI Law School, Hyderabad.
Citation: TARB.P. 716/2019
Judgment date: 7 April, 2021
Bench: Vibhu Bakhru, J
Original copy: View
Issue in question:
- Whether an arbitration agreement exists between Indiabulls (Petitioner) and Shapoorji (Respondent) in respect to all the contracts entered between the parties?
Background of the case:
- Indiabulls (Respondent No. 1) was developing a power plant in Maharashtra and Elena (Respondent No. 2) is the wholly owned subsidiary of Indiabulls. Elena signed four contracts with Shapoorji (Petitioner) for the building of the power plant.
- The disagreement arose between the parties due to non-completion of the work and not providing services mentioned under the contracts. Petitioner issued a notice for arbitration between the parties; they wanted that the parties should accept arbitration as one step method for solving all the disputes.
- Indiabulls responded that all the contracts referred by Shapoorji in its notice invoking arbitration were four independent and separate contracts, except for one (work order agreement) and none of the contracts were signed on behalf of Indiabulls and so there was no arbitration agreement between them. Indiabulls also stated that the work order agreement does not contain any arbitration clause so they were not compelled to arbitrate.
- Elena responded that all the four contracts between the parties did not contain any arbitration clause and they all were separate and independent contracts, except one.
- The petitioner then filed the present petition under Section 11 of Arbitration and Conciliation Act, 1996.
- The court held that the respondents were directly involved in all the contracts as they played a crucial part in negotiations and were directly involved in the project. It did not matter that they were non-signatory parties as they were directly involved.
- The court referred to the case of Gvozdenovic v. United Air Lines Inc, in which the court held that the company is part of the contract if it plays an important part in the negotiations and it does not matter if their consent is implied or expressed; they play an equal part in the agreement.
- The court also referred to the case judgment of Mahanagar Telephone Nigam Ltd. v. Canara Bank, where it was observed that the circumstance in which the non-signatory party is involved is in which they are directly involved. The composite transactions, referred in this case, mean the transactions which are interlinked in nature and their performance dependent on the aid, execution or cash given to the performing party and have common objectives. In the present case there is a composite transaction involved between the parties.
- At the end, considering all the facts of the case, the court held that the respondents were directly involved in all the contracts. So, they were required to invoke arbitration with the petitioner and resolve all the issues of the contracts through the arbitration process as they were directly involved.
- The present case tells us that even non- signatory parties will be involved in the agreement even if they did not directly sign the contract as they were the direct part of the contractual negotiations.
- The arbitration agreements will exist between the parties in respect to all the contracts entered by the parties as they were directly related to the contracts and all the contracts were referred to them.
- This case is an example of the composite transaction as there is an agreement between the parties for providing all the assistance for completion of the project and so they have a valid contract between them.