Delhi District Court
Asian Paints Limited vs M/S Greenville Welfare Association on 24 March, 2023
IN THE COURT OF MS. VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL COURTS-03),
PATIALA HOUSE COURTS, NEW DELHI
ARB. A. (Comm) No. 09/22
CNR No. DLND01-005898-2022
ASIAN PAINTS LIMITED
6-A, Shanti Nagar,
Santa Cruz (East)
Mumbai.
Through: Sh. Indresh Kumar Mishra ....... Petitioner
versus
1. M/S GREENVILLE WELFARE ASSOCIATION
C/o Parsvnath Greenville, Sector-48
Sohna Road, Gugaon.
Through its General Secretary / President /Joint Secretary
2. SAKSHI INTERIOR & CONSTRUCTION
Through its proprietor
909, 9th Floor,
Unitech Arcadia South City-II, Sector 49,
Gurgaon, Haryana. ....... Respondents
Date of institution : 14.07.2022
Date of reserving judgment : 14.03.2023
Date of decision : 24.03.2023
Appearance: Ms. Ekta Mehta & Ms. Akanksha Agarwal, Ld. Counsels for
petitioner.
Sh. Lalit Bhardwaj, Sh. Sh. Rohan Rishi Bhatnagar & Sh. Jatin
Anant Dwivedi, Ld. counsels for respondent no. 1
Sh. Sunil Mund, Ld. Counsel for respondent no. 2
JUDGMENT
1. The present appeal has been filed under Section 37 (2)
(b) of Arbitration & Conciliation Act, 1996 (hereinafter referred Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 1 of 24 as "Act") by the appellant to challenge order dated 26.02.2022 & 06.06.2022 passed by Ld. Arbitrator in AC-2248/2021 between Sakshi Interior Vs. M/s Green Valley Welfare Association and Anr praying for setting aside of order dated 26.02.2022 passed by Ld. Arbitrator impleading the appellant in aforesaid arbitral proceedings and order dated 06.06.2022 to the extent it has rejected the application for deletion of appellant from array of parties.
Facts:
2. Brief facts of the case which are necessary for adjudication of the present appeal is that the parties; Sakshi Interior (Respondent no. 2 and the claimant before Ld. Arbitrator), M/s Green Valley Welfare Association (Respondent no. 1 and the counter claimant before Ld. Arbitrator) and M/s Asian Paints Limited, appellant herein entered into a Tripartite Agreement dated 16.11.2016 (herein after referred as the Tripartite Agreement) which culminated into Work Order dated 16.11.2016 (herein after referred as the Work Order).
2.1. The abovesaid Sakshi Interior respondent no. 2 invoking the Arbitration Clause 20 in Work Order filed a Statement of Claim on 23.08.2021 for Rs. 64,99,546/- against respondent no. 1 being the outstanding amount and interest on the same from 15.09.2018 till 31.07.2021 alleging that respondent no. 1 has placed order bearing PO No. GVWA/PO/CI/03 dated Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 2 of 24 16.11.2016 (hereinafter referred as "Work Order") for exterior painting, waterproofing, seepage and civil repair of common area at Parasnath Green Villa, Sohna Road, Sector-48, Gurugram. As per the Work Order between the parties. The total value of the contract was Rs. 1,89,00,000/-. The respondent no. 2 had done not only the contracted work but has also done additional work beyond the quantity provided in Work Order and raised bills for a total amount of Rs.
2,36,71,661/-. The respondent no. 1 against the total bill of Rs. 2,36,71,661/- has paid Rs. 1,98,26,711/-. After adjustment of this amount, against the total bill amount, the respondent no. 1 is liable to make payment of Rs. 38,44,950/- to the respondent no. 2 along with interest @ 24% per annum. As stated above, the respondent no. 2 relied upon Clause 20 of the Work Order and invoked arbitration clause and sent a reference letter to the respondent no. 1 for referring the dispute to arbitration before Indian Council of Arbitration.
2.2 The respondent no. 1 filed Statement of Defence and Counter Claim against respondent no. 2 and M/s Asian Paints Limited, appellant herein on 24.01.2022. The respondent no. 1 also raised an objection that claim filed by respondent no. 2 is bad for non joinder of parties as a Tripartite Agreement dated 16.12.2016 was entered into between respondent no. 1, respondent no. 2, and the appellant. It was submitted that Respondent no. 2 is an authorized contractor of appellant (M/s Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 3 of 24 Asian Paints Limited). It is stated that M/s Asian Paints Limited had an active role to play. As per Clause 5 of the Tripartite Agreement, the technical team of respondent no. 2 and appellant had surveyed the project site and it is only thereafter the respondent no. 2 agreed to undertake the assignment as per terms & conditions of the agreement. It is also claimed that as per Clause 7 (c) the appellant had to supervise the project works. The respondent no. 1 also referred to other Clauses of Tripartite Agreement to show active participation of appellant. It is stated that in view of Tripartite Agreement, the respondent no. 2 has no locus even to refer the matter to arbitration. The respondent no. 1 filed an application before Ld. Arbitrator for impleading of M/s Asian Paints Limited (appellant). On 26.02.2020, considering that M/s Asian Paints is signatory to the Tripartite Agreement and Work Order, the existence of an arbitration agreement and submission on behalf of claimant (respondent no. 2 herein) that they have no objection to the impleadment of the said party, Ld. Arbitrator issued notice to the appellant. The appellant objected to be impleaded as a party without being heard filed an application under Order 1 Rule 10 CPC seeking deletion from array of parties. The Ld. Arbitrator vide a common order dated 06.06.2022 dismissed the application of the appellant and also allowed application filed by respondent no. 1 under Order VI Rule 17 CPC seeking to amend its counter claim.
Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 4 of 24Submissions on behalf of the appellant:
3. Aggrieved by this, the appellant has filed the present petition under Section 37 (2) (b) of the Act on the grounds that the appellant was impleaded without issuance of notice and without being heard. The Tripartite Agreement contains an arbitration clause, which is separate and distinct from the arbitration clause in the Work Order dated 16.11.2016. The Work Order and Tripartite Agreement are two separate agreements and Tripartite Agreement itself has no connection to the dispute in hand. Ld. Arbitral Tribunal has failed to appreciate that the petitioner is not a party to the arbitration clause invoked to institute the arbitral proceeding i.e. clause 20 of Work Order dated 16.11.2016. Further, Ld. Arbitral Tribunal erred in not appreciating that being a signatory to the Work Order dated 16.11.2016, does not ipso facto make the appellant a party to the arbitration agreement. The appellant does not bear any obligation under the Work Order and can at best be said to be a signatory only as confirming party. It is contended by Ld. Counsel for the appellant that there is no express provision in the Act to implead a third party and any application is necessarily to be treated as an application under Section 17 (1) (ii) (e) of the Act and therefore an appeal under Section 37 (2) (b) is maintainable. It is further contended that appellant is not a party to the arbitration agreement/ clause appearing in the Work Order dated 16.11.2016 thus the arbitration cannot be invoked. It is settled law that an Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 5 of 24 Arbitrator's jurisdiction arises from and is confined to the arbitration agreement and thus by impleading the appellant, Ld. Arbitrator has expanded its scope of authority. It is argued that there has to be consensus ad idem between the parties to arbitrate and in the present case, there is no consensus ad idem.
It is next argued that respondent no. 2 issued 'notice of request for initiation of arbitration in terms of Rule 15 ICA Rules' only to the respondent no. 1 invoking clause 20 of the Work Order. This clause is very clear in stipulating arbitration as a dispute resolution mechanism in respect of disputes between respondent nos. 1 & 2 (both parties) arising out of terms of the Work Order.
3.1 It is further argued by Ld. Counsel for the appellant that the respondent no. 1 took preliminary objection to the locus of respondent no. 2 to refer the matter to arbitration relying upon arbitration clause under the Tripartite Agreement. The Tripartite Agreement provides for a different & distinct arbitration clause that has admittedly not been invoked. The respondent no. 2, in reply to the application of respondent no. 1 to implead the appellant has categorically averred that the arbitration agreement under clause 20 of the Work Order and arbitration agreement under Clause (ttt) of Tripartite Agreement are different and the appellant is not a party to the arbitration agreement under the clause 20 of the Work Order for which it cannot be impleaded. It is contended that Ld. Arbitrator did not Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 6 of 24 consider the above facts and passed the impugned order dated 06.06.2020. It is contended that an arbitration agreement is independent of the other terms of the contract and further it is distinguishable from the other clauses of the contract. It is an agreement of the parties with consensus ad idem that any dispute if arises shall be settled by a Tribunal of their own constitution. To implead a third party, it must be a party to both
- that the arbitration agreement and the underlined substantive agreement. It is contended that reply of respondent no. 2 confirming that appellant is not a party to arbitration agreement, have not been considered by the Ld. Arbitrator. Being a mere signatory does not make the appellant a party to the arbitration agreement, which agreement is clearly between "both parties" - that is respondent no. 1 & 2 and particularly when the intention of the parties qua the said arbitration agreement is expressly on record. The obligation and the responsibility of appellant in execution of Work Order and the appellant being or not being a party to the arbitration clause are clearly different issue. The former is not relevant to the issue under consideration i.e. whether the appellant is party to the arbitration agreement invoked and if it can be impleaded. To adjudicate the issue, the obligation of the appellant is not relevant. It is contended that Ld. Arbitrator has erred in mixing up the tool.
3.2 It is further contended that no proper procedure has been Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 7 of 24 followed by the Ld. Arbitrator. Rule 4 (c) of ICA provides that where parties have provided a different procedure for appointment of Arbitrator or schedule of cost including the Arbitrator's fee, the council shall not be bound to process the case unless both the parties agree to follow the entire procedure of arbitration under rules of arbitrations of Council. The respondent no. 1 did not issue notice to the appellant under Section 21 of the Act invoking arbitration to make any claim against it. It cannot make a counter claim against the third party in an arbitration invoked by another party.
Submissions of respondent no. 1:
4. Reply to the appeal was filed by respondent no. 1 inter alia submitting that there is no infirmity in the order and the impugned order passed by the Ld. Arbitrator. Ld. Arbitrator after applying his judicial mind impleaded the appellant as party to the arbitration proceeding. The respondent no. 2 has also given no objection for impleadment of the appellant. A well-reasoned order was passed by the Ld. Arbitrator. It is further submitted that appellant is signatory to the Tripartite Agreement as well as Work Order and hence, the arbitration clause squarely applies to the appellant. The caption of the Work Order dated 16.11.2016 addressed to respondent no. 2 mentions that the authorized contractor was none other than the appellant and hence, the appellant is a necessary party. It is further submitted that Work Order emerges out of Tripartite Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 8 of 24 Agreement. Both are interlinked and the appellant being a signatory to both is necessary party.
4.1. It is contended by Ld. Counsel for the respondent 1 that the appellant had an active role to play as per clause 5 of Tripartite Agreement. The technical team of the respondent no. 2 had surveyed the project site and it was only thereafter, that the respondent no. 2 agreed to undertake the assignment as per terms & conditions of agreement. It is further submitted that the appellant has a major role to play in the agreement given. As per clause 7 of Tripartite Agreement under the head of "Obligations of Paint Supplier", the appellant had to supervise project work and the appellant has an active role in the work assigned to the respondent no. 2. The relevant clause (s) reproduced as under:
7 (c): The paint supplier shall supervise the entire painting work at the project site through a designated supervisor who shall visit the project site daily during the execution of painting work by the contractor.
7 (e): The paint supplier shall arrange a visit by a technologist during the execution of painting work once in five (5) working days. The said technologist would also issue a completion certificate upon completion of the paining work in respect thereof and shall also advise the Client on post painting maintenance, if so desired.
7 (f): The paint supplier shall attend to and rectify all or any problem that may arise related to paint quality within the warranty period of accordance with the terms & conditions of the standard (10) reducing warranty card issued by the paint supplier for its product ULTIMA PROTECT. Format of the same is attached as schedule-III to this agreement.
4.2 During the course of arguments, Ld. Counsel referred to Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 9 of 24 various other clauses of Tripartite Agreement and argued that appeal is not maintainable as it is a clear case, where the appellant is a necessary party. The appellant has an active role and the terms of Tripartite Agreement and Work Order could not have been executed without the appellant.
4.3 It is pertinent to mention here that respondent no. 2 did not file reply to the appeal.
Analysis & Findings:
5. I have heard arguments advanced by Ld. Counsel for the parties and gone through the record.
5.1 The point of determination before this court is that whether Ld. Arbitrator was justified in passing impugned orders dated 26.02.2022 & 06.06.2022.
5.2 The impugned order dated 26.02.2022 was passed by Ld. Arbitrator at the behest of Greenville Welfare Association (respondent no. 1 herein) when it invoked Order 1 Rule 10 CPC application interalia pleading that Asian Paints (the appellant herein) was necessary party. It is also matter of record that this order was passed on 26.02.2022 by Ld. Arbitrator without hearing Asian Paints.
5.3 Subsequently, Asian Paints (the appellant) moved an Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 10 of 24 application before Ld. Arbitrator under Order 1 Rule 10 CPC praying for deletion from the array of the parties but in the meantime Greenville Welfare Association (respondent no. 1 herein) moved application under Order VI Rule 17 CPC praying for amendment of the counter-claim. Ld. Arbitrator vide common order dated 06.06.2022 rejected the contentions of the appellant for deletion from array of parties and allowed the amendment of counterclaim of Greenville Welfare Association.
5.4 A perusal of the operative part in paragraph 7 of the impugned order dated 06.06.2022 shows that even though the Arbitration proceedings before Ld. Arbitrator commenced based on Arbitral clause 20 of the Work Order but Ld. Arbitrator was persuaded by the facts emerging from the Tripartite Agreement such as because the appellant was in touch with the respondent, it contains obligations regarding paint supplier and warranties therefore Asian Paints (the appellant) can be arrayed.
5.5 Further, Ld. Arbitrator also considered that because the Work Order is addressed to the claimant (respondent no. 2 herein) in the capacity of Authorized Contractor of Asian Paints (appellant herein), secondly, it is marked for kind attention of Sales Head of Asian Paints and also the Work Order has been signed by the representative of the Asian Paints (the appellant) thus Arbitration can be invoked.Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 11 of 24
5.6 Further, Ld. Arbitrator in paragraph 7(viii) of the impugned order dated 06.06.2022 read two agreements simultaneously and attempted to make harmonious interpretation of clauses in the light of one another.
5.7 Further Ld. Arbitrator in paragraph 7(ix) of the impugned order dated 06.06.2022 observed that the agreement (Work Order) supersedes all earlier correspondences and thus constitutes valid Arbitration agreement between the parties meeting the requirement of section 7(1) of the Act.
5.8 Further Ld. Arbitrator in paragraph 7(xii) of the impugned order dated 06.06.2022 observed that the Tripartite Agreement and the Work Order are related and interlinked. Therefore, it has been held that clause 20 of the Work Order would also bound the Respondent no. 2 before the Ld. Arbitrator (the appellant herein).
5.9 Ld. Arbitrator, as mentioned above, has read the Tripartite Agreement and the Work Order together to invoke Arbitral agreement vis-à-vis the appellant. In M R Engineers and Contractors Private Limited vs Som Datt Builders Limited, (2009) 7 SCC 696 : (2009) 3 SCC (Civ) 271 (supra), Hon'ble Supreme Court was analyzing a question where the PWD had entrusted the work under a contract to the respondent which Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 12 of 24 contained an Arbitration Clause. The respondent in turn had hired the appellant as a sub-contractor to execute the work. Disputes arose between the parties and the appellant filed an application under Section 11 of the Act invoking the Arbitration Clause incorporated in the main contract between the PWD and the respondent. Hon'ble Supreme Court held that:
"We will give a few instances of incorporation and mere reference to explain the position (illustrative and not exhaustive). If a contract refers to a document and provides that the said document shall form part and parcel of the contract, or that all terms and conditions of the said document shall be read or treated as a part of the contract, or that the contract will be governed by the provisions of the said document, or that the terms and conditions of the said document shall be incorporated into the contract, the terms and conditions of the document in entirety will get bodily lifted and incorporated into the contract. When there is such incorporation of the terms and conditions of a document, every term of such document (except to the extent it is inconsistent with any specific provision in the contract) will apply to the contract. If the document so incorporated contains a provision for settlement of disputes by arbitration, the said arbitration clause also will apply to the contract."
The principle which emerges from the provisions of Section 7(5) of Act is elucidated in paragraph 19 of the judgment, which is extracted below:
"Sub-section (5) of Section 7 merely reiterates these well- settled principles of construction of contracts. It makes it clear that where there is a reference to a document in a contract, and the reference shows that the document was not intended to be incorporated in entirety, then the reference will not make the arbitration clause in the document, a part of the contract, unless there is a special reference to the arbitration clause so as to make it applicable."Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 13 of 24
5.10 In the present case, a perusal of Work Order show that Work Order has merely made passing reference to the existence of a Tripartite Agreement but did not mention that the that all the terms and conditions of the said Tripartite Agreement shall be read or treated as a part of the Work Order. It, nowhere reflects any intention of the parties that the Work Order intends to incorporate/ adopt the clauses of the Tripartite Agreement. Applying the above said principles of law, it is clear that the Arbitration Agreement contained in one contract cannot be incorporated into another contract, unless there is a clear intention of the parties to do so while entering into a second agreement.
5.11 Further, the facts of the present case are even on a lower pedestal because in the present case, the Work Order specifically incorporated a separate Arbitration Clause to govern the subcontract which is different from the Arbitration clause of the Tripartite Agreement. The Arbitration Clause of the Work Order contains an in-built mechanism for reference of the disputes arising between Both the parties was also mentioned therein, which unambiguously conveys the intention that the disputes of the Work Order would be governing only two parties. This intention of the parties cannot be re-written by reading it in conjunction with arbitration clause contained in another agreement so as to enlarge its scope. By doing so the Ld. Arbitrator has exceeded jurisdiction expressly granted in Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 14 of 24 the Arbitration Clause of the Work Order.
5.12 Another significant point of consideration in the present case is that there are two different documents (Agreements) executed between the parties viz. the Tripartite Agreement dated 16.11.2016 and Work Order dated 16.11. 2016 and both contain individual Arbitration clauses.
5.13 A careful analysis of both agreements reveal that the Tripartite Agreement has defined broad contours of the respective obligation of the following three parties:
i. Green Valley Welfare Association (as the client), ii. Asian Paints Limited (as the Paint supplier), and iii. Sakshi Interior & Construction (as the Contractor).
The Tripartite Agreement contains Schedule as under: -
Schedule Clause Description Obligation related to Schedule-I clause 4 The project site requires painting of exteriors/ interiors as per the scope of the Contractor work specified in Schedule-I of this Agreement.
Schedule-III clause 7(f) The Paint Supplier shall attend to and rectify all or any problems that may the Paint supplier arise related to paint quality within the warranty period in accordance with the terms and conditions of the standard Ten (10) years reducing warranty card issued by the Paint Supplier for its Product ULTIMA PROTEK. Format of the same is attached as Schedule III to this Agreement.Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 15 of 24
Now the above schedules are giving broader details of obligations of the Contractor and the Paint supplier. The Clause 3 of Tripartite Agreement provides that:-
3. It has been agreed that the Client shall place a Work Order on the Contractor on the basis of joint quotation submitted by the Paint Supplier and SAKSHI INTERIOR & CONSTRUCTION.
It clearly shows that the Work Order would only be placed on the contractor even though quotation is joint.
5.14 It is noteworthy that items of BOQ (Bill of Quantities) appearing in Schedule I of the Tripartite Agreement and the body of the Work Agreement are identical. On comparing both the tables it transpires that not only description is identical but the figures are also identical. If the intention was to bind both the Contractor and the Paint supplier for the BOQ/ execution of work, then there would have been no need to issue a separate Work Order for the contractor. The intention of the parties was very clear to provide for separate obligations because Schedule I and III defined respective obligations the Contractor and the Paint supplier.
5.15. The intention of the parties that the Paint supplier will not be responsible for the Contractor is also evident from clause 7(g) incorporated under the head, "Obligations of the Paint supplier" which is extracted below:-
Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 16 of 24(g) Notwithstanding anything contained herein in this Agreement, under no circumstances shall the Paints Supplier be liable or cause to be made liable to the Contractor or the Client with respect to any claim arising out of or in connection with this Agreement under any contract, negligence, tort, strict liability or other legal or equitable theory for any special, indirect, consequential or exemplary damages (including but not limited to loss of revenue, or goodwill, or anticipated profits, or lost business. Further, save and except the applicability of the warranty, subject to the terms and conditions of its standard warranty card, the Paints Supplier does not make any other representations and warranties Inter alia with regards to the Contractor, the services to be rendered by the Contractor the work thereof and expressly disclaims any representations made otherwise, falling beyond the purview of its standard warranty card. The above will not apply if there is wilful default or negligence by the paint supplier.
The clause above leaves no doubt that aggregation of terms of two contracts and consequentially mixing the liabilities is beyond the scope of agreed terms and conditions.
5.16 The respective Arbitration clauses under two agreements are as under: -
Clause (ttt) of the Tripartite Agreement dated Clause 20 of the Work Order 16.11.2016 dated 16.11.2016 (ttt) If at any time, during the progress of the work or 20. Arbitration:
after completion, termination or non- performance of the Contract, any dispute/ difference arise between the Both the parties agree that in case of parties hereto in relation to the work or in relation to this any dispute or difference arising out of Agreement, or in connection with the interpretation or the terms of this Agreement towards construction of the contract, the same shall be settled rights and obligations of the parties amicably by mutual discussions amongst the parties. arising out of or relating to meaning. In the event of non -settlement of the said disputes or scope, operation or effect of this difference, etc. within sixty (60) days the same shall be Agreement or the validity or breach referred to the Sole Arbitrator to be jointly nominated thereof shall be settled by the parties by the President of the CLIENT and PAINT by mutual discussions, failing which SUPPLIER according to the provisions of the through arbitration in accordance with Arbitration & Conciliation Act 1996. The venue of such the Rules of Arbitration of the Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 17 of 24 arbitration shall be Delhi/New Delhi, and the language of Indian Council of Arbitration and arbitration proceedings shall be English. The award of the award made in pursuance thereof the Sole Arbitrator shall be final and binding on the shall be binding on the parties. The parties as from the date it is made. The Parties agree and venue of arbitration will be at New undertake to carry out such Award without delay. Delhi.
5.17 A careful analysis of the abovementioned clauses show that Clause (ttt) makes reference to the parties which is plural used for more than two parties thus includes all the three parties to the Tripartite Agreement whereas Clause 20 starts with Both the parties showing the intention of referring to the client and the contractor.
5.18 The method of appointment of the Arbitrator in two clauses is different because clause (ttt) provides for the Arbitrator jointly nominated by the President of the CLIENT and PAINT SUPPLIER whereas clause 20 provides for the procedure provided in Rules of Arbitration of the Indian Council of Arbitration. Ld. Arbitrator was not justified in assuming that clause 20 has overwritten all the other agreed procedures between the parties.
5.19 Hon'ble Supreme Court in Yogi Agarwal v. Inspiration Clothes and U and Others (2009) 1 SCC 372, held as under: -
When a defendant invokes section 8 of the Act by alleging existence of an arbitration agreement, he should establish that such arbitration agreement related to, or is applicable to, the suit transaction/contract. The parties may enter into different contracts at different points of time or may enter into a series of unrelated transactions. It is possible that in Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 18 of 24 regard to some, they may provide for arbitration and in regard to others, may not provide for arbitration. Obviously, the existence of an arbitration agreement with reference to some other transaction/contract to which plaintiff was or is a party, unconnected with the transactions or contracts to which a suit relates, cannot be considered as existence of an `arbitration agreement' in regard to the suit transactions/contracts. When sections 7 and 8 of the Act refer to the existence of an arbitration agreement between the parties, they necessarily refer to an arbitration agreement in regard to the current dispute between the parties or the subject matter of the suit. It is fundamental that a provision for arbitration, to constitute an arbitration agreement for the purposes of sections 7 and 8 of the Act, should satisfy two conditions. Firstly, it should be between the parties to the dispute. Secondly, it should relate to or applicable to the dispute.
5.20 It is emphasized above that the same parties may enter into series of agreements and transactions. In such circumstances, the Arbitral clause invoked should be between the parties and also should relate to/ applicable to the dispute.
In the present case, the Work Order is a separate sustainable contract between the Respondent no. 1 and 2 which contains an Arbitration Clause binding these two parties alone. The effect of The appellant also signing the Work Order would be discussed in the later part. The Arbitration clause in the Work Order begins with the words "Both Parties" which clearly indicates that the contracting parties are two. Further, the statement of claim filed by Sakshi Interior and the counter claim filed by M/s Green Valley Welfare Association predominantly flows from the contract/ the Work Order.
Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 19 of 245.21 This is further buttressed from the clause 7(g) of the Tripartite Agreement. It is fact emerging from the record that the claiming party invoked Arbitration clause of the Work Order. The entire Counter-claim of the other party is emerging from the Work Order as was originally filed but subsequently permitted to be amended for inclusion of the appellant.
5.22 Much emphasis has been laid on the fact that because the appellant has placed signatures on the Work Order thus it has been held to be a party to the contract (the Work Order) thus the Arbitration clause of the Work Order was invoked. The jurisprudence has always been that merely because signatures are appended by one party on a document it does not make that party a consenting party to the agreement.
5.23 Hon'ble Delhi High Court in Anil Goel vs. Satish Goel; judgment dated 15.11.2022 in ARB.P. 683/2015 [Neutral Citation Number: 2022/DHC/004826] considered decision rendered by Hon'ble Supreme Court in Veena Singh (Dead) v. District Registrar/Additional Collector (F/R) , 2002 SCC OnLine SC 593, wherein it is held that "execution' of a document does not stand admitted merely because a person admits to having signed the document.
5.24 The approach of composite Arbitration was under
consideration of the Hon'ble Delhi High Court in Libra Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 20 of 24 Automotives Private Limited vs. BMW India Private Limited and Another 2019 SCC OnLine Del 9073 and under the circumstances where parties entered into number of contracts the following was held:-
22. The Court while exercising its power under Section 11 of the Act, cannot recast the terms of the Contract and direct the parties to go for a composite arbitration contrary to the procedure prescribed under the arbitration clause provided in distinct arbitration agreements. The overlapping of the issues does not mean that the arbitration proceedings under the two respective contracts cannot commence and continue independently. Fundamental feature of an arbitration agreement is that there is an understanding between the parties to adopt alternate mechanism for the adjudication of the future disputes that arise between them. The law does not prescribe any standard form of arbitration agreement and the parties are free to agree upon a procedure and designate the private forum where the parties would like to go in case the disputes and differences arise between them.
Thus, there is to be consensus ad-idem between the parties regarding the choice of the forum.
5.25 In yet another case, Hon'ble Delhi High Court in Huawei Telecommunications (India) Co. Pvt. Ltd. Vs BSNL & anr., Neutral Citation No-2020:DHC:1416, ARB.P.- 591/2019 dated 27.02.2020 has held that Arbitration Agreement between one contract cannot be incorporated into another contract, unless there is a clear intention of the parties to do so while entering into a second agreement.
5.26. The arguments advanced by the Counsel for the Respondents has been duly considered to the extent that the appellant is necessary party and Hon'ble Supreme Court in Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 21 of 24 Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. and others 2013 1 SCC 641 applying the group of companies doctrine, examined the proximity of relationship between the parties, it was recognized that even though multiple agreement had been entered into, the all formed part of one composite transaction and the performance of one was intrinsically linked to other, the Court permitted a single reference to the arbitration.
5.27 A Careful consideration has been given to the contention of the Respondent regarding judgment of the Hon'ble Supreme Court in the case of Chloro (supra) but the said judgment would not inure to the benefit of the petitioner. What the Hon'ble Supreme Court held in the said case was that where the performance of the Mother Agreement is intrinsically linked with the performance of the ancillary agreement and the two are incapable of being severed or preformed without each other, the disputes can be referred for composite arbitration and a non-signatory to an Arbitration Agreement would be bound. It is important to mention here that the Hon'ble Supreme Court in the said case was dealing with transactions between the Group Companies and the question was whether an Arbitration Agreement entered by a Company, being one of the Group Companies, can bind its non-signatory affiliates or sister or parent concerns. This is evident from reading para 71 of the judgment. In para 72, Hon'ble Supreme Court in the context of Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 22 of 24 para 71 observed that it is doctrine of Group of Companies which has evolved the principle of a non-signatory party being subjected to arbitration provided these transactions were intrinsically linked and there was an intention to bind both the signatory as well as the non-signatory parties. Hon'ble Apex Court also added the Caveat that each case would be decided on its clear factual matrix and no strait jacket formula arrived at.
5.28 In the present case, both the agreements are distinct and not inter linked within the meaning that the performance of the Work Order agreement is capable of being severed or preformed without the Tripartite order.
5.29 Further, it is no more res-integra that Arbitration proceedings emanate from the contract thus, there must be an Arbitration clause which must be invoked by the party to the contract. The requisite condition of invoking of the Arbitral Clause being mandatory has been held in number of cases. In the case in hand, the Arbitration was invoked by Sakshi Interior (Respondent no. 2 /the claimant before Ld. Arbitrator) against M/s Green Valley Welfare Association (Respondent no. 1/ counter claimant before the Arbitrator) invoking Arbitration clause contained in clause 20 of the Work order. The fact is evident from the Notice of request for initiation of arbitration clause in terms of Rule 15 of ICA, which was sent to Green Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 23 of 24 Valley Welfare Association at no point of time, conditions of Section 21 of the Act have been complied with.
6. In view of above discussions, Ld. Arbitrator erred in impleading the appellant without appreciating that appellant is not a party to arbitration clause 20 of Work Order. Accordingly, order dated 06.06.2022 is set aside to the extent that it has rejected deletion of appellant from array of parties.
7. Accordingly, the appeal is allowed. Parties are left to bear their own costs.
8. File be consigned to Record Room.
Pronounced in the open (VINEETA GOYAL)
Court on 24.03.2023 District Judge (Commercial-03)
Patiala House Courts,New Delhi
Arb No. 09/22 Asian Paints Ltd Vs. Greenville Welfare Association Page 24 of 24