Severn Trent Water Purification Inc. and Ors
Vs
Arbitration and Conciliation Act, 1996 (26 of 1996), Sections 2(b), 7 & 45 – Multiple Agreements – Principal
Agreement containing Arbitration Clause and some Ancillary Agreements did not contain Arbitration Clause –
Reference to Arbitration for dispute arising under Ancillary Agreement not containing Arbitration Clause, whether
Warranted ? – Arbitration Clause in principal Agreement widely worded – Term ‘connection’ used in Arbitration
Clause in Principal Agreement expands scope of disputes under Ancillary Agreements - Moreover, Principal
Agreement itself by implication referring to all other Agreements – When Ancillary Agreements originated from
Principal Agreement, terms and conditions of Principal Agreement are applicable to Ancillary Agreements –
Signing of all agreements on same day also indicative of factor that Agreements entered into as a composite
transaction – Established from conduct of parties and subsequent events that composite transaction contained in
Principal Court as provided in Agreements not invoked by any of parties – Held, when parties to composite
transactions provide for different alternative forums including Arbitration, real intention of parties deemed to be
interpreted to refer entire subject matter to Arbitration and not to resolve disputes collectively by Arbitration –
Arbitration Clause contained in Principal Agreement would, thus, stand incorporated in Ancillary Agreement.
Contract Act, 1872 (9 of 1872), Section 2(h) – Contract – Business Law – Joint Venture – Multiple
Agreements between parties – Character of – Joint Venture entered into between parties provided under Principal
Agreement, fulfillment of same subject of performance of Ancillary Agreements – All Agreements entered into
between parties, ancillary/incidental to Principal Agreement – Segregation of Principal Agreement from Ancillary
Agreements would render Ancillary Agreements ineffective – Principal Agreement would become inconsequential if
Ancillary Agreements are not performed – All of other Agreements in one Agreement also indicates intention –
Such agreements constitute integral parts of composite transaction and are covered under Principle of
“Agreements within Agreements” – Implementation/execution of any one Agreement improbable and impossible
without collective performance of all other Agreements.
1
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 45 – Interpretation of provision – Provision,
held, a self-contained code - Expression ‘person claiming through or under’ to take within its ambit multiple and
multi-party Agreements – Non-signatory parties to Agreements can pray and be referred to Arbitration if pre-
requisites of Sections 44 & 45 satisfied with Schedule I – Court empowered to delete name of parties who are not
necessary or proper to proceedings before Court – Discretion of Court for making reference to Arbitration of non-
signatory Companies to be exercised in exceptional, limiting and befitting cases of necessity.
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 45 - “Claiming through or under” – Several
Agreements entered into between parties with one Agreement being the Principal Agreement – Parties to all
Ancillary Agreements not common – However, interests of said parties not adverse to interest of Principal
Company – Interest of said parties derived from principal Agreement and performance of all Ancillary Agreements
to be in consonance with Principal Agreement – In such circumstances, said parties/Companies though not
signatory to all Agreements, would be covered under expression ‘claiming through or under’ parties to Agreement.
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 45 r/w Schedule I – Intention of Legislature – In
order to uphold intention of Legislature, provision to be construed liberally – Reference to Arbitration to be made
by Court when party or any person claiming through him approaches Court and Court is satisfied that Agreement is
valid, enforceable and operative – Provision to be interpreted widely to achieve twin objectives of Arbitration –
Legislative intent behind provision to hold parties to Arbitration by invoking Civil jurisdiction involving multifarious
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 45 vis-a-vis Section 8 – Extension of term
‘parties’ – Section 8 refers to term ‘parties’ simpliciter – Section 45 uses term ‘one of parties or any person claiming
through or under him’ – Thus, language of Section 45 has wider import, wherein request of party is considered and
referred to an Arbitral Tribunal – However, under Section 8, Court may refer parties to Arbitration only upon
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 45 – Code of Civil procedure, 1908 (5 of 1908) –
Overriding effect of Section 45 of Act over Code, discussed.
Arbitration of Conciliation Act, 1996 (26 of 1996), Section 45 – Questions to be determined by Court at
threshold? – Court to determine on ingredients of provision on its threshold itself and to decide on validity of
Agreement in order to avoid multiplicity of litigation and re-agitating of issues over and over again – Jurisdiction of
Arbitral Tribunal also to be determined at first instance – Held, determination of fundamental issues under Article
45 not only appropriate, but also in furtherance of intention of Legislature.
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 45 – Precept of jurisdictional forum of parties –
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 45 – Validity of Arbitration Agreement – Factors
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 45 – Convention on Recognition and
Enforcement of Foreign Arbitral Award [New York Convention], Articles II(1) &(3) – ‘Legal Relationship’ – Term
connotes relationship of party with person claiming through or under him – Persons, not signatory to Arbitration
Agreement, would be parties claiming through or under parties signatory to Contract containing Arbitration
Agreement on account of their cause of action being directly relatable to said contract.
Alternate Dispute Resolution – Arbitration – Multiple Agreements – Reference to Arbitration – Terms and
conditions of Ancillary Agreement, integral part of Principal Agreement – Arbitration Clause in Principal Agreement
wide enough to cover all Ancillary Agreements – Arbitration Clause in said Agreement governed by Indian Law – In
such circumstances, when legal jurisdiction of US Courts not invoked by any of parties, as provided in Principal
Agreement, invocation of Arbitration Clause provided in Principal Agreement would not be barred.
Alternate Dispute Resolution – Arbitration – Composite Transaction – Reference of non-signatory
Company to Arbitration – When multiple Agreements are entered into between parties and all Ancillary Agreements
are relatable to Principal Agreement and performance of all Agreements is intrinsically inter-linked, Arbitration
Clause in Principal Agreement would bind parties of Ancillary Agreements, who were even not signatories to
Principal Agreement, however, in such circumstances, conjoint reading of Agreements, intention of parties and
attendant circumstances would be determining factors.
Alternate Dispute Resolution – Arbitration – Reference of non-signatory parties to Arbitration Agreement –
Third parties, i.e. non-signatory parties, who claim through or are used as being directly affected through a party to
Arbitration Agreement and said third parties are signatory to Subsidiary Agreement, which is totally originating
from Principal Agreement containing Arbitration Clause, said third parties would be referred to Arbitration.
Alternate Dispute Resolution – Arbitration – Non-signatory to Arbitration Agreement – Theories binding
Alternate Dispute Resolution – Arbitration – Group of Companies – Non-signatory Company – Reference to
Arbitration – Intention of parties - Significance of.
Alternate Dispute Resolution – Arbitration – Group of Companies – Non-signatory Company – Reference to
Arbitration without prior consent – Factors to be considered by Court.
Alternate Dispute Resolution – Arbitration – Multiple Agreements – Different forums for adjudication of
disputes – Real intention of parties – Reference to Arbitration – Justification of.
Alternate Dispute Resolution – Arbitration – English Law – Doctrine of Group of Companies – Agreement
entered into by Company, which is one group of Companies, to bind its non-signatory Company, if mutual intention
of all parties was to bind both signatory and non-signatory affiliates.
Arbitration and Conciliation Act, 1996 (26 of 1996), Sections 8 & 45 – Sukanya Holdings case, whether
correctly decided – Sukanya Holdings arose under Section 8 – Chloro Controls (present case) arose under Section
45 – Sukanya Holdings related to Partnership dispute - Chloro Controls deals with Mother Agreement and Ancillary
Agreements born from Mother Agreement - Ratio in Sukanya’s case not applicable to chloro’s case – Correctness
of Sukanya Holdings need not be considered.
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 11(6) – Matters determined by Court under
Section 11(6) only to be disturbed by Court of competent jurisdiction and cannot be reopened by Arbitral Tribunal.
Arbitration and Conciliation Act, 1996 (26 of 1996), Section 50 – Findings of Court, whether appealable or
can be re-adjudicated by Arbitral Tribunal? – When reference has been declined on account of Arbitration
Agreement or Clause therein being null, void or inoperative/incapable of being performed, party aggrieved has
remedy to Appeal under Section 50(1)(a) and Arbitral Tribunal would not deliver any determination on said issue.
Alternate Dispute Resolution – Arbitration – Kompetnez Knmpetenz Principle – Principle requires
Arbitration Tribunal to exercise jurisdiction over dispute under Arbitration Agreement – Challenge to validity or
existence of Agreement would not prevent Tribunal from proceeding with hearing and ruling upon its jurisdiction –
Positive effect of principle is that Arbitral Tribunal can make an award without waiting for decision of Court on
issue of jurisdiction – Negative effect of principle is that jurisdiction determined by Tribunal is reviewable by Court
in situation where Court is approached for enforcing or setting aside award – Thus, Courts are deprived of their
jurisdiction – Arbitrators by virtue of principle determine issue of their own jurisdiction prior to any Court or
Judicial Authority, thus, limiting jurisdiction of National Courts.
Doctrine of stare decisis – Observations in judgment, stared upon by Larger Bench would not constitute
valid precedent by virtue of Principle of stare decisis.
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