AMEET LALCHAND SHAH AND OTHERS versus RISHABH ENTERPRISES AND ANOTHER

[2016] 6 S.C.R. 1001

AMEET LALCHAND SHAH AND OTHERS

RISHABH ENTERPRISES AND ANOTHER

(Civil Appeal No. 4690 of 2018)

MAY 03, 2018

[RANJAN GOGOI AND R. BANUMATHI, JJ.]

Arbitration and Conciliation Act, 1996 – ss.8 and 45 – FirstRespondent entered into four agreements in regard to commissionof Photovoltaic Solar Plant – Two agreements dated 01.02.2012were with M/s. ‘JI’; one agreement dated 05.03.2012 with appellantno.2 and another agreement dated 14.03.2012 with appellant no.3– All the agreements contained arbitration clause except agreementdated 05.03.2012 – Dispute arose between the parties – Firstrespondent alleged that appellant no.3 defaulted in payment of rentand appellant no.2 committed fraud by inducing first respondent topurchase the Photovoltaic products by investing huge amount –Appellants sought for reference to arbitration u/s.8 of all fouragreements as they were inter-connected – Single Judge of HighCourt dismissed the application u/s.8 and held that agreement dated14.03.2012 cannot be treated as mother/principal agreement andother agreements as ancillary agreements and further that sincethere was criminal complaint against the appellants, they cannot bereferred to arbitration – Division Bench of High Court held thatmain agreement dated 05.03.2012 did not contain an arbitrationclause, thus the matter cannot be referred to arbitration – On appeal,held: All the four agreements were inter-connected – It was casewhere several parties were involved in commercial project executedthrough several agreements/contracts – In such case, all partiescan be covered by the arbitration clause in the main agreementdated 14.03.2012 – Insofar as allegations of fraud are concerned,it is only where serious questions of fraud are involved, thearbitration can be refused – In instant case, the allegations cannotbe said to be so serious to refuse to refer the parties to arbitration– Arbitrator appointed can examine the allegations regarding fraud– All the four agreements and the parties thereon referred toarbitration.

[2018] 6 S.C.R.

AAllowing the appeal, the Court

HELD: 1. In case like the present one, though there aredifferent agreements involving several parties, it is singlecommercial project namely operating 2 MWp Photovoltaic SolarPlant. Commissioning of the Solar Plant, which is the commercialBunderstanding between the parties and it has been effectedthrough several agreements. The agreement – Equipment LeaseAgreement (14.03.2012) for commissioning of the Solar Plant isthe principal/main agreement. The two agreements of Firstrespondent with ‘JI’ (i) Equipment and Material Supply Contract(01.02.2012); and (ii) Engineering, Installation andCCommissioning Contract (01.02.2012) and the First RespondentSale and Purchase Agreement with appellant no.2 (05.03.2012)are ancillary agreements which led to the main purpose ofcommissioning the Photovoltaic Solar Plant by Appellant No.3(Lessee). Even though, the Sale and Purchase AgreementD(05.03.2012) between First Respondent and appellant no.2 doesnot contain arbitration clause, it is integrally connected with thecommissioning of the Solar Plant by appellant no.3. ‘JI’, eventhough, not party to the suit and even though, appellant no.2and appellant No.1 are not signatories to the main agreementviz. Equipment Lease Agreement (14.03.2012), it is commercialEtransaction integrally connected with commissioning ofPhotovoltaic Solar Plant. Be it noted, as per clause(v) of Article4, parties have agreed that the entire risk, cost of the deliveryand installation shall be at the cost of the first respondent(Lessor). What is evident from the facts and intention of theFparties is to facilitate procurement of equipments, sale andpurchase of equipments, installation and leasing out theequipments to Dante Energy. The dispute between the partiesto various agreements could be resolved only by referring all thefour agreements and the parties thereon to arbitration. [Para21][1019-E-H; 1020-A-C]G

2. All the four agreements are inter-connected. This is acase where several parties are involved in single commercialproject (Solar Plant at Dongri) executed through severalagreements/contracts. In such case, all the parties can becovered by the arbitration clause in the main agreement i.e.HEquipment Lease Agreement (14.03.2012). [Para 22][1020-D-E]

3. In the present case, both parties have consciouslyproceeded with the commercial transactions to commission thePhotovoltaic Solar Plant. The first respondent has proceeded toprocure the materials, entered into agreement with ‘JI’ forengineering, installation and commissioning and the sale andpurchase agreement with appellant no.2, were all the conscioussteps taken in the commercial understanding to commission theSolar Plant. Even though ‘JI’ and appellant no.2 are not partiesto the main agreement-Equipment Lease Agreement(14.03.2012), all the agreements/ contracts contain clausesreferring to the main agreement. It is the duty of the Court toimpart the commercial understanding with “sense of businessefficacy” and not by the mere averments made in the plaint. TheHigh Court was not right in refusing to refer the parties on theground of the allegations of fraud levelled in the plaint. [Para33][1026-B-D]

4. It is only where serious questions of fraud are involved,the arbitration can be refused. In this case, as contended by theappellants there were no serious allegations of fraud; theallegations levelled against appellant no.2 is that appellant no.1misrepresented by inducing the respondents to pay higher pricefor the purchase of the equipments. There is criminal caseregistered against the appellants in FIR before the EconomicOffences Wing, Delhi. The appellant no.1 has filed Criminal WritPetition before the High Court of Delhi for quashing the saidFIR. The said writ petition is stated to be pending. Suffice to saythat the allegations cannot be said to be so serious to refuse torefer the parties to arbitration. In any event, the Arbitratorappointed can very well examine the allegations regarding fraud.[Para 34][1026-E-G]

5. Main agreement- Equipment Lease Agreement(14.03.2012) for leasing and commissioning of Solar Plant containsarbitration clause (Clause 29). Other three agreements-twoagreements between first respondent and ‘JI’ (01.02.2012) andSale and Purchase Agreement (05.03.2012) between firstrespondent and appellant no.2 are integrally connected with thecommercial understanding of commissioning the Solar Projectand to resolve the dispute between the parties, they are to be

Areferred to arbitration. The order of the High Court declining torefer the parties to arbitration cannot be sustained and is liableto be set aside. The four agreements namely:- (i) Equipment andMaterial Supply Contract (01.02.2012) between first respondentand ‘JI’; (ii) Engineering, Installation and CommissioningContract (01.02.2012) between first respondent and ‘JI’; (iii) SaleBand Purchase Agreement (05.03.2012) between first respondentand appellant no.2; and (iv) Equipment Lease Agreement(14.03.2012) between respondent and appellant no.3 and theparties thereon are referred to arbitration. [Para 35][1026-G-H;1027-A-C]

6. As per the terms of Equipment Lease Agreement(14.03.2012), appellant No.3 has to pay lease rentals ofRs.13,67,500/- for the month of March, 2012 and with effect fromApril, 2012 to pay lease rentals of Rs.28,26,000/- per month for aperiod of fifteen years. Respondents has submitted that appellant

DNo.3 has not paid the rentals as per the terms and conditions ofEquipment Lease Agreement and has also drawn attention thatappellant no.2 has transferred 99.99% of its shares and appellantno.1 has only one share (0.01%). The interest of the respondentsis to be protected till the matter is resolved by the arbitrator bydirecting the appellants to pay the arrears of lease rent and alsoEto pay the future lease rent for the equipments at the rate ofRs.28,26,000/- per month. [Para 36][1027-C-D, F-G]

A. Ayyasamy v. A. Paramasivam and others (2016) 10SCC 386 : [2016] 11 SCR 521 – relied on.

FSukanya Holdings (P) Ltd. v. Jayesh H. Pandya andanother (2003) 5 SCC 531 : [2003] 3 SCR 558; ChloroControls India Private Limited v. Severn Trent WaterPurification Inc. and others (2013) 1 SCC 641 : [2012]13 SCR 402; Arundhati Mishra (Smt) v. Sri RamCharitra Pandey (1994) 2 SCC 29 – referred to.

GJustice R.S. Bachawat’s Law of Arbitration andConciliation, Sixth Edition, Vol. I (Sections 1 to 34) atpage 695 published by Lexis Nexis) – referred to.

Case Law ReferenceH[2003] 3 SCR 558referred to

[2012] 13 SCR 402referred toPara 10A(1994) 2 SCC 29referred toPara 29[2016] 11 SCR 521relied on Para 32

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4690of 2018.

From the Judgment and Order dated 17.04.2017 of the High Courtof Delhi at New Delhi in FAO (OS) (Comm.) No. 85 of 2017 and C. M.No. 14229-14300 of 2017.

Shanti Bhushan, Yatinder Singh, Sr. Advs., Kamini Jaiswal, SanjeevDubey, Rohit Kumar Singh, Ms. Rani Mishra, Jatinderpal Singh,Rajmangal Kumar, Ms. Shruti Dutt, Advs. for the Appellants.

Kapil Sibal, C.S. Vaidyanathan, K.V. Vishwanathan, Amit Sibal,Sr. Advs. Amit Bhandari, Anish Dayal, Dr. Saif Mahmood, Sumant De,Adit S. Pujari, Abhishek Kaushik, Vinay Tripathi, Amrendra KumarMehta, Advs. for the Respondents.

The Judgment of the Court was delivered by

R. BANUMATHI, J. 1. Leave granted.

2. This appeal arises out of the judgment dated 17.04.2017 passedby the Delhi High Court in FAO(OS) (COMM) No.85 of 2017 in and bywhich the Division Bench affirmed the order of the Single Judge dismissingthe application filed under Section 8 of the Arbitration and ConciliationAct, 1996 (the ‘Act’) by holding that the agreements between the partiesare not inter-connected with the principal agreement dated 05.03.2012and therefore, the parties cannot be referred to arbitration as per thedecision in Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya andanother (2003) 5 SCC 531.

3. Brief facts which led to filing of this appeal are as follows:-

On 01.02.2012, the first respondent – Rishabh Enterprises (the‘Rishabh’), the sole proprietorship concern of the second respondent –Dr. A.M. Singhvi entered into two agreements with M/s Juwi IndiaRenewable Energies Pvt. Ltd. (Juwi India) namely:- (i) Equipment andMaterial Supply Contract for purchase of power generating equipmentsto the tune of Rs.8,89,80,730/-; and (ii) Engineering, Installation andCommissioning Contract for installation and commissioning of the SolarPlant for Rs.2,20,19,270/-. Both these agreements contain arbitrationclause.

A4. The first respondent - Rishabh entered into Sale and PurchaseAgreement dated 05.03.2012 with the second appellant company –Astonfield Renewables Private Limited (Astonfield) for purchasing CISPhotovoltaic products to be leased to appellant No.3 – Dante EnergyPvt. Ltd. (Dante Energy) to be installed at the Solar Plant at Dongri,Raksa, District Jhansi, Uttar Pradesh. As per the agreement, theseBproducts were valued for Rs.25,16,00,000/-. The second appellant –Astonfield received Rs.21,40,49,999/- from the respondents under variouscheques issued by the Rishabh. This agreement dated 05.03.2012 doesnot contain the arbitration clause. According to the appellants, an amountof Rs.10,00,00,000/- by cash was paid back to the sons of Dr. A.M.CSinghvi i.e. Rs.2,50,00,000/- to Mr. Avishkar Singhvi and Rs.7,50,00,000/- to Mr. Anubhav Singhvi. An Equipment Lease Agreement (ELA)dated 14.03.2012 was entered into between the Rishabh and Dante Energywhereby Dante Energy agreed to pay the Rishabh Rs.13,50,000/- aslease rent for March, 2012 and from April, 2012 onwards, the said rentpayable was Rs.28,26,000/-. The Solar Plant at Jhansi has beenDcommissioned and energized on 16.03.2012.

5. Gist of the agreements are as under:-

6. Dispute arose between the parties when respondents allegedthat appellant No. 3 – Dante Energy has defaulted in payment of rentand that Astonfield committed fraud by inducing the Rishabh to purchasethe Photovoltaic products by investing huge amount. The respondentshave also alleged that the appellants have committed misrepresentationand criminal breach of trust so far as the equipments procured and leasedto Dante Energy. The respondents have also filed criminal complaintbefore the Economic Offences Wing at Delhi against the appellants,based on which, FIR No. 30 of 2015 was registered. The appellantshave filed writ petition bearing CWP No.619 of 2016 before the HighCourt of Delhi seeking quashing of the said FIR which is sub judice.There was also an enquiry by the Income Tax Authorities seekingexplanation from the appellants regarding transfer of money to the sonsof Dr. A.M. Singhvi i.e. Rs.2,50,00,000/- to Mr. Avishkar Singhvi andRs.7,50,00,000/- to Mr. Anubhav Singhvi. Appellant No.1 – AmeetLalchand Shah was summoned by the Income Tax Authorities seekingexplanation with regard to transfer of the said money to the sons of Dr.A.M. Singhvi.

7. Owing to the dispute between the parties, appellant No.3 –Dante Energy issued notice dated 13.02.2016 invoking arbitration clauseand nominated Justice Sujata Manohar, former Judge, Supreme Courtof India as the Arbitrator. The respondents namely the Rishabh and itssole proprietor preferred Civil Suit (Commercial) No.195 of 2016 beforethe High Court on 11.03.2016 against all the appellants levelling variousallegations including fraud and misrepresentation. In the suit, multiplereliefs were claimed:- (i) for declaration that Sale and PurchaseAgreement dated 05.03.2012; Equipment and Material Supply Contract,Engineering, Installation and Commissioning Contract both dated01.02.2012 and Equipment Lease Agreement dated 14.03.2012 arevitiated by serious fraud committed by the appellants and that theagreements are void; (ii) for recovery of sum of Rs.32,22,80,288/-which the appellants are jointly and severely liable to pay to therespondents; (iii) to pay sum of Rs.19,31,74,804/- as the interest on theaforesaid amount of Rs.32,22,80,288/- at the rate of 18% per annumfrom the date of the agreement i.e. 01.02.2012 till the date of therealization; and (iv) to pay arrears of lease rent.

8. On receipt of notice and summons in the suit, the appellants/

Adefendants preferred application I.A. No.4158 of 2016 under Section 8of the Act seeking for reference of the dispute between the parties toarbitration pertaining to all the four agreements. The appellants soughtfor reference to arbitration of all the four agreements by contending thatthe Sale and Purchase Agreement (05.03.2012) is the main agreementand that other three agreements are inter-connected as they are executedBbetween the same parties and the obligations and the performance ofthe terms of the agreements are inter-connected viz. commissioning ofthe Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, U.P. Therespondents Rishabh and Dr. A.M. Singhvi resisted the application bycontending that the suit is for declaration that the agreements are vitiatedCdue to fraud and misrepresentation and while so, the matter cannot bereferred to arbitration. It was further averred that the suit is neitherconcerned about the agreement dated 01.02.2012 with Juwi India norconcerned about Equipment Lease Agreement (14.03.2012); whereasthe suit is concerned about the false assurances and fraud played by theappellants Ameet Lalchand Shah and Dante Energy regarding which aDcriminal case has also been registered and hence, the dispute is notreferable to arbitration.

9. The learned Single Judge by order dated 15.03.2017 dismissedthe application filed under Section 8 of the Act holding that the EquipmentLease Agreement (14.03.2012) between Rishabh and Dante EnergyEcannot be treated as the mother/principal agreement and the agreementsbetween the respondents and Astonfield and Juwi India cannot be saidto be ancillary agreements to the same. The learned Single Judge furtherheld that not only the respondents accuse the appellants of fraud butappellants also accuse the respondents of fraud, concealment andFsuppression of material facts and that there was also registration of acriminal case based on the complaint filed by the respondents and alsothe enquiry by the Income Tax Authorities regarding transfer ofRs.10,00,00,000/- to the sons of Dr. A.M. Singhvi and when there aresuch serious issues between the parties, they cannot be referred toarbitration.G

10. Being aggrieved by the dismissal of the application, theappellants preferred appeal before the Division Bench which came tobe dismissed. The Division Bench pointed out the difference in thelanguage between Section 8 and Section 45 of the Act and after referring

to Chloro Controls India Private Limited v. Severn Trent WaterPurification Inc. and others (2013) 1 SCC 641, observed that SukanyaHoldings was not overruled. The Division Bench further pointed outthat in spite of amendment brought in under Section 8, since the main/principal agreement–Sale and Purchase Agreement (05.03.2012) doesnot contain an arbitration clause, the matter cannot be referred toarbitration. After referring to A. Ayyasamy v. A. Paramasivam andothers (2016) 10 SCC 386, the Division Bench held that in view ofserious allegations of fraud, arbitration of such dispute is excluded.

11. We have heard Mr. Shanti Bhushan, learned senior counselappearing for the appellants and Mr. Kapil Sibal, learned senior counselappearing for the respondents. Upon consideration of the rivalsubmissions, the following points arise for consideration in this appeal:-

1. Whether all the four agreements viz. – (i) Equipment andMaterial Supply Contract (01.02.2012) between Rishabh andJuwi India; (ii) Engineering, Installation and CommissioningDContract (01.02.2012) between Rishabh and Juwi India; (iii)Sale and Purchase Agreement (05.03.2012) between Rishabhand Astonfield; and (iv) Equipment Lease Agreement(14.03.2012) between Rishabh and Dante Energy are inter-connected to refer the parties to arbitration though there is noarbitration clause in the Sale and Purchase AgreementE(05.03.2012) between Rishabh and Astonfield?2. Whether reference of the dispute between the parties toarbitration is to be refused on the ground of allegations of fraudlevelled against the appellants by the respondents in the plaintor whether the agreements ought to be taken as commercialF

2. Whether reference of the dispute between the parties toarbitration is to be refused on the ground of allegations of fraudlevelled against the appellants by the respondents in the plaintor whether the agreements ought to be taken as commercialundertaking of the parties “with sense of business efficacy”as held in Ayyasamy case?

12. First, the Rishabh entered into two agreements with Juwi Indiadated 01.02.2012:- (i) Equipment and Material Supply Contract; and (ii)Engineering, Installation and Commissioning Contract. The firstagreement-Equipment and Material Supply Contract (01.02.2012)contains arbitration clause (Clause 19.4). The second agreement –Engineering, Installation and Commissioning Contract (01.02.2012) alsocontains arbitration clause (Clause 25). Sale and Purchase Agreement(05.03.2012) between Rishabh and Astonfield for Rs.25,16,00,000/- does

Anot contain the arbitration clause. The fourth agreement namelyEquipment Lease Agreement (14.03.2012) between Rishabh and DanteEnergy contains arbitration clause (Clause 29). careful perusal of allthe four agreements that is:- (i) Equipment and Material Supply Contract;(ii) Engineering, Installation and Commissioning Contract; (iii) Sale andPurchase Agreement; and (iv) Equipment Lease Agreement shows thatBall the four agreements were for the single purpose to commission 2MWp Photovoltaic Solar Plant at Dongri, Raksa, District Jhansi, UttarPradesh to be purchased by Rishabh and leasing the equipments to DanteEnergy.

13. The averments in the plaint also prima facie indicate that allCthe four agreements are inter-connected and that appellant No.1 – AmeetLalchand Shah is stated to be the promoter and controlling man of bothAstonfield as well as Dante Energy. We may usefully refer to the relevantaverments in the plaint which read as under:-

“Defendant No.1, Mr. Ameet Lalchand Shah, is theDPromoter of the Defendant Nos. 2 and 3 Companies.Through his other group companies, Defendant No.1 is alsothe controlling shareholder of Defendant Nos. 2 and 3. Heis involved in running the day to day affairs of the saidcompanies and it is on his instructions and directions andEunder his overall control and dictation that the saidcompanies are run. He is the co-founder and the co-chairman of the “Astonfield Group” consisting of variouscompanies incorporated both outside of and in India(www.astonfield.com). Defendant No.1 is the main brain behindthe serious fraud that has been perpetuated upon the PlaintiffsFand the prima donna, mind, body, soul and controlling entity of allother defendants to this suit. If the corporate veil is lifted by thisHon’ble Court (and, this is an appropriate case for lifting of thecorporate veil), it will be found that it is, in fact, Defendant No.1only who is the real entity behind all the other defendants and it isGon his directions that the others have made, played their respectiveroles in and/or participated in the transactions in question…….Further, Defendant No.1 has also been corresponding with theplaintiffs on behalf of Defendant Nos. 2 and 3. ……… The saidDefendant No.1 is also responsible for running the day today affairs of this Company which is run on his directions

and under his control. Defendant No.2 entered into Saleand Purchase Agreement with the Plaintiffs, the transactionunder which is vitiated by serious fraud. ……”

Though there are two agreements, individual parties to the Saleand Purchase Agreement (05.03.2012) and the Equipment LeaseAgreement (Dante Energy) are one and the same,. Though Juwi Indiais not the defendant, as discussed infra, Equipment and Material SupplyContract and Engineering, Installation and Commissioning Contract withJuwi India itself were for the purpose of commissioning PhotovoltaicSolar Plant at Dongri, Raksa, District Jhansi, Uttar Pradesh.

14. The clauses in the Equipment and Material Supply Contract(01.02.2012) between Rishabh and Juwi India clearly indicate that theRishabh has entered into Lease Agreement with Dante Energy and thatthe Rishabh proposes to source Photovoltaic products/panels etc. andsimilar Solar Power generating equipments for onward lease of thosegoods to Dante Energy. The following clauses in the said Equipmentand Material Supply Contract would clearly establish the link of Equipmentand Material Supply Contract with the main Lease Agreement with DanteEnergy:-

“This Equipment and Material Supply contract is between

M/s Rishabh Enterprises………….. (the ‘Client’)

AND

Juwi India Renewable Energies Private Limited ……..(the‘Supplier’)

Whereas:-

A. The Client (Rishabh) is entering into Lease Agreementwith M/s Dante Energy Pvt. Ltd. (‘Lessee’) and theLessee (Dante Energy) has necessary authorizationsto develop, own, operate and commercially exploit a2 MWp thin-film photovoltaic solar plant at Dongri,Raksa, District-Jhansi, UP (Plant Site), transmissionline from power plant to the Grid Substation, bay extensionwork at the Grid Substation, including all of the infrastructureand relevant installations required to connect the electricity-producing equipment to the distribution/transmission grid at

Athe Grid Substation in UP, India (the ‘Facility’).

B. The Client (Rishabh) proposes to source PhotovoltaicProducts/Panels, Inverters, Transformers and similarsolar power generating equipments, etc. for sale ofgoods to the Client (Rishabh) and the Client (Rishabh)Bwill onward lease these goods to M/s Dante EnergyPvt. Ltd. (Lessee).

C. The Client (Rishabh) wishes to engage the Supplier (JuwiIndia) for supply of Equipment (as defined below) andmaterials with respect to the development of the Solar Park.

D. The M/s Dante Energy Private Limited (Lessee) will havethe right to inspect the respective goods to be sourced bythe Client (Rishabh) and based on the confirmation fromthe M/s Dante Energy Private Limited (Lessee), therespective goods will be purchased by the Client (Rishabh)for onward sale to M/s Dante Energy Private Limited(Lessee) and will be consigned to the project site.

E. The Supplier (Juwi India) is aggregable to supply theEquipment and Materials to the Client (Rishabh) inaccordance with the terms of this Contract.”

E15. Likewise, clauses in the agreement for Engineering, Installationand Commissioning Contract between Rishabh and Juwi India(01.02.2012) also clearly indicate that the agreement was entered intofor the purpose of commissioning Photovoltaic Solar Plant at Dongri,Raksa, District Jhansi, Uttar Pradesh. Clause (A) of the agreementthat the Rishabh has entered into Equipment Lease Agreement with M/Fs Dante Energy (Lessee) reiterates that the second agreement withJuwi India for engineering, installation and commissioning is integrallyconnected with Equipment Lease Agreement (14.03.2012). The relevantclauses in the agreement read as under:-

“This Engineering, Installation and CommissioningGContract Agreement is between

M/s Rishabh Enterprises……….. (the ‘Client’)

AND

Juwi India Renewable Energies Pvt. Ltd………(the

‘Contractor’)

Whereas:-

A. The Client (Rishabh) is the owner of certainPhotovoltaic products/Panels, Inverters,Transformers and similar solar power generatingequipments etc. and is entering into an EquipmentLease Agreement with M/s Dante Energy Pvt. Ltd.(Lessee).

B. The Lessee (Dante Energy) has necessaryauthorizations to develop, own, operate andcommercially exploit a2 MWp thin-film photovoltaicsolar plant at Dongri, Raksa, District-Jhansi, UP (PlantSite), transmission line from power plant to the GridSubstation, bay extension work at the Grid Substation,including all of the infrastructure and relevant installationsrequired to connect the electricity-producing equipment tothe distribution/transmission grid at the Grid Substation inUP, India (the ‘Facility’).

C. The Client (Rishabh) proposes to purchase the Client’sEquipment as required by the Lessee (Dante Energy) foronward lease to the Lessee (Dante Energy).

D. The Lessee (Dante Energy) requires the services fordesign, engineering, construction, erection, testing,commissioning and handing over of the Facility to the Client(Rishabh) and accordingly the Client (Rishabh) hasagreed to identity the competent Contractor (JuwiIndia) for undertaking the above work.

E. The Contractor (Juwi India) has represented to the Client(Rishabh) and the Lessee (Dante Energy) that theContractor (Juwi India) has the requisite experience,expertise, resources and skills for undertaking andperforming all the activities and services required for designengineering, construction, erection, testing, commissioningand handing over of the Facility and has submitted an offerto the Client (Rishabh) in response to the Technical

1014SUPREME COURT REPORTS

ASpecifications as set out by the Client (Rishabh).

F. Based on the offer submitted by the Contractor (Juwi India)and relying on the Contractor’s representations andwarranties herein, and on the concurrence and approval ofthe Lessee (Dante Energy), the Client (Rishabh) wishesBto appoint the Contractor (Juwi India) to undertakethe Services and (except for purchase of the Client’sEquipments) to perform all the activities and servicesrequired for design, engineering, construction,erecting, testing, commissioning and handing over ofthe Facility and the Contractor (Juwi India) has agreedCto such appointment and to undertake such otherduties and obligations as mentioned in this Contract.”

The above clauses in the very commencement of the agreementwith Juwi India dated 01.02.2012 clearly state that the agreement itselfwas for the purpose of commissioning Photovoltaic Solar Plant at Dongri,DRaksa, District Jhansi, Uttar Pradesh for which Dante Energy (Lessee)has necessary authorizations. The above quoted clauses in theEngineering, Installation and Commissioning Contract (01.02.2012)establish that this agreement is inter-connected with Equipment LeaseAgreement (14.03.2012) with Dante Energy.E16. Equally, the Sale and Purchase Agreement (05.03.2012)between M/s Astonfield and Rishabh is also for the purpose of onwardleasing of goods to Dante Energy as seen from the following clauses:-

“Sale and Purchase Agreement

Astonfiled Renewable Pvt. Ltd. ……….. (Seller) AND RishabhFEnterprises…….. (Buyer) agree to sell and to purchase thefollowing products, which are required for onwards leasing ofgoods by the Buyer (Rishabh) to Dante Energy PrivateLimited.…………… (Lessee) under the terms and conditionsstated below (Transaction), effective as of the date of lastGsignature below (Effective Date):-

1. Buyer: Rishabh Enterprises

2. Seller: Astonfield Renewables Private Limited

3. Transaction: The parties agree that this Transaction shall beH

governed by this Sale and Purchase Agreement and itsapendices.

The products under this Agreement shall be used for the 2 MWpgrid connected solar PV power project being set up by the Lessee(Dante Energy) at Dongri, Raksa, District-Jhansi, Uttar Pradesh(Plant Site)

The Buyer (Rishabh) is purchasing the above goods foronward supply/lease to lessee (Dante Energy). Lessee(Dante Energy) will have the right to inspect the respectivegoods and based on the confirmation from the Lessee (DanteEnergy), the respective goods will be purchased by theBuyer (Rishabh) for onward sale to Lessee (Dante Energy)and will be consigned to the Project Site.”

Though the Sale and Purchase Agreement (05.03.2012) does nothave any arbitration clause, by the above clauses, it is clearly linked withthe main agreement - Equipment Lease Agreement (14.03.2012). Saleand Purchase Agreement was entered into between Astonfield andRishabh only for the purpose of onward transmission of leasing of thegoods by Rishabh to Dante Energy. There is no merit in the contentionthat the Sale and Purchase Agreement is not connected with theEquipment Lease Agreement with Dante Energy.

17. Equipment Lease Agreement (14.03.2012) between Rishabhand Dante Energy is only follow-up of all the above three agreementsas is clear from the various clauses in the Equipment Lease Agreement.The relevant clauses of Equipment Lease Agreement (14.03.2012) areas under:-

“Equipment Lease Agreement

M/s Rishabh Enterprises………. (Lessor) AND M/s DanteEnergy Pvt. Ltd……….. (Lessee) is setting up 2 MWpgrid connected solar PV power project at Dongri, Raksa,District-Jhansi, Uttar Pradesh (Plant Site)……

Whereas the Lessor (Rishabh) is the owner of certainPhotovoltaic products/Panels, Inverters, Transformers andsimilar solar power generating equipments etc. (hereinreferred to as “Equipments”), more particularly describedin the First Schedule hereunder written.

1016SUPREME COURT REPORTS

AAnd whereas the Lessee (Dante Energy) has necessaryauthorizations to develop, own, operate and commercially exploita 2 MWp thin-film photovoltaic solar plant on the Site (“SPYPower Plant”), transmission line from power plant to the GridSubstation, bay extension work at the Grid Substation, includingall of the infrastructure and relevant installations required to connectBthe electricity-producing equipment to the distribution/transmissiongrid at the Grid Substation in Jhansi, Uttar Pradesh, India asspecified in the Second Schedule (“Facility”) and for this purpose,they are in requirement of the Equipments as mentioned in theFirst Schedule hereunder written.

And whereas the Lessee (Dante Energy) being desirous ofobtaining from the Lessor (Rishabh) on lease the specified natureof Equipments more particularly described in the First Schedulehereunder written, has approached the Lessor (Rishabh) and hasrequested the Lessor (Rishabh) to lease out the Equipments toDthe Lessee (Dante Energy) on the terms, covenants and conditionsherein contained/specified.

Article 4

EDelivery, Commencement and disbursement:

(i) It is expressly understood by the Lessee (Dante Energy) andLessor (Rishabh) that in the present case, the respectiveEquipments are being sourced from the supplier of SolarPhotovoltaic Modular-located in the State of Maharashtra i.e.Astonfield Renewables Private Limited and supplier of otherFsolar power generating equipments like inverters, transformers,etc. in the State of Karnataka i.e. Juwi India RenewableEnergies Private Limited. These goods have been inspectedby the Lessee (Dante Energy) and are found suitable for itscommercial use of the same.

(ii) Pursuant to this lease agreement, the respective Equipments,will be purchased by the Lessor (Rishabh) from the respectiveSupplier and accordingly, the Equipments will be consigneddirectly to the project site in the State of Uttar Pradesh.Accordingly, in the present case, the delivery of respectiveHEquipments will be effected by Endorsement of the

consignment Note in the favour of Lessee (Dante Energy) bythe Lessor (Rishabh).

(v) Irrespective of how and by whom the delivery is effected,

it is hereby agreed that the entire risk, cost or anyoutgoing pertaining to the said delivery and installationshall be at the cost and risk of the Lessor (Rishabh).”

The above extracted clauses clearly demonstrate that all the fouragreements are inter-connected. Clause (v) in Article 4 in the EquipmentLease Agreement that delivery and installation shall be at the cost andrisk of Rishabh (Lessor) is clearly linked with the Engineering, Installationand Commissioning Contract between Rishabh and Juwi India.

18. The High Court placed reliance upon Sukanya Holdings fordismissal of the application filed under Section 8 of the Act. In SukanyaHoldings, the suit was filed for dissolution of the partnership firm andaccounts and inter alia challenged the conveyance deed executed bythe partnership firm in favour of M/s West End Gymkhana Limited. Anapplication filed under Section 8 of the Act was opposed by respondentNo.1 thereon by contending that the subject matter of the suit was notbetween the contracting parties and that the reliefs claimed are not onlyagainst respondents No. 1 and 2 who are the contracting parties but areclaimed against the remaining twenty-three parties who are thepurchasers/tenants of disputed flats. This Court held that if all the partiesto the suit are not parties to the agreement then the matter cannot bereferred to arbitration since there is no provision in the Act for partlyreferring the dispute to arbitration. This Court noted that the buyerswere not parties to the arbitration agreement and that the non-signatoriescannot be referred to arbitration. In Sukanya Holdings in paras (15)and (16), this Court held as under:-

“15. The relevant language used in Section 8 is: “in matterwhich is the subject of an arbitration agreement”. The courtis required to refer the parties to arbitration. Therefore, the suitshould be in respect of “a matter” which the parties have agreedto refer and which comes within the ambit of arbitration agreement.Where, however, suit is commenced — “as to matter” whichlies outside the arbitration agreement and is also between some

Aof the parties who are not parties to the arbitration agreement,there is no question of application of Section 8. The words “amatter” indicate that the entire subject-matter of the suit shouldbe subject to arbitration agreement.

16. The next question which requires consideration is — even ifBthere is no provision for partly referring the dispute to arbitration,whether such course is possible under Section 8 of the Act. Inour view, it would be difficult to give an interpretation to Section 8under which bifurcation of the cause of action, that is to say, thesubject-matter of the suit or in some cases bifurcation of the suitbetween parties who are parties to the arbitration agreement andCothers is possible. This would be laying down totally newprocedure not contemplated under the Act. If bifurcation of thesubject-matter of suit was contemplated, the legislature wouldhave used appropriate language to permit such course. Sincethere is no such indication in the language, it follows that bifurcationDof the subject-matter of an action brought before judicial authorityis not allowed.”

19. Mr. Sibal, learned senior counsel for the respondents submittedthat the High Court rightly relied upon Sukanya Holdings as it relatesto Part-I of the Act that the parties who are not signatories to theEarbitration agreement (in this case, Astonfield under Sale and PurchaseAgreement) cannot be referred to arbitration. It was further submittedthat Chloro Controls arises under Part-II of the Act and was rightlydistinguished by the High Court and Sukanya Holdings was notoverruled by Chloro Controls and hence, the appellants cannot relyupon Chloro Controls. It was contended that the Sale and PurchaseFAgreement (05.03.2012) under which huge money was parted with, isthe main agreement having no arbitration clause cannot be referred toarbitration. It was submitted that the subject matter of the suit cannotbe bifurcated between the parties to arbitration agreement and others.20. In Chloro Controls, this Court was dealing with the scopeGand interpretation of Section 45 of the Act - Part-II of the Act and in thatcontext, discussed the scope of relevant principles on the basis of whicha non-signatory party also could be bound by the arbitration agreement.Under Section 45 of the Act, an applicant seeking reference of disputesto arbitration can either be party to the arbitration agreement or anyHperson claiming through or under such party. Section 45 uses the

expression “….at the request of one of the parties or any personclaiming through or under him…..” includes non-signatory parties whocan be referred to arbitration provided they satisfy the requirements ofSections 44 and 45 read with Schedule I of the Act. In para (73) ofChloro Controls, this Court held as under:-

“73. non-signatory or third party could be subjected to arbitrationwithout their prior consent, but this would only be in exceptionalcases. The court will examine these exceptions from thetouchstone of direct relationship to the party signatory to thearbitration agreement, direct commonality of the subject-matterand the agreement between the parties being compositetransaction. The transaction should be of composite nature whereperformance of the mother agreement may not be feasible withoutaid, execution and performance of the supplementary or ancillaryagreements, for achieving the common object and collectivelyhaving bearing on the dispute. Besides all this, the court wouldhave to examine whether composite reference of such partieswould serve the ends of justice. Once this exercise is completedand the court answers the same in the affirmative, the referenceof even non-signatory parties would fall within the exception afore-discussed.” (Underlining added)

21. In case like the present one, though there are differentagreements involving several parties, as discussed above, it is singlecommercial project namely operating 2 MWp Photovoltaic Solar Plantat Dongri, Raksa, District Jhansi, Uttar Pradesh. Commissioning of theSolar Plant, which is the commercial understanding between the partiesand it has been effected through several agreements. The agreement –Equipment Lease Agreement (14.03.2012) for commissioning of the SolarPlant is the principal/main agreement. The two agreements of Rishabhwith Juwi India:- (i) Equipment and Material Supply Contract(01.02.2012); and (ii) Engineering, Installation and CommissioningContract (01.02.2012) and the Rishabh’s Sale and Purchase Agreementwith Astonfield (05.03.2012) are ancillary agreements which led to themain purpose of commissioning the Photovoltaic Solar Plant at Dongri,Raksa, District Jhansi, Uttar Pradesh by Dante Energy (Lessee). Eventhough, the Sale and Purchase Agreement (05.03.2012) between Rishabhand Astonfield does not contain arbitration clause, it is integrally connectedwith the commissioning of the Solar Plant at Dongri, Raksa, District

AJhansi, U.P. by Dante Energy. Juwi India, even though, not party tothe suit and even though, Astonfield and appellant No.1 – Ameet LalchandShah are not signatories to the main agreement viz. Equipment LeaseAgreement (14.03.2012), it is commercial transaction integrallyconnected with commissioning of Photovoltaic Solar Plant at Dongri,Raksa, District Jhansi, U.P. Be it noted, as per clause(v) of Article 4,Bparties have agreed that the entire risk, cost of the delivery and installationshall be at the cost of the Rishabh (Lessor). Here again, we mayrecapitulate that engineering and installation is to be done by Juwi India.What is evident from the facts and intention of the parties is to facilitateprocurement of equipments, sale and purchase of equipments, installationCand leasing out the equipments to Dante Energy. The dispute betweenthe parties to various agreements could be resolved only by referring allthe four agreements and the parties thereon to arbitration.22. Parties to the agreements namely Rishabh and Juwi India:- (i)Equipment and Material Supply Agreement; and (ii) Engineering,DInstallation and Commissioning Contract and the parties to Sale andPurchase Agreement between Rishabh and Astonfield are one and thesame as that of the parties in the main agreement namely EquipmentLease Agreement (14.03.2012). All the four agreements are inter-connected. This is case where several parties are involved in singlecommercial project (Solar Plant at Dongri) executed through severalEagreements/contracts. In such case, all the parties can be covered bythe arbitration clause in the main agreement i.e. Equipment LeaseAgreement (14.03.2012).

23. Since all the three agreements of Rishabh with Juwi India andAstonfield had the purpose of commissioning the Photovoltaic Solar PlantFproject at Dongri, Raksa, District Jhansi, Uttar Pradesh, the High Courtwas not right in saying that the Sale and Purchase Agreement (05.03.2012)is the main agreement. The High Court, in our view, erred in not keepingin view the various clauses in all the three agreements which make themas an integral part of the principal agreement namely Equipment LeaseGAgreement (14.03.2012) and the impugned order of the High Courtcannot be sustained.Amendment to Section 8 of the Arbitration and ConciliationAct, 1996

24. Arbitration and Conciliation (Amendment) Act, 2015 has

brought in amendment to Section 8 to make it in line with Section 45 ofthe Act. In view of the observation made in Sukanya Holdings, LawCommission has made recommendation for amendment to Section 8 ofthe Act. Consequent to 2015 Amendment Act, Section 8 is amended asunder:-

“8. Power to refer parties to arbitration where there is anarbitration agreement. - (1) judicial authority before whichan action is brought in matter which is the subject of an arbitrationagreement shall, if party to the arbitration agreement or anyperson claiming through or under him, so applies not later thanwhen the date ofsubmitting his first statement on the substanceof the dispute, then, notwithstanding any judgment, decree or orderof the Supreme Court or any courtrefer the parties to arbitrationunless it finds that prima facie no valid arbitration agreementexists.

(2) The application referred to in sub-section (1) shall not beentertained unless it is accompanied by the original arbitrationagreement or duly certified copy thereof

Provided that where the original arbitration agreement or certifiedcopy thereof is not available with the party applying for referenceto arbitration under sub-section (1), and the said agreement orcertified copy is retained by the other party to that agreement,then, the party so applying shall file such application along with acopy of the arbitration agreement and petition praying the Courtto call upon the other party to produce the original arbitrationagreement or its duly certified copy before that Court.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority,an arbitration may be commenced or continued and an arbitralaward made.

25. “Principally four amendments to Section 8(1) have beenintroduced by the 2015 Amendments - (i) the relevant “party” that isentitled to apply seeking reference to arbitration has been clarified/amplified to include persons claiming “through or under” such party tothe arbitration agreement; (ii) scope of examination by the judicial authorityis restricted to finding whether “no valid arbitration agreement exists”and the nature of examination by the judicial authority is clarified to be

Aon “prima facie” basis; (iii) the cut-off date by which an applicationunder Section 8 is to be presented has been defined to mean “the dateof” submitting the first statement on the substance of the dispute; and(iv) the amendments are expressed to apply notwithstanding any priorjudicial precedent. The proviso to Section 8(2) has been added to allowa party that does not possess the original or certified copy of theBarbitration agreement on account of it being retained by the other party,to nevertheless apply under Section 8 seeking reference, and call uponthe other party to produce the same.” (Ref: Justice R.S. Bachawat’sLaw of Arbitration and Conciliation, Sixth Edition, Vol. I (Sections 1to 34) at page 695 published by LexisNexis).

26. Amendment to Section 8 by the Act, 2015 are to be seen inthe background of the recommendations set out in the 246[th] LawCommission Report. In its 246[th] Report, Law Commission, whilerecommending the amendment to Section 8, made the followingobservation/comment:-D“LC Comment: The words “such of the parties…. to thearbitration agreement” and proviso (i) of the amendment havebeen proposed in the context of the decision of the Supreme Courtin Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya and Anr.(2003) 5 SCC 531, - in cases where all the parties to the disputeEare not parties to the arbitration agreement, the reference is to berejected only where such parties are necessary parties to the action– and not if they are only proper parties, or are otherwise legalstrangers to the action and have been added only to circumventthe arbitration agreement. Proviso (ii) of the amendmentcontemplates two-step process to be adopted by judicialFauthority when considering an application seeking the referenceof pending action to arbitration. The amendment envisages thatthe judicial authority shall not refer the parties to arbitration only ifit finds that there does not exist an arbitration agreement or that itis null and void. If the judicial authority is of the opinion that primaGfacie the arbitration agreement exists, then it shall refer the disputeto arbitration, and leave the existence of the arbitration agreementto be finally determined by the arbitral tribunal. However, if thejudicial authority concludes that the agreement does not exist, thenthe conclusion will be final and not prima facie. The amendmentalso envisages that there shall be conclusive determination as to

whether the arbitration agreement is null and void.

(2) The application referred to in sub-section (1) shall not beentertained unless it is accompanied by the original arbitrationagreement or duly certified copy thereof or copy accompaniedby an affidavit calling upon the other party to produce the originalarbitration agreement or duly certified thereof in circumstanceswhere the original arbitration agreement or duly certified copy isretained only by the other party.

LC Comment: In many transactions involving Government bodiesand smaller market players, the original/duly certified copy of thearbitration agreement is only retained by the former. Thisamendment would ensure that the latter class is not prejudiced inany manner by virtue of the same” (Ref: 246[th] Law CommissionReport, Government of India)

27. The language of amendment to Section 8 of the Act is clearthat the amendment to Section 8(1) of the Act would apply notwithstandingany prayer, judgment, decree or order of the Supreme Court or anyother Court. The High Court laid emphasis upon the word “.....unless itfinds that prima-facie no valid agreement exists”. The High Courtobserved that there is no arbitration agreement between Astonfield andRishabh. After referring to Sukanya Holdings and the amended Section8 and Section 45 of the Act, the High Court pointed out the difference inlanguage of Section 8 and Section 45 of the Act. The High Courtdistinguished between Sukanya Holdings andChloro Controls, andobserved that Sukanya Holdings was not overruled by Chloro Controls.In para (23) of the impugned judgment, it was held as under:-

“23. ......The change in Section 8 is that the Court is to - in caseswhere arbitration agreements are relied on- to refer the disputesin the suit, to arbitration, “notwithstanding any judgment, decreeor order of the Supreme Court or any Court, refer the parties toarbitration unless it finds that prima facie no valid arbitrationagreement exists”. The Court is of opinion that Sukanyais not perse overruled, because the exercise of whether an arbitrationagreement exists between the parties, in relation to the disputesthat are the subject matter of the suit, has to be carried out. If

Athere are causes of action that cannot be subjected to arbitration,or the suit involves adjudication of the role played by parties whoare not signatories to the arbitration agreement, it has to continuebecause “prima facie no valid arbitration agreement exists”between such non parties and others, who are parties.”

B28. Re: contention: allegations of fraud disable anarbitration:-Yet another ground based on which the High Court declinedto refer the parties to arbitration is the allegations of fraud levelled byrespondents/plaintiffs in their plaint against Astonfield and appellant no.1.The High Court held that the respondents levelled allegations of fraudagainst the appellants which raise serious triable issues of fraud andChence, the matter cannot be referred to arbitration.

29. According to the respondents, it is not case where “fraud isalleged merely to disable an arbitration”. Mr. Sibal, learned seniorcounsel for respondents contended that the plaint is based on theaverments that from inception, the intention of appellants/defendantsDwas to cheat the respondents and the respondents were made to partwith large sums of money on the basis of the misrepresentation made bythe appellants. It was submitted that alternative prayer in the plaint willnot convert the fraud suit to regulatory suit because of alternativeprayer since alternative prayer – ‘lease rental’ has been projected onlyEas an alternative remedy. Placing reliance upon Arundhati Mishra (Smt)v. Sri Ram Charitra Pandey (1994) 2 SCC 29, it was submitted that itis settled law that it is open to the parties to raise mutually inconsistentpleas and the relief could be granted on the alternative plea so raised.

30. Refuting the above contentions, Mr. Shanti Bhushan, learnedFsenior counsel for the appellants placed reliance upon Ayyasamy caseto contend that there are no serious allegations in the plaint to declinereference of the matter to arbitration. It was submitted that mereallegations of fraud were not sufficient to detract from the performanceof the obligation of the parties in terms of the agreement and refer thematter to arbitration.G

31. Under the Act, an arbitration agreement means an agreementwhich is enforceable in law and the jurisdiction of the arbitrator is on thebasis of an arbitration clause contained in the arbitration agreement.However, in case where the parties alleged that the arbitration agreementis vitiated on account of fraud, the Court may refuse to refer the parties

to arbitration. In Ayyasamy case, this Court held that mere allegationof fraud is not ground to nullify the effect of arbitration agreementbetween the parties and arbitration clause need not be avoided and partiescan be relegated to arbitration where merely simple allegations of fraudtouched upon internal affairs of parties is levelled. Justice A.K. Sikriobserved that it is only in those cases where the Court finds that thereare serious allegations of fraud which make virtual case of criminaloffence and where there are complicated allegations of fraud then itbecomes necessary that such complex issues can be decided only bythe civil court on the appreciation of evidence that needs to be produced.In para (25) of Ayyasamy case, Justice Sikri held as under:-

“25…..Therefore, the inquiry of the Court, while dealing with anapplication under Section 8 of the Act, should be on the aforesaidaspect viz. whether the nature of dispute is such that it cannot bereferred to arbitration, even if there is an arbitration agreementbetween the parties. When the case of fraud is set up by one ofthe parties and on that basis that party wants to wriggle out ofthat arbitration agreement, strict and meticulous inquiry into theallegations of fraud is needed and only when the Court is satisfiedthat the allegations are of serious and complicated nature that itwould be more appropriate for the Court to deal with the subject-matter rather than relegating the parties to arbitration, then alonesuch an application under Section 8 should be rejected.”

32. While concurring with Justice Sikri, Justice D.Y. Chandrachudpointed out that the duty of the Court is to impart “sense of businessefficacy” to the commercial transactions pointing out that mere allegationsof fraud were not sufficient to decline to refer the parties to arbitration.In para (48) of Ayyasamy case, Justice D.Y. Chandrachud held asunder:-

“48. The basic principle which must guide judicial decision-makingis that arbitration is essentially voluntary assumption of anobligation by contracting parties to resolve their disputes througha private tribunal. The intent of the parties is expressed in theterms of their agreement. Where commercial entities and personsof business enter into such dealings, they do so with knowledgeof the efficacy of the arbitral process. The commercialunderstanding is reflected in the terms of the agreementbetween the parties. The duty of the court is to impart to

1026SUPREME COURT REPORTS

Athat commercial understanding sense of businessefficacy.” (Underlining added)

33. When we apply the aforesaid principles to the facts of thepresent case, as discussed earlier, both parties have consciously proceededwith the commercial transactions to commission the Photovoltaic SolarBPlant at Dongri, Raksa, District Jhansi, U.P. The first respondent hasproceeded to procure the materials, entered into agreement with JuwiIndia for engineering, installation and commissioning and the sale andpurchase agreement with Astonfield, were all the conscious steps takenin the commercial understanding to commission the Solar Plant at Dongri,Raksa, District Jhansi, U.P. Even though Juwi India and Astonfield areCnot parties to the main agreement - Equipment Lease Agreement(14.03.2012), all the agreements/contracts contain clauses referring tothe main agreement. It is the duty of the Court to impart the commercialunderstanding with “sense of business efficacy” and not by the mereaverments made in the plaint. The High Court was not right in refusingDto refer the parties on the ground of the allegations of fraud levelled inthe plaint.

34. It is only where serious questions of fraud are involved, thearbitration can be refused. In this case, as contended by the appellantsthere were no serious allegations of fraud; the allegations levelled againstEAstonfield is that appellant no.1 - Ameet Lalchand Shah misrepresentedby inducing the respondents to pay higher price for the purchase of theequipments. There is, of course, criminal case registered against theappellants in FIR No.30 of 2015 dated 05.03.2015 before the EconomicOffences Wing, Delhi. The appellant no.1 – Ameet Lalchand Shah hasfiled Criminal Writ Petition No.619 of 2016 before the High Court ofFDelhi for quashing the said FIR. The said writ petition is stated to bepending and therefore, we do not propose to express any views in thisregard, lest, it would prejudice the parties. Suffice to say that theallegations cannot be said to be so serious to refuse to refer the partiesto arbitration. In any event, the Arbitrator appointed can very well examineGthe allegations regarding fraud.

35. Main agreement - Equipment Lease Agreement (14.03.2012)for leasing and commissioning of Solar Plant at Dongri, Raksa, DistrictJhansi, Uttar Pradesh contains arbitration clause (Clause 29). Asdiscussed earlier, other three agreements - two agreements betweenHRishabh and Juwi India (01.02.2012) and Sale and Purchase Agreement

(05.03.2012) between Rishabh and Astonfield are integrally connectedwith the commercial understanding of commissioning the Solar Projectat Dongri, Raksa, District Jhansi, Uttar Pradesh and to resolve the disputebetween the parties, they are to be referred to arbitration. The order ofthe High Court declining to refer the parties to arbitration cannot besustained and is liable to be set aside. The four agreements namely:- (i)Equipment and Material Supply Contract (01.02.2012) between Rishabhand Juwi India; (ii) Engineering, Installation and Commissioning Contract(01.02.2012) between Rishabh and Juwi India; (iii) Sale and PurchaseAgreement (05.03.2012) between Rishabh and Astonfield; and (iv)Equipment Lease Agreement (14.03.2012) between Rishabh and DanteEnergy and the parties thereon are referred to arbitration.36. As per the terms of Equipment Lease Agreement (14.03.2012),appellant No.3 - Dante Energy has to pay lease rentals of Rs.13,67,500/- for the month of March, 2012 and with effect from April, 2012 to paylease rentals of Rs.28,26,000/- per month for period of fifteen years.Learned Senior Counsel for respondents, Mr. Sibal has submitted thatappellant No.3 - Dante Energy has not paid the rentals as per the termsand conditions of Equipment Lease Agreement. Mr. Sibal has also drawnour attention that Astonfield Solar Rajasthan Pvt. Ltd. has transferred99.99% of its shares to ARRL (Mauritius) Ltd. (Holding Company) andAmeet Lalchand Shah has only one share (0.01%). Our attention wasalso drawn to Astonfield Solar Gujarat Pvt. Ltd., which has also transferred99.99% of its shares to ARRL (Mauritius) Ltd. (Holding Company) andthat Ameet Lalchand Shah has only one share (0.01%). It was alsosubmitted that the appellant No.1 - Ameet Lalchand Shah wassubsequently removed from the Board of Directors of Astonfield SolarGujarat Pvt. Ltd. by the shareholders by EGM dated 17.12.2016. Wedo not propose to go into the merits of this contention; however, keepingin view that Astonfield has transferred its shareholdings qua Rajasthanand Gujarat Solar Power units, in our view, the interest of the respondentsis to be protected till the matter is resolved by the arbitrator by directingthe appellants to pay the arrears of lease rent and also to pay the futurelease rent for the equipments at the rate of Rs.28,26,000/- per month.

37. The impugned order of the High Court is set aside and thisappeal is allowed. All the aforesaid four agreements and the partiesthereon are referred to arbitration. By notice dated 13.02.2016, appellantshave nominated Justice Sujata Manohar, former Judge of the Supreme

ACourt of India as their Arbitrator. We leave it open to the parties as tothe choice of the Arbitrator. If the parties are not in position to arriveat consensus as to the Arbitrator, the parties shall approach theappropriate High Court for appointment of the Arbitrator. Appellantsare jointly and severely liable to pay the arrears of lease rent and also topay the future lease rent for the equipments of the PV Solar PowerBPlant at Dongri, Raksa, District Jhansi, Uttar Pradesh at the rate ofRs.28,26,000/- per month till the disposal of the arbitration proceedings.Such payment of lease rent shall be without prejudice to the contentionsof both parties and shall be subject to the final outcome of arbitrationproceedings. Since parties are referred to arbitration, commercial SuitCNo.85 of 2017 filed by the respondents on the file of Delhi High Courtshall stand disposed of. No cost.

Ankit Gyan

Appeal allowed.