1 IN THE HIGH COURT OF JUDICATURE AT MADRAS (ORDINARY ORIGINAL CIVIL JURISDICTION) SATURDAY, THE 10th DAY OF DECEMBER 2011 THE HON'BLE MR. JUSTICE VINOD K. SHARMA A. No.1916 of 2011 in C.S. No.380 of 2010 M/s.MB Foods Pvt. Ltd., (A Company registered under the Companies Act 1956) rep. by its Director Shri Pradeep Badlani, 2-A/1-2, Sector "A", Industrial Area, Sanwer Road, Indore-452 015. ... Plaintiff -Versus- 1. M/s.PS Power Infrastructures India Private Ltd., (A company registered under the Companies Act 1956) New No.6, Old No.4, 2nd Cross Street, VOC Nagar, Kodambakkam, Chennai-600 024. 2. M/s.Pioneer Wincon Private Ltd., (A Company registered under the Companies Act 1956) 30/1-A, Harrington Chambers, 2nd Floor, "A" & "B" Block, Abdul Razag, 1st Street, Saidapet, Chennai-600 015. ... Defendants A. No.1916 of 2011:- Pioneer Wincon Private Ltd., No.30/1-A, Harrington Chambers, 2nd Floor, "A" & "B" Block, Abdul Razag, 1st Street, Saidapet, Chennai-600 015, rep. by its Company Secretary S.Rajendran ... Applicant/2nd Defendant -Versus- 1. M/s.MB Foods Pvt. Ltd., (A Company registered under the Companies Act 1956) rep. by its Director Shri Pradeep Badlani, 2-A/1-2, Sector "A", Industrial Area, Sanwer Road, Indore-452 015. ... Respondent/Plaintiff https://hcservices.ecourts.gov.in/hcservices/ 2 2. M/s.PS Power Infrastructures India Private Ltd., (A company registered under the Companies Act 1956) New No.6, Old No.4, 2nd Cross Street, VOC Nagar, Kodambakkam,Chennai-600 024. ... Respondent/1st defendant (The 2nd respondent is formal Party hence the notice in this application may be dispensed with) Application praying that this Hon'ble Court be pleased to refer the parties to arbitration as per clause 9(b) of the Purchase order dated 24.02.2007. This application coming on this day before this court for hearing the court made the following order: The plaintiff / non applicant has filed a suit against defendant nos.1 & 2 to jointly and severally pay to the plaintiff a sum of Rs.1,54,76,785/- (Rupees One Crore Fifty Four Lakhs Seventy Six Thousand Seven Hundred and Eighty Five only) towards damages for the loss occasioned to the plaintiff due to the delayed installation and commissioning of the wind energy generators and the loss occasioned due to the stoppage of the generators from 04.01.2008 till 27.09.2008 by the authorities for production of bogus certificate by the defendants and the loss due to poor performance together with interest at the rate of 18% p.a. from the date of plaint till date of realization. 2. The plaintiff is a company, registered under the Companies Act, which deals with manufacturing manufacturing biscuits. The plaintiff, for expansion of business, decided to set up one Wind Mill project. https://hcservices.ecourts.gov.in/hcservices/ 3 3. It is pleaded that defendant no.1 approached the plaintiff and represented that it is engaged in developing infrastructure in identified locations in Maharashtra and Gujarat, for wind farms project for nearly 12 years. 4. The defendant also represented that it would undertake all the works, including providing of land and obtaining of statutory clearance for erecting and commissioning of wind farms for generation of electricity. 5. The defendant no.1 submitted a detailed project report along with recommendation to install Pioneer Wincon 250 Kw as the medium capacity turbine as more suitable for the site in view of the investments and optimum output considering low wind regime at the site. The defendant no.1 also represented that their Group company Tuljbhawani Wind Farms Private Ltd, had obtained necessary clearance from Maharashtra State Electricity Transmission Company Limited, with regard to suitability of the site. 6. It was projected that the Wind Mill project will be commissioned by 31.03.2007. The defendant no.1 also stated that second defendant was associated with them in supply, erection and commissioning and maintenance of wind turbine in the State of Maharashtra and Gujarat. The second defendant also vide its letter dated 19.02.2007, had categorically stated that the first defendnt was actively working with them and there was mutual understanding between both of them for supply, erection and commissioning https://hcservices.ecourts.gov.in/hcservices/ 4 and maintenance of wind turbine, as per the accepted terms and condition of purchase orders, placed by customers. 7. The plaintiff placed purchase orders in the name of defendants separately, as required by them on 24.02.2007. The purchase order of defendant no.1 was for value of Rs.99.75 lakhs (Rupees Ninety Nine Lakhs and Seventy Five Thousand only) and purchase order of defendant no.2 was Rs.245.25 lakhs (Rupees Two Crores Forty Five Lakhs and Twenty Five Thousand only) for supply of 3 Nos. Pioneer Wincon P250/29-250kw wind operated electricity generators and installation and commissioning of the same. The total value of the project was Rs.3.45 crores (Rupees Three Crores and Forty Five Lakhs only). 8. The plaintiff availed financial assistant from the Small Industries Development Bank of India. The order was accepted by defendants, which constitutes a binding contract between the parties, but the defendants could not commission the plant within the stipulated period, which resulted in cancellation of commissioning clearance by Maharashtra Energy Development Agency (MEDA). 9. A show cause notice was issued to the plaintiff with regard to the fact that NOC issued by the Developmer M/s.Tuljabhawani Wind Farms Private Limited was forged and bogus. The plaintiff, therefore, has claimed the loss suffered. https://hcservices.ecourts.gov.in/hcservices/ 5 10. Clause-14 of the Madras High Court the Letters Patent reads as under: "14. Joinder of several causes of action- And We do further ordain that where plaintiff has several causes of action against defendant, such causes of action not being for land or other immovable property, and the said High Court shall have original jurisdiction in respect of one of such causes of action, it shall be lawful for the said High Court to call on the defendant to show cause why the several causes of action should not be joined together in one suit, and to make such order for trial of the same as the High Court shall seem fit." 11. The reading of Clause-14 of the Letters Patent shows that the plaintiff is entitled to several causes of action against defendants. However, different cause of action against two different defendants cannot be covered, as admittedly in this case, there is admission by the plaintiff that two separate purchase orders resulted into a contract executed with defendant nos. 1 & 2 separately for different amount. No leave has also been obtained for filing of this suit or for joint cause of action against two defendants, who are distinct and separate legal entities, i.e. companies registered under the Companies Act. 12. On notice, defendant no.2 has moved this application for stay of the suit, for referring the party to arbitration as per Clause 9(B) of the purchase order dated 24.02.2005. It is pleaded in the application that the plaintiff / non applicant had approached the applicant and expressed its willingness to procure WEG from the applicant https://hcservices.ecourts.gov.in/hcservices/ 6 company. The quotation given by the applicant was accepted. The plaintiff / non applicant placed order on 24.02.2007 and the order placed was for supply of 3 Nos. of P 250/29 Pioneer Wincon 250 kw Wind, operated electricity generators for total consideration of Rs.2,45,25,000/- (Rupees Two Crores Forty Five Lakhs and Twenty Five Thousand only). 13. Clause-9(b) of the purchase orders reads as under: "b) Arbitration: If at any time, any dispute arises in relation to this Purchase Order and if both the parties are not able to reach an amicable settlement, the same shall be referred to an Arbitrator under the Indian Arbitration Act, 1940 and such arbitration shall take place at Chennai." 14. The case of the applicant is that the dispute in suit, being covered under the Arbitration clause, the same deserves to be referred to Arbitration, under Section 8 of the Arbitration and Conciliation Act, 1996. 15. The application is opposed by the plaintiff / non applicant by denying averments made in the affidavit. The plea taken is that defendant no.1 had projected that it was associated with defendant no.2 and that there was mutual understanding between defendant nos. 1 & 2 as pointed out in the suit. 16. It is the stand of the plaintiff / non applicant that it was on the said understanding, that two purchase orders in the name of defendants were issued. It is also https://hcservices.ecourts.gov.in/hcservices/ 7 stand of the plaintiff that there is no dispute arising out of the agreement, as it is a matter of breach of contract and that defendant nos.1 & 2 jointly and severally cannot be able to pay damages. 17. The stand of the plaintiff is that the suit has been filed against both defendants, therefore, the matter cannot be referred to arbitration, as in that event, the plaintiff will have to sue defenddants separately. 18. Learned counsel for the applicant, in support of the application, vehemently contended that it is not disputed that there is arbitration clause between the parties and the original agreement has been placed on record. It is further contention of the learned counsel for the applicant that damages have been claimed alleging breach of contract between the parties, therefore, dispute has arisen out of the contract, which is covered under the arbitration clause. In terms of Section 8 of the Arbitration and Conciliation Act, the dispute deserves to be referred to Arbitration. 19. In support of the contention that the dispute quo the application can be referred to arbitration by excluding other defendants, learned counsel for the applicant placed reliance on the judgment of the Hon'ble Supreme Court in the case of Deutsche Post Bank Home Finance Ltd vs. Taduri Sridhar & Another, 2011 (4) CTC 472, wherein the Hon'ble Supreme Court, has been pleased to lay down as under: https://hcservices.ecourts.gov.in/hcservices/ 8 "The existence of an arbitration agreement between the parties to the petition under section 11 of the Act and existence of dispute/s to be referred to arbitration are conditions precedent for appointing an Arbitrator under section 11 of the Act. A dispute can be said to arise only when one party to the arbitration agreement makes or asserts a claim/demand against the other party to the arbitration agreement and the other party refuses/denies such claim or demand. If a party to an arbitration agreement, files a petition under section 11 of the Act impleading the other party to the arbitration agreement as also a non-party to the arbitration agreement as respondents, and the court merely appoints an Arbitrator without deleting or excluding the non-party, the effect would be that all parties to the petition under section 11 of the Act (including the non-party to arbitration agreement) will be parties to the arbitration. That will be contrary to the contract and the law. If a person who is not a party to the arbitration agreement is impleaded as a party to the petition under section 11 of the Act, the court should either delete such party from the array of parties, or when appointing an Arbitrator make it clear that the Arbitrator is appointed only to decide the disputes between the parties to the arbitration agreement. The arbitration agreement relied upon by the first respondent to seek appointment of arbitrator, is clause (7) of the construction agreement dated 21.2.2008. The appellant was not a party to the said construction agreement dated 21.2.2008 containing the arbitration agreement. It is no doubt true that the loan agreement dated 21.12.2006 between the first respondent as borrower, and the appellant as the creditor, also contains an arbitration clause (vide Article 11) providing for resolution of disputes in regard to the said loan agreement by arbitration. But the developer was not a party to the loan agreement. There is no arbitration agreement between the developer and the appellant. The disputes between the first respondent and the developer cannot be arbitrated under Article 11 of the Loan Agreement. The first respondent invoked the arbitration agreement contained in clause 7 of the construction agreement (between first respondent and developer) and not the arbitration agreement contained in clause 11 of the loan agreement https://hcservices.ecourts.gov.in/hcservices/ 9 (between appellant and first respondent). The existence of an Arbitration Agreement in a contract between appellant and first respondent, will not enable the first respondent to implead the appellant as a party to an arbitration in regard to his disputes with the developer. In view of the above, we allow this appeal and set aside the order dated 12.4.2010 of the designate of the Chief Justice, in part, in so far as the appellant is concerned. We make it clear that the appointment of arbitrator under the impugned order shall remain undisturbed in so far as the disputes between first respondent and the second respondent (developer) are concerned. We further make it clear that this order will not come in the way of first respondent making any claim or raising a dispute against the appellant or appellant making any claim or raising a dispute against the first respondent and either of them seeking recourse to arbitration in regard to such disputes." 20. The application is opposed by the learned counsel for the plaintiff / non applicant by contending that there is no arbitration agreement with one of the parties, therefore, this would be the case where subject matter of the suit partly falls within the agreement and partly outside and also involving party who are one of the parties to the arbitration agreement and other is not, therefore, the provisions of Section 8 would not be applicable. 21. In support of this contention, learned counsel for the plaintiff / non applicant placed reliance on the judgment of the Hon'ble Supreme Court in the case of Sukanya Holdings (P) Ltd vs. Jayesh H.Pandya and another, (2003) 5 SCC 531, wherein the Hon'ble Supreme Court has https://hcservices.ecourts.gov.in/hcservices/ 10 been pleased to lay down as under: "The relevant language used in Section 8 is: "in a matter which is the subject matter of an arbitration agreement". The Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of 'a matter' which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words 'a matter' indicates entire subject matter of the suit should be subject to arbitration agreement. it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action, that is to say, the subject matter of the suit or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. Secondly, such bifurcation of suit in two parts, one to be decided by the Arbitral Tribunal and other to be decided by the civil court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums." 22. There can be no dispute that the proposition of law laid down by the Hon'ble Supreme Court in the case of Sukanya Holdings (P) Ltd vs. Jayesh H.Pandya and another (supra), but the question to be determined in this case is whether the party can join different causes of action, with respect to two different parties under separate contracts https://hcservices.ecourts.gov.in/hcservices/ 11 to defeat the arbitration proceedings. 23. The reading of the plaint in this case shows that the impression sought to be given is that both defendant nos.1 & 2 were acting jointly to maintain joint cause of action. In that event, the arbitration clause would cover the entire dispute. 24. This is not true, but at the same time, it may be noticed, that it is not permissible for the plaintiff / non applicant to join different cause of action, as each of the contract is independent contract, executed by two separate legal entities. The plaintiff has claimed a consolidated sum making both defendants liable for the consolidated sum, therefore, it cannot be said that whole of the claim against applicant will not be covered under the arbitration clause. 25. The plaint also does not distinguish between different part played by each of the defendant nor there are different claims against each of the defendant. The plaintiff, therefore, by praying of joint and several decree, has raised the claim against both the defendants for the whole of the amount, under each of the contract. 26. The judgment of the Hon'ble Supreme Court, therefore, in the case of Sukanya Holdings (P) Ltd vs. Jayesh H.Pandya and another (supra), would not be applicable. Similar judgment relied upon by the learned counsel for the applicant in the case of Deutsche Post Bank https://hcservices.ecourts.gov.in/hcservices/ 12 Home Finance Ltd vs. Taduri Sridhar & Another, (supra) is also not applicable to the facts and circumstances of the case, as it deals with an application moved under Section 11 of the Act for referring the matter for arbitration. 27. It is well settled law that once there is arbitration agreement between parties and the defendants filed the original agreement along with the application for referring the matter for arbitration before submitting his first statement on the substance of the dispute. It is mandatory for the Court to refer the matter for arbitration. The agreement cannot be defeated by plaintiff by joining two different causes of action against two different defendants, as is sought to be done in the present case. Furthermore, suit has been filed without leave under Clause 14 of the Letters Patent. 28. Consequently, this application is allowed and the dispute, qua plaintiff and applicant is referred to the arbitration in terms of arbitration clause, between the parties. No costs. Sd/-V.K.S.J 10.12.2011 //Certified to be a true copy// Dated this the day of 2012. R.s/11.05.2012 COURT OFFICER From 25.09.2008 the Registry is issuing certified copies of the Order/Judgment Decree in this format. https://hcservices.ecourts.gov.in/hcservices/