Case: Indowind Energy Ltd Vs. Wescare (I) Ltd. &amp; Another

facie a party to the arbitration agreement and that a party is prima facie bound by it. It is not as if the Chief Justice or his Designate will subsequently be passing any other final decision as to who are the parties to the arbitration agreement. Once a decision is rendered by the Chief Justice or his Designate under section 11 of the Act, holding that there is an arbitration agreement between the parties, it will not be permissible for the arbitrator to consider or examine the same issue and record a finding contrary to the finding recorded by the court. This is categorically laid down by the Constitution Bench in SBP. Therefore the prima facie finding by the learned Chief Justice that Indowind is a party to the arbitration agreement is not what is contemplated by the Act.21 It is no doubt true that if Indowind had acknowledged or confirmed in any correspondence or other agreement or document, that it is a party to the arbitration agreement dated 24.2.2006 or that it is bound by the arbitration agreement contained therein, it could have been possible to say that Indowind is a party to the arbitration agreement. But that would not be under section 7(4)(a) but under section 7(4)(b) or section 7(5). Be that as it may. That is not the case of Wescare. In fact, the delivery notes/invoices issued by Wescare do not refer to the agreement dated 24.2.2006. Nor does any letter or correspondence sent by Indowind refers to the agreement dated 24.2.2006, either as an agreement executed by it or as an agreement binding on it. We may now refer to the several documents referred to and relied on by Wescare.22. The first is in regard to the sale of WEGs by Wescare to Indowind. The letter dated 15.3.2006 enclosing the invoice, the delivery notes dated 15.3.2006 given by Wescare to Indowind, the confirmation dated 15.3.2006 by Wescare to Indowind relating to the sale of WEGs, relied on by Wescare, very significantly do not refer to the agreement dated 24.2.2006. They are straight and simple delivery notes and an invoice in regard to the sale of goods. They can be independent transactions which do not depend on or relate to the agreement dated 24.2.2006. If they were with reference to the agreement dated 24.2.2006, it is strange that Wescare did not choose to refer to the said agreement in any of these documents.23. Strong reliance is placed on the Red Herring Prospectus issued by the Indowind in connection with the public issue of its shares. We extract below the relied upon portions of the prospectus : "30. We have agreed to takeover the assets of Wescare (India) Limited, subject to approval of owners of assets and statutory formalities, but only a portion of acquisition has been completed. Our Company agreed to takeover wind mills along with land, infrastructure and spares from Wescare India Limited. But due to non receipt of approvals from the lenders/lessors, only a part of the total being 6.49 MW has been acquired by us. The Company is not certain of completing the remaining acquisition. We had paid the total amount for 39 windmills, however only 28 windmills were delivered to us representing nearly 72% of the total money paid by us. 31. One of our Promoters, Subuthi Finance Limited, has entered into an agreement dated February 24, 2006 with Wescare (India) Limited for the acquiring wind mills and other assets in the name of its nominee viz. Indowind Energy Limited for a consideration aggregating approximately Rs.9819 lacs. The consideration for the above was to be partly settled in partly in cash (Rs.2419 lacs) and partly by way of shares (74 lacs) of Indowind Energy Limited. Wescare (India) Limited has filed the following applications before the Honble High Court of Madras under Section 9 of the Arbitration and Conciliation Act, 1996 : S.No. Application No. Applicant Respondents 1 O.A.No.641 of 2007 Wescare India (i) Subuthi Finance Limited Limited (ii) Indowind Energy Limited 2 O.A.No.642 of 2007 -same as above- -same as above- 3 Appl. No.3808 of 2007 -same as above- -same as above- 4 Appl. No.3808 of 2007 -same as above- -same as above- All above applications are pending before the Honble High Court of Madras. For further details of the same, please refer section titled "Outstanding Litigations and Material Developments" on page 190 of this Red Herring Prospectus." Para 30 of the Prospectus merely refers to Indowind agreeing to take over the wind mills along with land, infrastructure and spares from Wescare. It does not refer to the agreement dated 24.2.2006 nor does it state that the takeover of the wind mills etc., was in pursuance of the agreement dated 24.2.2006. Para 31 of the Prospectus specifically states that Subuthi had entered into an agreement dated 24.2.2006 with Wescare to acquire WEGs and other assets in the name of its nominee Indowind. This has never been disputed by anyone. But what is significant is that there is no acknowledgement or statement that the said agreement was authorized to be entered on its behalf by Indowind or Indowind had ratified or approved the said agreement. Para 31 also refers to the applications under section 9 filed by Wescare and the interlocutory applications filed in such applications. But then that also does not help as in fact in the said application under section 9 the High Court has held that Indowind is not a party to the agreement dated 24.2.2006 and therefore not a party to an arbitration agreement.24. Wescare relied upon two decisions of the US Court of Appeals to contend that a person to be bound by an arbitration agreement need not personally sign the written arbitration agreement. [FISSER v. International Bank - 282 F.2d 231 (1960) and J.J.Ryan & Sons, Inc. v. Rhone Poulene Textile, S.A. - 863 F.2d 315]. These decisions are of no assistance as they do not relate to a provision similar to section 7 of the Indian Act.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]The examination cannot extend to examining the agreement to ascertain the rights and obligations regarding performance of such contract between the parties. This Court in SBP & Co. v. Patel Engineering Limited [2005 (8) SCC 618 ] and in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. [2009 (1) SCC 267 ] has held that when an application is filed under section 11, the Chief Justice or his Designate is required to decide only two issues, that is whether the party making the application has approached the appropriate court and whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to such agreement. Therefore, the Chief Justice exercising jurisdiction under section 11 of the Act has to only consider whether there is an arbitration agreement between the petitioner and the respondent/s in the application under section 11 of the Act. Any wider examination in such a summary proceeding will not be warranted.20. In so far as the issue of existence of arbitration agreement between the parties, the learned Chief Justice or his Designate is required to decide the issue finally and it is not permissible in a proceeding under section 11 to merely hold that a party is prima facie a party to the arbitration agreement and that a party is prima facie bound by it. It is not as if the Chief Justice or his Designate will subsequently be passing any other final decision as to who are the parties to the arbitration agreement. Once a decision is rendered by the Chief Justice or his Designate under section 11 of the Act, holding that there is an arbitration agreement between the parties, it will not be permissible for the arbitrator to consider or examine the same issue and record a finding contrary to the finding recorded by the court. This is categorically laid down by the Constitution Bench in SBP. Therefore the prima facie finding by the learned Chief Justice that Indowind is a party to the arbitration agreement is not what is contemplated by the Act.21 It is no doubt true that if Indowind had acknowledged or confirmed in any correspondence or other agreement or document, that it is a party to the arbitration agreement dated 24.2.2006 or that it is bound by the arbitration agreement contained therein, it could have been possible to say that Indowind is a party to the arbitration agreement. But that would not be under section 7(4)(a) but under section 7(4)(b) or section 7(5). Be that as it may. That is not the case of Wescare. In fact, the delivery notes/invoices issued by Wescare do not refer to the agreement dated 24.2.2006. Nor does any letter or correspondence sent by Indowind refers to the agreement dated 24.2.2006, either as an agreement executed by it or as an agreement binding on it. We may now refer to the several documents referred to and relied on by Wescare.22. The first is in regard to the sale of WEGs by Wescare to Indowind. The letter dated 15.3.2006 enclosing the invoice, the delivery notes dated 15.3.2006 given by Wescare to Indowind, the confirmation dated 15.3.2006 by Wescare to Indowind relating to the sale of WEGs, relied on by Wescare, very significantly do not refer to the agreement dated 24.2.2006. They are straight and simple delivery notes and an invoice in regard to the sale of goods. They can be independent transactions which do not depend on or relate to the agreement dated 24.2.2006. If they were with reference to the agreement dated 24.2.2006, it is strange that Wescare did not choose to refer to the said agreement in any of these documents.23. Strong reliance is placed on the Red Herring Prospectus issued by the Indowind in connection with the public issue of its30 of the Prospectus merely refers to Indowind agreeing to take over the wind mills along with land, infrastructure and spares from Wescare. It does not refer to the agreement dated 24.2.2006 nor does it state that the takeover of the wind mills etc., was in pursuance of the agreement dated 24.2.2006. Para 31 of the Prospectus specifically states that Subuthi had entered into an agreement dated 24.2.2006 with Wescare to acquire WEGs and other assets in the name of its nominee Indowind. This has never been disputed by anyone. But what is significant is that there is no acknowledgement or statement that the said agreement was authorized to be entered on its behalf by Indowind or Indowind had ratified or approved the said agreement. Para 31 also refers to the applications under section 9 filed by Wescare and the interlocutory applications filed in such applications. But then that also does not help as in fact in the said application under section 9 the High Court has held that Indowind is not a party to the agreement dated 24.2.2006 and therefore not a party to an arbitration agreement.24. Wescare relied upon two decisions of the US Court of Appeals to contend that a person to be bound by an arbitration agreement need not personally sign the written arbitration agreement. [FISSER v. International Bank282 F.2d 231 (1960) and J.J.Ryan & Sons, Inc. v. Rhone Poulene Textile, S.A.863 F.2d 315]. These decisions are of no assistance as they do not relate to a provision similar to section 7 of the Indian Act.