In this case, several agreements and contracts were executed between various parties through their involvement in a single commercial project of a solar plant. Among the 4 agreements executed between parties, 3 contained an arbitration clause. Supreme Court in this case held that when a commercial transection is integrally connected and is for the same purpose, the matter can be referred to arbitration even if one of the agreement does not contain an arbitration clause provided all the agreements are inter-connected.
The respondents executed the following agreements in furtherance of the project:
1. Agreement with Juwi India to purchase power generating equipments dated 01.02.2012; (“Equipment and Material Supplies Contract”)
2. Agreement with Juwi India for engineering, installation and commission of the solar power plant at Jhansi dated 01.02.2012; (“Engineering, Installation and Commissioning Contract”)
3. Agreement with Aston renewables Pvt. Ltd. (“Astonfield”) for purchasing CIS photovoltaic products to be leased to Dante Energy Pvt. Ltd. (“Dante Energy”) for energizing solar plant installation at Jhanis dated 05.03.2012; (“Sale and Purchase Agreement”) and
4. An agreement with Dante Energy wherein Dante Energy leased equipment(“Equipment Lease Agreement”)
The appellant in the case, Mr. Ameet Lalchand Shah, is the promoter and controls both Astonfield as well as Dante Energy. The Sale and Purchase Agreement did not contain an arbitration clause whereas all other agreements had an arbitration clause.
Dispute arose between the parties and the respondents alleged that Dante Energy had defaulted in payment of lease rent and Astonfield committed fraud by inducing the respondents to purchase the photovoltaic products by investing huge amounts. The respondents have also alleged that appellants had committed misrepresentation and criminal breach of trust so far as the equipment procured and leased to Dante energy. An FIR was filed by the respondents in this regard.
Appellants sought for reference to arbitration of all four agreements by contending that the sale and purchase agreement is the main agreement and the other three agreements are interconnected as they are executed between the same parties and the obligations and the performance of the terms of agreements are inter-connected viz. commissioning of the photovoltaic solar plant at Dongri, Raska, District Jhansi U.P.
The respondents resisted the application to refer the matter to arbitration by contending that the suit is for declaration that the agreements are vitiated due to fraud and misrepresentation and while so the matter cannot be referred to arbitration.
The present case was appealed to the Hon’ble Supreme Court against the order of the Delhi High Court dismissing the application to refer the matter to arbitration under Section 8 of the Arbitration and Conciliation Act, 1966.
The Hon’ble Supreme Court held that even though there are different agreements involving several parties, if the agreements are in relation to a single commercial project, the matter can be referred to arbitration even if one of the agreements does not contain an arbitration clause. However, it is sine qua non that the agreement that does not contain an arbitration clause must be integrally connected with the commercial project.
The Hon’ble Court in Ameet Lalchand Shah and Others v. Rishabh Enterprises and Another has adopted a very broad approach in allowing the parties to refer the matter to arbitration. Such approach towards speeding up the procedure for disposal of commercial disputes will only improve the overall health of the economic sectors.