When Multiple Agreements Are Not Interconnected, Arbitration Clause In Any One Agreement Can't Justify Referring All Disputes To Arbitration: Telangana HC

The Telangana High Court bench of Chief Justice Alok Aradhe and Justice Sreenivas Rao, affirmed that where multiple agreements are interconnected and form part of a single commercial transaction then only the presence of an arbitration clause in one or more agreements can justify referring all disputes, involving all agreements and parties, to arbitration. This is true even if some agreements lack an arbitration clause. In this case, the court found that agreements were not interconnected.Brief FactsThis appeal under Section 13 of the Commercial Courts Act, 2015 read with Section 37 of the Arbitration and Conciliation Act, 1996 has been filed against the order dated 10.06.2024 passed in C.O.S.No.31 of 2021 by the Commercial Court by which the application filed by appellant/defendant No.1 seeking rejection of the plaint under Section 8 of the Arbitration and Conciliation Act, 1996 read with Order VII Rule 11(a) & (b) read with Section 151 of Code of Civil Procedure, 1908 (C.P.C.) was dismissed.Plaintiff had entered into an operational lease agreement dated 16.10.2019 with defendant No.1 company in respect of 30 Volvo Tippers and the said operational lease agreement was executed at Gurugram, Haryana. The defendant No.1 defaulted in payment of monthly lease rental of the Volvo Tippers from the 1st month itself and failed to pay the rents from November, 2019 to August, 2020. Subsequent thereto, the plaintiff and defendant No.1 have entered into Memorandum of Understanding (MOU) in furtherance of the operational lease agreement on 05.01.2020, whereby the original operational lease agreement was modified/revised. But,defendant continued to default.Thereafter, defendant Nos.1 to 3 approached the plaintiff in the month of February 2020 stating that defendant No.1 was independently awarded works of contract in Odisha and proposed joint venture with the plaintiff and offered to share 50% of the profits in the revenue accrued and also to refund the working capital to the plaintiff and accordingly, the plaintiff and defendant No.1 entered into joint venture agreement dated 21.02.2020. But this agreement was not acted upon.The plaintiff filed C.O.S.No.31 of 2021 seeking a direction to the defendants to jointly and severally pay an amount of Rs.10,93,05,243/- in respect of the Lease Agreement dated 16.10.2019 along with future interest @ 13% per annum from the date of suit till realisation and sought another relief directing defendant No.1 to pay an amount of Rs.33,41,069/- being amounts refundable by them towards initial capital investment and other expenses in respect of the joint venture agreement dated 21.02.2020 Defendant No.1 filed an application in I.A.No.73 of 2022 under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') read with Order VII Rule 11(a) and (b) of C.P.C. to reject the plaint on the ground that as per the arbitration clause in the joint venture agreement dated 21.02.2020, the Commercial Court is not having jurisdiction to adjudicate the dispute as well as bar under Section 8 of the Act as there is valid arbitration clause in the agreement existing between the parties and also on the ground of cause of action.ContentionsThe Defendant No. 1/appellant submitted that in the joint venture agreement, there is a specific clause enumerated that if any dispute arises between the parties, the said dispute has to be resolved through arbitrator. The plaintiff instead of invoking arbitration clause filed suit in C.O.S.No.31 of 2021 before the Commercial Court and the same is not maintainable under law and also there is no cause of action to institute the suit.Per contra, Plaintiff/the respondent submitted that the operational lease agreement dated 16.10.2019 and the joint venture agreement dated 21.02.2020 are not interconnected and both are different agreements and that the operational lease agreement dated 16.10.2019 was executed between the plaintiff and defendant No.1, whereunder the plaintiff leased out 30 Volvo Tippers to defendant No.1 for a period of 34 months.That Insofar as joint venture agreement dated 21.02.2020 is concerned, it is an independent agreement in respect of works which were already awarded to defendant No.1 at Lakhanpur, Odisha at the Mines of Mahanadi Coal Fields.That operational agreement and the MOU do not contain arbitration clause and only joint venture agreement contains an arbitration clause. Pursuant to the said clause, defendant No.1 filed Arbitration Application No.419 of 2022 before the High Court of Delhi seeking appointment of Sole Arbitrator to resolve the dispute between the parties and the said arbitration application was allowed.Court's AnalysisThe court noted that in pursuance of arbitration clause contained in the joint venture agreement defendant No.1 has filed Arbitration Application No.419 of 2022 before the High Court of Delhi and the same was allowed on 25.03.2022 referring the dispute arose out of a joint venture...

When Multiple Agreements Are Not Interconnected, Arbitration Clause In Any One Agreement Can't Justify Referring All Disputes To Arbitration: Telangana HC

Mohd Malik Chauhan

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