Tantia Constructions Limited vs Mather And Platt Pumps Limited And ...
2023 Latest Caselaw 1194 Cal/2

                       In The High Court at Calcutta
                         Original Civil Jurisdiction
                           Commercial Division

The Hon'ble Justice Sabyasachi Bhattacharyya


                          AP NO.72 OF 2023
                     Tantia Constructions Limited
                                  VS.
              Mather and Platt Pumps Limited and another


For the petitioner      :      Mr. Swatarup Banerjee,
                               Mr. Sariful Haque,
                               Mr. Hareram Singh
For the respondents      :     Mr. Jishnu Chowdhury,

Mr. Aritra Basu, Mr. Ritoban Sarkar, Mr. Debanjan Ghosh

Hearing concluded on : 10.05.2023

Judgment on : 17.05.2023

The Court:

1. The petitioner has filed the present application under Section 11 of

the Arbitration and Conciliation Act, 1996 (hereinafter referred to as

"the 1996 Act") for reference of a dispute which has arisen between

the parties in connection with a Memorandum of Understanding (in

brief, the "MOU") and connected Joint Venture Agreement (for short,

"JVA"), both dated February 3, 2014.

2. As per Clause 16 of the MOU, both parties shall make efforts to settle

the disputes or differences amicably if any. If disputes are not resolved

through amicable settlement, the same shall be referred to the sole

arbitrator mutually selected by both the parties. The decision of the

arbitrator shall be final and binding on both the parties. Arbitration

proceeding shall be conducted in accordance with the 1996 Act (the

year wrongly mentioned in the agreement as "1998") and the venues of

arbitration shall be in Kolkata.

3. There is no contention in principle that disputes, which are otherwise

arbitrable, have arisen between the parties within the purview of the

arbitration clause. However, the respondents contend that the

arbitration clause in the JVA dated February 3, 2014 is no longer

existent in view of Clause 10.1 of a subsequent agreement dated

November 29, 2018 entered into between the parties on the self-same

joint venture. The said clause reads as follows:

" 10.1 The Agreement represents the entire understanding of the parties with respect to the subject matter contained herein and supersedes all prior discussions, understandings and agreements between the Parties with respect thereto any and all agreements, representations, and contracts made or dated prior hereto (whether written or oral) concerning the subject matter hereof."

4. Learned counsel for the respondents places reliance on Section 62 of

the Indian Contract Act, 1872 which provides that if the parties to a

contract agree to substitute a new contract for it, or to rescind or alter

it, the original contract need not be performed.

5. In the present case, it is argued, the subsequent agreement dated

November 29, 2018 specifically supersedes all previous agreements,

discussions, understandings, etc. including the first JVA dated

February 2, 2014. Hence, the arbitration clause in the JVA cannot be

enforced.

6. Learned counsel appearing for the petitioner argues that the alteration

to the JVA does not amount to novation of the same.

7. Moreover, it is contended that the agreement dated November 29,

2018 has to be read as being intrinsically interlinked with the JVA. A

still-subsequent document, captioned as "Amendment To Joint

Venture Agreement (For Joint and Several Liability of Joint Venture

Partner)" is relied on by the petitioner to argue that even in the same,

which was executed between the parties subsequent to the November

29, 2018 agreement, the JVA and the connected Joint Venture

Declaration have been relied on. This indicates that all the three

documents referred to above as Joint Venture agreements or

amendment thereto, are part and parcel of the same joint venture.

Hence, the arbitration clause in the initial MOU covers disputes

arising out of all.

8. Learned counsel for the petitioner cites Choloro Controls India Private

Limited Vs. Severn Trent Water Purification Inc. and Others [ (2013) 1

SCC 641 ] and Ameet Lalchand Shah and Others Vs. Rishabh

Enterprises and Another [ (2018) 15 SCC 678 ] in support of the

proposition that where various agreements constitute a composite

transaction, the court can refer the disputes to arbitration existing

between the signatory or non-signatory parties if all ancillary

agreements between the parties are relatable to a principal agreement

and performance of one agreement is so intrinsically interlinked with

the others that they are incapable of being performed without

performance of the others or severed from the rest.

9. Citing such proposition, it is argued that the parties here are on a still

better footing, since the present parties were signatories to all the

documents.

10. Learned counsel for the petitioner also relies on Sanjiv Prakash Vs.

Seema Kukreja and Others, reported at (2021) 9 SCC 732, where it was

held that a disputed question of novation of the agreement containing

the arbitration clause is non-determinable by the court at the stage of

reference under Section 11 of the 1996 Act.

11. Learned counsel for the respondents submits that, unlike in Chloro

Controls (supra), here the different agreements were entered into on

different dates and the 2018 documents explicitly supersedes the

2014 MOU. Moreover, in the said report, the same transaction was

broken up into separate agreements under different heads, but

pertained to the same main project.

12. Unlike Ameet Lalchand Shah (supra), here the JVA or the MOU were

not the mother/principal agreements. The subsequent agreements

were entered into independently and the clear language of the 2018

agreement superseded all prior discussions, understandings and

agreements, written or oral, on the subject matter, including the 2014

JVA and MOU, the latter of which contained the arbitration clause.

13. Learned counsel for the respondents also seeks to distinguish the

judgment of Sanjiv Prakash (supra) on facts.

14. Upon hearing learned counsel, the first question which begs

consideration is the true purport of the expression "alter" in Section

62 of the Contract Act. Applying the doctrine of noscitur a sociis, the

term "alter" is to be attributed the meaning derived from the previous

expressions used in the Section for similar action. The other two

expressions are "substitute a new contract for it" and "rescind". In the

caption of the section, the terms "novation", "rescission" and

"alteration" have been used in the same breath. Construed in such

perspective, "alter" cannot mean a minor or cosmetic change but must

be a change hitting at the root of the contract, altering the essentials

of the earlier contract to bring forth a novated agreement for all

practical purposes. Even the illustrations to Section 62 exemplify such

view.

15. Scrutinizing the subsequent agreement dated November 29, 2018

closely, certain features of the same stand out in the present context.

16. First, the said agreement refers to the initial JVA and a

supplementary JVA dated December 4, 2014 recording the office

address of the JV and the contract value of "the work". It is stated that

the petitioner TANTIA "was to perform the following works" as

specified therein. However, it was "yet to perform" some of the

activities in compliance with its "obligation". The 2018 agreement

relied on by the respondents further goes on to mention that the

petitioner foregoes its right to receive any payment, if any, which it

was "yet to receive from the JV" pursuant to the invoices raised for the

"work done". It also acknowledged that it shall not initiate any

proceedings for the recovery of the amount which it had waived in

view of the clause. All such factors unerringly indicate that it was

referring to the JVA and the MOU, which were the genesis of the

entire "obligations" and "the work" to be done.

17. Secondly, Clause 10.1 spoke about supersession of the entire

understanding, prior discussions, agreements etc. "concerning the

subject matter hereof". The subject matter thereof was not the

origination of the joint venture project but an alteration of the ratio of

participation in the joint venture itself. Thereby, the petitioner waived

certain rights and conferred them on the respondents, but all flowing

from the original joint venture, of which the parent agreements were the

JVA of 2014 and the connected MOU.

18. A third aspect of the matter is required to be considered as well. In its

supplementary affidavit, the petitioner has annexed another

agreement dated January 31, 2019, which is even subsequent to the

2018 document cited by the respondent. Notably, the said 2019

document provides, in Clause 7 thereof, as follows:

"7. This Agreement form for joint and several liability is an integral part of the Joint Venture Declaration and Contract awarded to the partnership."

19. Thus, it can be seen that an agreement entered into between the

parties even after the 2018 document again refers to the JVA and

connected Declaration/MOU, which presupposes the continuance of

the MOU containing the arbitration clause till after the 2018

document.

20. The JVA mentions in Clause 6 of the same that the Agreement to form

it (the MOU) is entered on the same day. Clause 7 says that the said

Agreement form for joint and several liability is an integral part of the

Joint Venture Declaration and will be finalized in case the Contract is

awarded to the partnership/legal entity prior to the signature thereof.

Hence, the JVA and the MOU are integral parts of each other.

21. All the subsequent agreements and documents, copies of which have

been annexed to the pleadings and relied on by both parties, pertain

to the Joint Venture entered into by the parties by virtue of the MOU

and JVA dated February 3, 2014.

22. Thus, for a proper and complete adjudication of any dispute arising in

connection with the Joint Venture, it is essential that all the

connected documents, which are parts of the same transaction, are to

be looked into. The cause of action as pleaded in the invocation under

Section 21 of the 1996 Act dated January, 4, 2023, reiterating the

invocation dated November 25, 2022, pertains to the entire dispute,

which cannot be segregated into separate agreements.

23. All the agreements-in-question and the components of the dispute are

intrinsically and inextricably interlinked with each other, as

contemplated in Chloro Control (supra). The Supreme Court, in the

said case, went so far as to hold that even the fact that a party to the

arbitration agreement was non-signatory to one or other agreement

may not be of much significance.

24. Although there may be subtle differences between the language and

purport of the different agreements of Chloro Control (supra), Ameet

Lalchand Shah (supra) and the present case, the principles laid down

in the said judgments are equally binding in the facts of the instant

lis.

25. Applying the test laid down in Sanjiv Prakash (supra), following Vidya

Drolia Vs. Durga Trading Corpn. [ (2021) 2 SCC 1 ] and Duro Felguera,

S.A. Vs. Gangavaram Port Ltd. [ (2017) 9 SCC 729, there cannot be any

manner of doubt that detailed arguments on whether the MOU

containing the arbitration clause in the present case has or has not

been novated cannot possibly be decided in exercise of a limited prima

facie review as to whether an arbitration agreement exists between the

parties. Such an inquiry would lead to detailed interpretation of all the

connected documents as well as appreciation of detailed evidence,

which is entirely beyond the limited domain of a court referring the

dispute to arbitration under Section 11 of the 1996 Act, particularly in

view of sub-sections (6) and (6A) thereof.

26. Hence, the objection taken by the respondents is turned down.

27. The disputes, being otherwise arbitrable and falling within the

purview of the arbitration clause, ought to be referred to arbitration

under Section 11 of the 1996 Act, as there does not appear to be any

amicable resolution between the parties.

28. Accordingly, A.P. No. 72 of 2023 is allowed, thereby appointing Justice

Indira Banerjee, a former Judge of the Supreme Court of India (Mobile

No. 9560808777), as the sole arbitrator to resolve the disputes

between the parties, subject to obtaining her consent under Section

12 of the Arbitration and Conciliation Act, 1996.

( Sabyasachi Bhattacharyya, J. )