CHLORO CONTROLS (I) P. LTD v. SEVERN TRENT WATER PURIFICATION INC & Ors.

the Mother or the Prioclpal Agreement, the fact that a party was non-signatory to one or other agreement may not be of much significance. The performance of any one of such agreements may be quite irrelevant without the performance and fulfillment of the Principal or the Mother D Agreement. Besides designing the corporate management to successfully complete the joint ventures, where tt; ie parties execute different agreements but all with one primary object in mind, the Court would normally hold the parties to the bargain of arbitration and not E encourage its avoidance. In cases involving execution of such m'-lltiple agreements, two essential features exist; firstly, aH ancillary agreements are relatable to the mother agreement and secondly, performance of one is so intrinsically inter-linked with the other agreements that F they are incapable of being beneficially performed without performance of the others or severed from the rest. The intention of the parties to refer all the disputes between all the parties to the arbitral tribunal is one of the determinative factor. [Paras 69] [460-F-H; 461-A-B] G Ruhrgos AG v. Marathon Oil Co. 526 US 574 (1999) - referred to.

2.4 In the case of composite transactions and multiple agreements, it may again be possible to invoke such H 412 SUPREME COURT REPORTS [2012] 13 S.C.R. B A principle in accepting the pleas of non-signatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically inter-mingled or inter-dependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties to refer signatory as well as non-signatory parties to c arbitration. The principle of 'composite performance' would have to be gathered from the conjoint reading of the principal and supplementary agreements on the one hand and the explicit intention of the parties and the attendant circumstances on the other. [Para 71] [461-E-G] E D

2.5 Where the Court which, on its judicial side, is seized of an action in a matter in respect of which the parties have made an arbitration agreement, once the required ingredients are satisfied, it would refer the parties to arbitration but for the situation where it comes to the conclusion that the agreement is null and void, inoperative or incapable of being performed. These expressions have to be construed somewhat strictly so as to ensure that the Court returns a finding with certainty and on the correct premise of law and fact as it F has the effect of depriving the party of its right of reference to arbitration. These are the issues which go to the root of the matter and their determination at the threshold would prevent multiplicity of litigation and would even prevent futile exercise of proceedings before G the arbitral tribunal. [Para 76) [467-B-E] General Electric Co. v. Renusagar Power Co. (1987) 4 SCC 137: 1987 (3) SCR 858 - relied on.

2.6 In the present case, the corporate structure of the H respondent companies as well as that of the appellant CHLORO CONTROLS (I) P. LTD. v. SEVERN TRENT 413 WATER PURIFICATION INC. companies clearly demonstrates a legal relationship A which not only is inter-legal relationship but also intra legal relationship between the parties to the /is or persons claiming under them. They have contractual relationship which arises out of the various contracts that spell out the terms, obligations and roles of the respective parties B which they were expected to perform for attaining the object of successful completion of the joint venture agreement. This joint venture project was not dependant on any single agreement but was capable of being achieved only upon fulfillment of all these agreements. c [Para 105] [478-G-H; 479-A-B]

2.7 In the present case, the companies which executed the various agreements were the companies signatory to the Principal Agreement or their holding companies or the companies belonging to the D respondent group in which they had got merged for the purposes of attaining effective designing, manufacturing, import, export and marketing of the agreed chlorinated products. All the subsequent agreements were, therefore, ancillary or incidental agreements to the Principal Agreement. Thus, the joint venture entered between the parties had different facets. Its foundation was provided under the Principal Agreement but all the agreed terms could only be fulfilled by performance of the ancillary agreements. If one segregates the Principal Agreement from the rest, the subsequent agreements would be rendered ineffective. It was one composite transaction for attaining the purpose of business of the joint venture company. All these agreements are so intrinsically connected to each other that it is neither possible nor G probable to imagine the execution and implementation of one without the collective performance of all the other agreements. The intention of the parties was clear that all these agreements were being executed ss integral parts of a composite transaction. It can safely be covered F E H 414 SUPREME COURT REPORTS [2012] 13 S.C.R. A under the principle of 'agreements within an agreement'. [Paras 138 and 139) [502-F-H; 503-A, C-E]

2.8 All the six material agreements had been signed by some parties Oii' their holding companies or the companies into which the signatory company had 8 merged. None of these companies is either stranger to the transaction or not an appropriate party. The parties who have signed the agreements could alone give rights or benefits to the joint venture company and they, in turn, were the compani1es descendants in interest or the C subsidiaries of the principal company though all the parties to the /is are not signatory to all the agreements in question, but still they would be covered under the expression 'claiming through or under' the parties to the agreement. The interests of these companies are not D adverse to the interest of the principal company and/or the joint venture company. On the contrary, they derive their basic interest and enforceability from the Mother Agreement and performance of all the other agreements by respective parties had to fall in line with the contents E of the Principal Agreement. Thus, these companies claim their interest and invoke the terms of the agreement or defend the action in the capacity of a 'party claiming through or under' the parties to the agreement. [Paras 142 and 143) [505··G-H; 506-A-D] F

2.9 The arbitration clause contained in the Principal Agreement requires that any dispute or difference arising under or in connection with that agreement which could not be settled by friendly negotiation and agreement between the parties, would be finally settled by arbitration G conducted in accordance with the Rules of ICC. This clause is comprehensive enough to include the disputes arising 'under and in connection with' the agreement. The word 'connection' has been added by the parties to expand the scope of the disputes under the agreements. H The agreement has to be construed and interpreted in CHLORO CONTROLS (I) P LTD. v. SEVERN TRENT 415 WATER PURIFICATION INC. accordance with laws of the Union of India, as consented A by the parties. [Para 144] [506-F-H; 507-A]

2.10 The expression 'connection' means a link or relationship between people or things or the people with whom one has contact. The dictionary meaning of this expression is liberally worded. It implies expansion in its operation and effect both. Connection can be direct or remote but it should not be fanciful or marginal. In other words, there should be relevant connection between the dispute and the agreement by specific words or by necessary implication like reference to all other C agreements in one (principal) agreement. [Paras 145 and 146] [507-B, C-0] B Concise Oxford Dictionary (Indian Edition); Law Lexicon 2nd Edn. 1997 - referred to. D

2.11 The expression appearing in the arbitration clause has to be given a meaningful interpretation particularly when the Principal Agreement itself, by specific words or by necessary implication, refers to all other agreements. This would imply that the other E agreements originate from the Principal Agreement and hence, its terms and conditions would be applicable to those agreements. [Para 146] [507-D-E]

2.12 All the agreements were executed simultaneously on the same date, which fact fully supports the view that the parties intended to have all these agreements as a composite transaction. Furthermore, when the parties signed the Supplementary Collaboration Agreement by that time all these agreements had not only been signed and understood G by the parties but, in fact, had also been acted upon. [Para 147] [508-C-D] F

2.13 The conduct of the parties and even the subsequent events leave no doubt that the parties had H 416 SUPREME COURT REPORTS [2012] 13 S.C.R. A executed, intended and actually implemented the composite transaction contained in the Principal Agreement. The Courts have also applied the Group of Companies Doctrine in such cases. In group company cases, that the fact that a party being non-signatory to B one or other agreement may not be of much significance, the performance of one may be quite irrelevant with the performance and fulfillment of the principal or the mother agreement. That, in fact, is the situation in the present case. [Paras 149 and 150) [508-G-H; 509-A, C-D] C Olympus Superstructure Pvt. Ltd. v. Meena Vijay Khetan and Ors. (1999) 5 sec 651: 1999 (3) SCR 490 - relied on. 2.14 Two of the agreements did not contain any arbitration clause, but they also did not subject the parties 0 even for litigative jurisdiction. These two agreements had been executed in furtherance to and for compliance of the terms and conditions of the mother agreement which contained the arbitration clause. They were, thus, intrinsically inter-connected with the mother agreement. [Para 153) [510-E-F] E F

2.15 Where different agreements between the parties provide for alternative remedies, it does not necessarily mean that the other remedy or jurisdiction stands ousted. Where the parties to such composite transaction provide for different alternative forums, including arbitration, it has to be taken that real intention of the parties was to give effect to the purpose of agreement and refer the entire subject matter to arbitration and not to frustrate the remedy in law. It was for the parties to choose either to G institute a suit qua the International Distributor Agreement or to invoke the arbitration agreement in terms of clause 30 of the mother agreement. They have chosen the latter remedy. Thus, a composite reference was well within the comprehension of the parties to various agreements H which were executed on the same day and for the same CHLORO CONTROLS (I) P. LTD. v. SEVERN TRENT 417 WATER PURIFICATION INC, purpose. [Paras 154 and 156] [510-G-H; 511-A-B-E]

2.16 All the disputes that arise in the suit and from the agreement between the parties, are directed to be referred to arbitral tribunal and be decided in accordance with the Rules of ICC. [Para 169] [515-F] A B

3.1 The issue of jurisdiction normally is a mixed question of law and facts. Occasionally, it may also be a question of law alone. It will be appropriate to decide such questions at the beginning of the proceedings itself and they should have finality. Determination of fundamental c issues as contemplated under Section 45 of the 1996 Act at the very first instance by the judicial forum is not only appropriate but is also the legislative intent. Even, the language of Section 45 of the 1996 Act suggests that unless the Court finds that an agreement is null and void, 0 inoperative and incapable of being performed, it shall refer the parties to arbitration. [Para 131] [497-F-G; 498- B-C]

3.2 An application for appointment of arbitral tribunal u/s. 45 would also be governed by the provisions of E Section 11 (6) of the 1996 Act. Before making a reference, the Court has to dispose of the objections as contemplated under Section 8 or Section 45, as the case may be, and wherever needed upon filing of affidavits. Thus, to an extent, the law laid down by this Court on F Section 11 shall be attracted to an international arbitration which takes place in India as well as domestic arbitration. This would be applicable at pre-award stage. Thus, there exists a direct legal link, limited to that extent. [Paras 114 and 128] [483-C; 495-D-E] G SBP and Co. v. Patel Engineering Ltd. and Anr. (2005) 8 SCC 618:2005 (4) Suppl. SCR 688 - followed. Shree Ram Mills Ltd. v. Utility Premises (P) Ltd, (2007) 4 SCC 599; National Insurance Co. Ltd. v. Boghara Polyfab H 418 SUPREME COURT REPORTS [2012] 13 S.C.R. A (P) Ltd. (2009) 1 sec 267: 2008 (13) scR 638 - relied on. Shin-Etsu Chemcial Co. Ltd. v. Mis. Aksh Optifibre Ltd. and Anr.(2005) 7 SCC 234: 2005 (2) Suppl. SCR 699 - referred to. B

3.3 The absence of any provision in Chapter I of Part II of the 1996 Act, like Section 16 appearing in Part I of 1996 Act is suggestive of the requirement for the Court to determine the ingredients of Section 45, at the threshold itself. It is expected of the Court to answer the c question of validity of the arbitration agreement, if a plea is raised that the agreement containing the arbitration clause or the arbitration clause itself is null and void, inoperative or incapable of being performed. Such determination by the Court in accordance with law would certainly attain finality and would not be open to question by the arbitral tribunal, even as per the principle of prudence. It will prevent multiplicity to litigation and re ag itati ng of same issues over and over again. The underlining principle of finality in Section 11 (7) would be applicable with equal force while dealing with the interpretation of Sections 8 and 45. [Para 130) [496-B-E] E 0 F

3.4 The principle of 'Kompetenz kompetenz' requires the arbitral tribunal to rule on its own jurisdiction and at the first instance. One school of thought propagates that it has duly the positive effect as it enables the arbitrator to rule on its own jurisdiction as it widely recognized international arbitration. However, the negative effect is equally important, that the Courts are deprived of their jurisdiction. The arbitrators are to be not the sole judge G but first judge, of their jurisdiction. In other words, it is to allow them to come to a decision on their own jurisdiction prior to any court or other judicial authority and thereby limit the jurisdiction of the national courts to review the award. The kompetenz kompetenz rule, thus, concerned H not only is the positive but also the negative effect of the CHLORO CONTROLS (I) P. LTD. v. SEVERN TRENT 419 WATER PURIFICATION INC. arbitration agreement. [Para 129] (495-F-H] A Fouchard Gaillard Goldman on International Commercial Arbitration-referred to.

3.5 Another very significant aspect of adjudicating the matters initiated with reference to Section 45 of the 1996 B Act, at the threshold of judicial proceedings, is that the finality of the decision in regard to the fundamental issues stated under Section 45 would further the cause of justice and interest of the parties as well. [Para 131] [497- B-C] C

4.1 Though in terms of Section 9 CPC, the courts shall have jurisdiction to try all suits of civil nature and this Section also gives a right to a person to institute a suit before the court of competent jurisdiction, but the language of Section 9 itself makes it clear that the civil courts have jurisdiction to try all suits of civil nature except the suits of which taking cognizance is either expressly or impliedly barred. The jurisdiction of the court and the right to a party emerging from Settion 9 CPC is not an absolute right, but contains inbuilt E restrictions. [Para 156] [511-F-G] 0 ORDER

#1. Upon pronouncement of the judgment Mr. F.S. Nariman, learned senior counsel appearing for the petitioner, mentioned F G H 516 SUPREME COURT REPORTS [2012] 13 S.C.R. A B that the petitioner had filed an application for injunction in the suit before the High Court. The same was dismissed. Appeal against the order dismissing the application had been filed before this Court and was ordered to be listed along with SLP (C) No. 8950 of 2010 (which is an appeal against the order of the High Court making reference to arbitral tribunal). However, the Court had not heard arguments on that appeal.

#2. Learned senior counsel appearing fcir the respondents, Mr. K.V. Vishwanathan, submitted that the special leave petitions were listed but they were not admitted.

#3. In view of the common stand taken by the counsel for the parties, we permit the petitioner to move an independent application praying for hearing for those special leave petitions i.e. SLP(C)Nos.26514-26515 of 2011 (listed along with SLP(C)No. 8950/2010) pending for admission. K.K.T. Appeals dismissed. c 0