Arbitration – Impleadments of party to arbitration proceeding in absence of arbitration agreement

The Plaintiff had filed the suit for a declaration that there is no arbitration agreement between the Plaintiff and Defendant No. 1

The Plaintiff had also taken out a notice of motion, praying for an order of restraint restraining Defendant No. 1 from proceeding with or prosecuting the arbitration proceeding initiated by it before the International Chamber of Commerce. Defendant No. 2 is a subsidiary of the plaintiff, had an independent existence and, as such, independent contracting capacity.

The Court observed that the present case was squarely covered by the law laid down by the Apex Court in the case of Indowind Energy Ltd. vs. Wescare (I) Ltd. AIR 2010 SC 1793 wherein the Apex Court in clear terms had held that to constitute an arbitration agreement, it is necessary that it should be between the parties to the dispute and should relate to or be applicable to the dispute. The Apex Court in unequivocal terms observed that, unless the party who is sought to be implicated in the arbitration proceeding is signatory to the agreement, it cannot be roped in the arbitration proceedings. In the present case, it could clearly be seen from the contract as well as the correspondence between the Defendant No.1 and the Defendant No.2, that the Plaintiff was not a contracting party or even a consenting party to the contract between the Defendant No.1 and the Defendant No.2. Not only that, but the entire correspondence with regard to the claim of the Defendant No.1 was only between the Defendant No.1 and the Defendant No.2. It was only for the first time that in the arbitration proceedings the Plaintiff had been implicated and as the words used by the Defendant No.1 itself in the claim “to drag in this arbitration”. Thus, there was no agreement at all between the Plaintiff and the Dr. K. Shivaram Ajay R. Singh Advocates Allied laws Defendant No.1 and therefore, the Plaintiff could not be roped in the arbitration proceedings.