INDOWIND ENERGY LTD. versus WESCARE (I) LTD. AND ANR.

Citation: [2010] 5 S.C.R. 284 · Decided: 27-04-2010 · Supreme Court of India · Bench: R.V. RAVEENDRAN · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
[2010] 5 S.C.R. 284 
INDOWIND ENERGY LTD. 
v. 
WESCARE (I) LTD. AND ANR. 
(Civil Appeal No. 3874 of 2010) 
APRIL 27, 2010 
[R.V. RAVEENDRAN AND K.S. RADHAKRISHNAN, JJ.) 
Arbitration and Conciliation Act, 1996 - ss. 7 and 11 -
Agreement of sale between respondent nos. 1 and 2 
C described respondent no. 1 as the seller, and respondent no. 2 
as the buyer and the promoters of appellant - Agreement 
contained an arbitration clause -
Disputes between 
respondent no. 1 on one hand and respondent no. 2 and 
appellant on the other, in respect of th.e said agreement -
D Respondent no. 1 filed petition u/s. 11 (6) against respondent 
no. 2 and appellanf for appointment of sole arbitrator to· 
arbitrate upon disputes between them in respect of the said 
agreement - Dispute as to whether appellant was prima facie 
a party to the arbitration agreement contained in the 
E agreement of sale and was bound by it, even though it was 
not a signatory to the agreement of sale - Held: Merely 
because respondent no. 2 described appellant as its nominee 
or as a company promoted by it or that the agreement was 
purportedly entered by respondent no.2 on behalf of appellant, 
F did not make appellant a party to the agreement in the 
absence of a ratification, approval, adoption or confirmation 
of the same by appellant - Consequently, appellant cannot 
be deemed to be a party to the arbitration agreement 
contained in the said agreement - In absence of arbitration 
G agreement between respondent no. 1 and appellant, no claim 
against appellant or no dispute with appellant could be 
subject-matter of reference to an arbitrator - Order of High 
Court appointing arbitrator in regard to claims of respondent 
no. 1 against appellant accordingly set aside. 
H 
284 
INDOWIND ENERGY LTD. v. WESCARE (I) LTD. AND 285 
ANR. 
Arbitration and Conciliation Act, 1996 - ss.2(1){bj and 7 A 
- Arbitration agreement - Held: A provision for arbitration to 
constitute an arbitration agreement for the purpose of s. 7 
should satisfy two conditions : (i) it should be between the 
parties to the dispute; and (ii) it should relate to or be 
applicable to the dispute. 
B 
The appellant and respondent nos.1 and 2 are 
companies incorporated under the Companies Act, 1956. 
Respondent no.1 is in the business of setting up and 
operating/managing wind farms and generation of power C 
from Wind Electric Generators (WEGs). Respondent no.2 
is a promoter of appellant. 
On 24.2.2006 an agreement of sale was entered into 
between respondent nos.1 and 2. The agreement 
described respondent no.1 as the seller, and respondent D 
no.2 as the buyet and the promoters of appellant. The 
said agreement contained an arbitration clause. The 
Board of Directors of respondent no._1 at its meeting 
accorded approval to the agreement dated 24.2.2006. The 
Board of Directors of respondent no.2 also approved the E 
said agreement. There was however no such approval by 
the Board of Directors of the appellant. 
Certain 
disputes 
allegedly 
arose 
between 
:. respondent no.1 on the one· hand and respondent no.2 F 
and appellant on the other, in respect of the ,said 
agreement dated 24.2.2006. Respondent no.1 filed three 
petitions under section 9 of the Arbitration and 
Conciliation Act, 1996 against respondent no.2 and 
appellant seeking various interim measures. The petitions G 
were dismissed by the High Court. 
Thereafter, respon~ent no.1 filed a petition under 
section 11 (6) of the Act against respondent no.2 and 
appellant for appointment of a sole arbitrator to arbitrate 
upon the disputes between them in respect of agreement H 
• 
286 
SUPREME COURT REPORTS 
[2010] 5 S.C.R. 
A dated 24.2.2006. Respondent no.2 resisted the said 
petition alleging that there was no cause of action nor 
any arbitrable dispute between them. Appellant on the 
other hand resisted the petition inter alia on grounds that 
it was not a party to the agreement dated 24.2.2006 
B entered into between respondent nos. 1 and 2; that it had 
not ratified the agreement dated 24.2.2006 or acted upon 
it and that there was no arbitration agreement between 
respondent no.1 and appellant. 
The Chief Justice of the High Court allowed the said 
C application under section 11 and appointed a sole 
arbitrator holding that appellant was prima facie a party 
to the arbitration agreement and was bound by it, even 
though it was not a signatory to the agreement dated 
24.2.2006. 
D 
In appeal to this Court, the following
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