Bombay High Court- Invocation of Group of Companies Doctrine Does Not Require Explicit Prayer for Impleadment Under Section 11 of the Arbitration & Conciliation Act, 1996.

Petitioner: Cardinal Energy and InfraStructure Private Ltd.

Respondent: Subramanya Construction and Development Co. Ltd.

Court: Hon’ble Bombay Court of Delhi

Date: March 27, 2024

Coram: Hon’ble Mr. Justice R.I. Chagla.

Citation: 2024 SCC OnLine Bom 964.

FACTS:

1. On 10.02.2012 a Memorandum of Understanding was signed between Respondent Nos. 1, 2, and 3 which included an arbitration agreement in Clause 9. 
   
   
2. Following a notice of arbitration sent by Respondent Nos. 1 and 2 on 25.11.2021, the court appointed a Sole Arbitrator to adjudicate upon the disputes between Respondent Nos. 1 and 2 on one hand and Respondent No. 3 on the other hand, arising out of said MoU. 
   
   
3. Respondent Nos. 1 and 2 filed a Statement of Claim on 20.06.2023, to which Respondent No. 3 responded with a Statement of Defence on 7.08.2023, contesting the claim’s validity on the grounds of impleadment of the Petitioners as a party to the arbitration proceedings despite not being signatories to the arbitration agreement. 
4. The court was approached under Section 34 of the Arbitration and Conciliation Act, 1996 wherein the Petitioners challenged the validity and correctness of the Interim Award dated 2.01.2024.

ISSUE:

Whether the Arbitral Tribunal has the authority to implead non-signatories in arbitration proceedings, considering the inherent powers of the Tribunal and interpretation of Cox and Kings Ltd. v. SPA India Pvt. Ltd., despite contentions regarding the absence of such power and applicability of the “Group of Companies” doctrine.

JUDGEMENT:

The Bombay High Court, citing the Cox and Kings case, recognized the independent existence of the “Group of Companies” doctrine, and emphasised its role in preserving corporate separateness while discerning shared intentions. It was held that the absence of a plea for impleadment of a non-signatory in an application under Section 11 of the Act did not negate the doctrine’s applicability for the Sole Arbitrator.

The Arbitration & Conciliation Act, 1996, encompasses both signatories and non-signatories under the definition of “parties”, suggesting that non-signatories may be bound. Conduct of non-signatories can indicate consent to the agreement. The Act’s requirement for a written agreement did not preclude binding of non-signatories under its ambit. It distinguishes between “parties” and those “claiming through or under” them.

The High Court stressed that the Arbitration Tribunal has jurisdiction to determine issues of impleadment of non-signatories under Section 16 of the Act, however, the same can be challenged under Section 34 after the final award.

CONCLUSION:

The High Court, in the present case, concluded that there were no legal grounds raised in Section 34 of the Arbitration & Conciliation Act, 1996, which could result in the impugned award being set aside. Thus, the Sole Arbitrator was perfectly justified in determining the issue, i.e., whether the Petitioners, as non-signatories to the arbitration agreement, could be impleaded as parties to the arbitration on the premise that the impugned order is an interim award. The validity of the award was upheld