Group Of Companies | Absence Of Specific Prayer For Impleadment Of Non-Signatory Doesn't Preclude Arbitral Tribunal From Applying GOC: Bombay High Court

The Court held that the absence of a specific prayer for the impleadment of a non-signatory in a Section 11 Application does not preclude the application of the 'group of companies' doctrine by the arbitral tribunal.

Brief Facts:

The Petitioners and Respondents entered into a Memorandum of Understanding (MoU) which contained an Arbitration Agreement. Respondent Nos.1 and 2 invoked arbitration leading to the appointment of the Sole Arbitrator by the Bombay High Court. Respondent Nos.1 and 2 sought to include the Petitioners in the arbitral proceedings through an Application under Order 1 Rule 10 of the Code of Civil Procedure, 1908. Respondent No.3 opposed this, arguing that only the High Court could direct such impleadment, not the Arbitral Tribunal. The Tribunal issued notices to the Petitioners and after a hearing on 2nd January, 2024, the Interim Award was communicated on 5th January, 2024. Feeling aggrieved the Petitioners approached the High Court and filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).

Contentions of the Parties:

Petitioners:

- The Arbitral Tribunal lacks the inherent power to implead a non-signatory.

- Cox and Kings Ltd. Vs. SPA India Pvt. Ltd 2023 LiveLaw (SC) 1042 does not grant Arbitral Tribunal the power to implead non-signatories.

Respondent Nos.1 and 2:

- The Arbitral Tribunal derives its power from the agreement between parties and relevant legal provisions.

- Section 16 of the Arbitration Act empowers Arbitral Tribunal to decide on the existence of Arbitration Agreement.

- Non-impleadment in a Section 11 Application doesn't preclude the application of 'Group of Companies' doctrine.

- The Arbitral Tribunal has the authority to consider impleadment of non-signatories based on judicial precedents.

Observations by the High Court:

The High Court referred to the decision of the Supreme Court in Cox and Kings case, which primarily dealt with the 'Group of Companies' doctrine and the impleadment of non-signatories to an Arbitration Agreement in arbitral proceedings. The High Court noted that the Supreme Court in this case held that the Arbitral Tribunal possesses the authority to determine if a non-signatory is bound by the Arbitration Agreement and to include them if necessary.

Moreover, the High Court found no indication in the Cox and Kings that the Arbitral Tribunal's power to apply the 'group of companies' doctrine is contingent upon a prayer for impleadment of non-signatories in a Section 11 Application. It held that held that merely by there being no prayer for impleadment of a non-signatory in the Section 11 Application, it cannot be said that the applicability of the doctrine of 'group of companies' by the Arbitral Tribunal stands excluded.

Furthermore, the High Court held that under Section 16 of the Arbitration Act, the Arbitral Tribunal has the authority to determine issues of jurisdiction, including over non-signatories to an Arbitration Agreement.

Consequently, the High Court dismissed the Arbitration Petition, finding no valid grounds under Section 34 of the Arbitration Act to set aside the arbitral award.

Case Title: Cardinal Energy and Infra Structure Private Ltd. vs Subramanya Construction and Development Co. Ltd.

Case Number: COMM ARBITRATION PETITION (L) NO.2603 OF 2024

Advocate for the Petitioner: Shriraz Rustomjee i/b. Ms. Kinnari Mehta for the Petitioner.

Advocate for the Respondent: Rahul Sarda with Punthi Shah i/b. Aarna Law LLP for Respondent Nos.1 and 2. Siddhesh Bhole, Yakshay Chheda, Anushree Koparkar and Ms. Ashwin Pimple i/b. SSB Legal and Advisory for the Respondent No.3.

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