2017 (11) TMI 1987 - HC - Indian Laws

Court Affirms Arbitration Jurisdiction Over Alter Ego, SIAC Rules Apply

GMR Energy Limited Versus Doosan Power Systems India Private Limited and Ors.

GMR Energy Limited Versus Doosan Power Systems India Private Limited and Ors. - TMI Issues Involved:1. Whether the arbitration that commenced at Singapore pursuant to Arb.316/16/ACU would fall under Part-I or Part-II of the Arbitration ActRs.2. Whether on the basis of pleas in the notice of arbitration issued by Doosan India a case is made out by Doosan India to subject GMR Energy to arbitration with GCEL and GILRs.3. Whether the Arbitral Tribunal has no jurisdiction to pierce the corporate veilRs.4. In the present suit whether this Court will form a prima facie opinion on the issue of alter ego or return a findingRs.5. Whether the invocation of arbitration against GMR Energy is contrary to Rule 7 of the SIAC RulesRs.Detailed Analysis:Issue 1: Whether the arbitration that commenced at Singapore pursuant to Arb.316/16/ACU would fall under Part-I or Part-II of the Arbitration ActRs.The court held that the arbitration falls under Part-II of the Arbitration Act, rejecting the contention that Singapore is merely a venue and not the seat of arbitration. The court emphasized the decision in *Yograj Infrastructure Ltd. v. Ssangyong Engineering & Construction Co. Ltd.*, which clarified that when arbitration proceedings are conducted in accordance with SIAC Rules, Singapore is the seat of arbitration, and the arbitration dispute is governed by the Singapore International Arbitration Act. The court also noted that the amendments to Section 2(1)(f) of the Arbitration Act do not change the applicability of Part-II for arbitrations seated outside India, even if the parties are Indian entities. The court dismissed the argument that two Indian parties cannot choose a foreign seat, referencing *Atlas Exports Industries v. Kotak & Co.*, which upheld the validity of such agreements.Issue 2: Whether on the basis of pleas in the notice of arbitration issued by Doosan India a case is made out by Doosan India to subject GMR Energy to arbitration with GCEL and GILRs.The court found that Doosan India made a prima facie case to subject GMR Energy to arbitration based on the principle of alter ego. The court considered the close interrelationship between GMR Energy, GCEL, and GIL, including shared directors, commingled funds, and GMR Energy's acknowledgment of GCEL's debts through MOUs. The court referenced *Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. & Ors.*, which allows non-signatories to be bound by arbitration agreements under certain circumstances, such as implied consent or piercing the corporate veil.Issue 3: Whether the Arbitral Tribunal has no jurisdiction to pierce the corporate veilRs.The court held that the Arbitral Tribunal has the jurisdiction to pierce the corporate veil, rejecting the argument that this function is solely within the domain of the courts. The court cited *A. Ayyasamy v. A Paramasivam*, which delineates categories of non-arbitrable disputes and does not include the issue of alter ego. The court also referenced international arbitration principles, noting that issues like alter ego are arbitrable and can be determined by the Arbitral Tribunal.Issue 4: In the present suit whether this Court will form a prima facie opinion on the issue of alter ego or return a findingRs.The court decided to form a prima facie opinion rather than a final finding on the issue of alter ego, consistent with international arbitration principles and the decision in *Malini Ventura v. Knight Capital Pte. Ltd. & Ors.*, which supports a prima facie standard for determining the existence of an arbitration agreement. The court emphasized that the final determination of alter ego and the merits of the case should be left to the Arbitral Tribunal.Issue 5: Whether the invocation of arbitration against GMR Energy is contrary to Rule 7 of the SIAC RulesRs.The court rejected the argument that the invocation of arbitration against GMR Energy was contrary to Rule 7 of the SIAC Rules. The court clarified that Rule 7, which deals with the joinder of additional parties, is not applicable in the context of invoking arbitration against an alter ego. The court distinguished between the concepts of joinder and invoking arbitration against a non-signatory, affirming that Doosan India's actions were consistent with the SIAC Rules.Conclusion:The court dismissed GMR Energy's application for an interim stay and vacated the interim order. The court held that GMR Energy is required to submit to the arbitration pursuant to SIAC Arbitration No. 316/2016. The findings on the issue of alter ego were made to subject GMR Energy to arbitration, leaving the final determination on merits to the Arbitral Tribunal.