2019 (7) TMI 65 - SC - Indian Laws

Court dismisses application against respondent No.2, orders domestic commercial arbitration with sole arbitrator.

Reckitt Benckiser (India) Private Limited Versus Reynders Label Printing India Private Limited and Anr.

Reckitt Benckiser (India) Private Limited Versus Reynders Label Printing India Private Limited and Anr. - TMI Issues Involved:1. Whether respondent No.2, a non-signatory to the arbitration agreement, can be impleaded in the arbitration proceedings.2. Examination of the correspondence and mutual intention to bind both signatory and non-signatory parties.3. The role and authority of Mr. Frederik Reynders in the negotiation process.4. The implications of the group of companies doctrine on the arbitration agreement.5. The distinction between domestic and international commercial arbitration in this context.Detailed Analysis:1. Whether respondent No.2, a non-signatory to the arbitration agreement, can be impleaded in the arbitration proceedings:The core issue is whether respondent No.2, a Belgian company, can be subjected to arbitration despite not being a signatory to the agreement dated 1st May 2014. The court referenced the legal position established in Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors., and Cheran Properties Limited Vs. Kasturi and Sons Limited and Ors., which allows non-signatories to be bound by arbitration agreements under certain conditions. The court emphasized that the doctrine of “group of companies” could bind non-signatory affiliates if the intention to bind them is evident.2. Examination of the correspondence and mutual intention to bind both signatory and non-signatory parties:The court scrutinized the correspondence between the parties to determine if there was a mutual intention to bind respondent No.2 to the arbitration agreement. The applicant claimed that respondent No.2 was involved in the negotiations and aware of the indemnity clause, thus implying assent to the arbitration agreement. However, respondent No.2 refuted these claims, stating it had no involvement in the negotiation, execution, or performance of the agreement and that there was no privity of contract with the applicant.3. The role and authority of Mr. Frederik Reynders in the negotiation process:The applicant asserted that Mr. Frederik Reynders acted on behalf of respondent No.2 during the negotiations. However, respondent No.2 clarified that Mr. Frederik Reynders was an employee of respondent No.1 and had no authority to represent or bind respondent No.2. This assertion was crucial as the applicant's claim heavily relied on Mr. Frederik Reynders' alleged role.4. The implications of the group of companies doctrine on the arbitration agreement:The court noted that while respondent No.1 and respondent No.2 are part of the Reynders Label Printing Group, they are separate legal entities. The burden was on the applicant to prove that respondent No.2 intended to be bound by the arbitration agreement. The court found that the applicant failed to establish this intention, as respondent No.2 was not involved in the negotiations or execution of the agreement.5. The distinction between domestic and international commercial arbitration in this context:Since respondent No.2 was not a party to the arbitration agreement, the arbitration could not be considered international commercial arbitration. The court concluded that the dispute between the applicant and respondent No.1 should be resolved through domestic commercial arbitration. Respondent No.1 agreed to the appointment of a sole arbitrator for this purpose.Conclusion:The court dismissed the application against respondent No.2, stating that it cannot be subjected to the proposed arbitration proceedings. However, the court appointed Mr. Justice Badar Durrez Ahmed as the sole arbitrator to conduct domestic commercial arbitration between the applicant and respondent No.1 in New Delhi. The application was disposed of in these terms, with no costs awarded.Order:The arbitration application is dismissed as against respondent No.2. Mr. Justice Badar Durrez Ahmed is appointed as the sole arbitrator for conducting domestic commercial arbitration between the applicant and respondent No.1. All pending interim applications are also disposed of.