Group of companies doctrine in arbitration: joinder of a non-signatory requires proper consideration of evidence and common intention.

An arbitration agreement under Section 7 binds signatories, but a non-signatory group company may be joined in exceptional cases where mutual intention, relationship between entities, common subject matter, composite transaction, and contract performance justify the group of companies doctrine. The tribunal rejected joinder on the basis that the company was not a contract party, but it did so without first deciding the claimant's discovery and inspection request for material said to support the doctrine. By leaving that evidentiary application unresolved and failing to assess the pleaded basis for lifting the corporate veil, the interim award was found unsustainable and set aside, along with the High Court judgment affirming it.

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Issues: Whether the interim arbitral award rejecting joinder of a non-signatory group company was vitiated for failing to consider the application for discovery and inspection and for not examining the applicability of the group of companies doctrine.

Analysis: The arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996 binds parties to the agreement, but a non-signatory may be brought within its fold in exceptional cases where the mutual intention of the parties, the relationship between the entities, the commonality of subject matter, the composite nature of the transaction, and the performance of the contract justify application of the group of companies doctrine. The tribunal rejected jurisdiction principally on the footing that the alleged non-signatory was not a party to the contract and proceeded without first deciding the claimant's application for discovery and inspection, even though that application was directed to material said to be necessary for proving the factual foundation of the doctrine. By leaving that application unresolved, the tribunal shut out evidence relevant to the jurisdictional inquiry and did not adequately address whether the corporate veil could be lifted on the pleaded facts.

Conclusion: The interim award was unsustainable and had to be set aside, as did the High Court judgment affirming it.

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