2024 (3) TMI 1352 - HC - Indian Laws

Arbitral tribunal can implead non-signatories under group of companies doctrine without prior referral prayer

Cardinal Energy and Infra Structure Private Ltd. Versus Subramanya Construction and Development Co. Ltd.

The Bombay HC dismissed a petition challenging an interim award where petitioners were impleaded as party respondents despite not being signatories to the ... Validity and correctness of the Interim Award - impleadment of Petitioners as party Respondents to the Arbitration proceedings despite not being signatories to the Arbitration Agreement - Section 34 of the Arbitration and Conciliation Act, 1996 - HELD THAT:- The Supreme Court in Cox and Kings [2023 (12) TMI 427 - SUPREME COURT (LB)] has held that where at a referral stage impleadment of a non-signatory to the Arbitration Agreement is raised, the Referral Court should leave it for the Arbitral Tribunal to decide whether the non-signatory is bound by the Arbitration Agreement. Thus, it is clear that the Arbitral Tribunal has the power to decide whether the non-signatory is bound by the Arbitration Agreement and to implead the non-signatory if answered in the affirmative. It is not found from a reading of the decision of the Supreme Court in Cox and Kings Ltd. that merely by there being no prayer for impleadment of a non-signatory in the Section 11 Application, the applicability of the doctrine of 'group of companies' by the Sole Arbitrator is excluded. The Arbitrator does have the power/authority to implead the non-signatory if such non-signatory is otherwise liable to be impleaded on the basis of the 'group of companies' doctrine - there are no merit in the submission of Mr. Rustomjee that in the event the issue of joinder of a non-signatory to an Arbitration Agreement is not raised before the Referral Court, the Arbitral Tribunal on its own accord does not have the power to determine this issue and/or allow the impleadment of a non-signatory to an Arbitration Agreement. The Arbitrator under Section 16 of the Arbitration Act has the power to determine issues of jurisdiction which in my view would include whether the Arbitrator has jurisdiction over non-signatories to an Arbitration Agreement. Any such decision taken by the Arbitrator can always be the subject matter of a challenge by the Petitioners in a Petition filed under Section 34 of the Arbitration Act after the final Award is passed. There are no valid grounds raised under Section 34 of the Arbitration Act which can at all result in the impugned award being set aside - Arbitration Petition is dismissed. Issues Involved:1. Impleadment of non-signatories to the Arbitration Agreement.2. Jurisdiction and powers of the Arbitral Tribunal under Section 16 of the Arbitration Act.3. Applicability of the 'Group of Companies' Doctrine.4. Maintainability of the Petition under Section 34 of the Arbitration Act.Issue-wise Detailed Analysis:1. Impleadment of Non-Signatories to the Arbitration Agreement:The Petitioners challenged the Interim Award allowing their impleadment as party Respondents to the arbitration proceedings despite not being signatories to the Arbitration Agreement. They argued that the Arbitral Tribunal lacked the power to direct such joinder, citing the principles of constructive res judicata and the absence of explicit authority from the Referral Court. The Respondents contended that the Arbitral Tribunal could implead non-signatories by applying the 'Group of Companies' Doctrine, as supported by the Supreme Court's decision in Cox and Kings Ltd. The Court held that the Arbitral Tribunal has the power to decide whether non-signatories are bound by the Arbitration Agreement and can be impleaded based on the 'Group of Companies' Doctrine.2. Jurisdiction and Powers of the Arbitral Tribunal under Section 16 of the Arbitration Act:The Petitioners argued that the Arbitral Tribunal does not possess inherent powers akin to those of a Court under Order 1 Rule 10 of the CPC to implead non-signatories. The Respondents countered that the Arbitral Tribunal's power to rule on its own jurisdiction is derived from Section 16 of the Arbitration Act, which includes deciding on the existence and validity of the Arbitration Agreement. The Court agreed with the Respondents, stating that the Arbitral Tribunal's jurisdiction extends to determining whether non-signatories can be bound by the Arbitration Agreement.3. Applicability of the 'Group of Companies' Doctrine:The Petitioners contended that the 'Group of Companies' Doctrine could only be applied if the Referral Court specifically empowered the Arbitral Tribunal to do so. The Respondents argued that the Arbitral Tribunal could apply this doctrine independently. The Court held that the 'Group of Companies' Doctrine allows the Arbitral Tribunal to bind non-signatories based on their conduct and the common intention of the parties. The Supreme Court's decision in Cox and Kings Ltd. supports this view, affirming that the Arbitral Tribunal can determine the applicability of the doctrine and implead non-signatories.4. Maintainability of the Petition under Section 34 of the Arbitration Act:The Petitioners argued that the impugned Award was an interlocutory order and not an Interim Award, making it non-challengeable under Section 34 of the Arbitration Act. The Respondents maintained that the impugned Award was an Interim Award, as it decided substantive issues, including the joinder of non-signatories. The Court concluded that the impugned Award was indeed an Interim Award, as it finally decided on the joinder of the Petitioners, thereby affecting their rights and obligations. Consequently, the Petition under Section 34 was maintainable.Conclusion:The Court dismissed the Arbitration Petition, affirming the Arbitral Tribunal's power to implead non-signatories based on the 'Group of Companies' Doctrine and its jurisdiction under Section 16 of the Arbitration Act. The impugned Award was deemed an Interim Award, making the Petition under Section 34 maintainable. The Court found no valid grounds to set aside the impugned Award.