TaxTMI 
TaxTMI 
2019 (7) TMI 65
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....ed and subjected to arbitration proceedings is no more res integra. In the case of Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors., (2013) 1 SCC 641 a three Judge Bench of this Court opined that ordinarily, an arbitration takes place between the persons who have been parties to both the arbitration agreement as well as the substantive contract underlying it. Invoking the doctrine of "group of companies", it went on to observe that an arbitration agreement entered into by a company, being one within a group of corporate entities, can, in certain circumstances, bind its nonsignatory affiliates. That exposition has been followed and applied by another three Judge Bench of this Court in Cheran Properties Limited Vs. Kasturi and Sons Limited and Ors. (2018) 16 SCC 413 In paragraph 23 of this decision, the Court, after analysing the earlier decisions and including the doctrine expounded in Chloro Controls India Private Limited (supra), concluded as follows: "23. As the law has evolved, it has recognised that modern business transactions are often effectuated through multiple layers and agreements. There may be transactions within a group o....
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....d both the signatory as well as the nonsignatory parties, namely, respondent No.1 and respondent No.2, respectively, qua the existence of an arbitration agreement between the applicant and the said respondents. 4. In the wake of the amended Section 11(6) read with Section 11(6A) of the Act, the enquiry by this Court must confine itself to the examination of existence of an arbitration agreement. No more and no less. For that, we must revert to the assertion made by the applicant in the present application. Be it noted that respondent No.1 has not filed any counter affidavit to refute the assertions made by the applicant in the application under consideration. Respondent No.1, however, through its counsel has urged that respondent No.2 has no concern with the subject agreement dated 1st May, 2014. That agreement is only between the applicant and respondent No.1 and as a result thereof, it would give rise to a domestic commercial arbitration and not an international commercial arbitration. Respondent No.1 has also made it amply clear through its counsel that it will have no objection, whatsoever, if the Court were to appoint a sole arbitrator for resolving the dispute between the ....
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.... replied to the same through Mr. Frederik Reynders (promoter of respondent No.2 which is the parent company of respondent No.1) by his email of 23rd April, 2014 at 12:00 PM. The said email sent by Mr. Frederik Reynders was responded to by the applicant on 23rd April, 2014 at 12:10 PM. Further, Mr. Frederik Reynders, by his email of 23rd April, 2014 at 4:09 PM, attached a copy of the draft with some attached comments from the headquarters of the respondents in Belgium (respondent No.2 herein). According to the applicant, the comments related to clause 9 of the draft agreement relating to the indemnity of respondent Nos.1 & 2. It is then stated that in the same email, Mr. Frederik Reynders gave a counter proposal, concerning clause 9.1 of the draft agreement, of providing a document of insurance to inform the applicant about their maximum coverage. On this basis, it is asserted that respondent No.2 was aware of the fact that indemnity is being extended to the applicant and that respondent No.2 was the disclosed principal on whose behalf the respondent No.1 was executing the agreement. It is further asserted that the arbitration agreement was an integral part of the agreement executed....
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....g". Further, in relation to quality assurance, the Respondents represented to the Applicant that they provide standard quality assurance and in addition, they also provide quality check by camera control. True typed copy of the Presentation dated NIL made by the Respondents is annexed as ANNEXURE A3 (at pages 135 to 156). 7.9 In the interregnum, the Applicant entered into a Supply Agreement dated April 16, 2014 with its affiliate in India viz., RB Healthcare. True typed copy of the Supply Agreement executed between the Applicant and RB Healthcare dated 16.04.2014 is annexed as ANNEXURE A4 (at pages 157 to 189). 7.10 The Applicant and Respondents held detailed negotiations in relation to execution of an agreement, whereby the Respondents were to provide packaging material to the Applicant and its affiliates. Based on negotiations, the Applicant by email dated April 23, 2014, circulated a draft of the Agreement along with the Code of Conduct and AntiBribery policy, of the Applicant. True typed copy of the email 23.04.2014 addressed by the Applicant to the Respondents is annexed as ANNEXURE A5 (at pages 190 to 191). The applicant also requested the Respondents to att....
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....ns, the Respondent No.1, on its behalf of and on behalf of its parent and disclosed principal - Reynders Belgium) of Respondent No.2, executed the Agreement on May 1, 2014 and sent the same to the Applicant. In this context it is stated that the Respondent No.1 had addressed an email dated June 6, 2014 to the Applicant enclosing the signed copy of the Agreement and further stating that hard copy shall be delivered to the Applicant. True typed copy of the email dated June 6, 2014 sent by the Respondent No.1 to the Applicant is annexed as ANNEXURE A9 (at page 195). The Agreement was subsequently executed by the Applicant and a hard copy, was sent to the Respondents." (emphasis supplied) 6. We deem it apposite to reproduce the correspondence, referred to in the aforesaid paragraphs of the application under consideration, for examining the case made out by the applicant as to whether respondent No.2 can be said to have assented or had an intention to become party to the arbitration agreement by its conduct, without being a signatory to the agreement dated 1st May, 2014. Annexures5 to 9 referred to by the applicant read thus: "ANNEXURE A-5 From: Joshi, Sonu [mail to....
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....ys and publish the official lead times to BADDI planning team. The unofficial or real/crash/squeeze lead time must remain between the three of us. Regards Sonu Dev Joshi ManagerPM Procuremen RB ANNEXURE A-8 From: Frederic Reynders [mail to: [email protected]] Sent: Wednesday, April 23, 2014 4:09 PM To: Joshi, Sonu Cc: Kari Vandenbussche Subject: RE: Commercial Agreement signoff - RB & Reynders Dear Sonu, Please find attached the contract with some comments of our HQ in Belgium. We will discuss & agree on a realistic and necessary lead time between the 3 of us. For 9.1. I will provide you with an document of our insurance to inform you about our maximum coverage. Waiting for your feedback. Feel free to call in case of any questions. Frederik Reynders Reynders_Label Printing India Pvt. Ltd. www.reynders.com ANNEXURE A-9 From: Kari Vandenbussche [mail to :[email protected]] Sent: Friday, June 06, 2014 4:38 PM To: Joshi, Sonu Cc: Frederic Reynders Subject: FW: Commercial Agreement signoff - RB & Reynders Dear Mr. Sonu Joshi, ....
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....by the Applicant, the answering Respondent did not provide any comments on the draft of the Agreement. The answering Respondent submits that it is not aware of the email dated 23.04.2014, as alleged by the Applicant. Respondent No.1 did not forward email dated 23.04.2014 or any such email to the answering Respondent seeking comments of the answering Respondent on the draft of the Agreement. The reference to HQ in Belgium is not a reference to the answering Respondent. As explained above, the answering Respondent is but one of seven subsidiaries of the holding company Reynesco NV. 17. The answering Respondent submits that it was not party to any negotiations pertaining to the Agreement. The signatory to the Agreement, Mr. Karl Vandenbussche, and Mr. Frederik Reynders, who is alleged to have carried out the negotiations with respect to the Agreement, were not representing (or purporting to represent) or acting in any way for the answering Respondent, and they had no authority to bind the answering Respondent. 18. The answering Respondent has no connection to the present dispute not having been a party in any capacity to the negotiation, execution, or enforcement of ....
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....respondent No.2. In paragraphs 10 to 12 of the said affidavit, in response to the stand taken by respondent No.2, the applicant has stated thus: "10. The contents of Para 15 are wrong and denied. It is a matter of record (Annexure - A3 at Page 135 of the Application) that the Respondents had approached the Applicant at the time of negotiation of Agreement under the common banner of 'Reynders Label Printing' and in that capacity had made a presentation to the Applicant. In fact, the Respondents market themselves as a label printing company, the printing being executed through various sites around the world. 11. The contents of Para 16-18 are incorrect and denied. It is a matter of record that Respondent No.2 had actively participated in the negotiation of the Agreement. It is a matter of record (Annexure A8 at Page 194 of Application) that Respondent No.1 was taking directions from Respondent No.2 during the stage of negotiations of the Agreement. In fact, Respondent No.2 through Mr. Kristof Vandenbroucke had shared comments on the Agreement. The same Mr. Kristof Vandenbroucke subsequently participated in the escalation meeting held in Amsterdam for amicable resolu....
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....blish that respondent No.2 had an intention to consent to the arbitration agreement and be party thereto, maybe for the limited purpose of enforcing the indemnity clause 9 in the agreement, which refers to respondent No.1 and the supplier group against any claim of loss, damages and expenses, howsoever incurred or suffered by the applicant and arising out of or in connection with matters specified therein. That burden has not been discharged by the applicant at all. On this finding, it must necessarily follow that respondent No.2 cannot be subjected to the proposed arbitration proceedings. Considering the averments in the application under consideration, it is not necessary for us to enquire into the fact as to which other constituent of the group of companies, of which the respondents form a part, had participated in the negotiation process. 10. Suffice it to observe that respondent No.2 was never involved in the negotiation process concerning the stated agreement dated 1st May, 2014. On this finding, the application must fail as against respondent No.2 and as a consequence whereof, the provisions for making reference to the sole arbitrator, on the assumption that it is an inte....
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....smissed as against respondent No.2. However, we appoint Mr. Justice Badar Durrez Ahmed (Former Chief Justice, Jammu & Kashmir High Court) as the sole arbitrator to conduct domestic commercial arbitration at New Delhi, between the applicant and respondent No.1 on the terms and conditions as specified in the Act of 1996. 14. Application stands disposed of in the above terms. No costs. All pending interim applications are also disposed of. 3 "13. Dispute Resolution 13.1 Prior to the beginning of any arbitration process the parties hereby undertake to attempt in good faith to resolve any dispute by way of negotiation between senior executives of the parties who have authority to settle such dispute. A copy of any Escalation Notice shall be given to the Regional Senior Vice President (or equivalent person of seniority) of each party or their Affiliates (which copy shall state that it is an Escalation Notice pursuant to this Agreement). Provided, however, that the negotiations shall be completed within thirty (30) days of the date of the Escalation Notice or within such longer period as the parties may agree in writing prior to the expiration of the initial....