TaxTMI 
TaxTMI 
2021 (3) TMI 903
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....aran Luthra, Mr. Pranjit Bhattacharyya, Mr. Ankit Banati, Advocates for R-1, R-3, R-12 and R-14 Mr. Harish Salve, Senior Advocate, Mr. Darius Khambata, Senior Advocate with Mr. Somasekhar Sundaresan, Mr. Ameet Naik, Mr. Raghav Shankar, Mr. Aditya Mehta, Mr. Tushar Hathiramani, Mr. Abhishek Kale, Ms. Madhu Gadodia, Mr. Harshvardhan Jha and Ms. Arshiya Sharda, Advocates for R-2, R-15 and R-16 Mr. Rohan Shah and Mr. Nakul Mohta, Advocates for R-4 to R-11 and R-13 JUDGMENT 1. The petitioner has filed this petition under Section 17(2) of the Arbitration and Conciliation Act, 1996 read with Order XXXIX Rule 2A and Section 151 of Code of Civil Procedure for enforcement of the interim order dated 25th October, 2020 passed by the Emergency Arbitrator. 2. The respondents have raised a legal objection to the maintainability of this enforcement petition on the ground that the Emergency Arbitrator is not an Arbitrator within the meaning of Section 2(1)(d) of the Arbitration and Conciliation Act; the interim order dated 25th October, 2020 is not an order under Section 17(1) and, therefore, not enforceable under Section 17(2) of the Arbitration and Conciliation Act. 3. Respondent No.2 has rai....
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....in FRL namely, that the Retail Assets of FRL would not be alienated without the petitioner's prior written consent, and never to a Restricted Person. FCPL and FRL further agreed that FRL would remain the sole vehicle for conduct of its retail business. The entire investment of Rs. 1431 Crore was invested by FCPL into FRL. FRL received the benefit of the Petitioner's entire investment of Rs. 1431 Crore. 8. Between 12th August 2019 and 22nd August 2019, the following agreements were executed between the following parties:- (i) Shareholders' Agreement dated 12th August 2019 between respondents No.1 to 13 (hereinafter referred to 'FRL - SHA'); (ii) Shareholders' Agreement dated 22nd August 2019 between petitioner and respondents No. 1, 3 to 13 (hereinafter referred to ' FCPL - SHA'); and (iii) Share Subscription Agreement dated 22nd August 2019 between petitioner and respondents No. 1, 3 to 13 (hereinafter referred to 'SSA'). 9. According to the petitioner, the Biyanis began breaching the Agreements, within months of its investment, by permitting their shareholding in FRL to get further encumbered. On 29th August, 2020, FRL controlled by Biyanis, in violation of its contractual....
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.... 574; M/s Duro Felguera S.A. v. M/S Gangavaram Port Ltd., (2017) 9 SCC 729; and Ameet Lalchand Shah v. Rishabh Enterprises, (2018) 1SCC 678. Both the parties submitted their response to the aforesaid judgments. 16. The respondents raised an objection to the jurisdiction of the Emergency Arbitrator on various grounds inter-alia that Part I of the Arbitration & Conciliation Act does not contemplate a remedy before an Emergency Arbitrator; the appointment of an Emergency Arbitrator under SIAC Rules was invalid; any order granted by the Emergency Arbitrator would not have any force of law under the Arbitration and Conciliation Act; and 'Arbitral Tribunal' defined in Section 2(1)(d) of the Arbitration and Conciliation Act does not include an Emergency Arbitrator. 17. On 16th October, 2020, the learned Arbitrator heard all the parties through video conference facilities hosted by Maxwell Chambers, Singapore. 18. The Emergency Arbitrator passed an interim order on 25th October, 2020. The interim order records the contentions of all the parties, detailed analysis of their submissions and the reasoned findings. The contentions of the petitioner are recorded in paras 51 to 57 whereas cont....
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....an Act allows parties to determine the arbitral procedure, which in the present case is manifested in the form of the SIAC Rules. This, in turn, envisages that such institutional rules may designate particular modalities and or an authorised body or person appointed in accordance with the institutional framework to determine an issue relating to the arbitration proceedings that have been initiated. The determination of an issue by such body or person is final and binding on the parties, subject to the provisions for limited review under the provisions of the Indian Arbitration Act 1996. 101. Section 2(8) of the Indian Arbitration Act 1996 expressly provides that where Part I of the Indian Arbitration Act 1996 refers to an "agreement of the parties", such agreement shall include the arbitration rules referred to in the parties' agreement. In this way, the Indian Arbitration Act 1996 provides that any arbitration rules agreed to by the parties are incorporated into the arbitration agreement. Unless expressly excluded, it is trite that the parties cannot resile from the terms of their arbitration agreement, including their agreement to allow either party to request the appointment o....
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.... provided for. In these proceedings, the Parties by incorporating the SIAC Rules in their arbitration agreement have agreed to the following provisions: SCHEDULE 1 EMERGENCY ARBITRATOR 6. The Emergency Arbitrator shall have the power to order or award any interim relief that he deems necessary. The Emergency Arbitrator shall give reasons for his decision in writing. The Emergency Arbitrator may modify or vacate the interim award or order for good cause shown. ....................... 9. An order or award pursuant to this Schedule 1 shall be binding on the parties when rendered. By agreeing to arbitration under these Rules, the parties undertake to comply with such an order or award without delay. (emphasis in italics added) 104. To all intents and purposes the EA is the Tribunal and can as a result of the Parties' agreement exercise the powers to grant interim relief until the Tribunal is constituted. The Respondents ought to be held to this agreement they made with the Claimant. B. Emergency Arbitrators are recognised under the Indian Arbitration Framework 105. The Claimant rightly asserts that the Respondents' insistence that the notion of emergency arbitration is a....
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....esolution of the dispute, preventing imminent harm or prejudice to the arbitral process, preserving assets, and preserving evidence; and (c) The emergency arbitrator only has the power to grant interim measures that have a temporary effect and cannot by his orders definitively resolve any dispute. 109. The ultimate source of any arbitrator's authority to order provisional measures is the parties' agreement to arbitrate - that is to say, in contract. An international arbitration agreement confers the authority to order provisional measures if this is expressly provided for in the adopted institutional rules unless the parties provide otherwise. The Parties' choice of the SIAC Rules (even for the FRL SHA, which embraced domestic rather cross border issues) clearly shows that they had the common intention to confer authority on an emergency arbitrator to order emergency provisional measures, if this was merited." (Emphasis supplied) 20. Future Retail Limited (respondent No.2) raised an objection before the Emergency Arbitrator that respondent No.2 was not signatory to the FCPL - SHA, and therefore, cannot be drawn into the arbitration proceedings. The learned Arbitrator rejected....
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....ration under Indian law. 114. FRL initially relied heavily on the decision rendered by a two-judge bench of the Supreme Court of India in Indowind Energy Ltd v Wescare (India) Limited & Another (2010) 5 SCC 306 ("Indo-wind"). 115. However, Indian law has made consequential strides since that decision. Non- signatories may now be bound by an arbitration agreement if the circumstances compellingly show that it was the mutual intention of all the parties to bind both signatories to the arbitration agreement as well as certain non-signatory entities. In Chloro, a three-judge bench of the Supreme Court of India held that a "non-signatory or third party could be subjected to arbitration without their prior consent, but this would be in exceptional cases." 116. As the Claimant points out, in Cheran Properties Ltd. v. Kasturi and Sons Ltd. (2018) 16 SCC 413 ("Cheran"), another three-judge bench of the Supreme Court of India more recently emphasised that the Section 7 requirement of the Indian Arbitration Act 1996 that an arbitration agreement must be in writing, does not exclude the possibility of binding third parties who may not be signatories to an agreement between two contract....
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....oup of companies doctrine of implied consent cannot be used to override the clear meaning of a contract. ... (vi) The "group of companies" doctrine cannot be extended to bind a listed company to private agreements between shareholders which purport to impose restrictions on the functioning of the Board of Directors of the company and the transferability of the shares of the company, particularly when the listed company is not itself a party to the agreement sought to be enforce. Admittedly, the Articles of Association of FRL have not been amended to reflect the restrictions contemplated in the FCRL SHA. 120. On the other hand, the Claimant asserts that: FRL's objection is incorrect, and contradicted by (a) the content of the Agreements; (b) simultaneous discussions and negotiations on all the Agreements; (c) single / common team representing all Respondents including FRL vis-à-vis the Claimant in those discussions and negotiations including the FRL SHA; (d) full awareness and knowledge of all the Respondents (including FRL) that protective, special and material rights are being created in favour of Respondent No. 1 for the Claimant's benefit; (e) Respondent No. 2 being t....
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....cts, as well as recognizing the FCPL SHA through statements, including public disclosures indicating the intention to be bound by the FCPL SHA in lieu of the benefits provided under the single integrated bargain. 123. FRL has a direct relationship with the Respondent companies, all of which are controlled by the Promoters and therefore, part of a group of companies, the Future Group, which comprises, inter alia, FCPL and FRL. There is direct commonality of subject matter, being the preservation of FRL's business, in general, and the Retail Assets. The inter-linkages of the clauses in the Agreements demonstrate that they constitute a single integrated transaction, with FRL being the beneficiary of the investment made by the Claimant into FCPL and rights created in favour of FCPL for the benefit of the Claimant. 124. FRL's conduct reinforces this position - its disclosures in August 2019 about the FRL SHA and the FCPL SHA, as well as its execution of the 19 December 2019 Letter confirms that it was aware of and in fact, considered itself bound by the terms of the FCPL SHA. FRL's contention that the disclosure dated 22 August 2019 was merely for informational purposes is misleadin....
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.... the entire agreement relating to the subject matter, to the exclusion of any further term that may be implied by law; and secondly, that the agreement will supersede any prior written or oral understanding between the Parties. By alluding to the existence of the single integrated transaction, the Claimant states that it is not attempting to imply any term into either the FCPL SHA or the FRL SHA. Equally, the Claimant is not attempting to include any prior written or oral understanding into the terms of the FCPL SHA or the FRL SHA. 129. The Claimant's investment into FCPL (including the protective, special and material rights granted to it with respect to FRL's Retail Assets) under the FCPL SHA read with the FRL SHA is fully compliant with all laws. It is relevant that the Claimant could, in any event, have directly made the same investment into FRL under the foreign portfolio investor route recognized under Indian law and also obtained the same protective, special and material rights in FRL. Therefore, any question of the Claimant's investment being in violation of India's Foreign Direct Investment laws does not arise. Even otherwise, the Claimant's ability to exercise the FRL C....
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.... exercise is completed and the court answers the same in the affirmative, the reference of even non- signatory parties would fall within the exception afore-discussed. ... 76. The Court will have to examine such pleas with greater caution and by definite reference to the language of the contract and intention of the parties. In the case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of non-signatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or interdependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be sufficient indicator of intent of the parties to refer signatory as well as non-signatory parties to arbitration. The principle of "composite performance" would have to be gathered from the conjoint reading of the principal and supplementary agreements on the one hand and the explicit intention of the....
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....ird parties who may not be signatories to an agreement between two contracting entities? The evolving body of academic literature as well as adjudicatory trends indicate that in certain situations, an arbitration agreement between two or more parties may operate to bind other parties as well. ... 27. Gary B. Born in his treatise on International Commercial Arbitration indicates that: The principal legal bases for holding that a non-signatory is bound (and benefited) by an arbitration agreement ... include both purely consensual theories (e.g., agency, assumption, assignment) and non- & consensual theories (e.g. estoppel, alter ego). Explaining the application of the alter ego principle in arbitration, Born notes: Authorities from virtually all jurisdictions hold that a party who has not assented to a contract containing an arbitration clause may nonetheless be bound by the clause if that party is an 'alter ego'of an entity that did execute, or was otherwise a party to, the agreement. This is a significant, but exceptional, departure from the fundamental principle ... that each company in a group of companies (a relatively modern concept) is a separate legal entity possess....
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....ation agreement and the non-signatory entity on the group has been engaged in the negotiation or performance of the commercial contract, or made statements indicating its intention to be bound by the contract, the non-signatory will also be bound and benefitted by the relevant contracts. The circumstances in which the 'Group of Companies' Doctrine could be invoked to bind the non-signatory affiliate of a parent company, or inclusion of a third party to an arbitration, if there is a direct relationship between the party which is a signatory to the arbitration agreement; direct commonality of the subject matter; the composite nature of the transaction between the parties. A 'composite transaction' refers to a transaction which is inter-linked in nature; or, where the performance of the agreement may not be feasible without the aid, execution, and performance of the supplementary or the ancillary agreement, for achieving the common object, and collectively having a bearing on the dispute. .... 10.9. It will be a futile effort to decide the disputes only between MTNL and Canara Bank, in the absence of CANFINA, since undisputedly, the original transaction emanated from a transac....
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....action between the Claimant and all the Respondents. FRL was actively involved in its negotiation, performance and was its ultimate beneficiary. 137. Mr. Darius Khambata argues that if the Claimant's single integrated contract approach was adopted, the arrangement might likely be illegal, since the Claimant's rights as a foreign investor were limited. He further suggests that the Claimant has misled the CCI on the structure of the relationships among the Parties. I do not think there is much substance in any of these arguments. First, the stake was not a direct investment made by the Claimant, but one through an Indian Owned Controlled Entity. This is a permissible arrangement under Indian law and appears to have received regulatory scrutiny. Second, the Agreements do not confer, and the Claimant has not attempted to assert control of or over FRL. 138. The documents that the Claimant filed with the CCI have to be read in their entirety, rather than cherry picked. A close reading does not suggest that there were misstatements made by the Claimant. It did not conceal its protective rights. Such protective rights do not amount to control of FRL. Rather, they oblige FRL not to act ....
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....the board of directors of FRL. It is clear that rights were created in favour of FCPL (through the FRL SHA), for the benefit of the Claimant (under the FCPL SHA), and all the Respondents were fully aware and actively participated in those negotiations; and (i) similar dispute resolution clauses prevail in all the Agreements. Even the FRL SHA (which is essentially a domestic agreement) has an SIAC dispute resolution clause. 140. It is also material that, before the effective date of the Agreements, FRL accepted the 19 December 2019 Letter sent by FCPL, without qualification. The 19 December 2019 Letter manifested the interconnectivity of the Agreements and, in particular, the dispute resolution clauses. The sending and acceptance of the 19 December 2019 Letter stating the names of the Restricted Persons was a precondition required by the Claimant, prior to the Effective Date of the FCL SHA and SSA coming into force. The Claimant only made its investment on 26 December 2019 after this was done. Given its pertinence, the 19 December 2019 Letter is reproduced below, for easy reference: 141. Paragraph 5 of the 19 December 2019 Letter incorporates any dispute over the disposal of t....
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....ecisions, and, crucially, after considering all the other criteria have been amply satisfied. 146. Last but not least, the Parties have all assented to SIAC arbitral proceedings on identical terms. The Parties' mutual obligations are inexorably linked. This matter is, at its core, about a group of affiliated companies entering into an indivisible contractual arrangement with the Claimant within a conceptual framework that they all unequivocally consented to." 21. The learned Arbitrator recorded the contentions of the petitioner on merits in paras 173 to 203 and the respondents' contentions in paras 204 to 223. The analysis of the contentions of the parties is recorded in paras 224 to 236 of the award. In para 237, the learned Arbitrator recorded his satisfaction that the petitioner has made out a strong prima facie case that the respondents are in breach of their contractual obligations and/or undertakings to the petitioner under the three agreements. Paras 224 to 237 of the interim order are reproduced hereunder: "4. Analysis of Parties Contentions i. The Merits 224. It is not disputed by the Respondents that the Claimant entered into the subject transactions on the basis....
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....puted Transaction. FRL has stated that statutory approvals for the completion of the Disputed Transaction will take quite some time. 229. It is plain as a pikestaff that, if the Disputed Transaction proceeds, the special and protective rights with respect to the Retail Assets that the Claimant has under the contractual arrangements entered into with the Respondents will be irretrievably lost. There is substance in the Claimant's submission that the widespread network of retail stores across India, which was built by FRL over a period of several years is a uniquely strategic asset for it. 230. It is apparent that the Respondents have acted in concert contrary to the obligations they have undertaken and in a manner that is inimical to the Claimant's interests. 231. Even accepting Mr. Singh's statement from the Bar that 5.53 % of the shares were sold on 10 September 2020, the Promoters continue to collectively remain the single largest shareholders of FRL with fragmented public shareholding, and are therefore in control of FRL. In various public filings made by FRL, the Majority Respondents have been identified and hold themselves out as "promoters" of FRL. Indian law defines a ....
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....and the SSA. Before the Effective Date, FRL was also put on notice who were the Restricted Persons vide the 19 December 2020 Letter. Fourth, the Respondents had decided not to produce any of minutes of FRL's Board Meeting apropos the Disputed Transaction to show whether any enquiry was made as to whether the Claimant had given its consent and or the minutes of any FCPL board meeting on the "consent" issue. For completeness, I should add that I am not quite convinced that the Board Resolution is "void" as asserted by the Claimant. But that legal characterisation is not material for now. What is important for present purposes is that they have prima facie established that the Respondents have breached a number of their contractual obligations. 235. Mr. Singh very properly did not attempt to argue that no contractual breaches had been committed by the Majority Respondents. Instead, he premised his submissions on the basis that I was "to assume against [his clients] the way that the cause of action has been framed by the [C]laimant". Mr. Salve also adopted a similar stance and made his submissions on a "demurrer basis" without accepting the correctness of the Claimant's factual asser....
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.... informed by the Respondents of the nature, terms and or substance of the Disputed Transaction. During the several exchanges that the Claimant's officers had with the Promoters and key members of the Future Group between March 2019 and 29 August 2020, no disclosure was ever made by the Promoters about the key terms of Track 1. How was the Claimant expected to match this? When did the Respondents actually decide to disengage from the Claimant? Why were the Respondents not candid with the Claimant? 256. The central plank of Mr. Singh's submissions is attractive for its enticing simplicity. It is that since the unencumbered portion of the Promoters' shares is now merely "nearly 0.5%" there is no realistic possibility of the Claimant ever becoming FRL's largest shareholder if and when legally permitted. However, I cannot agree with this submission. The discussions that the Claimant and the Respondents were engaged in were meant to address this particular problem as well. Accepting that the Respondents' position(s) had been prejudiced, the Claimant agreed to work with the Respondents to repair the damage. Mr. Yeo is correct in saying that the Claimant was not sitting on [its] hands. ....
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....ver, it now appears that the Claimant's forbearance to exercise its legal rights by giving the Respondents time to formulate a rescue scheme is being used against it. 259. It bears reiteration that while the Claimant was aware that the Respondents were engaged in discussions with Reliance it has not been suggested that they were aware of the precise details of what it entailed save for what was being reported in the media. The documents on record show that the Respondents fobbed off the Claimant when it queried them. All the Claimant could do (and did) was to ask for updates and remind them of their legal obligations not to dispose of the Retail Assets and or deal with a Restricted Entity. 260. The Respondents had, in good times, entered into a long-term commercial arrangement with the Claimant. In exchange for a very substantial investment that benefitted FRL the Respondents conferred a number of rights on the Claimant and emphatically undertook to protect them. Their relationship was by no means a short-term commercial flirtation of convenience. There were no force majeure clauses or exit terms that allowed any of the Parties to resile from their obligations if and when the g....
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....e NCLT to approve the Disputed Transaction. FCPL has also stated that "it is also open to the Claimant to approach the NCLT (as and when the NCLT process commences), to seek to restrain the Disputed Transaction if it can make out the grounds for such relief". As the Parties have agreed to resolve all their differences under the auspices of an SIAC Tribunal, this is not a pertinent consideration. 265. As set out above, the Respondents additionally submit that FRL is a listed company with more than three hundred thousand (300,000) shareholders, over twenty-five thousand (25,000) employees and several other stakeholders (including banks and financial institutions). The COVID-19 pandemic, they say has had a significant impact on Indian businesses, particularly the retail sector in which FRL carries on business. The Disputed Transaction seeks to protect the interest of all these stakeholders through a large infusion of funds and acquisition of liabilities of the business. If the reliefs sought by Amazon are granted, it may seriously jeopardise the Disputed Transaction and the interest of the FRL's stakeholders would be adversely affected. The loss and damage caused to FRL and its stak....
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....hich was built over a period of several years". The special, protective and material rights with respect to the Retail Assets represent a valuable and strategic asset to the Claimant and the loss of its interests in these Retail Assets cannot be compensated in monetary terms. The Respondent's entire premise of damages being the only remedy is wrong. 269. In this context it is pertinent to note that the Parties themselves agreed in the FCPL SHA (as well as the FRL SHA and the SSA) that: 27.7 Remedies ... (ii) The Parties also agree that damages may not be an adequate remedy for a breach of this Agreement and the Parties shall he entitled to an injunction, restraining order, right for recovery, suit for specific performance or such other equitable relief as a court of competent jurisdiction may deem necessary or appropriate to restrain the other Party from committing any violation or enforce the performance of the covenants, representations and obligations contained in this Agreement. [emphasis in italics added] 270. It is plain that the Claimant's interests in FRL and the related entities represent a unique proposition to it from a strategic national and global persp....
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....tated that they will not give any assurances to preserve the current status quo pending the outcome of these proceedings. It will take quite some time for the Tribunal to be constituted and after that to consider any applications for interim relief (let alone finally determine the Parties' differences). The greater the progress made towards the completion of the Disputed Transaction, the harder it will be to unravel it. Over time, the interests of additional third parties may also become entwined with the Disputed Transaction and be subsequently compromised. 274. In sum, the more delay in giving relief the greater the prejudice to the Claimant. It is apparent that at some point of time in the very near future, restoring the Claimant's rights will become impossible. The grave and imminent threat to the destruction of the rights conferred on it by the Respondents under the Agreements merit immediate interim relief. 275. In the circumstances, I am prima facie satisfied that it is just that the Claimant be entitled to orders/directions restraining the Respondents from proceeding further with the Disputed Transaction until further order from the Tribunal. This is to take effect imme....
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....sregarded their obligations to the Claimant. 280. The Respondents are the primary authors of this unhappy situation. Granted, the COVID-19 pandemic had caused them unforeseeable difficulties as well as substantial losses and, without fresh capital, FRL's future appears unstable. But, even in these situations, the law expects businesspersons to honour their contractual commitments unless these have been legally vitiated or modified. Economic hardship alone is not a legal ground for disregarding legal obligations. The Respondents have given no good legal reasons for effecting the sale of FRL's Retail Assets behind the Claimant's back and thereby gravely comprising its interests. 281. FRL's retail chains are unique and have peculiar strategic importance and value to the Claimant. The grave and imminent threat to the destruction of the rights conferred on it by the Respondents under the Agreements merit immediate interim relief. 282. The Majority Respondents have asserted that the "horse has bolted" and that, consequentially, the Claimant no longer has any legitimate interests meriting protection. This is incorrect. The horse has not bolted, even though the Respondents have opene....
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.... of the costs of this Arbitration." III. Submissions of the petitioner 26. The Biyanis led by Kishore Biyani (respondent No. 3) and Rakesh Biyani (respondent No. 8) are the controlling shareholders of Future Retail Limited ("FRL") and Future Coupons Private Limited ("FCPL"). Mr. Kishore Biyani is the Executive Chairman and Director of FRL, and Mr. Rakesh Biyani is the Managing Director of FRL. 27. FRL is India's second largest organized offline retailer and has approximately 1,534 retail stores across India. Its widespread retail network is, therefore, an invaluable strategic asset. 28. The Biyanis wanted to collaborate with strategic foreign investors with a long-term vision to grow the business of the Future group, who would be a long-term partner and stakeholder in FRL, and would further enable Biyanis to monetize their existing shareholding in FRL. If and when Indian laws changed, this investor could choose to become the controlling shareholder of FRL. 29. As a first step, the Biyanis re-structured an existing Future group entity, FCPL, to acquire securities of FRL, and correspondingly, acquire special, material and protective rights in FRL. This structure enabled the Biya....
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....d persons which was identical to the list agreed by Biyanis in the FCPL- SHA. 42. On 26th December 2019, Amazon invested Rs. 1431 Crore in FCPL and the FCPL-SHA came into effect. This entire amount was invested by FCPL in FRL as agreed in the SSA. 43. On 26th December 2019, the Articles of Association of FCPL were amended by the Biyanis to reflect Amazon's rights, including the fact that Biyanis will not exercise FCPL's limited rights in FRL without Amazon's consent. 44. In June 2020, the Biyanis and FRL directly approached Amazon to provide additional funding to FRL. At that time, FRL represented to Amazon and other existing investors that FRL needed INR 5000 Crores to resolve its distress. FRL also indicated that any further funding from Amazon could come through the same structure as Amazon's investment in FCPL. 45. While Amazon was engaging in discussions with FRL to resolve FRL's problems, FRL entered into discussions with MDA Group. 46. On several occasions, including 27th August 2020, Amazon enquired about the discussions with MDA Group but FRL only provided vague responses. 47. On 29th August 2020, FRL announced that its Board of Directors had approved a transaction w....
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....der." 54. On and from 26th October 2020, FRL began publicly impugning the validity of the EA Order by claiming it was a nullity under Indian law. FRL also actively pursued regulators to ignore the EA Order and grant their approvals for the Disputed Transaction. 55. With a view to mount a collateral challenge to the ongoing Arbitral Proceedings and the EA Order, FRL filed a suit before this Court on the ground that Amazon was interfering with a lawful transaction between FRL and MDA Group. FRL also sought interim relief seeking to restrain Amazon from writing to regulators. However, during the hearing of the I.A No. 10376 of 2020, FRL stated that it was not claiming an antiarbitration injunction, nor was it challenging the EA Award. The learned Single Judge in the order dated 21st December 2020 has noted: "Mr. Harish Salve, learned Senior Counsel appearing for the plaintiff further stated that in the interim application, he is not seeking any anti arbitration injunction or any anti suit injunction" 56. FRL had raised an objection to the jurisdiction before the SIAC Court on the ground that it was not a party to the arbitration agreement in terms of Rule 28 of the SIAC Rules. On....
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....Arbitrator is enforceable as an order of the Court under Section 17(2) of the Arbitration and Conciliation Act. 65. Section 2(6) of the Arbitration and Conciliation Act gives freedom to the parties to authorize any person including an institution to determine the disputes between the parties. Section 2(8) of the Arbitration and Conciliation Act provides that the agreement to authorize an institution shall include any Arbitration Rules referred to in that agreement. 66. The Emergency Arbitrator is an arbitrator under SIAC Rules read with Section 2(1)(d), 2(6) and 2(8) of Arbitration and Conciliation Act. Under SIAC Rules, Emergency Arbitrator occupies the position of and functions as an arbitrator till the Arbitral Tribunal is fully constituted. Rule 1.3 of SIAC Rules defines an "Emergency Arbitrator" as an arbitrator appointed in accordance with Schedule 1. Rules 38, 39 and Schedule 1 - Rules 4, 5, 7, 8 and 12 reinforce the position that an Emergency Arbitrator occupies the position of an Arbitrator and functions as an Arbitrator. 67. The interim order dated 25th October, 2020 contains interim injunctions to protect and safeguard the subject matter of the disputes, which squarel....
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....ed no wider than its plain language permits. The Section provides that any order issued by "the arbitral tribunal under this section." is enforceable as an order of the Court. The order under Sections 17 (1) is an order which may be made "during the arbitral proceedings", or an order which may be made "after the making of the arbitral award....". The arbitral proceedings before a Tribunal can only commence after the appointment of the Arbitral Tribunal. 75. The order of an Emergency Arbitrator is not an order of the Arbitral Tribunal. It is not an order that can be appealed under Section 37 since it is not an order "of the arbitral tribunal". 76. The question whether an Emergency Arbitrator can or cannot be appointed, consistent with Indian law and in an arbitration governed by the Act is a secondary issue. In the first instance, even if the parties can, by an agreement, agree to the appointment of an Emergency Arbitrator (by choosing Rules of procedure which envisage the appointment of an Emergency Arbitrator), such an arbitrator is not the "arbitral tribunal" within the meaning of section 2 (1) (d) of the Act. 77. The language of Section 17 (2) cannot be stretched nor can the ....
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....ribunal is not bound by the reasons given by the Emergency Arbitrator. Any interim order or Award issued by the Emergency Arbitrator shall, in any event, cease to be binding if the Tribunal is not constituted within 90 days of such order or Award or when the Tribunal makes a final Award or if the claim is withdrawn." 83. According to respondent No.2, the petitioner's reliance on the Rules of the Delhi International Arbitration Centre, Mumbai Centre of International Arbitration and Madras High Court Arbitration Centre, which provide for emergency arbitration procedures to contend that Emergency Arbitration is recognised under Indian law is misconceived as these Rules cannot override the mandatory provisions of the Act. In fact, these Rules (Rule 1.2 of the DIAC Rules, Rule 1.1 of the MCIA Rules and Rule 1.4 of the MHCAC Rules) provide that in the event that any of the Rules are in conflict with a mandatory provision of law applicable to the arbitration / arbitration agreement from which the parties cannot derogate, the mandatory provision would prevail. These Rules are also applicable to foreign seated arbitrations, as they permit the parties to choose a seat of choice. In the cont....
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....n granted by SEBI dated 20th January 2021 as also the approvals granted by BSE, NSE and CCI. It is pertinent to mention that the Delhi High Court by its Order dated 21st December, 2020 has directed the statutory authorities /regulators to apply their mind to the facts and legal issues and come to the right conclusion and take a decision after considering the representations and counter representations of FRL and Amazon to the statutory authorities and regulators. Further to such directions of the Delhi High Court, SEBI/Stock Exchanges has granted approval in accordance with law. 88. On 26th January, 2021, FRL has filed the Scheme of Amalgamation with the National Company Law Tribunal, Mumbai Bench before whom the matter is pending and will be decided in accordance with the procedure under Section 230 of the Companies Act, which is a self-contained code. 89. Reliance is placed on paras 7.10, 9.17, 9.19, 9.18, 10.31, 11.16, 11.22, 12.3 and 13 of the judgment dated 21st December, 2020 in CS(COMM) 493/2020 titled Future Retail Ltd. v. Amazon.Com Investment Holdings LLC, 2020 SCC OnLine Del 1636. V. Additional submissions of respondent No.2 90. The order dated 25th October, 2020 pas....
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....t dated 22nd August, 2019 between Amazon, FCPL and the promoters, Biyanis, whereas Amazon is not a party to the agreement dated 12th August, 2019 between FRL, FCPL and the promoters. The plea of Amazon that the aforesaid three agreements constituted a 'single integrated bargain' is misconceived which is clear from the relevant clauses of the agreement. If the three agreements are treated as a single integrated transaction, it would violate the provisions of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (FEMA FDI Rules). Reference is made to paras 10.29, 10.30 and 10.31 of the Future Retail Ltd. v. Amazon.Com Investment Holdings LLC (supra). 95. Prayer (e) of this petition seeking restraint against the respondents from relying upon the approval granted by any regulatory body/agency contrary to the Emergency Arbitrator order is a backdoor challenge to the regulatory authorities decision in accordance with law. 96. Amazon has challenged the order dated 21st December, 2020 in Future Retail Ltd. v. Amazon.Com Investment Holdings LLC (supra) before the Division Bench of this Court in appeal. Reference is made to Grounds 12, 14, 15 and 16 of the appeal. VI. Petitio....
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....e same objections before the Emergency Arbitrator regarding its legal status under the Arbitration and Conciliation Act, 1996, which was rejected by the Emergency Arbitrator after a proper hearing and through a detailed and reasoned order. 100. Having done so and lost before the Emergency Arbitrator, FRL cannot unilaterally claim that the EA Order is a nullity. The EA Order continues to be valid and binding qua parties having been passed in accordance with the SIAC Rules. 101. The concept of party autonomy and its consequences have been both accepted by the learned Single Judge who has found that an Emergency Arbitrator falls within the definition of "arbitral tribunal" and the selection of SIAC Rules which recognize an EA Order, is permissible under Indian law. 102. FRL erroneously alleges that the EA Order has been "superseded" by the order of the learned Single Judge. The learned Single Judge did not go into the merits of the EA Order and expressly holds that the court could not have gone into the same. The learned Single Judge has rejected not just FRL's argument that the EA Order is coram non judice, but has also denied it any interim reliefs sought. Consequently, FRL's all....
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....rbitration shall proceed. 110. FRL raised the same objection under Schedule I, Rule 7 of the SIAC Rules before the Emergency Arbitrator on 7th October 2020. This objection was rejected by the EA Order on 25th October 2020. This objection was rejected by the Emergency Arbitrator giving detailed reasons. 111. FRL has in accordance with Rule 28.2 of the SIAC Rules read with Section 16 of the Arbitration and Conciliation Act, 1996 raised this objection before the Tribunal vide its emails dated 16th January 2021 and 28th January 2021. A challenge to the jurisdiction of the Arbitral Tribunal can only be raised in a manner recognised under the Arbitration and Conciliation Act, 1996 and raising such a challenge in the present enforcement proceeding is not in accordance with the Arbitration and Conciliation Act, 1996. 112. The Emergency Arbitrator's finding that FRL is a proper party to the arbitration is now sought to be assailed on merits by urging this Court to go behind the EA Order, by erroneously mischaracterizing it as a "nullity". 113. The Emergency Arbitrator had jurisdiction to decide whether FRL was a proper party to the arbitration proceedings. 114. The Emergency Arbitr....
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....is a party. The occasion of adverting to the reasoning of the Emergency Arbitrator or superseding or vacating the EA Order did not arise in the Suit. Amazon has no control over FRL 121. FRL now alleges that the EA Order is a nullity as combining the two agreements would result in Amazon acquiring control over FRL, and this would be violative of FEMA. This constitutes, at best a defence in the Arbitration proceedings and, in fact, was urged as a defence in the Arbitration Proceedings. This is not an argument on nullity. It is an argument on merits, which has been rejected by the Emergency Arbitrator. 122. The plain facts are that Respondents induced an investment from Amazon based on specific representations, that the investment is in accordance with law and that the control remains with the respondents despite the special, material and protective rights. 123. However, the Respondents, contrary to the express terms of the Agreements and their representations, acted in egregious breach of their obligations without any justification by proposing to dispose of the Retail Assets to a Restricted Person, viz. Mukesh Dhirubhai Ambani Group. 124. In the absence of any defence to breach....
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....ny allegation that Amazon did not engage to find a solution or to take care of FRL in their financial distress is factually incorrect and false. Amazon reiterates its stated position to assist FRL and explore viable solutions for FRL. In fact, this plea was rejected by the Emergency Arbitrator with the following findings; (i) The respondents had, in good times, entered into a long term commercial arrangements with Amazon entities in exchange for a very substantial investment that benefitted FRL, the respondents conferred a number of rights on Amazon and emphatically undertook to protect them. (ii) The relationship between Amazon and the respondents was by no means a short term commercial flirtation of convenience. (iii) Biyanis first drove and then caused FRL to enter into the Disputed Transaction. (iv) Amazon was not an idle spectator and actively sought to engage with the Respondents to support an alternative rescue scheme for FRL. (v) A term sheet from potential investors acceptable to Amazon was provided to the Promoters. (vi) Without providing Amazon the details of the Disputed Transaction or engaging in further negotiations, the Promoters chose to enter into the D....
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....use in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in- (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. Section 17 - Interim measures ordered by arbitral tribunal (1) A party may, during the arbitral proceedings, apply to the arbitral tribunal- (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely- (a) the preservation, interim custody or sale of any goods which....
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....t aside an arbitral award under Section 34. (2) An appeal shall also lie to a Court from an order of the arbitral tribunal- (a) accepting the plea referred to in sub-section (2) or sub-section (3) of Section 16; or (b) granting or refusing to grant an interim measure under Section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. Code of Civil Procedure, 1908 Section 51 - Powers of Court to enforce execution Subject to such conditions and limitations as may be prescribed, the Court may, on the application of the decree-holder, order execution of the decree- (a) by delivery of any property specifically decreed; (b) by attachment and sale or by sale without attachment of any property; (c) by arrest and detention in prison 72[for such period not exceeding the period specified in Section 58, where arrest and detention is permissible under that section]; (d) by appointing a receiver; or (e) in such other manner as the nature of the relief granted may require: Provided that, where the decree is for the payment of money, execution by ....
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.... judgment-debtor has not obeyed the decree and the decree-holder has applied to have the attached property sold, such property may be sold; and out of the proceeds the Court may award to the decree-holder such compensation as it thinks fit, and shall pay the balance (if any) to the judgment-debtor on his application. (4) Where the judgment-debtor has obeyed the decree and paid all costs of executing the same which he is bound to pay, or where, at the end of six months from the date of the attachment, no application to have the property sold has been made, or if made has been refused, the attachment shall cease. (5) Where a decree for the specific performance of a contract or for an injunction has not been obeyed, the Court may, in lieu of or in addition to all or any of the processes aforesaid, direct that the act required to be done may be done so far as practicable by the decree-holder or some other person appointed by the Court, at the cost of the judgment-debtor, and upon the act being done the expenses incurred may be ascertained in such manner as the Court may direct and may be recovered as if they were included in the decree. Explanation.-For the removal of doubts, it ....
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....arbitration agreement. An arbitration agreement which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration agreement, and the Tribunal shall not cease to have jurisdiction by reason of any allegation that the contract is non-existent or null and void. 28.3 Any objection that the Tribunal: a. does not have jurisdiction shall be raised no later than in a Statement of Defence or in a Statement of Defence to a Counterclaim; or b. is exceeding the scope of its jurisdiction shall be raised within 14 days after the matter alleged to be beyond the scope of the Tribunal's jurisdiction arises during the arbitral proceedings. The Tribunal may admit an objection raised by a party outside the time limits under this Rule 28.3 if it considers the delay justified. A party is not precluded from raising an objection under this Rule 28.3 by the fact that it has nominated, or participated in the nomination of, an arbitrator. 28.4 The Tribunal may rule on an objection referred to in Rule 28.3 either as a preliminary que....
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.... Registrar of such application and payment of the administration fee and deposits. 4. If the parties have agreed on the seat of the arbitration, such seat shall be the seat of the proceedings for emergency interim relief. Failing such an agreement, the seat of the proceedings for emergency interim relief shall be Singapore, without prejudice to the Tribunal's determination of the seat of the arbitration under Rule 21.1. 5. Prior to accepting appointment, a prospective Emergency Arbitrator shall disclose to the Registrar any circumstances that may give rise to justifiable doubts as to his impartiality or independence. Any challenge to the appointment of the Emergency Arbitrator must be made within two days of the communication by the Registrar to the parties of the appointment of the Emergency Arbitrator and the circumstances disclosed. 6. An Emergency Arbitrator may not act as an arbitrator in any future arbitration relating to the dispute, unless otherwise agreed by the parties. 7. The Emergency Arbitrator shall, as soon as possible but, in any event, within two days of his appointment, establish a schedule for consideration of the application for emergency interim relief.....
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....nt to this Schedule 1 may initially be apportioned by the Emergency Arbitrator, subject to the power of the Tribunal to determine finally the apportionment of such costs. 14. These Rules shall apply as appropriate to any proceeding pursuant to this Schedule 1, taking into account the urgency of such a proceeding. The Emergency Arbitrator may decide in what manner these Rules shall apply as appropriate, and his decision as to such matters is final and not subject to appeal, review or recourse. The Registrar may abbreviate any time limits under these Rules in applications made pursuant to proceedings commenced under Rule 30.2 and Schedule 1. (Emphasis supplied) The Delhi International Arbitration Centre (DIAC) (Arbitration Proceedings) Rules 2018 2.1 (c) "Arbitral Tribunal" or "Tribunal" means person(s) acting as arbitrators or a sole arbitrator and includes an Emergency Arbitrator. Part E - Emergency Arbitration And Interim Relief 14. Emergency Arbitration 14.1 If a party is in a requirement of urgent interim or conservatory measures that cannot await the formation of the Arbitration Tribunal, it may make an application to the Secretariat addressed to the Coordinator, ....
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.... 14.9 The Emergency Arbitrator shall ensure that the entire process from the appointment of the Emergency Arbitrator to making the order shall be completed within seven (7) days. 14.10 The Emergency Arbitrator shall become functus officio after the order is made and shall not be a part of the Arbitral Tribunal, which may be formed subsequently and in accordance with Rule 14 unless otherwise agreed to by all the parties. 14.11 The order for urgent interim or conservatory measures passed by the Emergency Arbitrator shall not bind the Arbitral Tribunal on the merits of any issue or dispute that the said Tribunal may be required to determine. 14.12 The order passed by the Emergency Arbitrator shall remain operative for a period of two months from the date of passing of the order unless modified, substituted or vacated by the Arbitral Tribunal. The Arbitral Tribunal will also have the power to extend the order beyond the period of two months. 14.13 Any order of the Emergency Arbitrator may be confirmed, varied, discharged or revoked, in whole or in part, by order or award made by the Arbitral Tribunal upon application by any party or upon its own initiative. VIII. Discussion ....
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....itration Centre; Asian International Arbitration Centre and Dubai International Finance Centre have also incorporated the provisions relating to the Emergency Arbitration in their Rules. 136. In our country, the provisions relating to Emergency Arbitration have been incorporated by Delhi International Arbitration Centre (DIAC); Mumbai Centre for International Arbitration (MCIA); Madras High Court Arbitration Centre (MHCAC); Nani Palkhivala Arbitration Centre; Indian Council of Arbitration; Indian Institute of Arbitration & Mediation; and Bangalore International Mediation, Arbitration and Conciliation Centre. 137. Rule 2.1(c) of the Rules of Delhi International Arbitration Centre (DIAC) defines 'Arbitral Tribunal' to include an Emergency Arbitrator. Rule 14 contains similar provisions for appointment of an Emergency Arbitrator as contained in Rules of SIAC. Rule 14.8 provides that an order or of an award of an Emergency Arbitrator shall be enforceable in the manner as provided in the Act. The Rules of Mumbai Centre for International Arbitration (MCIA) and Madras High Court Arbitration Centre (MHCAC) also contain similar provisions for appointment of an Emergency Arbitrator. 138. ....
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....17(2) provides that the interim order passed by the Arbitral Tribunal shall be deemed to be an order of the Court and shall be enforceable as an order of the Court. 143. By virtue of Section 2(8) of the Arbitration and Conciliation Act, the Rules of Singapore International Arbitration Centre are incorporated in the arbitration agreement between the parties. By incorporating the Rules of SIAC into the arbitration agreement, the parties have agreed to the provisions relating to Emergency Arbitration. 144. This Court is of the view that the Emergency Arbitrator is an Arbitrator for all intents and purposes, which is clear from the conjoint reading of Sections 2(1)(d), 2(6), 2(8), 19(2) of the Arbitration and Conciliation Act and the Rules of SIAC which are part of the arbitration agreement by virtue of Section 2(8). Section 2(1)(d) is wide enough to include an Emergency Arbitrator. 145. Under Section 17(1) of the Arbitration and Conciliation Act, the Arbitral Tribunal has the same powers to make interim order, as the Court has, and Section 17(2) makes such interim order enforceable in the same manner as if it was an order of the Court. The Interim Order is appealable under Section ....
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.... the Arbitration and Conciliation Act. The learned Single Judge dismissed the petition holding that the Emergency Arbitrator rejected the claim by a very detailed and reasoned order and the claimant cannot invoke the jurisdiction under Section 9 of the Arbitration and Conciliation Act. The learned Single Judge further noted that the Court, in a petition under Section 9 of the Act, cannot sit as a Court of Appeal to examine the order of the Emergency Arbitrator. The learned Single Judge further noted that the mandate of the Emergency Arbitrator was continuing and it was open to the appellant to seek modification, if so advised. The appellant relied upon Raffles Design (supra) which was distinguished by the learned Single Judge. The claimant challenged the judgment of learned Single Judge before the Division Bench. The Division Bench of this Court rejected the challenge holding that a party having chosen to go to the Emergency Arbitrator and having failed to its in endeavour to obtain interim relief, cannot seek the same relief in Section 9 proceedings. The Division Bench distinguished Raffles Design (supra). The Division Bench upheld that the petition under Section 9 of the Arbitrat....
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....reements are signed between different parties and where some contain an arbitration clause and others do not and further the parties are not identically common in proceedings before the court (in a suit) and the arbitration agreement, a reference of disputes as a whole or in part can be made to the Arbitral Tribunal, more particularly, where the parties to an action are claiming under or through a party to the arbitration agreement?" (Emphasis supplied) 155. The Supreme Court held that Group of Companies doctrine shall bind a non-signatory party to arbitration where there is a clear intention of the parties to bind both the signatory as well as the non-signatory parties who are part of group of companies. The 'intention of the parties' is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties. Paras 71 and 72 of the judgment are reproduced hereunder: "71. Though the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the courts under the English law have, in certain cases, also applied the "group of compani....
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....ng a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court answers the same in the affirmative, the reference of even non-signatory parties would fall within the exception afore-discussed. xxx xxx xxx 76. The Court will have to examine such pleas with greater caution and by definite reference to the language of the contract and intention of the parties. In the case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of non-signatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or i....
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....e of commercial arrangements, the intent to bind a party who is not formally a signatory, but has assumed the obligation to be bound by the actions of the signatory. The Court held the award to be enforceable against a non-signatory entity. The relevant portion of the judgment is reproduced as under:- "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 of companies. The circumstances in which they have entered into them may reflect an intention to bind both signatory and non-signatory entities within the same group. In holding a non-signatory bound by an arbitration agreement, the court approaches the matter by attributing to the transactions a meaning consistent with the business sense which was intended to be ascribed to them. Therefore, factors such as the relationship of a non-signatory to a party which is a signatory to the agreement, the commonality of subject-matter and the composite nature of the transaction weigh in the balance. The group of companies doctrine is essentially intended to facilitate the fulfilment of a mutually held intent bet....
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....ine is a means of identifying the intentions of parties and does not disturb the legal personality of the entities in question. In other words: "the group of companies doctrine is akin to principles of agency or implied consent, whereby the corporate affiliations among distinct legal entities provide the foundation for concluding that they were intended to be parties to an agreement, notwithstanding their formal status as non-signatories." (Emphasis supplied) 159. Applying the aforesaid principles, the Supreme Court rejected the appellant's defence that the award cannot be enforced against the appellant. The Supreme Court held that to allow such a defence to prevail would be to cast the mutual intent of the parties to the winds and to put a premium on dishonesty. Relevant portion of para 35 is reproduced hereunder: "35...Having regard to this factual context, the defence of the appellant against the enforcement of the award cannot be accepted. To allow such a defence to prevail would be to cast the mutual intent of the parties to the winds and to put a premium on dishonesty" (Emphasis supplied) 160. The Supreme Court further noted that the arbitral award has the character o....
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.... accord with the principles of agency or representation, will be the only entity in a group, to be bound by that agreement. Similarly, an arbitration agreement is also governed by the same principles, and normally, the company entering into the agreement, would alone be bound by it. 10.3. A non-signatory can be bound by an arbitration agreement on the basis of the "group of companies" doctrine, where the conduct of the parties evidences a clear intention of the parties to bind both the signatory as well as the non-signatory parties. Courts and tribunals have invoked this doctrine to join a non-signatory member of the group, if they are satisfied that the non-signatory company was by reference to the common intention of the parties, a necessary party to the contract. 10.4. The doctrine of "group of companies" had its origins in the 1970s from French arbitration practice. The "group of companies" doctrine indicates the implied consent to an agreement to arbitrate, in the context of modern multi-party business transactions. It was first propounded in Dow Chemical v. Isover-Saint-Gobain, 1984 Rev Arb 137, where the Arbitral Tribunal held that: "... the arbitration clause expressl....
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....nd together under the arbitration agreement. This will apply in particular when the funds of one company are used to financially support or restructure other members of the group. 10.8. The "group of companies" doctrine has been invoked and applied by this Court in Chloro Controls (India) (P) Ltd. v. Severn Trent Water Purification Inc. with respect to an international commercial agreement. Recently, this Court in Ameet Lalchand Shah v. Rishabh Enterprises, (2018) 15 SCC 678, invoked the group of companies doctrine in a domestic arbitration under Part I of the 1996 Act. xxx xxx xxx 10.11. It will be a futile effort to decide the disputes only between MTNL and Canara Bank, in the absence of CANFINA, since undisputedly, the original transaction emanated from a transaction between MTNL and CANFINA - the original purchaser of the bonds. The disputes arose on the cancellation of the bonds by MTNL on the ground that the entire consideration was not paid. There is a clear and direct nexus between the issuance of the bonds, its subsequent transfer by CANFINA to Canara Bank, and the cancellation by MTNL, which has led to disputes between the three parties. Therefore, CANFI....
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....ower Systems India Private Limited, GMR Infrastructure Limited and GCEL. Relying on the decision in Chloro Controls, it was held that GMR Energy Limited was the alter ego of GCEL as (a) GCEL was a joint venture of the GMR Group with GMR Energy as the parent company; (b) GMR Energy and GCEL did not maintain their separate legal personalities and comingled corporate funds; (c) GMR Energy guaranteed to make certain payments on behalf of GCEL, and discharged its liability by making part payment of the same; (d) at the time of entering into two MoUs with Doosan India, GMR Energy had acquired a 100% stake in GCEL. The Madras High Court in SEI Adhavan Power Private Limited and Ors. v Jinneng Clean Energy Technology Limited and Ors., 2018 (4) CTC 464 also followed the decision in Chloro Controls to join a non-signatory as a party to arbitration. The court relied on factors such as shared office, e-mails, agent relationship, etc, to conclude that the signatory and non-signatory were alter egos of one another and therefore the non-signatory could be made party to the arbitration. The group of companies doctrine has, however, acquired particular relevance in international arbitration, to ....
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....roup, and several other subsidiaries have been set up to execute its business project, and constitute executive branches of the parent company. A tight group structure is also evidenced when several companies share intellectual property rights, assets, and financial or human resources including corporate name, offices and premises, bank accounts and trademarks. In the Dow Chemical case, the tribunal found that the several signatory and the non-signatory companies of the Dow Chemical group were sharing the use of the same trademarks. Additionally, it is required that the non-signatory company has had an active role in the negotiations, the performance, or the termination of the contract, which contains the arbitration agreement. In Contractor v Yugoslavian Enterprise, ICC Award No. 6000 of 1988 the tribunal assumed jurisdiction over the non-signatory affiliate of the signatory company, as it was satisfied that the two affiliate companies had close business and corporate links because they were in all respects substantially identical entities, although separate companies under the US law as both companies were owned by the same shareholders in equal proportion. Furthermore, the sub....
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....(Bihar) Ltd. v Monnet Finance Ltd. (2011) 1 SCC 320. A non-signatory has however been held to be bound by an arbitration agreement by invoking various doctrines such as the principal-agent relationship, piercing the corporate veil, joint venture agreements, succession, implied consent, third party beneficiaries, guarantors, assignment, (Kotak Mahindra Bank v S. Nagabhushan and Ors. 2018 (2) Arb LR 488 (Delhi)) and other concepts of contractual rights. The 'group of companies' doctrine has been applied where an arbitration agreement is entered into by a company being a constituent of a group of corporate entities, to bind a non-signatory affiliate Chloro Controls India (P) Ltd. v Severn Trent Water Purification Inc. (2013) 1 SCC 641 in certain circumstances. For instance, it is invoked in a case where there is a composite transaction, and a clear intention of the parties to bind both the signatory and non-signatory parties. xxx xxx xxx The doctrine implies that a non-signatory party could be subjected to arbitration provided the transactions were with a group of companies, and there was a clear intention of the parties to bind both, the signatory as well as the n....
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....eering, installation and commission of the plant contained arbitration clauses. However, the fourth agreement for purchase of the photovoltaic products for energising the solar plant did not contain an arbitration clause. The court took the view that even though there are different agreements involving several parties, these agreements are inter-related and are in pursuance of a single commercial project. The disputes between all the parties, under the four agreements, were referred to a common arbitration. The Courts have held that where there is a tight group structure with strong organizational and financial links, so as to constitute the corporate entities into a single economic unit, or a single economic reality, the group of companies doctrine could be invoked. In MTNL v Canara Bank, AIR 2019 SC 4449 the court invoked the group of companies doctrine, to join a wholly owned subsidiary to the arbitration proceedings. This doctrine would apply in particular when the funds of one company are used to financially support or restructure the other members of the group." xxx xxx xxx Non-Signatories/Third Parties to an Arbitration (At pages 1362 to 1366) The amendme....
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....tion of the contract in dispute. The doctrine has its origin in French arbitration practice of the 1970s. The doctrine was first formulated by an ICC Tribunal in Dow Chemical v Isover Saint Gobain wherein the tribunal decided that non-signatory companies in a group could rely on an arbitration clause in contracts between Isover St. Gobain and two Dow Chemical group companies. The tribunal held that a group of companies constituted one and the same economic reality (une realite economique unique) which the tribunal should take into account when ruling on its jurisdiction. Courts have relied on the doctrine to hold that an arbitration agreement is enforceable against third parties who are involved in the execution or performance of the contract, or when the contract and conduct of these parties make it possible to presume that they were aware of the existence and scope of the arbitration clause. The application of this doctrine is factdependent, and the conduct, involvement of the non-signatory parties is of crucial significance. xxx xxx xxx In cases of composite transactions and multiple agreements, the intention of the parties to refer non-signatories to arbitrati....
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....d into by a company, being one within a group of companies, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates. 163.5 A non-signatory party can be subjected to arbitration where there was a clear intention of the parties to bind both, the signatory as well as the non-signatory parties who are part of Group of Companies. In other words, "intention of the parties" is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties. 163.6 Direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the Court has to examine whether a composite reference of such parties would serve the ends of ....
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....ency Arbitrator on Group of Companies doctrine 164. The Emergency Arbitrator considered the objections of respondent No.2 in paras 110 to 146 of the interim order. The Emergency Arbitrator noted in para 118 of the interim order that a "party" to an arbitration agreement defined in Section 2(1)(h) of the Arbitration and Conciliation Act need not be a signatory to the arbitration agreement. The Emergency Arbitrator referred to and relied upon the aforesaid three Supreme Court judgments, namely, Chloro Controls (supra), Cheran Properties Ltd. (supra) and MTNL vs. Canara Bank (supra). 165. In para 136, the Emergency Arbitrator recorded the prima facie satisfaction that FRL is a proper party as the facts on record establish a cogent commonality, intimate interconnectivity and undeniable indivisibility. Para 136 of the interim order is reproduced hereunder: "136. The Claimant has prima facie satisfied the established legal criteria that makes FRL a proper party to these proceedings. The facts on record clearly establish the cogent commonality, intimate interconnectivity, and undeniable indivisibility of the contractual arrangements in the Agreements. It is apparent that none of these....
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....Assets of FRL and (ii) the Promoters' shareholding in FRL, free from any encumbrance. Notably, from April to July 2020, representatives from the Future Group have sought additional investments from the Claimant into FRL, prepared and discussed various structure options for the Claimant's investment to benefit FRL, increase the Claimant's stake in FRL, and also proposed that the Claimant's nominee would be on the board of directors of FRL. It is clear that rights were created in favour of FCPL (through the FRL SHA), for the benefit of the Claimant (under the FCPL SHA), and all the Respondents were fully aware and actively participated in those negotiations; and (i) similar dispute resolution clauses prevail in all the Agreements. Even the FRL SHA (which is essentially a domestic agreement) has an SIAC dispute resolution clause." 167. Applying the well settled law relating to Group of Companies doctrine laid down by the Supreme Court to the present case, this Court is satisfied that the Group of Companies doctrine is applicable to the present case and respondent No.2 is a proper party to the arbitration proceedings for the reasons given by the learned Emergency Arbitrator and more....
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....n Group of Companies doctrine in Chloro Controls (supra), Cheran Properties (supra) and MTNL (supra), before the Emergency Arbitrator. Reference be made to para 119 of the interim order in which the Emergency Arbitrator recorded that "In the course of the oral submissions FRL's Counsel, Mr. Salve, did not dispute the correctness of these legal propositions." However, respondent No.2 has set up a new plea before this Court that that the Group of Companies doctrine applies only to proceedings under Section 8 of the Arbitration and Conciliation Act, which is contrary to the law laid down by the Supreme Court. This Court is of the view that the law laid down by the Supreme Court is binding on all the parties and setting up a plea contrary to the well settled law declared by the Supreme Court is a very serious matter and is dealt with in the latter part of this judgment. Whether the Interim Order is Nullity 170. According to the respondents, the interim order is Nullity. However, the respondents do not dispute that the three agreements in question are legal and valid. The basic feature of a valid agreement is that it is enforceable by law. A valid contract is "An agreement enforceable ....
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....e arrangement under Indian law and appears to have received regulatory scrutiny. Second, the Agreements do not confer, and the claimant has not attempted to assert control of or over FRI. 138. The documents that the Claimant filed with the CCI have to be read in their entirety, rather than cherry picked. A close reading does not suggest that there were misstatements made by the Claimant. It did not conceal its protective rights. Such protective rights do not amount to control of FRL. Rather, they oblige FRL not to act in a manner that would be inimical to the Claimant's interests as its long-term stakeholder." (Emphasis supplied) 174. The Emergency Arbitrator held the investment to be in accordance with law as the control remains with FRL despite the protective rights. This Court agrees with the Emergency Arbitrator that the protective rights do not amount to control of the petitioner over FRL and do not violate any law. 175. The respondents have strongly relied upon the observations made in order dated 21st December, 2020 in Future Retail Ltd. v. Amazon.Com Investment Holdings LLC, 2020 SCC Online Del 1636. This Court notes that the Court has made certain prima facie observatio....
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....dents neither filed the submissions relating to the facts nor responded to the factual submissions of the petitioner. The hearing continued on 01st February, 2021 and 02nd February, 2021. On 02nd February, 2021, both the parties concluded their oral submissions whereupon this Court reserved the order. During the course of hearing, it was put to the respondents whether they were willing to withhold further action till the pronouncement of the order which was declined by the respondents whereupon this Court granted interim protection to the petitioner till the pronouncement of this detailed order. 180. On 29th January, 2021, this Court had directed the respondents to place on record their case on facts. This Court further directed the respondents to respond to the plaintiffs submissions on facts. However, the respondents neither disclosed their case on facts nor responded to the statement of facts made by the petitioner despite being directed by this Court. The respondents have not given any justification for not disclosing their stand on facts despite being directed to do so. The purpose of calling for the statement of facts was to satisfy whether the interim order is not against t....
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....on a "demurrer basis" without accepting the correctness of the Claimant's factual assertions and the jurisdiction of this Tribunal apropos FRL. He, nevertheless, candidly acknowledged: And we know today that the promoters have a serious case to answer on breach, and they are saying there was a term where they would have had to help, they have not helped us, we are not in breach...... I am arguing this on the footing that the promoters have breached some arrangement with Amazon." 184. The respondents have taken Rs. 1431 crore from the petitioner solely on the basis of the rights provided by FRL to FCPL that they would not transfer their retail assets without the prior consent of the petitioner and never to a Restrict Person. Admittedly, the respondents have breached the agreements. However, there is no remorse. The intention of the respondents do not appear to be honest. The whole thrust of the respondents before this Court is that the petitioner is a trillion dollar company and Rs. 1430 crore invested by them in the present case is peanuts for them and they should forget about this money as it is worth zero today. To quote learned senior counsel for the respondent No.2 "...What ....
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....s dishonestly making a false claim in a Court an offence punishable imprisonment up to two years and fine. Section 209 is a very important provision to curb false claims but has been rarely invoked in our country. The leading case on Section 209 IPC is Bachoo Mohan Singh v. Public Prosecutor, (2010) SGCA 25 by Singapore Supreme Court in which Three Judges Bench of Singapore Supreme Court interpreted Section 209 IPC. The majority judgment authored by V.K. Rajah, J., as he then was, is reproduced in para 9 of the H.S. Bedi (Supra). This Court accepted the principles laid down by the Singapore Supreme Court. This Court has laid down the guidelines relating to Section 209 IPC. Conclusion 188. The Emergency Arbitrator is an Arbitrator for all intents and purposes; order of the Emergency Arbitrator is an order under Section 17(1) and enforceable as an order of this Court under Section 17(2) of the Arbitration and Conciliation Act. 189. Respondent No.2 is a proper party to the arbitration proceedings and the Emergency Arbitrator has rightly invoked the Group of Companies doctrine by applying the well settled principles laid down by the Supreme Court in Chloro Controls (supra), Cheran P....