| Headnote |
Arbitration and Conciliation Act, 1996: Arbitration agreement – Existence of valid arbitration agreement – Joinder of subsidiary company in arbitral proceedings – On facts, transactions between the appellant and respondent no. 1 and its subsidiary, respondent no. 2 – Respondent no. 2 subscribed to the bonds floated by appellant and subsequently transferred the Bonds to its holding Company-respondent no. 1 – Case of appellant that since respondent no. 2 did not pay the entire sale consideration for the Bonds, appellant constrained to cancel the allotment of the Bonds – Appointment of an arbitrator to settle the dispute through arbitration – Objection by appellant with respect to existence of valid arbitration agreement between the parties and objection by respondent no. 1 to the joining of respondent no. 2 as party to arbitration since respondent no. 2 was not party to the arbitration agreement, it could not be impleaded in the proceedings – Held: Agreement between appellant and respondent no. 1 to refer the disputes to arbitration is evidenced from the documents exchanged between the parties, and the proceedings and is final and conclusive – Appellant after giving its consent to refer the disputes to arbitration before the High Court, is now estopped from contending that there was no written agreement to refer the parties to arbitration – Respondent no. 1 had filed its statement of claim before the Arbitrator, and appellant filed its reply to the statement of claim, and also made a counter claim against respondent no. 1, which would constitute evidence of the existence of an arbitration agreement, and the same was not denied by the other party – As regards an objection to the joinder of respondent No. 2 in arbitral proceedings, it will be a futile effort to decide the disputes only between appellant and Respondent no. 1, in the absence of respondent no. 2, since undisputedly, the original transaction emanated from a transaction between appellant and respondent no. 2-original purchaser of the Bonds – Disputes arose on the cancellation of the Bonds by appellant 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 respondent No. 2 to respondent no. 1, and the cancellation by appellant, which has led to disputes between the three parties – Thus, respondent no. 2 is a necessary and proper party to the arbitration proceedings – Given the tri-patite nature of the transaction, there can be a final resolution of the disputes, only if all three parties are joined in the arbitration proceedings, to finally resolve the disputes which have been pending – respondent no. 2 has participated in the proceedings before the High Court, and the Committee on Disputes, was represented by its separate counsel before the Sole Arbitrator – Respondent no. 1 filed before the High Court, had joined respondent No. 2, even though it was joined as a proforma party – objection to respondent No. 2 being impleaded as a party to the arbitration proceedings was raised by Respondent no. 1, and not respondent No. 2 – There is no merit in the objection raised by Respondent no. 1 opposing the joining of respondent No. 2 as a party to the dispute. Respondent no. 1 had enclosed a Draft Arbitration Agreement to appellant, wherein it has clearly stated that the arbitration would be between three parties i.e. Respondent no. 1 and respondent No. 2 as party of the first part, and appellant as party of the second part – There was implied or tacit consent by respondent No. 2 to being impleaded in the arbitral proceedings, which is evident from the conduct of the parties – Respondent No. 2 has throughout participated in the proceedings before the Committee on Disputes, before the High Court, before the Sole Arbitrator, and was represented by its separate counsel before this Court in the instant appeal – There was a clear intention of the parties to bind both Respondent no. 1, and its subsidiary- respondent No. 2to the proceedings – There can be no final resolution of the disputes, unless all three parties are joined in the arbitration – Group of Companies doctrine is invoked to join respondent No. 2 in the arbitration proceedings pending before the Sole Arbitrator – Matter remitted to the Sole Arbitrator to continue with the arbitral proceedings. Arbitration agreement – Existence of valid arbitration agreement – Held: Arbitration agreement is the written agreement between the parties, to submit their existing, or future disputes or differences, to arbitration – Valid arbitration agreement is the foundation on which the arbitral process is structured – Binding agreement for disputes to be resolved through arbitration is a sinequa-non for referring the parties to arbitration – Essential elements or attributes of an arbitration agreement is the agreement to refer their disputes or differences to arbitration, which is expressly or impliedly spelt out from a clause in an agreement, separate agreement, or documents/correspondence exchanged between the parties – If it can prima facie be shown that parties are ad idem, even though the other party may not have signed a formal contract, it cannot absolve him from the liability under the agreement – Intention of the parties must be inferred from the terms of the contract, conduct of the parties, and correspondence exchanged, to ascertain the existence of a binding contract between the parties – If the documents on record show that the parties were ad idem, and had actually reached an agreement upon all material terms, then it would be construed to be a binding contract – ‘Arbitration agreement’ must be interpreted so as to give effect to the intention of the parties, rather than to invalidate it on technicalities.Doctrines: Group of Companies Doctrine – Invocation of – Held: Group of Companies doctrine can be invoked to bind a nonsignatory by an arbitration agreement 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 – ‘Group of Companies’ doctrine indicates the implied consent to an agreement to arbitrate, in the context of modern multi-party business transactions – Doctrine provides that a nonsignatory may be bound by an arbitration agreement where the parent or holding company, or a member of the group of companies is a signatory to the arbitration 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 – Circumstances are 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 |
