whether respondent No.2 a company established under the laws of Belgium, having its principal place of business at Nijverheldsstraat 3, 2530 Boechout, Belgium, could be impleaded in the proposed arbitration proceedings despite the fact that it is a non 2 signatory party to the agreement dated 1st May, 2014, executed between the applicant and respondent No.1 a company established under the Companies Act, 2013 merely because it (respondent No.2) is one of the group companies of which respondent No.1 also is a constituent. ?
The legal position as to when a nonsignatory to an arbitration agreement can be impleaded 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., 1 a threeJudge 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.
whether it is manifest from the indisputable correspondence exchanged between the parties, culminating in the agreement dated 1st May, 2014, that the transactions between the applicant and respondent No.1 were essentially with the group of companies and whether there was a clear intention of the parties to bind both the signatory as well as nonsignatory parties (respondent No.1 and respondent No.2, respectively). In other words, whether the indisputable circumstances go to show that the mutual intention of the parties was to bind both 5 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.
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, 6 if the Court were to appoint a sole arbitrator for resolving the dispute between the applicant and respondent No.1, who would conduct the arbitration proceedings in accordance with the Act, in Delhi, as a domestic commercial arbitration between the applicant and respondent No.1 alone.
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.
the thrust of the claim of the applicant is that Mr. Frederik Reynders was acting for and on behalf of respondent No.2, as a result of which the respondent No.2 has assented to the arbitration agreement. This basis has been completely demolished by respondent 22 No.2 by stating, on affidavit, that Mr. Frederik Reynders was in no way associated with respondent No.2 and was only an employee of respondent No.1, who acted in that capacity during the negotiations preceding the execution of agreement. Thus, respondent No.2 was neither the signatory to the arbitration agreement nor did have any causal connection with the process of negotiations preceding the agreement or the execution thereof, whatsoever. If the main plank of the applicant, that Mr. Frederik Reynders was acting for and on behalf of respondent No.2 and had the authority of respondent No.2, collapses, then it must necessarily follow that respondent No.2 was not a party to the stated agreement nor had it given assent to the arbitration agreement and, in absence thereof, even if respondent No.2 happens to be a constituent of the group of companies of which respondent No.1 is also a constituent, that will be of no avail.
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
PETITION FOR ARBITRATION (CIVIL) NO. 65 OF 2016
Reckitt Benckiser (India) Private Limited …..Petitioner(s)
Reynders Label Printing India
Private Limited and Anr. ….Respondent(s)