Chambers of Ishaan Garg
Ch. No. 217, Western Wing, District & Sessions Court, Tis Hazari, New Delhi, Delhi 110054
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Purification Inc is erroneous to the extent it held that 'non-signatories' can be roped in by invoking the phrase "parties claiming through or under" as the said phrase is used to bind successors-in-interest of party in a derivative capacity.
k. The 'group of companies' doctrine must be retained in the Indian arbitration jurisprudence considering its utility in determining the intention of the parties in the context of complex transactions involving multiple parties and multiple agreements.
l. At the referral stage, the referring court must leave it to the Arbitral Tribunal to decide whether non-signatories are bound by the arbitration agreement.
Justice Narasimha penned a separate but concurring judgment.
In May 2022, a three judge bench led by the then CJI NV Ramana had referred the matter to a larger bench after observing that some aspects of the "group of companies" doctrine required reconsideration, doubting the the decision in Chloro Controls India Pvt. Limited v. Seven Trent Water Purification Inc and subsequent decisions following it. In Mahanagar TelephoneNigam Ltd. v. Canara Bank, (2020) 12 SCC 767, it was observed that the group of companies doctrine can be utilized to bind a third party to an arbitration, if a tight corporate group structure constituting a single economic reality existed.
The reference happened in an application filed under Section 11 of the Arbitration Act by Cox and Kings Ltd(CKL) seeking the appointment of arbitration in an international commercial arbitration in a dispute related to SAP India Private Ltd. The issue was where the German holding company of SAPIPL could be roped in to arbitration.
The referring bench noted that the group of companies doctrine must be applied with caution and mere fact that a non-signatory is a member of a group of affiliated companies will not be sufficient to claim extension of the arbitration agreement to the non-signatory.
Stating that the ratio in Chloro Controls is based on economic convenience rather than correct application of law, the Court referred the aspect of interpretation of 'claiming through or under' as occurring in amended Section 8 of the Arbitration Act qua the doctrine of group of companies to a larger Bench.
Case : Cox and Kings Ltd v. SAP India Pvt Ltd | ARBIT. PETITION No. 38/2020
