TMI Blog2021 (4) TMI 1281X X X X Extracts X X X X X X X X Extracts X X X X ..... i had submitted its bid (revised offer) directly to Indiabulls pursuant to the invitation issued by Indiabulls. The said bid was accepted and such acceptance constituted a binding contract. Concededly, on Shapoorji's bid (revised offer) being accepted, it was no longer open for Shapoorji to resile from its commitments. In this view, there is ample evidence to show that Indiabulls had directly participated in the negotiations and formation of the contract for execution of the BTG Works even though it was not a signatory to the BTG Contract that was executed subsequently. There is also ample material on record to show that Indiabulls had a direct involvement in the BTG Contract. It is not disputed that in terms of Clause 6 of the LoA, Shapoorji was obliged to provide Bank Guarantees to Indiabulls. It is also not disputed that in terms of the LoA, Shapoorji had furnished Bank Guarantees against the advances received as well as a Performance Bank Guarantee and the same were in favour of Indiabulls and not Elena. Thus, Indiabulls had secured itself against performance of the BTG Contract by Shapoorji - It is also not disputed that Indiabulls had directly issued Letters of Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been mentioned in parenthesis against the name of Indiabulls in the LoA. The shareholding pattern confirms that Indiabulls does exercise complete control as a shareholder over Elena. The fact that the officials of Indiabulls acted on behalf of Elena also indicate that Indiabulls exercises substantial and dominant direct control over the affairs of Elena. Elena had appointed Justice C.K. Prasad as its nominee arbitrator. He would also be considered as the nominee Arbitrator of Indiabulls. He, along with the learned Arbitrator nominated by Shapoorji, shall nominate the third Arbitrator to constitute an Arbitral Tribunal within a further period of two weeks from date, failing which the parties are at liberty to approach this Court for appointment of the third Arbitrator. Petition allowed. - Arb. P. 716/2019 and I.A. No. 7836/2020 - - - Dated:- 7-4-2021 - Vibhu Bakhru, J. For Appellant: Ciccu Mukhopadhaya, Senior Advocate, Abhijeet Sinha, Ravi Tyagi, Shubhanshu Gupta and Rashmi Gogoi, Advocates For Respondents: Gopal Jain, Senior Advocate and Karan Batura, Advocates JUDGMENT Vibhu Bakhru, J. 1. The petitioner (hereafter referred to as 'Shapoorji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract for Civil and Structural work for the Balance of Plant (BoP Works) was entered into with Gannon Dunkerley Co. Ltd. The respondents claim that Gannon Dunkerley Co. could not complete the BoP Works. Shapoorji agreed to complete it; therefore, the same was offloaded to Shapoorji. Shapoorji claims that the BoP Contract was supplemental to BTG Works and therefore, is covered within the Dispute Resolution Clause under the BTG Contract. 6. On 14.01.2014, a Letter of Intent dated 14.01.2014 was issued by Indiabulls to Shapoorji for civil construction for RCC Bridges. 7. On 18.10.2012, a Work Order bearing No. 332003859 (DG Contract) was awarded to Shapoorji for arrangement of DG Sets. 8. Disputes have arisen in respect of execution of the works and rendering of services under the aforementioned Contract(s). In view of the said disputes, Shapoorji issued a notice invoking arbitration in respect of (i) Letter of Award dated 06.02.2010 (BTG Contract); (ii) Work Order no. 3451000221 dated 03.01.2012 (BoP Contract), awarded to Shapoorji for Balance of Plant Works (BoP Works); (iii) Work Order bearing No. 3382003859 dated 18.10.2012, awarded to Shapoorji for arrangement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the time, as stipulated. It also sets out its claim against Shapoorji. It also stated that the said reply be treated as its notice of invocation of arbitration in respect of all the claims under the LoA dated 06.02.2010 and the Contract dated 26.03.2010. Elena appointed Justice (Retd.) C.K. Prasad, a former Judge of the Supreme Court of India as its nominee arbitrator in respect of disputes arising out of letter of Award dated 06.02.2010 and the Contract dated 26.03.2010. 12. During the course of arguments, Mr. Mukhopadhaya, learned Senior Counsel appearing for Shapoorji submitted that disputes relating to the Work Order dated 18.10.2012 for arranging DG Sets on hire as well as disputes relating to the Letter of Intent dated 14.01.2014 issued by IIC Limited be excluded from the scope of the present petition. He confined the present petition to seeking constitution of an Arbitral Tribunal to adjudicate disputes in relation to the BTG Contract (which included the LoA dated 06.02.2010) for execution of BTG Works and Work Order dated 03.01.2012 (BoP Contract) for the execution of BoP Works. 13. In view of the above, the limited controversy required to be addressed in this peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also contemplated 'Owner's Approval'. He submitted that none of those terms were defined under BoP Contract but were defined under the BTG Contract. Thus, it was obvious that the BoP Work Order was supplemental to and was required to be read in conjunction with the BTG Contract and not on a stand-alone basis. He submitted that the parties always conducted themselves in a manner so as to accept arbitration as a one-step method of resolving their, inter se, disputes. It would not make any commercial sense for the parties to agree to refer disputes regarding the main contract to arbitration and not include disputes regarding the supplemental and connected contracts. 17. Mr. Jain, learned senior counsel appearing for Indiabulls submitted that Indiabulls was not a signatory to the BTG Contract and, therefore, could not be compelled to arbitrate. He further submitted that the notice invoking arbitration was a composite notice in respect of four separate contracts and thus, the same was invalid. He submitted that since the contracts were independent, a composite notice could not be issued. He submitted that Elena was an EPC Contractor and Indiabulls had entered into three s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on clause a part of the contract. The legislative intent in postulating that an Arbitration Agreement must be in writing is to ensure that the existence of the Agreement is not brought into question and the same is firmly established. Indisputably, arbitration is an alternate dispute resolution mechanism that rests on consent between the parties. Undeniably, the rule is that a non-signatory cannot be compelled to arbitrate on the assumption that the said party has not acceded to arbitration. However, the said rule is not without exceptions. 21. In Cheran Properties Ltd. v. Kasturi Sons Ltd.: (2018) 16 SCC 413, the Court had noted that 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. The Courts in different jurisdictions have evolved various principles on the basis of which, in certain exceptional circumstances non-signatories may be compelled to arbitrate. The Courts in United States of America and France have been liberal in their approach. The Courts in United States of America have largely drawn on principles of contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunals have also in some cases imputed implied consent on the part of the non-signatory and held the non-signatory to be bound by the arbitration agreement. These are typically cases where the Courts/Arbitral Tribunals have found that the non-signatories have played an active role in negotiations and are directly involved in the contract. In Gvozdenovic v. United Air Lines, Inc.,: 933 F.2d 1100, 1105 (2d. Cir. 1991) the Court held that where a party conducts itself as it were a party to a commercial contract, by playing a substantial role in negotiations and/or performance of the contract, it may be held to have the impliedly consented to be bound by the contract . 27. There are also cases where third party beneficiaries of a contract may be compelled to arbitrate. Similarly, in cases such as assignment or succession, the assignees or successors interest may be compelled to arbitrate although, they were not original signatories to the arbitration agreement. 28. There exists another set of cases where the Courts have compelled non-signatories to arbitrate by disregarding their corporate facade or where the Courts have found the signatory to be an alter ego of the non-signato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... void arbitration. The court observed that to allow [plaintiff] to claim the benefit of [a] contract and simultaneously avoid its burdens would both disregard equity and contravene the purposes underlying enactment of the Arbitration Act. 32. In Life Techs. Corp. v. AB Sciex Prop. Ltd.: 803 F.Supp. 2d 270, 273-274 (S.D.N.Y. 2011) it was held that a non-signatory may be estopped from avoiding arbitration where it knowingly accepted the benefits of an agreement with an arbitration clause. The benefits must be direct-which is to say, flowing directly from the agreement . 33. In addition to the above, the Courts have also applied the Group of Companies doctrine to compel a non-signatory to an Agreement to arbitrate. The Group of Companies Doctrine was first applied in the case of Dow Chemical v. Isover-Saint-Gobain (1984 Rev Arb 137). The said doctrine rests on the concept of a 'single economic reality'. 34. Dow Chemical Venezuela and Dow Chemical Europe, were both directly or indirectly owned and controlled by a parent company Dow Chemical Co. They entered into distribution agreements with several companies the rights of which were subsequently assumed by a company- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) or the domestic law (Federal Arbitration Act) prohibits courts from deciding that non-signatories may be bound by or enforce arbitration agreements based on contract, agency, equity or related principles. The Supreme Court referred to the drafting history of the New York Convention and concluded that: Nothing in the drafting history suggests that the Convention sought to prevent contracting states from applying domestic law that permits non-signatories to enforce arbitration agreements in additional circumstances. The Court found that the New York Convention does not address whether non-signatories may enforce arbitration agreements under domestic doctrines such as equitable estopped and according held that silence is dispositive here because nothing in the text of the Convention could be read to otherwise prohibit the application of equitable estoppel doctrines. The Supreme Court also found support in citation to cases from several New York Convention contracting states' courts that had permitted enforcement of arbitration agreements by non-signatories. 38. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parent, or the subsidiary company, entering into an agreement, unless acting in 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 [Dow Che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, for achieving the common object, and collectively having a bearing on the dispute. 10.7. The group of companies doctrine has also been invoked in cases where there is a tight group structure with strong organisational and financial links, so as to constitute a single economic unit, or a single economic reality. In such a situation, signatory and non-signatories have been bound 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. [ICC Case No. 4131 of 1982, ICC Case No. 5103 of 1988.] 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. [Chloro Controls (India) (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641: (2013) 1 SCC (Civ) 689 The Madras High Court has invoked the group of companies doctrine in a foreign seated arbitration in SEI Adhavan Power (P) Ltd. v. Jinneng Clean Energy Technology Ltd., (2018) 4 CTC 464.], with respect to an international commercial agreement. Recently, this Court in Ameet Lalchand Shah v. Rishab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration. 41. The controversy in the present case-that is, whether Indiabulls can be compelled to arbitrate regarding the disputes that have arisen with Shapoorji-must be addressed in view of the principles as noted above. 42. In the present case, it is evident that Indiabulls had fully participated in the formation of the BTG Contract. It is material to note that the thermal power plant in question was being developed by Indiabulls as its undertaking. Undisputedly, Indiabulls is a beneficiary of the works being executed by Shapoorji. As noted above, whether a non-signatory is a direct beneficiary of the contract containing the arbitration clause is material in determining whether the said beneficiary can be compelled to arbitrate even though it is not a signatory to the Agreement. However, this is coupled with the condition that such benefit should be direct and not indirect. 43. In the present case, Indiabulls (and not Elena) had invited offers for BTG Works. Shapoorji had submitted its bid (revised offer) directly to Indiabulls pursuant to the invitation issued by Indiabulls. The said bid was accepted and such acceptance constituted a binding contract. Concededly, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Contract (GCC) (forms part of Bid Document) (iv) Technical Specifications (forms part of Bid Document) (v) Construction Safety, Health and Environment (SHE) manual (forms part of Bid Document) (vi) All Applicable commercial/technical requirements, specifications, data sheets and drawings (vii) All relevant codes and standards (viii) Your Offer letter dated 6th Feb 2010 All conditions and deviations/exceptions, explicit or implicit, contained in your offer or any subsequent communication/discussions, unless specifically agreed during meetings and recorded herein, shall be deemed to be withdrawn and considered invalid. Subsequent to the signing of the contract agreement, documents mentioned in the contract agreement and this LOA shall govern the Contract. 48. The opening sentence of Clause 8 required Shapoorji to enter into a formal contract agreement within one month from the date of issuance of the said LoA with Indiabulls. The name of Elena was mentioned in parenthesis. Parenthesis is used to provide an explanation or clarification. 49. In Fuerst Day Lawson Limited v. Jindal Exports Limited: (2011) 8 SCC 333, the Supreme Court ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal expression. 51. The Law Lexicon, The Encyclopaedic Law Dictionary by P. Ramanatha Aiyar, 2000 Edn., defines parenthesis as under: Parenthesis.--a parenthesis is defined to be an explanatory or qualifying clause, sentence, or paragraph, inserted in another sentence, or in course of a longer passage, without being grammatically connected with it. (Cent. Dist.) Parenthesis is used to limit, qualify or restrict the meaning of the sentence with which it is connected, and it may be designated by the use of commas, or by a dash, or by curved lines or brackets (United States v. Schilling [53 Fed 81: 3 CCA 440]). 52. Having regard to the grammatical use of brackets or parentheses, if the words (and from no others) occurring in Section 39 of the 1940 Act or Section 37 of the 1996 Act are viewed as an explanation or afterthought or extra information separate from the main context, then, there may be some substance in Mr. Dave's submission that the words in parenthesis are surplusage and in essence the provisions of Section 39 of the 1940 Act or Section 37 of the 1996 Act are the same as Section 50 of the 1996 Act. Section 39 of the 1940 Act says no more and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur attention to the bracketed portion and contended that because of the bracketed portion which is to the effect or such other place as the parties may agree in writing , the seat could be elsewhere also. It is based on this that Ms. Mohana contended that, therefore, there is no express exclusion of Part I of the Act. It is not possible to accept this contention for the simple reason that a bracket could not be allowed to control the main clause. The bracketed portion is only for the purposes of further explanation. In my opinion, Shri Gurukrishna Kumar, learned counsel appearing on behalf of the respondent, is right in contending that the bracketed portion is meant only for the convenience of the Arbitral Tribunal and/or the parties for conducting the proceedings of the arbitration, but the bracketed portion does not, in any manner, change the seat of arbitration, which is only Seoul, Korea. 52. It can be discerned from the aforesaid decisions that words, clauses or a sentence appearing in parenthesis are inserted in a passage as an explanation, which is otherwise also, grammatically complete without it. In other words, the purpose of a parenthesis is ordinarily to insert an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms thereof which are stated above, which included a specific condition that it would enter into a formal contract agreement with Indiabulls. 55. The BTG Contract was amended several times. The last amended Work Order bearing Amendment No. 21 for executing the BTG Works for a total consideration of ₹ 189,18,87,147.07/- was issued on 31.05.2017. The said Work Order specifically contemplated reference of disputes between Shapoorji and the Owner to arbitration. The term 'Owner' is defined to mean Indiabulls under the BTG Contract. The terms and conditions as included in Amendment No. 21 as well as the arbitration clause is set out below: Terms Condition: Note: For Detailed Terms Conditions refer to the Contract Agreement (With Annexure) 1. Payment Terms The contractor shall be entitled to receive the payment in following manner, subject to such adjustments/variations as allowed in the SCC and GCC: I) 5% of the contract prince shall be paid as mobilization advance on acceptance of LOA and submission of necessary Bank Guarantee/Security. Another 5% advance shall be paid on completion of initial mobilization duly approved by Engineer in cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to arbitration as hereinafter provided. 3.5 All disputes or differences in respect of which the decision, if any, of the Owner has not become final and binding as aforesaid, shall be settled by arbitration, under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification, in the manner hereinafter provided. The venue of arbitration shall be New Delhi, India. 3.6 The arbitration shall be conducted by a sole arbitrator appointed by the Owner. 3.7 The decision of the sole arbitrator shall be final and binding upon the parties. The expense of the arbitration shall be paid as may e determined by the arbitrator. The arbitrator may, from time to time, with the consent of both parties increase the time for the award. 3.8 During settlement of disputes and arbitration proceedings, both parties shall be obliged to carry out their respective obligations under the Contract. 56. Indiabulls cannot claim that was not aware of the terms of the said Amendment considering it had made payments/issued LCs; approved rates of certain material; and also issued the Final Acceptance Certificate. The Final Bill for the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tractor and was awarded three separate contracts by Indiabulls, there is no material on record to indicate that Elena and Indiabulls function as independent and separate organisations. On the contrary, there is material to indicate that Elena is not organized and staffed separately and is independent of Indiabulls. 60. It was also pointed out that one Mr. Shanker Dutt who was the General Manager of Indiabulls, had issued the Work Completion Certificate for both the BTG and BoP Works on behalf of Elena. He had also signed a letter dated 24.01.2017 as an authorized signatory of Indiabulls. It does appear that Indiabulls and Elena share common resources. It is also seen from the affidavits placed on record that both Indiabulls and Elena share a common office space (at A-49, Ground Floor Road No. 4, Mahipalpur, New Delhi-110037). Further as mentioned above, the LoA was issued on the letterhead mentioning Indiabulls even though it was signed on behalf of Elena. It would be reasonable to draw an inference that Elena also used stationery which prominently mentions Indiabulls . 61. In Fisser v. Int'l Bank: 282 F.2d 231 : 238 (2nd Cir. 1960), the Court analysed the situation in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Developers South, Inc.: 933 F.2d 131, 32 : 32 Fed. R. Evid. Serv. 1218 (2d Cir. 1991), the Court listed some grounds on which piercing the corporate veil would be justified, such as, where the parent and subsidiary are run by common officers, do not deal at arm's length with each other, are not treated as separate profit centres and share common office space. The law in this regard has been summarised in ARW Exploration Corp. v. Aguirre: 45 F.3d 1455 (10th Cir, 1995), where the Court held that a corporation will be bound to arbitrate when it is merely the alter ego of an individual or previously established corporation that has entered into the arbitration agreement . 65. Given the facts and circumstances of the case, this Court is of the view that it would be apposite to compel Indiabulls to arbitrate as there is sufficient material to show that Elena is its alter ego. This is evident from the fact that Elena's name has been mentioned in parenthesis against the name of Indiabulls in the LoA. The shareholding pattern confirms that Indiabulls does exercise complete control as a shareholder over Elena. The fact that the officials of Indiabulls acted on behalf of Elena ..... X X X X Extracts X X X X X X X X Extracts X X X X
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