TMI Blog2017 (11) TMI 1987X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional para mentioned in the plaint GMR Energy submits that the closest connect of the parties to the present case is Chhattisgarh in India, thus the Court at Delhi is ousted of the territorial jurisdiction to try the suit and pass orders - the arbitration that commenced at Singapore pursuant to Arb.316/16/ACU would fall under Part-II of the Arbitration Act and not Part-I. Whether on the basis of pleas in the notice of arbitration issued by Doosan India a case is made out by Doosan India to subject GMR Energy to arbitration with GCEL and GIL? - HELD THAT:- It is evident that though Doosan India stated that the tripartite agreement between GCEL and GMR Energy and Doosan India became null and void on 31st December, 2015 and that the payment obligation was now on the GCEL and GIL by invocation of the corporate guarantee however, the said letter was without prejudice to the rights and remedies available to Doosan India in respect of any breach of agreements, MOUs, Corporate Guarantee and related documentation and agreements. Further whether a tripartite agreement resulting in the two MOUs between Doosan India, GCEL and GMR Energy could be novated by a unilateral letter is a quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of this case it would be sufficient if this Court returns a finding based on the pleadings supported by affidavits by the parties without going into a full-fledged trial. Whether the arbitration against GMR Energy is contrary to Rule 7 of SIAC Rules? - HELD THAT:- There being a distinction between invoking arbitration against a non-signatory and joinder of a non-party during arbitration, the contention of learned counsel for GMR Energy that the invocation of arbitration against GMR Energy is contrary to Rule 7 of the SIAC Rules is rejected. In any case GMR Energy would be at liberty to raise the plea before the arbitral tribunal - This Court having held that the arbitration that has commenced at Singapore would fall under Part-II of the Arbitration Act and not Part-I; the arbitration pending in Singapore pursuant to Arb.316/16/ACU not on a reference by Court, the issue of piercing the corporate veil, in the facts the present case, can be decided both by the Court as well as the Arbitral Tribunal; and this Court having formed an opinion based on the pleadings on affidavit that from the notice of arbitration Doosan India has made out a case for proceeding against GMR Ene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oosan India and GMR Energy dated 1st July, 2015 and 30th October, 2015 2. Basing its claim on the three agreements, that is, EPC agreements dated 22nd January, 2010, the Corporate Guarantee dated 17th December, 2013 and the two MOUs, Doosan India sent a notice of arbitration dated 11th December, 2016 to GIL as first respondent, GMR Energy as second respondent and GCEL as third respondent seeking enforcement of the liability of the three respondents therein jointly and severally towards Doosan India, GCEL being liable in terms of three EPC agreements, GIL in terms of the Corporate Guarantee and GMR Energy, though not a party to the three EPC Agreements and the Corporate Guarantee, but by virtue of the two MOUs, common family governance, transfer of shareholding and being the alter ego of GCEL and GIL. In the plaint GMR Energy claims that since it was not a party to the three EPC agreements or the Corporate Guarantee which contained arbitration clause, it responded to the correspondence received from SIAC, objecting to its being arrayed as a party and sought discharge of GMR Energy as a party, respondent and termination of the reference, wrongfully and incorrectly initiated agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, observed little, if not any, corporate formality and separation and as such being the alter ego of GCEL, GMR Energy is bound by the arbitration agreement between Doosan India, GCEL and GIL for resolution of dispute. Further GCEL is represented to be a special purpose vehicle established by GMR Group specifically for development of the Project and entered into the three EPC contract agreements with Doosan India which is wholly owned subsidiary of Doosan India Heavy Industries and Construction, (in short 'Doosan Korea'), a company registered and existing under the laws of Korea. After GCEL failed to discharge its liability GMR Energy and Doosan India entered into a Memorandum of Understanding dated 1st July, 2015 being MOU-I between GMR Energy, GCEL, Doosan India and Doosan Korea followed by the second Memorandum of Understanding dated 30th October, 2015 being MOU-II between GMR Energy, GCEL and Doosan India. 6. Since the three EPC agreements and Corporate Guarantee Agreement, all contain arbitration clause with the intention to resolve any dispute through arbitration under SIAC Rules with the seat in Singapore and the two MOUs are also governed by the same agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein interpreting a similar arbitration agreement it was held that the arbitration clause only provided that venue of arbitration was London however, the seat of arbitration was in India, as the Arbitration Act was made applicable by the parties. Further the identification of the parties to an agreement is a question of substantive law and not procedural law as held by the Commercial Court of England in 2002 EWHC 121 (Comm) Peterson Farms Inc. and C M Farming Ltd. Since two Indians cannot contract out of the law of India and the Arbitration Act of 1996 is a substantive law, exclusion of Part-I of the Arbitration Act which Doosan India seeks to do, would be hit by Section 28 of the Indian Contract Act. Simply because the place of arbitration is out of India, Part-II of Arbitration Act would not apply and as per the proviso to Section 2 (2) of the Arbitration Act engrafted through the amendment dated 23rd October, 2015 Part-I of the Arbitration Act would apply. Once the arbitration amongst two Indians ceases to be an international commercial arbitration , it would automatically cease to be considered as commercial under the law enforced in India which is the principle conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as 2017 (4) ArbLR 1(Delhi) Ameet Lalchand Shah v. Rishabh Enterprises decided by Division Bench of this Court. Even in the decision reported as 2013 (1) SCC 641 Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. Ors. relied upon by learned counsel for Doosan India, Supreme Court held that a heavy onus lies on the party seeking to claim under or through the principle of alter ego a non-signatory party to an arbitration and Doosan India cannot get away by showing that only a prima facie view has to be formed. Reliance is also placed on the decisions reported as 2011 (11) SCC 375 Deutsche Post Bank Home Finance Ltd. v. Taduri Sridhar and 2017 (1) MhLJ 681 Integrated Sales Services Limited v. Arun Dev and Ors. 11. Learned counsel for GMR Energy further contends that GMR Energy is also not liable to be made a party to the arbitration on the basis of being guarantor by virtue of the two MOUs for the reason admittedly the two MOUs stood terminated vide letter dated 3rd November, 2016 of Doosan India which letter was not made a part of the notice of arbitration. Relying upon the decision reported as 1994 Suppl. (3) SCC 126 M/s. P.K. Ramaiah and Co. v. Chairman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 Delhi Mcdonald's India Private Limited v. Vikram Bakshi and Ors. and 2015 SGHC 225 Malini Ventura v. Knight Capital Pte. Ltd. Ors. which decision of the Singapore High Court has been affirmed in the decision reported as 2015 SGHC 57 Tomolugen Holdings Ltd. Anr v. Silica Investors Ltd. and Ors. It is further contended that the Arbitral Tribunal is the appropriate forum to adjudicate on the issue of alter ego and the same being determinable by the Arbitral Tribunal, this Court will not proceed with the present suit to determine whether GMR Energy is liable to be proceeded in the arbitration or not. Reliance is placed on the decision of Division Bench of Bombay High Court in Integrated Sales Services (supra), of the High Court of Singapore reported as 2006 (3) SGHC 78 Aloe Vera of America, Inc. v. Asianic Food (S) Pte. Ltd. Anr., and M/s. Sai Soft Securities Ltd. v. Manju Ahluwalia, FAO(OS) No. 65/2016 decided by the Division Bench of this Court. Distinguishing the decision of the learned Single Judge of this Court in Sudhir Gopi (supra) it is contended that in the said matter this Court was not dealing with an international arbitration but under Part-I of the Arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on the decisions reported as Bharat Aluminum (supra), Sasan Power (supra), 2014 (7) SCC 603 Reliance Industries Limited and Anr. v. Union of India, 2016 (11) SCC 508 Eitzen Bulk A/S and Ors. v. Ashapura Minechem Ltd. and Ors., 2017 (5) SCC 331 IMAX Corporation v. E-City Entertainment (I) Pvt. Ltd. and 2017 (7) SCC 678 Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. It is further contended that the three EPC agreements do not set out the law governing arbitration and thus this issue must be determined. 18. Rebutting the contention of learned counsel for GMR Energy that lifting of the Corporate Veil or determining the issue of alter ego can only be based on the allegation of fraud which can be determined by a judicial forum as held in 1996 (4) SCC 622 DDA v. Skipper Construction Co. (P) Ltd. and Sudhir Gopi (supra), it is contended that fraud is not the only ground on which the corporate veil can be pierced as held by the Supreme Court in 1988 (4) SCC 59 State of U.P. and Ors. v. Renusagar Power Co. and Ors. The concept of single common entity has been recognized by the House of Lords in 1976 (3) ALL ER 462 DHN Food Distributors Ltd. v. Tower Hamlets Lond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is a leading global infrastructure conglomerate with interests in Airport, Energy, Transportation and Urban Infrastructure. GMR Infra is the flagship holding company formed to fund the capital requirements of GMR Group's various infrastructure projects, which it undertakes through its various subsidiaries. 13. GMR Group represents that it is run by Family Governance guided by Family Constitution. The founder and chairman of GMR Group is Mr. GM Rao. As of November 2016, GMR Infra's Chairman is Mr. G. Kiran Kumar, Mr. GM Rao's younger son. The chairman of the Energy arm of GMR Group (GMR Energy and other Energy assets) is Mr. GBS Raju, Mr. GM Rao's older son. The chairman of the Airports arm of GMR Group is Srinivas Bommidala, Mr. GM Rao's son-in-law. The CEO of GMR Group's Corporate Affairs arm is Mr. G. Subba Rao, Mr. GM Rao's first cousin. 14........ C. GMR Energy's - Second Respondent 15...... 16. GMR Energy is a company incorporated under the laws of India and is the Energy arm of GMR Group. While GMR Energy had a 100% stake in GCEL during their dealings with Doosan India, GMR Energy no longer owns GCEL. As noted above, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons despite its best effort, in making timely payment to [Doosan India] as per the EPC Agreement, which resulted in impacting the execution of the project. 31. Under MOU I, GCEL without qualification acknowledged its obligation to pay the Outstanding Debt of over USD 400 million, including USD 311.50 million plus 619.85 Crores, to be broken down into the following payment stages (the Revised Payment Schedule ): Amount Payment due date INR 300 Crores (approximately USD 45 mil.) On or before 20 December, 2013 INR 600 Crores (approximately USD 91 mil.) June 2014 INR 600 Crores (approximately USD 91 mil.) December 2014 USD 311.50 million + INR 619.85 Crores 1,950 Crores (approximately USD 117 million) Per milestones and other contractual provisions 32. As memorialized in MOU I, GCEL and Doosan representatives further agreed that GMR Infrastructure Limited will provide a primary, independent and absolute Corporate Guarantee by 20 December 2013, and that in case GCE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further provided that [GMR Energy] shall remain liable for the payment of overdue amount not exceeding 437.5 crores and if GMR Energy failed to make payment, Doosan India was entitled to 30% of GCEL's profits in the preceding quarter. 43.............. 44................. 51. On 19 April, 2016, when Doosan India sought clarification on the sum of USD 4,462,293.62 for RT #1 invoice which has not been paid, GCEL represented that GCEL's liability of USD 4,462,293.62 has been transferred to GMR Energy. 52. By June 2016, GCEL's overdue payments for the Outstanding Debt had grown once again- to a sum including USD 41,910,590 and INR 674,024,462. The late interest accruing from the delayed payment stood at USD 5,219,643 plus INR 962,153,023. 53. On 9 June 2016, GCEL informed Doosan India that INR 12 Crores has been paid out of 430 Crores transferred to GMR Energy and Payment [was] also released directly from GMR Energy . H. GMR Infra refuses to honor the GMR Infra Guarantee 61.............. 62............ 63. Specifically, on 18 July, 2016, GMR Infra responded that it believed only INR 450 Crores (USD 65.8 million) of payment was outstanding, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national Arbitration Centre ( SIAC Rules ). as in force at the time. The guarantor and EPC Contractor shall each nominate one arbitrator for confirmation by the Chairman of the Singapore International Arbitration Centre. Both arbitrators shall agree on the third arbitrator within 30 Days after their appointment. Should the two arbitrators fail to reach agreement on the third arbitrator within such 30 days period, the third arbitrator shall be selected and appointed by Chairman of the Singapore International Arbitration Centre. The Parties agree that the arbitral tribunal shall have jurisdiction to adjudicate disputes on whether amounts have become payable by GCEL and/or whether GCEL has failed to make payment due under the EPC Contract. 17.2 The place of arbitration shall be Singapore and the language of the arbitral proceedings shall be English. 17.3 The award rendered shall be in writing and shall set out in reasonable detail the facts of the Dispute and the reasons for the arbitrators' decision. The award rendered shall apportion the costs of the arbitration. The award rendered in any arbitration commenced under this Agreement shall be final and binding upon the Partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitral award may be enforced against the Parties to the arbitration proceeding or their assets wherever they may be found and a judgment upon the arbitral award may be entered in any court having jurisdiction. (Emphases added.) 77. The Onshore Agreement contains an arbitration agreement in the following terms: 19.3.3 Unless the Parties agree otherwise and subject to Section 19.4, such Dispute may be referred to arbitration in accordance with Section 19.4 on or after the sixtieth (60th) day after the day on which written notice of Dispute was given, even if no attempt at negotiation or senior level discussion has been made. 19.4.1 Any Dispute which has not been resolved by negotiation and mediation pursuant to Section 19.3 shall, following notice by either Party, be exclusively and finally decided by arbitration in Singapore by a panel of three (3) arbitrators in accordance with the provisions of the Singapore International Arbitration Centre(SIAC) or any re-enactment or modification thereof. Save as specified in this Section 19.4.1, no arbitration provisions contained in any other law, shall apply to arbitration of any Dispute. 19.4.2 Each arbitrator shall be and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of arbitration to be Singapore. VI. NUMBER AND CHOICE OF ARBITRATORS 83. The arbitration agreements in the EPC Agreements and GMR Infra Guarantee provide for three arbitrators. 84. So as to settle the disputes, Doosan India requests that the procedures set out in SIAC Rule 12.2 for the appointment for arbitrators be applied. Doosan India will nominate one arbitrator and GCEL, GMR Energy and GMR Infra will collectively nominate one arbitrator. As not all parties have agreed upon another procedure for appointing the third arbitrator, the third arbitrator shall be selected and appointed by the President of the Singapore International Arbitration Centre in accordance with SIAC Rule 11.3. 22. Issue No. 1: Whether the arbitration that commenced at Singapore pursuant to Arb.316/16/ACU would fall under Part-I or Part-II of the Arbitration Act? 22.1. The four fold submission on behalf of GMR Energy on this issue is that firstly, on the plain reading of the arbitration clause, Singapore is not the seat of arbitration but only the venue; secondly, the parties to the arbitration being Indian entities, the arbitration cannot be construed to be an international commercial arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itration proceedings, is the SIAC Rules. Clause 27.2 makes it clear that the seat of arbitration would be Singapore. 50. What we are, therefore, left with to consider is the question as to what would be the law on the basis whereof the arbitral proceedings were to be decided? 51. In our view, Clause 28 of the agreement provides the answer. As indicated hereinabove, Clause 28 indicates that the governing law of the agreement would be the law of India i.e. the Arbitration and Conciliation Act, 1996. The learned counsel for the parties have quite correctly spelt out the distinction between the proper law of the contract and the curial law to determine the law which is to govern the arbitration itself. While the proper law is the law which governs the agreement itself, in the absence of any other stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it is now well settled that it is the law governing the contract which would also be the law applicable to the Arbitral Tribunal itself. Clause 27.1 makes it quite clear that the curial law which regulates the procedure to be adopted in conducting the arbitration would be the SIA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Singapore International Arbitration Act, 2002 would be the law of the arbitration. 22.4. Learned counsel for GMR Energy emphasizing on omission of the word company in Section 2 (1) (f) (iii) of the Arbitration Act states that pursuant to the amendment w.e.f. 23rd October, 2015 since all the four entities, that is, GMR Energy, GCEL, GIL and Doosan India are Indian companies incorporated in India, the arbitration instituted is a domestic arbitration and not an international commercial arbitration. 22.5. Section 2 (1) (f) of the Arbitration Act reads as under: 2. (1) f. International commercial arbitration means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in for in India and where at least one of the parties is- i. an individual who is a national of, or habitually resident in, any country other than India; or ii. a body corporate which is incorporated in any country other than India; or iii. an association or a body of individuals whose central management and control is exercised in any country other than India; or 22.6. In Chloro Controls (supra) the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firstly, the parties should be held to their bargain of arbitration and secondly, the legislative intent behind incorporating the New York Convention as part of Section 44 of the Act must be protected. Moreover, para 20 of the judgment in Sumitomo Corpn. [(2008) 4 SCC 91] does not state any principle of law and in any event it records no reasons for arriving at such a conclusion. In fact, that was not even directly the issue before the Court so as to operate as a binding precedent. For these reasons, respectfully but without hesitation, we are constrained to hold that the conclusion or the statement made in para 20 of this judgment does not enunciate the correct law. 22.7. Whether an arbitration between two Indian parties can be an international commercial arbitration and whether two Indian parties can choose a foreign seat was considered by the Madhya Pradesh High Court in Sasan Power (supra) and it was held that two Indian parties were free to arbitrate in a place outside India and an award rendered pursuant thereto would be a foreign award falling under Part-II of the Arbitration Act. The report notes: 57. On going through the scheme of the Arbitration and Conciliation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a different proper law from the proper law of the contract to which it is collateral. This status of self-contained contract exists irrespective of the type of substantive contract to which it is collateral. ] by which parties create contractual rights and obligations. Notwithstanding the fact that all such rights and obligations arising out of a substantive contract and the agreement to have the disputes (if any, arising out of such substantive contract) settled through the process of arbitration are contained in the same document, the arbitration agreement is an independent agreement. Arbitration agreement/clause is not that governs rights and obligations arising out of the substantive contract: It only governs the way of settling disputes between the parties. [See T.W. Thomas Co. Ltd. v. Portsea Steamship Co. Ltd., 1912 AC 1 (HL)] 49. In our opinion, the scope of enquiry (even) under Section 45 is confined only to the question whether the arbitration agreement is null and void, inoperative or incapable of being performed but not the legality and validity of the substantive contract. 50. The case of the appellant as disclosed from the plaint is that Article X S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purview of sub-clause (iii) of Section 2(1)(f) of the 1996 Act. 15. Whenever in an interpretation clause, the word means is used the same must be given a restrictive meaning. International commercial arbitration and domestic arbitration connote two different things. The 1996 Act excludes domestic arbitration from the purview of international commercial arbitration. The company which is incorporated in a country other than India is excluded from the said definition. The same cannot be included again on the premise that its central management and control is exercised in any country other than India. Although sub-clause (iii) of Section 2(1)(f) of the 1996 Act talks of a company which would ordinarily include a company registered and incorporated under the Companies Act but the same also includes an association or a body of individuals which may also be a foreign company. 16. .... 17. .... 18. .... 19. Determination of nationality of the parties plays a crucial role in the matter of appointment of an arbitrator. A company incorporated in India can only have Indian nationality for the purpose of the Act. It cannot be said that a company incorporated in India does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch parties derogate from (if so provided by the Act). The intention of the legislature appears to be clear that Indian nationals should not be permitted to derogate from Indian law. This is part of the public policy of the country. 24. Russell on Arbitration, 23rd Edn., p. 357, in his commentary on the English Arbitration Act, 1996, shows that although a distinction has been made between a domestic and non-domestic arbitration but the provisions relating to domestic arbitration had not been brought into force. 22.11. However, in para-36 of TDM Infrastructure (supra) Supreme Court clarified that any findings/observations made hereinabove were only for the purpose of determining the jurisdiction of the Court as envisaged under Section 11 of the 1996 Act and not for any other purpose and is also evident from the conclusions noted in para 20 and 22 of the report. Thus GMR Energy cannot rely upon the decision in TDM Infrastructure (supra) to contend that in the present case Part-I of the Arbitration Act would apply and not Part-II. 22.12. It is trite law that three sets of law may govern arbitration, that is, substantive law, curial law and appropriate law of contract which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen that problems arising out of an arbitration may, at least in theory, call for the application of any one or more of the following laws- 1. The proper law of the contract, i.e., the law governing the contract which creates the substantive rights of the parties, in respect of which the dispute has arisen. 2. The proper law of the arbitration agreement, i.e., the law governing the obligation of the parties to submit the disputes to arbitration, and to honour an award. 3. The curial law, i.e., the law governing the conduct of the individual reference. *** 1. The proper law of the arbitration agreement governs the validity of the arbitration agreement, the question whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration; the constitution of the tribunal; the question whether an award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any obligation to arbitrate future disputes. 2. The curial law governs the manner in which the reference is to be conducted; the procedural powers and duties of the arbitrator; questions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court referring to its earlier decision reported as (1992) 3 SCC 551 National Thermal Power Corporation v. Singer Co., held that the proper law of arbitration agreement is normally the same as proper law of contract and only in exceptional cases that it is not so, even where the proper law of contract is expressly chosen by the parties. However, where there is no express provision in the arbitration agreement as such, a presumption may arise that the law of the country where the arbitration is agreed to be held is the proper law of the arbitration agreement but that is only a rebuttable presumption. Supreme Court held: 80. There is yet another strange result which may come about by holding that Section 45 requires a final finding. This can be illustrated by reference to the facts of the present case. The parties here have subjected their agreement to the laws of Japan. The question that will arise is: When a court has to make a final determinative ruling on the validity of the arbitration agreement, under which law is this issue to be tested? This question of choice of law has been conclusively decided by the judgment of this Court in National Thermal Power Corpn. v. Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1996. 22.15. Further in Reliance Industries Ltd. (supra) it was held: 45. In our opinion, it is too late in the day to contend that the seat of arbitration is not analogous to an exclusive jurisdiction clause. This view of ours will find support from numerous judgments of this Court. Once the parties had consciously agreed that the juridical seat of the arbitration would be London and that the arbitration agreement will be governed by the laws of England, it was no longer open to them to contend that the provisions of Part I of the Arbitration Act would also be applicable to the arbitration agreement. This Court in Videocon Industries Ltd. [(2011) 6 SCC 161:(2011) 3 SCC (Civ) 257] has clearly held as follows: (SCC p. 178, para 33) 33. In the present case also, the parties had agreed that notwithstanding Article 33.1, the arbitration agreement contained in Article 34 shall be governed by laws of England. This necessarily implies that the parties had agreed to exclude the provisions of Part I of the Act. As a corollary to the above conclusion, we hold that the Delhi High Court did not have the jurisdiction to entertain the petition filed by the respondents under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or one of the grounds and if so done a reasoned order is required to be passed. For this reason, it was held that proceedings under Section 34 of the Arbitration Act do not necessarily take the shape of execution proceedings and while dealing with the issue whether the Court can pass an interim order even before arbitral proceedings commences or arbitrator is appointed, it was held that the provisions of 1996 Act were very different from the provisions of 1940 Act and that the 1996 Act is a self contained code and displaces all such aspects of substantive and procedural law in respect of which there is an explicit or implicit reference in the said Act. However, the Court indicated that by implication it cannot be held that every aspect of Code of Civil Procedure is excluded. 22.19. The plea of learned counsel for GMR Energy that two Indian parties cannot choose a foreign seat as the same would contravene to Section 23 read with Section 28 of the Contract Act was turned down by the Supreme Court in Atlas Exports (supra) wherein it was held: 10. It was however contended by the learned counsel for the appellant that the award should have been held to be unenforceable inasmuch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be raised by the appellant Atlas before this Court for the first time. 22.20. The two decisions relied upon by learned counsel for GMR Energy i.e. Seven Islands Shipping and M/s. Aadhar Mercantile (supra) are per incuriam as have not considered the law laid by the Supreme Court in Atlas (supra). 22.21. Contention of learned counsel for GMR Energy that the judgment in Atlas (supra) was given prior to Arbitration and Conciliation Act, 1996, and therefore not applicable to the present case, also deserves to be rejected in view of the decision of the Supreme Court reported as 2011 (8) SCC 333 Fuerst Day Lawson v. Jindal Exports Ltd. wherein comparing the pre amendment and post amendment Arbitration Act it was observed that the new Act is more favourable to international arbitration than its previous incarnation. The report comparing the provisions of the two Acts noted: 64. The provisions of Chapter I of Part II of the 1996 Act along with the provisions of the Foreign Awards (Recognition and Enforcement) Act, 1961, insofar as relevant for the present are placed below in a tabular form: Foreign Awards (Recognition and Enforcement) Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement is null and void, inoperative or incapable of being performed or that there is not, in fact, any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings. 45. Power of judicial authority to refer parties to arbitration. Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. 4. Effect of foreign awards. - (1) A foreign award shall, subject to the provisions of this Act, be enforceable in India as if it were an award made on a matter referred to arbitration in India. (2) Any foreign award which would be enforceable under this Act shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) A foreign award may not be enforced under this Act- 48. Conditions for enforcement of foreign awards.-(1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that- if the party against whom it is sought to enforce the award proves to the court dealing with the case that- the parties to the agreement were under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the law of the country where the award was made; or the party was not given proper notice of the appointment of the arbitrator or of the arbitration proceed-ings or was otherwise unable to present his case; or (iii) the award deals with questions not referred or contains decisions on matters beyond the scope of the agreement: Provided that if the decisions on matters submitted to arbitration can be separated from those not submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) If the court before which a foreign award is sought to be relied upon is satisfied that an application for the setting aside or suspension of the award has been made to a competent authority referred to in sub-clause (v) of clause (a) of sub-section (1), the court may, if it deems proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to furnish suitable security. Explanation.-Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security. 8. Evidence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitration agreement governed by the law of India. 51. Saving. Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted. 10. Repeal. The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), shall cease to have effect in relation to foreign awards to which this Act applies. 52. Chapter II not to apply. Chapter II of this Part shall not apply in relation to foreign awards to which this Chapter applies. 11. Rule-making power of the High Court. The High Court may make rules consistent with this Act as to- the filing of foreign awards and all proceedings consequent thereon or incidental thereto; the evidence which must be furnished by a party seeking to enforce a foreign award under this Act; and (c) generally, all proceedings in court under this Act. 65. A comparison of the two sets of provisions would show that Section 44, the definition clause in the 1996 Act is a verbatim reproduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by Doosan India a case is made out by Doosan India to subject GMR Energy to arbitration with GCEL and GIL? 23.1. Learned counsel for GMR Energy further contends that assuming it is held that the International Arbitration law of Singapore is applicable to the arbitration amongst the three defendants, that is, Doosan India, GCEL and GIL, GMR Energy not being the signatory to any of the three agreements, or the corporate guarantee, it cannot be roped into an international arbitration by applying the principle of alter ego or it being a guarantor without there being a written guarantee. Further admittedly the MOU-I dated 1st July, 2015 and MOU-II dated 30th October, 2015 have been terminated by Doosan India and liability of GMR Energy, if any was discharged by virtue of letter dated 3rd November, 2016 which Doosan India deliberately suppressed in the notice of arbitration. Thus GMR Energy cannot be made a party to the arbitration agreement either by virtue of the three EPC agreements and the Corporate Guarantee or the two MOUs as noted above by applying the principle of alter ego. 23.2. Relying upon the decision reported as Indowind Energy Ltd. (supra) learned counsel for GM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while strict, is not absolute and there are several situations where non-signatories may be considered as party to the arbitration agreement, one such being the corporate veil piercing on the basis of alter ego. It is further submitted that the principle of invoking arbitration against the non-signatory is consistent with Sections 44 and 45 of the Arbitration Act which recognizes situations where there can be arbitration even between the non-signatories to a contract, as Section 44 recognizes the legal relationship whether contractual or not . 23.5. Further relying upon the decision of this Court in M/s. Sai Soft Securities (supra) it is contended that the Division Bench of this Court recognized the award wherein the corporate veil was lifted and arbitration proceeded against a non-party. It is further contended that fraud is not the only concept in which corporate veil can be pierced. Supreme Court in the Renusagar Power Co. (supra) reiterated the expanding horizon of modern jurisprudence enumerating certain circumstances besides fraud wherein lifting of the corporate veil was permissible. The House of Lords in DHN Food Distributors (supra) recognized the concept of single eco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim is made against or by someone who is not originally named as a party. These may create some difficult situations, but certainly, they are not absolute obstructions to law/the arbitration agreement. Arbitration, thus, could be possible between a signatory to an arbitration agreement and a third party. Of course, heavy onus lies on that party to show that, in fact and in law, it is claiming through or under the signatory party as contemplated under Section 45 of the 1996 Act. Just to deal with such situations illustratively, reference can be made to the following examples in Law and Practice of Commercial Arbitration in England(2nd Edn.) by Sir Michael J. Mustill: 1. The claimant was in reality always a party to the contract, although not named in it. 2. The claimant has succeeded by operation of law to the rights of the named party. 3. The claimant has become a party to the contract in substitution for the named party by virtue of a statutory or consensual novation. 4. The original party has assigned to the claimant either the underlying contract, together with the agreement to arbitrate which it incorporates, or the benefit of a claim which has already come i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal agreement, the fact that a party was non-signatory to one or other agreement may not be of much significance. The performance of any one of such agreements may be quite irrelevant without the performance and fulfilment of the principal or the mother agreement. Besides designing the corporate management to successfully complete the joint ventures, where the parties execute different agreements but all with one primary object in mind, the court would normally hold the parties to the bargain of arbitration and not encourage its avoidance. In cases involving execution of such multiple agreements, two essential features exist; firstly, all ancillary agreements are relatable to the mother agreement and secondly, performance of one is so intrinsically interlinked with the other agreements that they are incapable of being beneficially performed without performance of the others or severed from the rest. The intention of the parties to refer all the disputes between all the parties to the Arbitral Tribunal is one of the determinative factors. xxxxx xxxxx xxx 102. Joinder of non-signatory parties to arbitration is not unknown to the arbitration jurisprudence. Even the IC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any purchases almost the entirety of the shares in another company, there was no extinction of corporate character for each company was a separate juristic entity for the tax purposes. Almost on similar facts, are the observations of P.B. Mukharji, J. in Turner Morrison Co. Ltd. v. Hungerford Investment Trust Ltd. [AIR 1969 Cal 238] where he held that holding company and subsidiaries are incorporated companies and in this context each has a separate legal entity. Each has a separate corporate veil but that does not mean that holding company and the subsidiary company within it, all constitute one company. 65. Mr. Justice O. Chinnappa Reddy speaking for this Court in LIC v. Escorts Ltd.[ (1986) 1 SCC 264 : AIR 1986 SC 1370 : 1985 Supp (3) SCR 909 : (1986) 59 Com Cas 548] had emphasised that the corporate veil should be lifted where the associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -General for the State relied on several decisions, some of which have been noted. 68. The veil on corporate personality even though not lifted sometimes, is becoming more and more transparent in modern company jurisprudence. The ghost of Salomon case [1897 AC 22] still visits frequently the hounds of Company Law but the veil has been pierced in many cases. Some of these have been noted by Justice P.B. Mukharji in the New Jurisprudence [Tagore Law Lectures, p. 183]. 69. It appears to us, however, that as mentioned the concept of lifting the corporate veil is a changing concept and is of expanding horizons. We think that the appellant was in error in not treating Renusagar's power plant as the power plant of Hindalco and not treating it as the own source of energy. The respondent is liable to duty on the same and on that footing alone; this is evident in view of the principles enunciated and the doctrine now established by way of decision of this Court in Life Insurance Corpn. of India [(1986) 1 SCC 264 : AIR 1986 SC 1370 : 1985 Supp (3) SCR 909 : (1986) 59 Com Cas 548] that in the facts of this case Sections 3(1)(c) and 4(1)(c) of the Act are to be interpreted accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern. Professor Gower in his book on company law [Principles of Modern Company Law, 3rd Edn., p. 216 (1969)] says: 'there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group'. This is especially the case when a parent company owns all the shares of the subsidiaries, so much so that it can control every movement of the subsidiaries. These subsidiaries are bound hand and foot to the parent company and must do just what the parent company says. A striking instance is the decision of the House of Lords in Harold Holdsworth Co. (Wakefield) Ltd. v. Caddies [(1955) 1 All ER 725]. So here. This group is virtually the same as a partnership in which all the three companies are partners. They should not be treated separately so as to be defeated on a technical point. They should not be deprived of the compensation which should justly be payable for disturbance. The three companies should, for present purposes, be treated as one, and the parent company, DHN, should be treated as that one. So that DHN are entitled to claim compensation accordingly. It was not ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts qua HCI, and the claim to the said right may still be open to the workmen as per law against the HCI. Thus, it cannot be concluded that the controller 'Air India' has avoided any obligation which the workmen may be legally entitled to. Further, on perusal of the Memorandum of Association and Articles of Association of the HCI, it cannot be said that the Air India intended to create HCI as a mere facade for the purpose of avoiding liability towards the Appellants-workmen herein. 23.11. The decision in S.N. Prasad (supra) relied by learned counsel for GMR Energy has no application to the facts of the case as even though GMR Energy was not a signatory to the three EPC agreements and the corporate guarantee by virtue of the two MOUs it undertook to discharge the liability of GCEL. Even in Deutsche Post Bank (supra), Supreme Court was dealing with an arbitration clause in a construction agreement to which the appellant was not a party but had only entered into a loan agreement. The Supreme Court was not dealing with the issue of 'alter ego' in the two decisions hence the decisions are not applicable to the facts of the present case. 23.12. As noted above the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to initiate a legal action. In this regard, we would like to remind the Owner that the Tripartite Agreement among GCEL, GEL and Doosan became null and void as of 31st Dec., 2015 because the conditions precedent for effectiveness were not fulfilled by the agreed upon date. Further, the nullification was notified to GCEL via the Contractor's letter dated 4th Jan., 2016. Please be advised, therefore, that the payment obligation is not on GEL, but on GCEL and GIL, by the invocation of Corporate Guarantee. Also, as was discussed during the last week's meeting, it is necessary to execute the Standstill Agreement between GCEL, GIL and the Contractor to continue negotiation without initiating a legal proceeding right away. Please review the attached Standstill Agreement and let us know of your readiness to sign as soon as possible, but no later than 15th Nov., 2016. As you may well understand, the Contractor has been in serious financial trouble due to the overdue payment for a long time and is now strained to initiate a legal proceeding unless the Owner takes a tangible action immediately to clear the overdue payment. Therefore, the Contractor requests to the GCEL and GI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in any way to this Agreement or the Other Contracts, whether based upon a piercing of the Party's corporate veil or any other legal theory based upon exercise of control over the party or otherwise. (emphasis supplied) 23.17. A perusal of clause 23.12 bars recourse to applications qua any partner, shareholder, office, director, employee or agent of either party even on the principle of piercing the parties' corporate veil or any other legal theory. However, the agreement did not bar other corporate entity to be made subject to arbitration based on the principle of piercing of the corporate veil or any such legal theory. 23.18. Considering the fact that firstly, GCEL was a joint venture of GMR Group, secondly, the group companies did not observe separate corporate formalities and commingled corporate funds, thirdly, by the two MOUs entered into between Doosan India, GMR Energy and GCIL, GMR Energy undertook to discharge liability and made part payments in discharge of GCEL's liability also, fourthly, when the two MOUs were entered into, GMR Energy had acquired GCEL and fifthly, whether the two MOUs being the tripartite agreement between Doosan India, GCEL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would undoubtedly have the power to determine whether in a given case the corporate veil should be pierced or not, however, an arbitral tribunal has no jurisdiction to lift the corporate veil, its jurisdiction being confined by the arbitration agreement which included the parties to arbitration and it would not be permissible for the arbitral tribunal to expand or extend the same to other persons. Continuing the discussion, this Court also noted that an arbitration agreement can be extended to a non-signatory in limited circumstances, firstly, where the Court comes to the conclusion that there is an implied consent and secondly, where there are reasons to disregard the corporate personality of a party, thus, making the shareholders answerable for the obligations of the company. Thus, this Court recognized that though limited, corporate veil could be lifted but it was for the court to do it and not the arbitral tribunal. To come to this conclusion this Court in Sudhir Gopi (supra) referred to the decision in DDA v. Skipper Construction (supra) wherein the Court lifted the corporate veil for the reason the corporate character was being employed for the purpose of committing illegali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party to such an agreement. 22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long-barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. 24.6. In National Insurance Co. Ltd. (supra) Supreme Court also drew a distinction between a reference to arbitration under Section 11 of the Arbitration Act and a dispute referred to the Arbitral Tribunal without the intervention of the Court and noted the questions which could be decided by the Arbitral Tribunal as under:- 21. It is thus clear that when a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive effect as it enables the arbitrator to rule on its own jurisdiction as it widely recognized international arbitration. However, the negative effect is equally important, that the courts are deprived of their jurisdiction. The arbitrators are to be not the sole judge but first judge, of their jurisdiction. In other words, it is to allow them to come to a decision on their own jurisdiction prior to any court or other judicial authority and thereby limit the jurisdiction of the national courts to review the award. The kompetenz kompetenz rule, thus, concerned not only is the positive but also the negative effect of the arbitration agreement. (Refer Fouchard Gaillard Goldman on International Commercial Arbitration.) 130. This policy has found a favourable mention with reference to the New York Convention in some of the countries. This is one aspect. The more important aspect as far as Chapter I of Part II of the 1996 Act is concerned, is the absence of any provision like Section 16 appearing in Part I of the same Act. Section 16 contemplates that the arbitrator may determine its own jurisdiction. Absence of such a provision in Part II Chapter I is suggestive of the requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Party B raises objections going to the very root of the matter that the arbitration agreement is null and void, inoperative and incapable of being performed, such objections, if left open and not decided finally at the threshold itself may result in not only parties being compelled to pursue arbitration proceedings by spending time, money and efforts but even the Arbitral Tribunal would have to spend valuable time in adjudicating the complex issues relating to the dispute between the parties, that may finally prove to be in vain and futile. Such adjudication by the Arbitral Tribunal may be rendered ineffective or even a nullity in the event the courts upon filing of an award and at execution stage hold that the agreement between the parties was null and void inoperative and incapable of being performed. The court may also hold that the Arbitral Tribunal had no jurisdiction to entertain and decide the issues between the parties. 131.2 The issue of jurisdiction normally is a mixed question of law and facts. Occasionally, it may also be a question of law alone. It will be appropriate to decide such questions at the beginning of the proceedings itself and they should have finality. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement . It was only after hearing evidence at the final hearing that the Arbitrator found that Mr. Chiew was the alter ego of Asianic based on Arizona law. As the Arbitrator had clearly found Mr. Chiew to be a party to the arbitration agreement with AVA, he was entitled to go on and decide in the course of the arbitration whether or not Mr. Chiew was the alter ego of Asianic. This issue was within the scope of the submission to arbitration and was clearly arbitrable. 24.10. In Chloro Controls (supra) the Supreme Court also drew distinction between the question of formal validity of the arbitration agreement and nature of parties to the agreement and held: 106. The question of formal validity of the arbitration agreement is independent of the nature of parties to the agreement, which is a matter that belongs to the merits and is not subject to substantive assessment. Once it is determined that a valid arbitration agreement exists, it is a different step to establish which parties are bound by it. The third parties, who are not explicitly mentioned in an arbitration agreement made in writing, may enter into its ratione personae scope. Furthermore, the Convention does not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the sole domain of the arbitral tribunal and this Court will not return a finding of fact on the said issue. Reliance is placed on the decisions in Shin-Etsu Chemical (supra), Malini Ventura (supra) and Mcdonald's India Private Limited (supra) wherein the test of prima facie view was upheld. It is reiterated that the Arbitral Tribunal is the proper forum to adjudicate upon the issue of alter ego as held in Integrated Sales (supra). 25.3. Singapore High Court in the decision reported as Malini Ventura (supra) held: 19. This is where the chicken and the egg question arises. Mr. Nakul Dewan, counsel for the defendants, says that the international arbitration regime in place in Singapore gives primacy to the Tribunal and it is the Tribunal that has the first bite at deciding whether or not there is an arbitration agreement which confers jurisdiction on it. The defendants further say that under s 6 of the IAA I have no choice but to refer the question of the existence, validity or termination of an arbitration agreement to the Tribunal. The plaintiff's riposte is that s 6 would only apply to an arbitration agreement and that since she did not sign the Guarantee, nei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd then, if any party was dissatisfied with the tribunal's decision, such party could come back to the court for the last say on the issue. In another case regarding a tribunal's jurisdiction, albeit a different aspect not involving the formation of the arbitration agreement, the Court of Appeal observed that it was only in the clearest case that the court should decide that there was no jurisdiction instead of remitting the matter to the tribunal for an initial decision (see Tjong Very Sumito v Antig Investments Pte Ltd [2009] 4 SLR(R) 732 at [22]-[24]). 37. I note that Commentary to the UNICTRAL Model Law by Stavros L Brekoulakis and Laurence Shore in Concise International Arbitration, Loukas A Mistelis (ed) (Kluwer Law International, 2010) ( the Commentary ) indicates at pp 601-602 that there have been other national courts which have given priority to the arbitral tribunal to decide the issue of existence of an arbitration agreement, holding that evidence that an arbitration agreement existed prima facie only would be enough for the courts to refer the issue to the tribunal for final determination. The Commentary also notes (at p 602) that other national courts hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or incapable of being performed. 64. .... 65. We part company with the English position and adopt the prima facie approach for the purposes of the threshold question essentially for four reasons. First, the prima facie approach coheres better with what we consider was envisaged by the drafters of the IAA. The earliest iteration of the IAA (viz, the International Arbitration Act 1994 (Act 23 of 1994) ( the original IAA )) was enacted in 1994, and it drew heavily from the recommendations made in the Report of the Subcommittee on Review of Arbitration Laws (1993) (Chairman: Giam Chin Toon) ( 1993 Report on Review of Arbitration Laws ). That report included a draft Bill, which was considered and adopted with amendments by the Singapore Academy of Law's Law Reform Committee, and this subsequently resulted in the enactment of the original IAA in 1994 (see the remarks of Assoc Prof Ho Peng Kee, the then Parliamentary Secretary to the Minister for Law, at the second reading of the International Arbitration Bill 1994 (Bill 14 of 1994) ( the 1994 International Arbitration Bill ): Singapore Parliamentary Debates, Official Report (31 October 1994) vol 63 ( Singapore Parliamentary D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings in court in the face of an arbitration agreement. The plaintiff will be well aware that the court will stay the proceedings in favour of arbitration except in cases where the arbitration clause is clearly invalid or inapplicable. The author of Jurisdiction and Arbitration Agreements also argues (at p 346), albeit anecdotally, that the parties to an arbitration are likely to accept a well-reasoned jurisdictional determination rendered by an arbitral tribunal without appealing against it, and this would avoid re-litigation of the same issue. Parties that attempt to protract proceedings by making unmeritorious appeals against an arbitral tribunal's jurisdictional determination also face the prospect of an adverse costs order under s 10(7) of the IAA. 25.5. The issue as to whether the Court should form a prima facie opinion or return a finding was also dealt in Chloro Controls (supra) and distinguishing the decision in Shin-Etsu Chemical (supra) Supreme Court held that if the decision of jurisdiction is left open and not decided finally at the threshold itself, the same may result not only parties being compelled to pursue arbitration proceedings by spending time, mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om raising the plea of jurisdiction merely because he has appointed or participated in the appointment of an arbitrator. Sub-section (3) lays down that a plea that the Arbitral Tribunal is exceeding the scope of its authority, shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. When the Tribunal decides these two questions, namely, the question of jurisdiction and the question of exceeding the scope of authority or either of them, the same is open to immediate challenge in an appeal, when the objection is upheld and only in an appeal against the final award, when the objection is overruled. Sub-section (5) enjoins that if the Arbitral Tribunal overrules the objections under sub-section (2) or (3), it should continue with the arbitral proceedings and make an arbitral award. Sub-section (6) provides that a party aggrieved by such an arbitral award overruling the plea on lack of jurisdiction and the exceeding of the scope of authority, may make an application on these grounds for setting aside the award in accordance with Section 34 of the Act. The question, in the context of subsection (7) of Section 11 is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes place in India as well as domestic arbitration. This, of course, would be applicable at pre-award stage. Thus, there exists a direct legal link, limited to that extent. 129. We are not oblivious of the principle kompetenz kompetenz . It requires the Arbitral Tribunal to rule on its own jurisdiction and at the first instance. One school of thought propagates that it has duly the positive effect as it enables the arbitrator to rule on its own jurisdiction as it widely recognized international arbitration. However, the negative effect is equally important, that the courts are deprived of their jurisdiction. The arbitrators are to be not the sole judge but first judge, of their jurisdiction. In other words, it is to allow them to come to a decision on their own jurisdiction prior to any court or other judicial authority and thereby limit the jurisdiction of the national courts to review the award. The kompetenz kompetenz rule, thus, concerned not only is the positive but also the negative effect of the arbitration agreement. (Refer Fouchard Gaillard Goldman on International Commercial Arbitration.) 130. This policy has found a favourable mention with reference to the New Yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atters initiated with reference to Section 45 of the 1996 Act, at the threshold of judicial proceedings, is that the finality of the decision in regard to the fundamental issues stated under Section 45 would further the cause of justice and interest of the parties as well: 131.1. To illustratively demonstrate it, we may give an example. Where Party A is seeking reference to arbitration and Party B raises objections going to the very root of the matter that the arbitration agreement is null and void, inoperative and incapable of being performed, such objections, if left open and not decided finally at the threshold itself may result in not only parties being compelled to pursue arbitration proceedings by spending time, money and efforts but even the Arbitral Tribunal would have to spend valuable time in adjudicating the complex issues relating to the dispute between the parties, that may finally prove to be in vain and futile. Such adjudication by the Arbitral Tribunal may be rendered ineffective or even a nullity in the event the courts upon filing of an award and at execution stage hold that the agreement between the parties was null and void inoperative and incapable of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the sense whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermore Rule -7 of SIAC Rules applies at the stage, after the commencement of arbitration under Rule 3 and GMR Energy not being named as a party to the arbitration in accordance with Rule 3, Rule 7 would have no application. Even otherwise Rule 7 of SIAC Rules is not mandatory as it uses the term May . 26.3. Rule 7 of SIAC Rules provide as under: 7.1 Prior to the constitution of the Tribunal, a party or non-party to the arbitration may file an application with the Registrar for one or more additional parties to be joined in an arbitration pending under these Rules as a Claimant or a Respondent, provided that any of the following criteria is satisfied. a. the additional party to be joined is prima facie bound by the arbitration agreement; or b. all parties, including the additional party to be joined, have consented to the joinder of the additional party. 26.4. The concept of joinder and consolidation while invoking an arbitration agreement against an alter ego was considered in Bernard Hanotiau, 'Non-signatories in International Arbitration: Lessons from Thirty Years of Case Law', in Albert Jan Van den Berg (ed), International Arbitration 2006; Back to Basi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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