TMI Blog2022 (4) TMI 1350X X X X Extracts X X X X X X X X Extracts X X X X ..... s until the issue of jurisdiction was decided. The net result is that the applications for discovery and inspection which were crucial to ONGC s claim that there existed functional, financial and economic unity between DEPL and JDIL remained to be decided before the application under Section 16 was taken up. There is merit in the submission which was been urged on behalf of the ONGC that the application for discovery and inspection had to be decided before the plea of jurisdiction was adjudicated upon. The failure of the first Arbitral Tribunal to hear the application for discovery and inspection goes to the root of its interim award dated 27 October 2010 holding an absence of jurisdiction qua JDIL. The interim award of the Arbitral Tribunal in the first proceeding, dated 27 July 2010 refers to the documents which were produced by ONGC and to the submission that neither DEPL nor JDIL had led any evidence to controvert the documentary and oral evidence adduced by ONGC. The first Arbitral Tribunal upheld the plea of jurisdiction that JDIL is neither a party to the contract nor had it submitted a bid to ONGC which resulted in the formation of the contract. The Tribunal held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........................................................................ 3 A.1. Transferred cases arising out of the arbitration ................................................. 11 B Submissions of Counsel .................................................................................... 14 C Analysis .............................................................................................................. 21 C.1. Group of Companies Doctrine..................................................................... 21 C.2. Standard for Review of the Interim Arbitral Award ...................................... 37 D Conclusion ......................................................................................................... 58 A Facts 1 The appeal arises from a judgment dated 27 June 2012 of the High Court of Judicature at Bombay by which an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 Act of 1996 has been dismissed. Oil Natural Gas Corporation Limited ONGC instituted an appeal against an interim award dated 27 October 2010 interim award of the Arbitral Tribunal holding that the second respondent Jindal Drill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jindal Group and in fact the shareholders are almost common. Respondent No. 1 has throughout represented that they are group company of Jindal apart from their representation in the bid they have been representing that through the letter heads which clearly indicated that they belong to a single group of companies, namely DP Jindal Group of companies. M/s Jindal Drilling has also acknowledged that the contractor M/s DEPL is a group company of Jindal Group in their website in an article titled Key due diligence observations . A copy of the said article is annexed herewith and marked as Annexure 8. Since Respondent No. 1 is liable to compensate ONGC for the losses suffered by it, ONGC has adjusted the said amount from the monies payable to Jindal Drilling and Industries Limited as a security to satisfy the award to be passed in this case. 18. As stated above, Respondent No. 2 was supplying vessels and rigs to ONGC under various contracts, for last many years. It is a fact that the Respondent No.1 was formed as a group company with the charter of introducing cutting-edge technology and solutions to the oil and gas market in India. Respondent No.1 has represented itself as a par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is a fit case where this Hon ble Tribunal has to pierce the corporate veil in order to see the acknowledged the realities of Respondent No.1 being a group company of DP Jindal Group. As submitted above, there is a clause corporate unity and applying the doctrine of group companies/alter ego/ultimate beneficiary. This Tribunal has to hold Respondent No. 2 also liable to compensate ONGC for the dues of respondent No.1. The issue preferred to Tribunal is within the arbitration agreement and under law and this Hon ble Tribunal has jurisdiction to entertain and decide the dispute. 4 An application under Section 16 of the Act of 1996 was filed by JDIL seeking its deletion from the arbitral proceedings on the ground that it is not a party to the arbitration agreement. ONGC responded to the application. During the course of the proceedings, ONGC filed an application on 5 January 2009 for discovery and inspection to support its case that DEPL is an alter ego of the Jindal Group of companies. In support of the application for discovery and inspection, ONGC pleaded that: (i) DEPL and JDIL are group companies and that the former is an agent or alter ego of the latter; (ii) Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on 17.8.06 and Noble Charlie Yester on 2.12.06. 6 ONGC led evidence in support of the statement of claim. During the course of the examination, ONGC s witness, Anindya Bhattacharya who was working as Chief Manager (MM) of ONGC, produced documents in support of claim. The production of documents was objected to by JDIL on the ground of relevance and admissibility. During the arbitral meeting on 7 July 2009, the Tribunal recorded the following minutes: Per Tribunal : The documents produced by the witness Anindya Bhattacharya (CW-1) along with his affidavit dated June 26th 2009 and annexures 1 to 10 are taken on record. Mr. Rahul Narichania, Ld. Advocate for Respondent No. 2 objects to these documents being taken on record on the ground that the same are not relevant and admissible as far as the Respondent No. 2 is concerned. He further stated that he will cross examine the witness on the documents without prejudice to his rights that the said documents were neither relevant nor admissible in evidence and ought not to be marked as exhibits. The rival contentions will be decided while disposing of the application made under Section 16 of the Arbitration Concil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case also, the Arbitral Tribunal has correctly held that merely because the two companies may at one point of time have had a common address and telephone number, it does not make them one economic unit. The mere fact that the son and daughter-in-law of the managing director of JDIL are directors in DEPL also does not and cannot establish that these companies are one and the same. There is also no credible evidence to show that because of the alleged nexus between the two companies, ONGC awarded the said contract to DEPL. Even assuming this to be correct, it does not take the case of ONGC any further. JDIL is admittedly not a party to the contract and cannot be liable under the said contract which is only between ONGC and DEPL. If ONGC wanted to bind JDIL to the said contract, it should have asked JDIL to be a party to the said contract. In fact, this court inquired from learned Advocate appearing for ONGC as to why ONGC did not insist on JDIL signing the said contract when admittedly there are other contracts which are entered into between ONGC and JDIL. However, the learned advocate appearing for ONGC had no answer to the same. In response, he only submitted that ONGC has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... together with interest at 4% per annum calculated from the due date of each invoice till the date of payment or realisation. The Arbitral Tribunal dealt with the submission of ONGC that DEPL and JDIL belong to the same group thus entitling ONGC to make the deductions. Rejecting the contention of ONGC, the Arbitral Tribunal held: 25. There is hardly any evidence to support the plea of the Respondent that DEPL and the Claimant are one and the same company. Both DEPL and the Claimant are group companies of D.P. Jindal group of companies. Although the directors of DEPL are the son and daughter-in-law of the managing director of the Claimant, and the two companies, for some time, shared a common office and telephone numbers, that does not make the two companies one. Both are subsidiaries of the main company and both have independent legal existence. DEPL was incorporated in the year 2003. The Claimant is a public limited company listed on the stock exchange and was incorporated in the year 1983. 26. [ ] The facts of the present case are totally different and do not warrant lifting of corporate veil, assuming there is one. The evidence in the present case does not justify the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal dated 27 October 2010, consisting of Mr Justice S P Kurdukar (Retd.), Mr Justice M S Rane (Retd.) and Mr S Venkateswaran. ONGC sought a transfer of the appeals lodged before the Bombay High Court against the judgment of the Single Judge dismissing the petitions under Section 34 for challenging the Arbitral Award in the second proceeding. The transferred cases Transferred Case (Civil) Nos. 47, 48, 49 and 50 of 2016 have come up before this Court together with the special leave petition arising out of the interim award dated 27 October 2010. B Submissions of Counsel 13 Mr K M Nataraj, Additional Solicitor General ASG , appearing on behalf of ONGC submitted that: (i) The case of ONGC is that DEPL and JDIL constitute one single commercial entity and that ONGC is hence entitled by law to compel JDIL to participate in the arbitration proceedings so as to enforce the award against it; (ii) Though evidence was available with ONGC to buttress the above claim, it filed an application for discovery and inspection to secure material which was within the possession, control and custody of JDIL. However, with the deletion of JDIL from the array of parties, the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Arbitral Tribunal; and (iv) The order of the High Court. The tabulated statement is reproduced below for convenience of reference: ONGC CONTENTION JDIL RESPONSE INTERIM AWARD HIGH COURT ORDER JDIL has substantial business interest in DEPL. None of these assertions are based on fact and no evidence led by ONGC points to towards this. Further JDIL is a publicly listed company at BSE and its annual reports, etc. are in public domain. It can be Para 16, Page 178 of SLP Not a tickle of evidence to show that JDIL ever played any role to find itself in the contract between Para 16 Page 14 of SLP There is no evidence tendered before Arbitral Tribunal that DEPL and JDIL had common shareholders and common Board of Directors. Even if that had been the case, the Hon'ble Supreme DEPL is an alter ego of JDIL. JDIL is the ultimate beneficiary in the business with DEPL. DEPL has close corporate unity with JDIL. seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by DEPL to ONGC, has represented that it is a part of the DP Jindal Group of DEPL DEPL is a part of DP Jindal Group of Companies which is an admitted fact. But JDIL and DEPL are two separate corporate entities. There is no relation between the Companies. two. There are other companies of DP Jindal Group of Companies as well including MSL, Jindal Pipes, etc. The directors of DEPL are related to the MD of JDIL (Son and daughter-in-law). There is no bar on the directorship of any person and this is not an evidence on the basis of which doctrine of group companies can be invoked. This is just an allegation unfounded in law and fact. It was a separate venture started by Mr. Manav Kumar on his own. An Arbitration agreement signed by one company in a group of companies binds other non- signatory companies, when the underlying contract is intended to benefit the non- signatory as in the instant case. There are no underlying contracts wherein JDIL has any interest. JDIL was never a party or had any benefits a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 003. JDIL was incorporated in 1983. Its shares are listed on the Bombay Stock Exchange. Though DEPL belonged to the DP Jindal Group of Companies, it ceased to remain a part of the group in 2010. The fact that DEPL and JDIL shared a common office is of no relevance. ONGC s witness asserted that he came to know that Mr G D Sharma (who signed on behalf of DEPL) is an employee of JDIL only after the signing of the contract. Hence there was no representation that JDIL was bidding for the contract. The association of the executive of JDIL was to render assistance to DEPL and nothing more; and (vii) ONGC s witness has no knowledge of the facts since he was not: a. Involved in the shortlisting of bidders; b. A part of the decision-making process for the award of the contract; c. A party to the deliberations by the tender committee for the award of the contract; d. Present at the time when the approval was given for the award of the contract; and e. Party to the deliberations within ONGC. The witness stated that he has accessed the website of DEPL for the first time in June 2008, after the award of the contract on 22 March 2006. Hence it is not open to ONGC to claim tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on party is defined in Section 2(h) to mean a party to an arbitration agreement. The interpretation of the term parties vis- -vis an arbitration agreement under Section 7 has been dealt with by this Court in Indowind (supra) in the context of an application for the appointment of an arbitrator under Section 11(6). In that case, the second respondent company was the promoter of Indowind. The first and second respondent had entered into an agreement of sale. In the agreement, the seller was described to include the first respondent and its subsidiaries. The second respondent was described as the buyer and as the promoter of Indowind. Under the agreement, the seller agreed to transfer business assets for a consideration which was partly payable in money and partly by the issuance of shares. The sale agreement also incorporated a clause to arbitrate any dispute. The Board of Directors of the first and second respondent approved of the agreement, but there was no approval by the Board of Indowind. After a dispute arose, the first respondent instituted a petition under Section 11(6) against both the second respondent and Indowind for the appointment of an arbitrator. Indowind resiste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Director who signed for Subuthi also to sign on behalf of Indowind. 18. The very fact that the parties carefully avoided making Indowind a party and the fact that the Director of Subuthi though a Director of Indowind, was careful not to sign the agreement as on behalf of Indowind, shows that the parties did not intend that Indowind should be a party to the agreement. Therefore the mere fact that Subuthi described Indowind as its nominee or as a company promoted by it or that the agreement was purportedly entered by Subuthi on behalf of Indowind, will not make Indowind a party in the absence of a ratification, approval, adoption or confirmation of the agreement dated 24-2-2006 by Indowind. [ .] 20. Wescare referred to several acts and transactions as also the conduct of Indowind to contend that an inference should be drawn that Indowind was a party to the agreement or that it had affirmed and approved the agreement or acted in terms of the agreement. An examination of the transactions between the parties to decide whether there is a valid contract or whether a particular party owed any obligation towards another party or whether any person had committed a breach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normally would take place between parties to the arbitration agreement, it could take place between a signatory to an arbitration agreement and a third party as well. This Court held that though the scope of the arbitration agreement is limited to parties who have entered into it and those who claim under or through them, courts under the English law have developed the group of companies doctrine. In substance, the doctrine postulates that an arbitration agreement which has been entered into by a company within a group of companies, can bind its non-signatory affiliates or sister concerns if the circumstances demonstrate a mutual intention of the parties to bind both the signatory and affiliated, non-signatory parties. Elaborating on the concept, the Court held: 71. Though the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the courts under the English law have, in certain cases, also applied the group of companies doctrine . This doctrine has developed in the international context, whereby an arbitration agreement entered into by a company, being one within a group of companies, can bind its non-signa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it relied on Chloro Controls (supra) to hold that a non-signatory would be bound by the arbitration clause in the mother agreement, since it is a party to an inter-connected agreement, executed to achieve a common commercial goal. 20 In Cheran Properties (supra), a three-judge Bench of this Court interpreted and applied the group of companies doctrine in the context of the enforcement of a domestic arbitration award against a non-signatory to the arbitration agreement. The Court observed that the decision by a two-judge Bench in Indowind (supra) was rendered before the evolution and application of the group of companies doctrine by a three-judge Bench in Chloro Controls (supra): 23. As the law has evolved, it has recognised that modern business transactions are often effectuated through multiple layers and agreements. There may be transactions within a group of companies. The circumstances in which they have entered into them may reflect an intention to bind both signatory and non-signatory entities within the same group. In holding a non-signatory bound by an arbitration agreement, the court approaches the matter by attributing to the transactions a meaning consistent wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es be extended to other members of the same group of companies; and, secondly, by operation of general rules of private law, principally on assignment, agency, and succession . [Id at p. 99.] The group of companies doctrine has been applied to pierce the corporate veil to locate the true party in interest, and more significantly, to target the creditworthy member of a group of companies [ Op cit fn. 16, 2.40, p. 100.] . Though the extension of this doctrine is met with resistance on the basis of the legal imputation of corporate personality, the application of the doctrine turns on a construction of the arbitration agreement and the circumstances relating to the entry into and performance of the underlying contract. [Id, 2.41 at p. 100.] This Court in Cheran Properties (supra) also distinguished the principle laid down in Chloro Controls (supra) from its application in the context of Section 11(6) in Duro Felguera v. Gangavaram Port Limited (2017) 9 SCC 729 [ Duro Felguera ]. In Duro Felguera (supra), a two-judge Bench of this Court refused to direct a joint arbitration in five different contracts between sister concerns of one of the parties of the original arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bound by the arbitration agreement and/or of deriving benefits from the performance of the underlying contract. 22 In MTNL (supra), a two-judge Bench of this Court was considering a situation in which MTNL had floated certain bonds to Can Bank Financial Services Ltd Canfina through a memorandum of understanding. The bond amount was placed in an FD by MTNL with Canfina. Canfina paid back a part of the amount of the FD while the rest was not paid to MTNL. As a consequence, MTNL did not service the interest of the bonds. Canfina was a wholly-owned subsidiary of Canara Bank. Canfina had transferred the bonds to Canara Bank. Subsequently, all three parties had participated in a meeting where the minutes indicated their view to take recourse to arbitration. A sole arbitrator was appointed to resolve the dispute and notice was issued in the arbitration to MTNL, Canara Bank and Canfina. A dispute was raised on whether Canfina could be joined as a party to the arbitral proceedings. In this backdrop, this Court while dealing with the joinder of Canfina in the arbitration proceedings held: 10.3. A non-signatory can be bound by an arbitration agreement on the basis of the group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject, 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.]. (emphasis supplied) On the facts, the Court held that Canfina was set up as a wholly-owned subsidiary of Canara Bank. The dispute arose out of the subscription by Canfina of the bonds floated by MTNL which were subsequently transferred by Canfina to its holding company, Canara Bank. MTNL had contended that it was constrained to cancel the allotment due to the non-payment of the sale consideration by Canfina. Hence, this Court held that it would be futile to decide the dispute only between MTNL and Canara Bank in the absence of Canfina since indisputably, the original transaction emanated f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied consent, whereby the corporate affiliations among distinct legal entities provide the foundation for concluding that they were intended to be parties to an agreement, notwithstanding their formal status as non-signatories Id. at page 1450 . 25 Recently, John Fellas elaborated on the principle of binding a non-signatory to an arbitration agreement from the lens of the doctrine of estoppel. He situated the rationale behind the application of the principle of direct estoppel against competing considerations of party autonomy and consent in interpreting arbitration agreements. Fellas observed that non-signatory parties can be bound by the principle of direct estoppel to prohibit such a party from deriving the benefits of a contract while disavowing the obligations to arbitrate under the same : There are at least two distinct types of estoppel doctrine that apply in the non-signatory context: the direct benefits estoppel theory and the intertwined estoppel theory. The direct benefits theory bears the hallmark of any estoppel doctrine- prohibiting a party from taking inconsistent positions or seeking to have it both ways by rely[ing] on the contract when it works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 7 of the Act of 1996, the Tribunal held that there must be a written agreement between the parties to submit to arbitration or in the specific manner envisaged under the provision. Before the Arbitral Tribunal, it was urged by ONGC that: (i) There is a commonality of interest in the business between DEPL and JDIL; (ii) DEPL is a corporate facade created by JDIL for their extended business; (iii) The executives of JDIL were actively associated in the bidding process; and (iv) The office of DEPL or JDIL were situated in the same building. The Arbitral Tribunal rejected the above submissions by holding that there was not a tickle of evidence on record to show that JDIL, which is a distinct corporate legal entity, ever played any role to find itself in the contract between JDIL and ONGC . The participation of JDIL in the execution of the contract was held to be on behalf of DEPL and that the fact that the directors of DEPL are the son and daughter-in-law of the MD of JDIL was held not to be of relevance. 28 The fundamental basis of the interim award is that in view of the provisions of Section 7 and the definition of the expression party in Section 2(1)(h), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff meeting held on 21 November 2005 between ONGC and DEPL, Mohan Ramanathan (General Manager, JDIL) was stated to have been in attendance on behalf of the DEPL. It was in this backdrop that ONGC sought to assert that there exists corporate, financial and functional unity between DEPL and JDIL. The Arbitral Tribunal has not considered whether the group of companies doctrine would stand attracted. The Arbitral Tribunal precluded itself from deciding as to whether the application for discovery and inspection should be allowed. The Arbitral Tribunal effectively shut out material evidence which ONGC sought to bring on the record. 32 In this backdrop, the failure of the Arbitral Tribunal to allow for discovery and inspection goes to the root of the process in as much as it disabled ONGC from pursuing its fundamental claim based on the application of the group of companies doctrine. 33 During the course of his submissions, Mr Shyam Divan, senior counsel urged that: (i) JDIL s application under Section 16 was decided by the Arbitral Tribunal after evidence was adduced; (ii) The witness for ONGC deposed and the Tribunal has evaluated the evidence and documentary material on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two recent decisions of this Court in Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (2019) 15 SCC 131 [ Ssangyong Engineering ] , and in M/s Dyna Technologies Pvt. Ltd. v. M/s Crompton Graves Ltd. (2019) 20 SCC 1 Both these decisions define the standard of review under Section 34. These decisions indicate that a challenge to an arbitral award must be adjudicated within the confines of Section 34. Clause (b)(ii) of sub-section (2) of Section 34 stipulates that an arbitral award may be set aside only if the court finds that it conflicts with the public policy of India. Prior to its substitution by Act 3 of 2016, the explanation stipulated that without prejudice to the generality of sub-clause (ii), 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 or was in violation of Section 75 or Section 81. As a result of the substitution of the explanation by Act 3 of 2016, Parliament has stipulated that an award conflicts with the public policy of India only if one of three conditions is fulfilled, namely: (i) The making of the award was induced or affected by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under public policy of India , would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse. (emphasis supplied) 37 In this backdrop, it has been held that: (i) A mere contravention of substantive law is not a ground to set aside an award; (ii) The court while exercising the power of judicial review should not reappreciate evidence; (iii) The construction of a contract is essentially a matter for the arbitral tribunal to decide; (iv) An award can be construed to be perverse only if it is based on no evidence or has ignored vital evidence; (v) The illegality of an award must be of such a nature or character so as to go to the root of the award; and (vi) Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute which entrusts the arbitral tribunal with the power to rule on its own jurisdiction. The decision of the tribunal that it lacks jurisdiction is not conclusive because it is subject to an appellate remedy under Section 37(2)(a). However, in the exercise of this appellate power, the court must be mindful of the fact that the statute has entrusted the arbitral tribunal with the power to rule on its own jurisdiction with the purpose of facilitating the efficacy of arbitration as an institutional mechanism for the resolution of disputes. 40 Now it is in this backdrop that the Court must approach the task at hand. In the present batch of cases, there are two parallel proceedings arising out of the constitution of two sets of arbitral tribunals. In the first proceeding, the Arbitral Tribunal consisted of Mr Justice S P Kurdukar, Mr Justice M S Rane and Mr S Venkateswaran. Both DEPL and JDIL were made parties by ONGC, which is the claimant. The application filed by JDIL under Section 16 was allowed by the Arbitral Tribunal by its interim award dated 27 October 2010. The appeal filed by ONGC was dismissed by the Bombay High Court on 27 June 2012. In pursuance of the arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs had failed to prove that the said DEPL and the respondents herein were one and the same company; ii) both the companies had independent legal existence; iii) the petitioners had failed to produce any evidence to prove that the petitioners had awarded the said contract to DEPL because it was in fact the respondents herein and/or was supported by the respondents; iv) there was no evidence to show that in order to secure the said contract, DEPL had represented that it was a part of the respondents group; v) the witness examined by the petitioners was not present in the meeting held by the Executive Purchase Committee and did not produce Minutes of Meeting held by the said Committee for short listing of the bidders; vi) the respondents herein had not issued any guarantee or letter of comfort from the respondents to the petitioners in respect of the liabilities, if any, of DEPL under its contract with the petitioners and vii) the petitioners had failed to provide any particulars of the alleged fraud or that the said DEPL was incorporated in order to defraud the creditors. In my view, all the aforesaid findings rendered by the arbitral tribunal are based on the pleadings, documents an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is one. The evidence in the present case does not justify the application of lifting the corporate veil . In respect of the contract which was entered into by the Respondent with DEPL, the tender was floated by ONGC in 2005 and the contract was entered into in 2006. There is no material to show that the Respondent awarded the contract to DEPL because it was in fact the Claimant and/or was supported by the Claimant. The minutes of the meeting held by the Respondents for short-listing of bidders in respect of that contract have not been produced. The only witness produced by ONGC was not present at the meetings held by the executive purchase committees when deliberations on the award of the contract to the recommended bidder took place [Of Answer to Question 39 in the cross-examination of the same witness in the first arbitration between ONGC and DEPL relied upon in this arbitration]. There is no evidence to show that in order to secure the said contract, DEPL represented that it was a part of the Claimant group. The Respondent contends that an employee of the Claimant namely Mr Mohan Ramanathan attended the pre-bid meeting and customs hearing in connection with their contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Claimant should be deleted from the said proceedings. The order has been upheld by the High Court in the petition filed by ONGC under Section 16 of the Arbitration and Conciliation Act 1996 by its order dated 27 June 2012. We are informed that an SLP is pending. There is now a final award dated 6 June 2013 given by the aforesaid Arbitral Tribunal in the arbitration proceedings between the Respondent and DEPL where the Respondents have been held entitled to recover from DEPL a sum of ₹ 6387.37 lakhs as well as US dollars 1756197.50 with interest at 9% per annum as set out therein and have been granted other reliefs as set out therein. After the Claimant took out the present arbitration proceedings, ONGC has filed a suit in the High Court being Suit Number 2947/2011 against the Claimant and DEPL. The findings of the earlier Arbitral Tribunal and the High Court in its order of 27 June 2012 support our present conclusions, and we respectfully agree with the same. (emphasis supplied) 46 It is important to note that in the Arbitral Award in the second proceeding, no issue of jurisdiction arose since only JDIL and ONGC were parties and the claim of JDIL arose under four disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L, which can be said to be an alter ego of JDIL. 48 ONGC pleaded that it had a continuing business relationship with JDIL for the past several years and this was a major factor which weighed with ONGC while deciding to award the contract in favour of the DEPL. On the date of the submission of the claim, ONGC had three subsisting contracts with JDIL. ONGC claimed that DEPL has a close corporate unity with the Jindal Group of Companies and that it has consistently represented that they are a group company within the DP Jindal Group of Companies. According to ONGC, besides the letterheads of DEPL which indicate that it belongs to the DP Jindal Group of Companies, JDIL has also acknowledged this position on its website. ONGC also indicated that since DEPL is liable to compensate ONGC for the loss suffered by it, ONGC has adjusted the monies payable to JDIL as security to satisfy the award. ONGC led the evidence of its Chief Manager (MM), Anindya Bhattacharya. The witness for ONGC deposed that: (i) At the pre-bid conference which was held on 7 October 2005, DEPL was represented by Mohan Ramanathan together with two other persons and he is an employee of JDIL; (ii) In response t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst Arbitral Tribunal notes the submission of ONGC that the applications for discovery and inspection must be decided first and it is only on the completion of the process that JDIL s challenge to jurisdiction under Section 16 could be addressed. The first Arbitral Tribunal deferred a decision on the two applications until the issue of jurisdiction was decided. The net result is that the applications for discovery and inspection which were crucial to ONGC s claim that there existed functional, financial and economic unity between DEPL and JDIL remained to be decided before the application under Section 16 was taken up. There is merit in the submission which was been urged on behalf of the ONGC that the application for discovery and inspection had to be decided before the plea of jurisdiction was adjudicated upon. The application for discovery and inspection was intended to facilitate ONGC in its plea that there existed functional, financial and economic unity between the two companies. The failure of the first Arbitral Tribunal to hear the application for discovery and inspection goes to the root of its interim award dated 27 October 2010 holding an absence of jurisdiction qua JDI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut out. As a matter of fact, it emerged from the record that no evidence was adduced by JDIL in support of its plea of the absence of jurisdiction under Section 16. JDIL having taken the plea of absence of jurisdiction was required to establish the grounds on which it set about to establish its plea. 50 Based on the above discussion, the interim award of the first Arbitral Tribunal stands vitiated because of: (i) The failure of the arbitral tribunal to decide upon the application for discovery and inspection filed by ONGC; (ii) The failure of the arbitral tribunal to determine the legal foundation for the application of the group of companies doctrine; and (iii) The decision of the arbitral tribunal that it would decide upon the applications filed by ONGC only after the plea of jurisdiction was disposed of. D Conclusion 51 For all the above reasons we have come to the conclusion that there was a fundamental failure of the first Arbitral Tribunal to address the plea raised by ONGC for attracting the group of companies doctrine. Moreover, by leaving the application filed by ONGC for discovery and inspection unresolved, the first Arbitral Tribunal failed to allow e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alive during the pendency of the proceedings before the Bombay High Court. The bank guarantee furnished by JDIL shall be kept alive to the satisfaction of the Prothonotary and Senior master of the Bombay High Court. 53 For the above reasons, we issue the following directions: (i) The judgment of the Single Judge of the Bombay High Court dated 27 June 2012 in Arbitration Petition No 814 of 2011 is set aside; (ii) The appeal filed by ONGC under Section 37 of the Act of 1996 against the interim award of the Arbitral Tribunal dated 27 October 2010 is allowed and the interim award of the Tribunal dated 27 October 2010 shall stand set aside; (iii) A fresh Arbitral Tribunal shall be constituted by ONGC and JDIL each nominating their arbitrators within a period of two weeks from the date of this judgment and the two arbitrators thereafter will jointly appoint the third arbitrator; (iv) The present judgment will not have any bearing on the arbitral award dated 6 June 2013 passed in favour of ONGC against DEPL; (v) The transferred cases shall stand remitted back to the Bomaby High Court. The hearing of the transferred cases is adjourned sine die so as to await the outcome ..... X X X X Extracts X X X X X X X X Extracts X X X X
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