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TMI Blog2024 (3) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Claimants in the arbitral proceedings and Respondent No. 3 is the original Respondent in the arbitral proceedings. 3. A brief background of facts is necessary and which is as under:- (i) A Memorandum of Understanding (MoU) was executed between Respondent Nos. 1 and 2, and Respondent No. 3 on 10th February, 2012. The MoU contained the Arbitration Agreement in Clause 9 thereof. (ii) Notice of invocation of arbitration sent by Respondent Nos. 1 and 2 to Respondent No. 3 on 25th November, 2021. (iii) This Court by an order dated 23rd November, 2022 in Section 11 proceedings filed by Respondent Nos. 1 and 2 against Respondent No. 3 being Arbitration Application No. 86 of 2022 appointed the learned Sole Arbitrator to adjudicate upon the disputes between the Respondent Nos. 1 and 2 on one hand and Respondent No. 3 on the other arising out of said MoU. (iv) On 20th June, 2023, Statement of Claim was filed by Respondent Nos. 1 and 2. (v) The Statement Defence was filed by Respondent No. 3 on 7th August, 2023. In the Statement of Defence preliminary objections were taken to the maintainability of the claim statement on the grounds that the arbitration reference does not rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is an interlocutory order and not an Interim Award which can be challenged under Section 34 of the Arbitration Act. He has submitted that on this specific preliminary objection of impleadment raised by Respondent Nos. 2 and 3, the Arbitral Tribunal framed the aforementioned issues (ii), (iii) and (v) as points for determination. The learned Arbitrator has decided the said points for determination in the impugned Award. Thus, the impugned Award has finally decided matters which form a part of the claims before it. He has placed reliance upon the decision of the Supreme Court in Indian Farmers Fertilizer Cooperative Limited Vs. Bhadra Products (2018) 2 SCC 534 in support of his contention that the impugned Award satisfies the requirements of an interim Award as opposed to an interlocutory order. This is in view of the impugned Award apart from finally deciding the aforementioned points for determination, has finally decided the question of joinder of the Petitioners to the arbitration proceedings. This has serious consequences and severely prejudices the Petitioners. Thus, this cannot be considered as an interlocutory order. 5. Mr. Rustomjee has submitted that, at any rate, the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting Respondents. 10. Mr. Rustomjee has submitted that the Arbitral Tribunal does not have any inherent power to implead a non-signatory to the arbitration proceedings, including powers under Order 1 Rule 10 of the CPC. He has placed reliance upon the decision of the Delhi High Court in Arupri Logistics Pvt. Ltd. Vs. Vilas Gupta and Ors. 2023 SCC OnLine Del 4297 wherein the Court had held that the Arbitral Tribunal owes its existence to operation of law under Section 8 or 11 of the Arbitration Act and does not have power of joinder akin to those of a Court under Order 1 Rule 10. 11. Mr. Rustomjee has submitted that in case of impleadment of a non-signatory by the Arbitration Tribunal, the original reference Court can either add a third party to the arbitration reference or permit the Arbitral Tribunal so constituted to decide the issue. However, the Arbitral Tribunal cannot arrogate to itself powers which are neither conferred by the statute or the rules which govern the arbitration, nor can it take recourse to inherent powers, which are only available with Courts. 12. Mr. Rustomjee has also placed reliance upon decision of the Madras High Court in Abhibus Services India Privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commissioner of Customs, Mumbai (2006) 12 Supreme Court Cases 583 at paragraphs 46 to 50 and Bank of India & Anr. Vs. K. Mohandas and Ors. (2009) 5 Supreme Court Cases 313 at paragraphs 54 to 63, in support of his contention that a case is only an authority for what it actually decides and not what logically flows from it. He has submitted that several decisions have been relied upon by the Respondent Nos. 1 and 2 and which have not addressed the issue which has been raised herein viz., whether the Arbitrator has inherent power to implead a non-signatory, third party to the Arbitration Agreement proceedings without power being expressly endowed upon it by the referral Court at the time of reference. 17. Mr. Rustomjee has submitted that the contesting Respondents have sought to contend that the reference to Order 1 Rule 10 in the impugned Award could be disregarded. They have submitted that reference to a wrong provision would not negate an order if the power otherwise existed in law. However, the contesting Respondents have never pointed out that they were not accepting that their reliance upon Order 1 Rule 10 was erroneous. They have continued to urge that the Arbitral Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners at all either in the present Petition or during the course of the hearing of the present Petition. 21. These facts include that the MoU permitted Respondent No. 3 (signatory to the MoU) to invest in the projects either directly or through its subsidiaries. The Respondent No. 3 invested in the properties/projects through the Petitioners and the Petitioners went on to perform the contract by executing the sale deeds. 22. The submission on behalf of the Petitioners that the Arbitral Tribunal can implead the non-signatories only if the Arbitral Tribunal has been empowered by the Referral Court to do so amounts to contending that the Arbitral Tribunal can apply the 'law of the land' only if empowered by the Referral Court in that behalf. He has submitted that this submission on behalf of the Petitioners ought to be rejected as the Arbitral Tribunal has drawn its power from the agreement between the parties, the provisions of the Arbitration Act which has been enacted as an alternate dispute resolution forum for resolving all contractual disputes (with an Arbitration Agreement) and the extant legal position as exposited by judgments of higher Courts. 23. Mr. Sarda has su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 165(h) of the judgment authored by Dr. Justice D.Y. Chandrachud (currently the Chief Justice of India) on behalf of himself, Justice Hrishikesh Roy, Justice J.B. Pardiwala and Justice Manoj Misra as also paragraphs 11, 15(viii), 53 and 56 (i) of the separate Judgment of Justice P.S. Narsimha's which is concurring judgment. 26. Mr. Sarda has submitted that the observation of the Supreme Court in paragraph 164 of the judgment in Cox and Kings Ltd. (Supra) to the effect that "... the Referral Court will be required to prima facie rule on the existence of the Arbitration Agreement and whether the non-signatory is a veritable party to the Arbitration Agreement". In view of complexity of such a determination, "the Referral Court should leave it for the Arbitrator to decide, whether non-signatory party is indeed a party to the Arbitration Agreement on the basis of the factual evidence and application of legal doctrine" would only mean that such a determination is to be prima facie made and then left for the Arbitral Tribunal if such an argument exists before the Referral Court, only. This observation should not be read out of context to mean that unless the Referral Court specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y legal or factual difference to remit of the Arbitral Tribunal nor does it prejudice any party, whether signatory or non signatory. 30. Mr. Sarda has submitted that the law laid down by the Supreme Court and various High Courts is that the Arbitral Tribunal is itself empowered to apply this doctrine and implead non-signatories if found fit. He has placed reliance upon the decision of the Supreme Court in Oil and Natural Gas Corporation Ltd. Vs. Discovery Enterprises Pvt. Ltd. and Anr. Civil Appeal No. 2402 of 2022 decided on 27th April, 2022 more particularly paragraphs 1, 4, 7 and 53(iii) and (vii). Further, he has placed reliance upon the decision of the Supreme Court in Vidya Drolia & Ors. (Supra) which has held that the jurisdictional issues such as applicability of 'group of companies' doctrine are best left for the Arbitral Tribunal to handle. He has placed reliance upon the decision of the Gujarat High Court in the case of IMC Ltd. V. Board of Trustees of Deendayal Port Trust MANU/GJ/1010 OF 2018 which concerned the specific argument of non-signatories who were impleaded by the Arbitral Tribunal in this case was that the Arbitral Tribunal erred in impleading them w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen such application was made before the Arbitral Tribunal for the first time. The exercise of power of impleadment by the Arbitral Tribunal was also upheld by the Kerala High Court in Maniyappan T.V. and Ors. Vs. Pattanakkad Service Co-Operative Bank Ltd. & Ors. MANU/KE/2190/2020 decided on 14th August, 2020. He has submitted that though this decision has been sought to be distinguished by Mr. Rustomjee on the ground that it was a statutory arbitration under the provisions of the Kerala Co-Operative Societies Act, and whereunder the Arbitral Tribunal was vested with specific powers and was akin to a Civil Court the power to implead third parties was not specifically mentioned. Despite that the Kerala High Court read such a power to exist. 34. Mr. Sarda has submitted that the decision relied upon by Mr. Rustomjee in Arupri Logistics Pvt. Ltd. (Supra) in support of his contention that the application for impleading Petitioners was filed by the Respondent Nos. 1 and 2 under Order 1 Rule 10 of the CPC which powers an Arbitral Tribunal does not possess is misplaced. He has submitted that the power to implead non-signatories is expressly conferred on the Arbitral Tribunal by the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petition requires to be dismissed on the ground that the impugned Award is not an Award/Interim Award and the present Petition is therefore not maintainable. Further, the Sole Arbitrator has the power to implead the Petitioners by applying the 'group of companies' doctrine and the Sole Arbitrator has correctly applied the said doctrine. 39. Having considered the rival submissions, it would be necessary to determine whether the Sole Arbitrator in the present case could have on his own accord allowed the impleadment of the Petitioners who were non-signatories to the Arbitration Agreement without such a power being expressly endowed upon it by the Referral Court at the time of reference. 40. The Sole Arbitrator has referred to the decision of the Supreme Court in Cox and Kings (Supra) where the Supreme Court has enunciated the 'Group of Companies' doctrine and in particular the impleadment of a non-signatory to an Arbitration Agreement in arbitral proceedings based on such doctrine. The Supreme Court in the said decision has considered a case where an Application was made to the Referral Court to join a non-signatory to the Arbitration Agreement and it was in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bound by the arbitration agreement; c. The requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding non-signatory parties; d. Under the Arbitration Act, the concept of a "party" is distinct and different from the concept of "persons claiming through or under" a party to the arbitration agreement; e. The underlying basis for the application of the group of companies doctrine rests on maintaining the corporate separateness of the group companies while determining the common intention of the parties to bind the non-signatory party to the arbitration agreement; f. The principle of alter ego or piercing the corporate veil cannot be the basis for the application of the group of companies doctrine; g. The group of companies doctrine has an independent existence as a principle of law which stems from a harmonious reading of Section 2(1)(h) along with Section 7 of the Arbitration Act; h. To apply the group of companies doctrine, the courts or tribunals, as the case may be, have to consider all the cumulative factors laid down in Discovery Enterprises (supra). Resultantly, the principle of single economic unit cannot be the sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of joinder of a non-signatory to an Arbitration Agreement is not raised before the Referral Court, the Arbitral Tribunal on its own accord does not have the power to determine this issue and/or allow the impleadment of a non-signatory to an Arbitration Agreement. I do not find there to be any estoppel on the Arbitral Tribunal determining this issue. 43. I further find much substance in the argument of Mr. Sarda on behalf of the Respondent Nos. 1 and 2 that the Arbitral Tribunal is obliged to follow the law laid down by the Supreme Court and/or judge made law. This would be the case despite the Arbitral Tribunal not having specific power to consider an application for impleadment and/or the power of the Civil Court under Order I Rule 10 of the CPC. The Delhi High Court in Abhibus Services India Private Ltd. and Ors. (Supra), paragraph 136 has the recognized concept of judge made law. However, it has been held that in the absence of any trace of such power in the entire scheme of the Act, the power of impleadment cannot be said to be conferred upon the Tribunal on the basis of judge made law. This decision of the Delhi High Court was prior to the decision of the Supreme Court in Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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