2019 Supreme(SC) 835

SUPREME COURT OF INDIA
ABHAY MANOHAR SAPRE, INDU MALHOTRA, JJ.
Mahanagar Telephone Nigam Ltd. – Appellant
Versus
Canara Bank & Ors. – Respondents
CIVIL APPEAL NOS. 6202-6205 OF 2019 (Arising out of SLP (Civil) No. 13573-13576 of 2014)
Decided on : 08-08-2019

IMPORTANT POINTS
In construing arbitration agreement, not the form but intention of parties is important.
Common sense approach to give effect to the agreement and make it workable is required while interpreting an arbitration agreement.
Even a non-signatory party can be bound by arbitration agreement between signing parties if so intended by reference.

Headnote:

Per Indu Malhotra, J.

       (a) Arbitration and Conciliation Act, 1996 - Section 7 - Arbitration agreement - A binding arbitration agreement is sine qua non for referring the parties to arbitration - Not the form but intention of parties is important - Can be derived from exchange of letters, telex, telegram or other means of communication, including electronic means - If the parties are prima facie ad idem, a party cannot be absolved from the liability under the agreement even though it may not have signed a formal contract. (Para 9)

       (b) Interpretation of contract - Common sense approach to give effect to the agreement and make it workable. (Para 9)

       (c) Arbitration and Conciliation Act, 1996 - Section 7 - Instantly, minutes of meetings and communications between the party showing their intention of referring their disputes to arbitration - Both parties agreeing before High Court to appointment of a sole arbitrator - No objection taken before arbitrator about non-existence of arbitration agreement - Both parties filing claim and counter claim before the arbitrator - Held, it cannot be contended that there is no arbitration agreement. (Para 9)

       (d) Contract law - An agreement entered into by one of the companies in a group, cannot bind other members of the same group - Applies to arbitration agreement as well - Non-signatory party can be bound by arbitration agreement between signing parties if so intended by reference - Composite nature of the transaction between the parties. (Para 10)

       (e) Group of Companies Doctrine - CANFINA - Set up as a wholly owned subsidiary of Canara Bank - CANFINA subscribing to MTNL Bonds - Subsequently transferring the Bonds to its holding Company: Canara Bank - Held, to decide the dispute without involving all the three parties would be futile - CANFINA held a necessary and proper party to the arbitration proceedings. (Para 10)

       (f) Arbitration law - CANFINA participating in the proceedings before High Court, and Committee on Disputes - Also represented before Sole Arbitrator - Canara Bank joining CANFINA in writ petition as Respondent No. 2 - Represented in Writ Proceedings before High Court - Counsel for CANFINA however not present on two dates i.e. on 16.09.2011 and 21.10.2011, when the High Court recorded agreement between parties for reference of disputes to arbitration - Sole Arbitrator also issuing notice to all the three parties including CANFINA - Implied or tacit consent by CANFINA to being impleaded in arbitral proceedings - Objection of Canara Bank inconceivable. (Para 10)

       Per Abhay Manohar Sapre, J.

       (g) Arbitration and Conciliation Act, 1996 - Section 7(4)(b) and (c) - Dispute inextricably linked between the three parties - Can effectively be decided only when all the three parties are made parties to the arbitral proceedings - The agreement held tripartite - Doctrine of “Group of Companies” applied. (Para 6, 7, 14)

       Facts of the case:

       Disputes arose between MTNL and Canara Bank and CANFINA with regard to transactions relating to Bonds issued by MTNL.

       The High Court appointed a sole arbitrator who held that CANFINA not being a party before High Court cannot be impleaded as a party in arbitration proceedings.

       MTNL sought clarification of order in writ petition as to standing of CANFINA which was dismissed being not pressed.

       MTNL then filed application for recall of the order in the writ petition and its subsequent application which has been dismissed.

       Finding of the Court:

       Dispute is so inextricably linked between the three parties that it can be effectively decided only when all the three parties are made parties to the arbitral proceedings.

       Result: Appeals partly allowed.