JUDGMENT

Dr. Dhananjaya Y. Chandrachud, J.

This judgment has been divided into sections to facilitate analysis. These are:

A Facts

A.1. Transferred cases arising out of the arbitration

B Submissions of Counsel

C Analysis

C.1. Group of Companies Doctrine

C.2. Standard for Review of the Interim Arbitral Award

D Conclusion

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, 1996¹["Act of 1996"] has been dismissed. Oil & Natural Gas Corporation Limited ²["ONGC'] instituted an appeal against an interim award dated 27 October 2010³ ["interim award"] of the Arbitral Tribunal holding that the second respondent - Jindal Drilling and Industries Limited⁴ ["JDIL" or the "second respondent"] was not a party to the arbitration agreement and must be deleted from the array of parties. The interim award was challenged in an appeal which was dismissed by the impugned judgment.

2. On 22 March 2006, ONGC awarded a contract to Discovery Enterprises Private Limited⁵ ["DEPL"], the first respondent, which is a company belonging to the D P Jindal Group, for operating a floating, production, storage and offloading vessel⁶ ["vessel"]. Pursuant to the stipulation contained in clause 25.7.11 of the contract, a vessel called Crystal Sea was imported on 11 May 2006. ONGC paid the customs duty in the amount of Rs. 55.78 crores on the understanding that the vessel would be re-exported after work was complete under duty drawback whose formalities would be completed by DEPL. The vessel left Indian territorial waters and did not return. According to ONGC, DEPL failed to complete the formalities for duty drawback and did not compensate ONGC for customs duty and other expenses incurred in the amount of Rs. 63.88 crores.

3. Clause 37 of the contract between ONGC and DEPL provides for the settlement of disputes of the parties through arbitration. On 25 April 2008, ONGC invoked arbitration against DEPL and JDIL and claimed an amount of Rs. 63.88 crores. An Arbitral Tribunal consisting of Mr Justice S P Kurdukar (Retd.), Mr Justice M S Rane (Retd.) and Mr. S Venkateswaran (Senior Advocate) was constituted. In its statement of claim filed before the Arbitral Tribunal, ONGC set up the case that DEPL and JDIL belonged to the DP Jindal Group of Companies and since they constitute a single economic entity, the corporate veil should be lifted to compel the non-signatory, JDIL, to arbitrate. According to ONGC, DEPL is an alter ego and agent of JDIL. The statement of claim read thus:

"17. It is submitted the Respondent no.1 was awarded the contract by relying on the fact that it is Group Company of D P Jindal group of companies and that the Respondent No.2, M/s Jindal Drilling & Industries Ltd has a vital business interest in the Respondent No.1, which can be said to be the alter ego of Respondent No.2. In fact, the Respondent No. 2 is the ultimate beneficiary of the business of Respondent No. 1. [...] Presently, they are having three valid existing contracts with ONGC. DEPL has close corporate unity with 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