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2024 Supreme(Online)(Bom) 3108
HIGH COURT OF BOMBAY
R.I. CHAGLA, J
CARDINAL ENERGY AND INFRASTRUCTURE PRIVATE LIMITED – Appellant
Versus
SUBRAMANYA CONSTRUCTION AND DEVELOPMENT COMPANY LIMITED – Respondent
CARBPL/2603/2024
Shriraz Rustomjee i/b. Ms. Kinnari Mehta for the Petitioner. Rahul Sarda with Punthi Shah i/b. Aarna Law LLP for Respondent Nos.1 and 2. Siddhesh Bhole, Yakshay Chheda, Anushree Koparkar and Ms. Ashwin Pimple i/b. SSB Legal and Advisory for the Respondent No.3.
The Arbitral Tribunal has the authority to implead non-signatories based on the 'Group of Companies' doctrine, and such decisions are not merely interlocutory but substantive.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Challenge to Interim Award - Petitioners contested the validity of the Interim Award allowing their impleadment in arbitration despite being non-signatories to the Arbitration Agreement - Court examined the powers of the Arbitral Tribunal regarding joinder of non-signatories. (Paras 1, 4, 39, 44)
(B) Jurisdiction of Arbitral Tribunal - The Tribunal has the authority to determine its jurisdiction over non-signatories based on the 'Group of Companies' doctrine, as established in Cox and Kings Ltd. v. SPA India Pvt. Ltd. (2023) - The Tribunal's decision on impleadment is not merely interlocutory but has substantive implications. (Paras 40, 42)
(C) Powers of Referral Court - The Referral Court's role is limited to appointing the Tribunal and does not extend to determining the powers of the Tribunal regarding non-signatories. (Paras 19, 44)
Facts of the case:
The Petitioners challenged an Interim Award that allowed their impleadment in arbitration proceedings initiated by Claimants against the original Respondent, arguing that they were not parties to the Arbitration Agreement. (Paras 1, 3)
Findings of Court:
The Court found that the Arbitral Tribunal had the authority to decide on the impleadment of non-signatories based on the 'Group of Companies' doctrine and that the Petitioners could be joined in the arbitration proceedings. (Paras 39, 46)
Issues: The main issues included whether the Arbitral Tribunal had the power to implead non-signatories and whether the Interim Award could be challenged under Section 34 of the Arbitration Act. (Paras 1, 4)
Ratio Decidendi: The Court held that the Arbitral Tribunal has the jurisdiction to determine the inclusion of non-signatories in arbitration proceedings and that the Interim Award was not merely interlocutory but had substantive legal consequences. (Paras 40, 44)
Result: Petition dismissed.
1. The Petitioners have filed the present Commercial Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996 (“the said Act”). The Petitioners have challenged the validity and correctness of the Interim Award dated 2nd January, 2024 passed by the learned Sole Arbitrator allowing an application of Respondent Nos.1 and 2 to implead the Petitioners as party Respondents to the Arbitration proceedings despite not being signatories to the Arbitration Agreement.
2. It would be pertinent to describe the Petitioners as the proposed Respondents joined by the impugned Award. The Respondent Nos.1 and 2 are 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 relate to properties transferred to the Petitioners in the absence of the Petitioners being made party Respondents and that the claim of the Claimants is not maintainable in the absence of the Petitioners.
(vi) The issues were framed by the Arbitral Tribunal on 25th September, 2023 and it is pertinent to refer to the issue Nos.(ii), (iii) and (v), which are as under:-
(ii) Whether the Claimants prove that the present arbitration reference relates to properties transferred in favour of Pegasus Ventures Private Ltd. i.e. properties at HMT land and Bondel land as described in Schedule M, N and O of Soc.?
(iii) Whether the Claimants prove that the present arbitration reference relates to properties transferred in favour of Cardinal Energy and Infrastructure Private Ltd. i.e. properties at BTM, Bangalore as described in Schedule L of SOC?
(v) Whether the Claimants prove that the present arbitration reference relates to properties which fall outside the scope of the said Memorandum of Understanding i.e., properties at Whitefield, Bangalore and Hyderabad ad described in Schedule A and F in SOC?
(vii) The Respondent Nos.1 and 2 filed an Application under Order 1 Rule 10 of the Code of Civil Procedure, 1908 (CPC) on 27th October, 2023 to implead the Petitioners as party Respondents in the Arbitration Proceedings.
(viii) The Respondent No.3 filed its Reply on 8th November, 2023 opposing the Application, inter alia on the ground that the Arbitral Tribunal did not have the power to direct impleadment of the Petitioners and that this could only have been done by the Court referring the disputes arbitration.
(ix) The Arbitral Tribunal issued notice to the Petitioners on 16th December, 2023.
(x) The parties were heard on 2nd January, 2024. The Petitioners opposed the Application inter alia on the grounds that the Arbitral Tribunal did not have the power to direct their joinder and that the Application was barred on the principles of constructive res judicata.
(xi) An Order / Award dated 2nd January, 2024 was communicated to the parties on 5th January, 2024.
4. Mr. Shiraz Rustomjee, the learned Senior Counsel appearing for the Petitioners has at the outset dealt with the prelimi
