2024 Supreme(Online)(DEL) 371
HIGH COURT OF DELHI
Prathiba M. Singh, J
ASF BUILDTECH PRIVATE LIMITED – Appellant
Versus
SHAPOORJI PALLONJI AND COMPANY PRIVATE LIMITED & ORS. – Respondent
ARB. A. (COMM.)-4/2024
Advocates:
Dr. Amit George, Mr. Vaibhav Jain, Mr. Shashank Pandey, Mr. Rayadurgam Bharat, Mr. Saurav Agrawal, Ms. Aakanksha Kaul, Mr. Aman Sahani, Mr. Anshuman Chowdhary, Mr. Satya Sabharwal, Ms. Rhea Borkotoky, Mr. Akash Saxena, Mr. Sanyat Lodha, Mr. Tejas Karia, Ms. Avlokita Rajvi, Mr. Ramakrishna Veerendra, Mr. Mahir Amir
The Group of Companies doctrine allows non-signatories to be bound by arbitration agreements if they are closely linked to the signatory parties and the subject matter of the dispute.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 14 and 37(2) - Disputes arising from Works Contract and Settlement Agreement - Appeals and petition challenging orders of Sole Arbitrator regarding impleadment of parties and jurisdiction - Court upheld the inclusion of non-signatories under Group of Companies doctrine, emphasizing the interconnectedness of parties involved in the arbitration process. (Paras 1-98)
(B) Group of Companies Doctrine - Non-signatories may be bound by arbitration agreements if they are closely linked to the signatory parties and the subject matter of the dispute. (Paras 62-96)
(C) Jurisdiction of Arbitrator - The Arbitrator's authority to determine the inclusion of parties in arbitration proceedings is affirmed, with emphasis on the necessity of comprehensive adjudication. (Paras 76-97)
Facts of the case:
The proceedings involve disputes between multiple parties regarding a construction project, with claims and counterclaims arising from various agreements, including a Works Contract and a Settlement Agreement. The Sole Arbitrator's decisions regarding the impleadment of parties and the bifurcation of claims were challenged.
Findings of Court:
The Court found that the Sole Arbitrator acted within jurisdiction and upheld the inclusion of non-signatories based on the Group of Companies doctrine, allowing for a comprehensive resolution of disputes.
Issues: The main issues included the legality of the Sole Arbitrator's bifurcation of claims and the inclusion of non-signatory parties in the arbitration proceedings.
Ratio Decidendi: The Court ruled that the interconnectedness of the parties justified the application of the Group of Companies doctrine, allowing non-signatories to be included in the arbitration process.
Result: Appeals and petition dismissed; the case is to be treated as a single dispute for adjudication.
JUDGEMENTPrathiba M. Singh, J.
1.The hearing in these matters has been held in hybrid mode. Background Facts 2.The present batch of proceedings include two appeals filed under Section 37(2) of the Arbitration and Conciliation Act, 1996, (hereinafter, ‘1996 Act’) being, Arb. A. (Comm.) 4/2024 and Arb. A. (Comm.) 5/2024 and one petition under Section 14 of the 1996 Act being O.M.P. (T) (Comm.) 4/2024.
3.All three proceedings arise out of orders dated 23rd May, 2023 and 17th October, 2023 passed by the ld. Sole Arbitrator, who was appointed by this Court vide order dated 22nd July, 2022 in Arb.P. 431/2022 titled ‘Black Canyon SEZ Pvt. Ltd. v. Shapoorji Pallonji and Company Pvt. Ltd.’ 4.In these three proceedings, the parties are as follows:
O.M.P. (T) (Comm.) 4/2024 PetitionerRespondent(s)Lis M/s.Black Canyon SEZ Private Ltd. (hereinafter, ‘BCSPL’) RespondentNo.1-
ShapoorjiPallonjiand Company Private Ltd. (hereinafter, ‘SPCPL’) This petition seeks termination of mandate of the ld. Sole Arbitrator in terms of Section 14(1)(a)readwithSection 14(2) of the 1996 Act.
RespondentNo.2-ASF Insignia SEZ Private Ltd. (hereinafter, ‘AISPL’) Respondent No. 3- ASF Buildtech Private Ltd. (hereinafter, ‘ABPL’) Arb. A. (Comm.) 4/2024 AppellantRespondentsLis ABPLSPCPLThisappealunderSection 37(2) of the 1996 Act has been filed seeking setting aside of the orders dated 23rd May, 2023 and 17th October, 2023.
Prayer is also for a declaration thatABPLisnota necessary/proper party to the arbitral proceedings arising out ofSPCPL’sStatementof Claim (hereinafter, ‘SOC’) AISPL BCSPL Arb. A. (Comm.) 5/2024 AppellantRespondentsLis AISPLSPCPLThisappealunderSection 37(2) of the 1996 Act has been filed seeking setting aside of the orders dated 23rd May, 2023 and 17th October, 2023.
BCSPL ABPL Prayer is also for a direction that AISPL be deleted from the array of parties in the arbitral proceedings before the ld. Sole Arbitrator, out of the purported SoC sought by SPCPL.
5.All the above three proceedings find their genesis in the following agreements/instruments executed between different parties:
Agreement/InstrumentParties Works Contract dated 21st November, 2016 AISPLSPCPL-- Co-Development Agreementdated14th November, 2017 AISPLBCSPL-- SupplementaryWorks Contractdated9th February, 2018 AISPLSPCPL-- NovationAgreement dated 17th April, 2018 AISPLBCSPLSPCPL SettlementAgreement dated 24th July, 2020 BCSPLSPCPL ARB. A. (COMM.) 5/2024 6.According to the AISPL (the Appellant in Arb. A. (Comm.) 5/2024), it is engaged in acquiring land for sale, developing plots, constructing buildings and flats, and acting as real estate agents. It also operates as a civil contractor for various construction projects. AISPL was involved in developing an IT/ITES SEZ project in Haryana, India, which includes a building named ‘Black Canyon B1’, measuring about 21,60,000 sq. ft., within the SEZ’s processing zone. The background of these proceedings is that in order to execute various construction works associated with the project, AISPL and SPCPL entered into a Works Contract dated 21st November, 2016, designating AISPL as the ‘Owner’. The Works Contract included an arbitration clause, which was not invoked during AISPL’s involvement. Subsequently, a Supplementary Works Contract dated 9th February 2018 was entered into to incorporate changes purportedly due to the implementation of Goods and Services Tax in India, revising the contract price.
7.It is also stated that to ensure better operations of the project, a Co- Development Agreement dated 14th November, 2017 was also executed between AISPL and BCSPL, designating BCSPL as a Co-Developer. As per AISPL, the said Co-Development Agreement transferred all of AISPL’s obligations under the said Works Contract to BCSPL. Following this, it is stated by AISPL that BCSPL received necessary approvals from the Ministry of Commerce and Industry, Government of India, allowing AISPL to completely withdraw from its role as the ‘Owner’ under the said Works Contr
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