Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 Supreme(Online)(SC) 9645

SUPREME COURT OF INDIA
COX AND KINGS LTD. – Appellant
Versus
SAP INDIA PVT. LTD. – Respondent
ARBIT.PETITON No.-000038 - 2020

Advocates:
Petitioner's Advocate: DIVYAKANT LAHOTI
Respondent's Advocate: DHEERAJ NAIR

The court emphasized that at the referral stage under the Arbitration Act, the role of the court is limited to determining the prima facie existence of an arbitration agreement, leaving substantive issues for the arbitral tribunal.

Headnote:(A) Arbitration & Conciliation Act, 1996 - Sections 11(6) and 11(12)(a) - Dispute resolution - Petition for appointment of arbitrator filed by petitioner against respondent for disputes arising from agreements related to SAP Hybris Software - Court emphasized the limited role of referral courts in determining the existence of arbitration agreements - The court allowed the petition and appointed an arbitrator. (Paras 1, 18, 34, 35)

(B) Group of Companies Doctrine - The court referred questions regarding the applicability of the Group of Companies doctrine to a larger bench for clarification, noting inconsistencies in its application in Indian jurisprudence. (Paras 18, 19)

(C) Prima Facie Determination - The court reiterated that at the referral stage, the court's role is limited to a prima facie examination of the arbitration agreement's existence, leaving substantive issues for the arbitral tribunal. (Paras 28, 30, 32)

Facts of the case:
The petitioner, a tourism company, sought arbitration against respondent no. 1, a software provider, regarding the execution of the SAP Hybris Software project, which faced delays and issues. The petitioner claimed that the agreements were interlinked and involved respondent no. 2, a parent company, despite it not being a signatory.

Findings of Court:
The court found that the requirement for prima facie existence of an arbitration agreement was satisfied and appointed an arbitrator to adjudicate the disputes.

Issues: The main issues included whether the Group of Companies doctrine applies and whether respondent no. 2 could be included in the arbitration proceedings.

Ratio Decidendi: The court held that the referral court should not delve into the merits of the case but should ensure the existence of an arbitration agreement, leaving complex issues to the arbitral tribunal.

Result: Petition allowed; arbitrator appointed.

Judgement Key Points

Key Points: - The referral court’s role under Section 11(6) is limited to a prima facie determination of the existence of an arbitration agreement (!) (!) (!) . - The Group of Companies doctrine raises questions about applicability, consistency, and reliance on implied consent or single economic reality, to be resolved by a larger bench (!) (!) (!) (!) . - The court allowed the petition and appointed an arbitrator, holding that the prima facie requirement of an arbitration agreement is satisfied and the non-signatory issue should be decided by the arbitral tribunal (!) (!) (!) (!) .

What is the scope of the referral court’s power under Section 11(6) of the Arbitration Act at the arbitration appointment stage?

How should the Group of Companies doctrine be applied in Indian arbitration law regarding non-signatory parties?

What is the standard for appointing an arbitrator when one party seeks appointment against a non-signatory?

J U D G M E N T

J. B. PARDIWALA, J.:

1. Cox & Kings Ltd. (hereinafter referred to as the “petitioner”) has filed the present petition in terms of Section 11(6) read with Section 11(12)(a) of the Arbitration & Conciliation Act, 1996 (for short “the Act, 1996”), seeking appointment of an arbitrator for the adjudication of disputes and claims in terms of clause 15.7 of the Services General Terms and Conditions Agreement dated 30.10.2015 entered into between the Petitioner and SAP India Pvt. Ltd. (hereinafter referred to as the “respondent no. 1”)

A. FACTUAL MATRIX

2. The petitioner is a company registered under the Companies Act, 1956 and is engaged in the business of providing tourism packages and hospitality services to its customers.

3. Respondent no. 1 is also a company registered under the Companies Act, 1956 and is engaged in the business of providing business software solution services. It is a wholly-owned subsidiary of SAP SE GMBH (Germany) (hereinafter referred to as the “respondent no. 2”), a company incorporated under the laws of Germany.

4. The petitioner and respondent no. 1 entered into a SAP Software End User License Agreement & SAP Enterprise Support Schedule (for short “License Agreement”) on 14.12.2010 under which the petitioner was made a licensee of certain Enterprise Resource Planning (“ERP”) software developed and owned by the respondents. The License Agreement is a mandatory pre-requisite for all customers of the respondents who intend to enter into any software agreement with the respondents.

5. It is the case of the petitioner that while it was developing its own software for e-commerce operations in 2015, it was approached by respondent no. 1 who recommended their ‘Hybris Solution’ (hereinafter referred to as the “SAP Hybris Software”) for use by the petitioner. It is the case of the petitioner that respondent no. 1 had, at the relevant point in time, represented that the SAP Hybris Software would be suitable and 90% compatible to the requirements of the petitioner. It was further represented that the customisation of the balance 10% would take about 10 months from the date of execution of an agreement and that the customisation of the SAP Hybris Software would take lesser time than the time the petitioner may take in developing its own technological solution.

6. The transaction for the purchase, customisation and use of the SAP Hybris Software was divided into three separate agreements entered into between the petitioner and respondent no. 1:

i. First, Software License and Support Agreement Software Order Form no. 3 (for short “Order Form no. 3”) dated 30.10.2015 for the purchase of SAP Hybris Software License by the petitioner.

ii. Second, the Services General Terms and Conditions Agreement (for short “GTC agreement”) dated 30.10.2015 containing the terms and conditions governing the implementation of the SAP Hybris Software.

iii. Third, SAP Global Service and Support Agreement, Order Form no.

1 dated 16.11.2015 (for short “Order Form no. 1”) which was executed pursuant to the signing of the GTC agreement and contained the terms of payment between the parties for the services being rendered.

7. It is the case of the petitioner that as it had already entered into the License Agreement with respondent no. 1 in 2010, it was not required to do so again for the purpose of purchasing the SAP Hybris Software. The GTC agreement, Order Form no. 3 and Order Form no. 1 were all executed pursuant to the License Agreement. The said three agreements are ancillary to the License Agreement and have a similar underlying commercial purpose.

8. It is pertinent to note that in terms of Clause 15.7 of the GTC agreement, in the event of any dispute, the parties agreed to resolve their disputes through arbitration. Clause 15.7 of GTC agreement reads as under:

“15.7 Dispute Resolution: In the event of any dispute or difference arising out of the subject matter of this Agreement, the Parties shall undertake to resolve such disputes amicably

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