IMPORTANT POINT
A group Company cannot be roped in arbitration proceedings unless it is shown that the group Company had an intention to consent to the arbitration agreement and be party thereto, maybe for the limited purpose.

JUDGMENT :

A.M. Khanwilkar, J.

1. The singular question involved in this application filed under Sections 11(5), 11(9) and 11(12)(a) of the Arbitration and Conciliation Act, 1996 (for short “the Act”) seeking appointment of a sole arbitrator, is whether respondent No.2 a company established under the laws of Belgium, having its principal place of business at Nijverheldsstraat 3, 2530 Boechout, Belgium, could be impleaded in the proposed arbitration proceedings despite the fact that it is a non-signatory party to the agreement dated 1st May, 2014, executed between the applicant and respondent No.1 a company established under the Companies Act, 2013 merely because it (respondent No.2) is one of the group companies of which respondent No.1 also is a constituent. The legal position as to when a nonsignatory to an arbitration agreement can be impleaded and subjected to arbitration proceedings is no more res integra. In the case of Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors., (2013) 1 SCC 641, a threeJudge Bench of this Court opined that ordinarily, an arbitration takes place between the persons who have been parties to both the arbitration agreement as well as the substantive contract underlying it. Invoking the doctrine of “group of companies”, it went on to observe that an arbitration agreement entered into by a company, being one within a group of corporate entities, can, in certain circumstances, bind its nonsignatory affiliates. That exposition has been followed and applied by another three Judge Bench of this Court in Cheran Properties Limited Vs. Kasturi and Sons Limited and Ors., (2018) 16 SCC 413. In paragraph 23 of this decision, the Court, after analysing the earlier decisions and including the doctrine expounded in Chloro Controls India Private Limited (supra), concluded as follows:

“23. As the law has evolved, it has recognised that modern business transactions are often effectuated through multiple layers and agreements. There may be transactions within a group of companies. The circumstances in which they have entered into them may reflect an intention to bind both signatory and nonsignatory entities within the same group. In holding a nonsignatory bound by an arbitration agreement, the court approaches the matter by attributing to the transactions a meaning consistent with the business sense which was intended to be ascribed to them. Therefore, factors such as the relationship of a nonsignatory to a party which is a signatory to the agreement, the commonality of subjectmatter and the composite nature of the transaction weigh in the balance. The group of companies doctrine is essentially intended to facilitate the fulfilment of a mutually held intent between the parties, where the circumstances indicate that the intent was to bind both signatories and nonsignatories. The effort is to find the true essence of the business arrangement and to unravel from a layered structure of commercial arrangements, an intent to bind someone who is not formally a signatory but has assumed the obligation to be bound by the actions of a signatory.”

2. In the present case, it is not in dispute that the respondents are constituents of a group of companies known as “Reynders Label Printing Group”. The constituent companies of the said group of companies can be described in the form of a chart appended to the written submission filed by respondent No.1 as Annexure R1/1, which reads thus:

Reynders Label Printing Group

Reynesco Invest Nv

Reynexco NV

3. Keeping in mind the exposition in Chloro Controls (supra) and Cheran Properties (supra), the crucial question is wh