1. Petition under Section 11(6) of the Arbitration & Conciliation Act, 1996, seeking appointment of an arbitrator for disputes involving a signatory and a non-signatory parent company. (Para 1 , 4 , 6 , 8 , 14 , 17 )
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2024 Supreme(SC) 760
SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, CJI, J.B. PARDIWALA, MANOJ MISRA, JJ.
Cox & Kings Ltd. – Appellant
Versus
Sap India Pvt. Ltd. & Anr. - Respondents
Arbitration Petition No. 38 OF 2020
Decided on : 09-09-2024
Advocates appeared:
For the Petitioner(s): Mr. Hiroo Advani, Adv. Mr. Divyakant Lahoti, AOR Ms. Vindhya Mehra, Adv. Ms. Madhur Jhavar, Adv. Mr. Navdeep Dahiya, Adv. Ms. Praveena Bisht, Adv. Mr. Kartik Lahoti, Adv. Mr. Kumar Vinayakam Gupta, Adv. Ms. Samridhi Bhatt, Adv. Ms. Shreya Gokel, Adv. Ms. Anushka Awasthi, Adv. Ms. Ria Garg, Adv.
For the Respondent(s): Mr. Ritin Rai, Sr. Adv. Mr. Farhad Sorabjee, Adv. Mr. Dheeraj Nair, AOR Mr. Kumar Kislay, Adv. Mr. Pratik Pawar, Adv. Mr. Siddhesh Pradhan, Adv. Ms. Shanaya Cyrus Irani, Adv. Mr. George Pothan Poothicote, Adv. Ms. Manisha Singh, Adv. Mr. Prakarsh Kumar, Adv. Ms. Jyoti Singh, Adv. Mr. Arunava Mukherjee, AOR Mr. Debesh Panda, AOR Mr. Pallav Mongia, AOR Mrs. Vanita Bhargava, Adv. Mr. Ajay Bhargava, Adv. Mr. Aseem Chaturvedi, Adv. Mr. Milind Sharma, Adv. For M/S. Khaitan & Co. Mr. Ujjwal A Rana, Adv. Mr. Himanshu Mehta, Adv. M/S. Gagrat And Co, AOR
For the Petitioner(s): Mr. Hiroo Advani, Adv. Mr. Divyakant Lahoti, AOR Ms. Vindhya Mehra, Adv. Ms. Madhur Jhavar, Adv. Mr. Navdeep Dahiya, Adv. Ms. Praveena Bisht, Adv. Mr. Kartik Lahoti, Adv. Mr. Kumar Vinayakam Gupta, Adv. Ms. Samridhi Bhatt, Adv. Ms. Shreya Gokel, Adv. Ms. Anushka Awasthi, Adv. Ms. Ria Garg, Adv.
For the Respondent(s): Mr. Ritin Rai, Sr. Adv. Mr. Farhad Sorabjee, Adv. Mr. Dheeraj Nair, AOR Mr. Kumar Kislay, Adv. Mr. Pratik Pawar, Adv. Mr. Siddhesh Pradhan, Adv. Ms. Shanaya Cyrus Irani, Adv. Mr. George Pothan Poothicote, Adv. Ms. Manisha Singh, Adv. Mr. Prakarsh Kumar, Adv. Ms. Jyoti Singh, Adv. Mr. Arunava Mukherjee, AOR Mr. Debesh Panda, AOR Mr. Pallav Mongia, AOR Mrs. Vanita Bhargava, Adv. Mr. Ajay Bhargava, Adv. Mr. Aseem Chaturvedi, Adv. Mr. Milind Sharma, Adv. For M/S. Khaitan & Co. Mr. Ujjwal A Rana, Adv. Mr. Himanshu Mehta, Adv. M/S. Gagrat And Co, AOR
IMPORTANT POINT
Appointment of Arbitrator – Arbitral Tribunal is preferred first authority to look into questions of arbitrability and jurisdiction, and courts at referral stage should not venture into contested questions involving complex facts.
Headnote:
Arbitration and Conciliation Act, 1996 – Section 11(6) read with Section 11(12)(a) – Appointment of Arbitrator – Dispute arising from License Agreement for Software solutions – Arbitral Tribunal is preferred first authority to look into questions of arbitrability and jurisdiction, and courts at referral stage should not venture into contested questions involving complex facts – None of objections as raised by respondents question or deny existence of arbitration agreement under which arbitration has been invoked by petitioner in present case – Requirement of prima facie existence of arbitration agreement, as stipulated under Section 11 of Act, 1996, is satisfied – Once Arbitral Tribunal is constituted, it shall be open for respondents to raise all available objections in law – Former Chief Justice of Bombay High Court appointed as sole Arbitrator. (Paras 30, 32, 33 and 35)
Facts of the case:
Petitioner has filed present petition in terms of Section 11(6) read with Section 11(12)(a) of Arbitration & Conciliation Act, 1996, seeking appointment of an Arbitrator for adjudication of disputes and claims in terms of clause 15.7 of Services General Terms and Conditions Agreement dated 30.10.2015 entered into between Petitioner and Respondent no. 1.
Findings of Court:
Shri Justice Mohit S. Shah, former Chief Justice of High Court of Judicature at Bombay appointed to act as sole Arbitrator. Fees of Arbitrator including other modalities shall be fixed in consultation with parties.
Result : Petition allowed.
Legal Category Hierarchy
Table of Contents
2. Petitioner claims non-signatory parent company is bound by composite transaction and conduct; Respondents argue lack of consent, absence of signatory status, and existence of parallel proceedings. (Para 20 , 21 , 22 , 23 , 24 , 25 )
3. The referral court's jurisdiction is limited to prima facie determination of the arbitration agreement's existence, leaving complex jurisdictional issues, including non-signatory joinder, to the arbitral tribunal. (Para 28 , 29 , 30 , 31 , 32 , 34 )
4. At the referral stage, the court determines prima facie existence of an arbitration agreement, leaving the determination of whether a non-signatory is bound to the arbitral tribunal. (Para 31 , 34 )
5. Petition allowed; sole arbitrator appointed; the tribunal to decide on the joinder of the non-signatory party and other preliminary objections. (Para 35 , 36 )
6. What is the scope of a referral court's power under Section 11(6) of the Arbitration & Conciliation Act, 1996?
The referral court's jurisdiction is limited to examining the prima facie existence of an arbitration agreement. It must not venture into contested questions involving complex facts or substantive objections, as these are the exclusive domain of the arbitral tribunal. (Para 28 , 29 , 30 )
7. How should a referral court handle the joinder of non-signatory parties to an arbitration agreement?
The referral court should only rule on the prima facie existence of the arbitration agreement. The complex determination of whether a non-signatory is a veritable party to the agreement should be left to the arbitral tribunal to decide based on factual evidence and legal doctrine. (Para 31 , 34 )
8. What is the significance of the competence-competence principle in Indian arbitration law?
Under Section 16 of the Act, the arbitral tribunal is empowered to rule on its own jurisdiction, including objections regarding the existence or validity of the arbitration agreement, which serves to minimize judicial intervention at the threshold stage. (Para 29 , 31 )
JUDGMENT :
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
