2021 Supreme(Del) 2060

IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Shapoorji Pallonji And Co Pvt Ltd - Appellant
Versus
Rattan India Power Ltd & Anr - Respondent
Arbitration Petition No. 716 of 2019; I.A. No. 7836 of 2020
Decided On : 07-04-2021

An arbitration agreement may exist between parties even if one of the parties is not a signatory to the contract, based on factors such as direct involvement in the formation and execution of the contract, acceptance of benefits under the contract, and estoppel.

Headnote:

ARBITRATION - APPOINTMENT OF ARBITRATOR - NOMINATION OF ARBITRATOR - APPOINTMENT OF ARBITRATOR BY COURT - POWER OF COURT - SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - SCOPE AND APPLICABILITY - APPOINTMENT OF ARBITRATOR BY COURT - WHEN CAN BE MADE - CIRCUMSTANCES - PRINCIPLES - JUDICIAL REVIEW OF ARBITRATION AGREEMENT - SCOPE AND EXTENT - DOCTRINE OF GROUP OF COMPANIES - APPLICATION AND SCOPE - ALTER EGO DOCTRINE - APPLICATION AND SCOPE - ESTOPPEL - APPLICATION AND SCOPE - CONSTRUCTION OF ARBITRATION CLAUSE - PRINCIPLES.

Fact of the Case:

Petitioner, Shapoorji, entered into a contract with Respondent No. 2, Elena, for execution of Civil and Structural Works (BTG Works) at a thermal power plant being developed by Respondent No. 1, Indiabulls. The contract included an arbitration clause. Disputes arose, and Shapoorji issued a notice invoking arbitration. Indiabulls responded, contending that the contracts were separate and independent, and there was no arbitration agreement between Indiabulls and Shapoorji. Elena admitted the existence of an arbitration agreement for disputes under the BTG Contract but disputed the existence of any arbitration agreement for disputes arising from other contracts. Shapoorji filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking appointment of an arbitrator to adjudicate disputes relating to the BTG Contract and the BoP Contract (awarded to Shapoorji after termination of the contract with another agency).

Finding of the Court:

1. The court held that an arbitration agreement exists between Indiabulls and Shapoorji in respect of the BTG Contract. 2. The court found that Indiabulls was directly involved in the formation and execution of the BTG Contract, even though it was not a signatory to the contract. 3. The court applied the doctrine of 'Group of Companies' and held that Elena was a necessary and proper party to the arbitration proceedings. 4. The court also applied the 'Alter Ego' doctrine and held that Indiabulls and Elena were one and the same entity, and therefore, Indiabulls was bound by the arbitration agreement. 5. The court further held that Indiabulls was estopped from denying the existence of an arbitration agreement, as it had accepted the benefits of the contract and participated in the arbitration proceedings. 6. The court rejected Shapoorji's claim that disputes relating to the BoP Contract should be considered as additional items under the BTG Contract, as the BoP Contract was a separate contract and did not include an arbitration clause.

Issues: 1. Whether an arbitration agreement exists between Indiabulls and Shapoorji in respect of the BTG Contract. 2. Whether the doctrine of 'Group of Companies' can be applied to compel Indiabulls to arbitrate disputes arising from the BTG Contract. 3. Whether the 'Alter Ego' doctrine can be applied to compel Indiabulls to arbitrate disputes arising from the BTG Contract. 4. Whether Indiabulls is estopped from denying the existence of an arbitration agreement. 5. Whether disputes relating to the BoP Contract should be considered as additional items under the BTG Contract.

Ratio Decidendi: 1. The court held that an arbitration agreement exists between Indiabulls and Shapoorji in respect of the BTG Contract based on the following factors: (i) Indiabulls was directly involved in the formation and execution of the BTG Contract, even though it was not a signatory to the contract; (ii) Indiabulls had accepted the benefits of the contract and participated in the arbitration proceedings; (iii) Indiabulls was estopped from denying the existence of an arbitration agreement. 2. The court applied the doctrine of 'Group of Companies' to compel Indiabulls to arbitrate disputes arising from the BTG Contract, as Elena was a necessary and proper party to the arbitration proceedings. 3. The court applied the 'Alter Ego' doctrine to compel Indiabulls to arbitrate disputes arising from the BTG Contract, as Indiabulls and Elena were one and the same entity. 4. The court rejected Shapoorji's claim that disputes relating to the BoP Contract should be considered as additional items under the BTG Contract, as the BoP Contract was a separate contract and did not include an arbitration clause.

Final Decision: The court allowed the petition and appointed an arbitrator to adjudicate disputes relating to the BTG Contract. The court also directed the parties to nominate the third arbitrator within two weeks, failing which the parties were at liberty to approach the court for appointment of the third arbitrator.