COX AND KINGS LIMITED VS SAP INDIA PRIVATE LIMITED CASE

COX AND KINGS LIMITED VS SAP INDIA PRIVATE LIMITED CASE


Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


IN THE SUPREME COURT OF INDIA
    CIVIL ORIGINAL JURISDICTION
    ARBITRATION PETITION (CIVIL) NO. 38 OF 2020
COX AND KINGS LIMITED               …PETITIONER
VERSUS
SAP INDIA PRIVATE LIMITED & ANOTHER                 …RESPONDENTS
    JUDGMENT
    N.V. RAMANA, CJI
1. This petition calls on us to examine the ‘group of companies
doctrine’. In particular, it requires us to examine whether the
principles   of   party   autonomy   under   arbitration   law   and
corporate personality in company law have been adequately
safeguarded   in   outlining   the   scope   and   applicability   of   the
doctrine being followed at present in Indian jurisprudence.
2. The   present   Arbitration   Petition   has   been   preferred   by   the
Petitioner­Applicant under Section 11(6) and Section l1(12)(a) of
the   Arbitration   and   Conciliation   Act,   1996   (hereinafter   the
"Arbitration Act"), for appointment of an Arbitral Tribunal in
terms of the provisions of the Arbitration Act, on the ground
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REPORTABLE
that there has been a failure with respect to the appointment of
an   Arbitral   Tribunal   in   accordance   with   the   agreements
between the parties. 
3. The facts necessary for the adjudication of the dispute are as
follows: on 14.12.2010, the Applicant and Respondent No. l
entered into an SAP Software End User License Agreement and
SAP Enterprise Support Schedule under which the Applicant
was made a licensee of certain ERP software developed and
owned   by   the   Respondents.   This   is   an   overall   licensing
agreement that all customers of the Respondents have to enter
into compulsorily in advance in order to utilize any software of
the Respondents. In 2015, while the Applicant was developing
its own e­commerce platform, the Respondents approached the
Applicant and recommended their Hybris Solution as it would
be   90%   compatible   with   the   Applicant’s   software.   The
Respondents indicated that the remaining 10% customisation
would take only 10 months, a much shorter solution than the
Applicant developing the software itself.
4. The   aforesaid   agreement   was   divided   into   3   separate
transactions: first, the Software License and Support Agreement
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­   Software   Order   Form   3,   dated   30.10.2015,   was   signed
between the Applicant and Respondent No. 1 for the purchase
of   the   SAP   Hybris   Software   License.   Second,  an   agreement
dated 30.10.2015 was signed between the parties containing
the terms and conditions governing the implementation of the
SAP   Hybris   software.   This   agreement   is   called   the   Services
General Terms and Conditions Agreement ("GTC").  Third, on
16.11.2015,   an   agreement   was   entered   into   for   the
customization of the software.
5. Clause 15.7 of the GTC contains the arbitration clause which
we are concerned with in the present matter. The clause reads
as follows:
"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. If disputes and differences cannot
be settled amicably then such disputes shall be
referred   to   bench   of   three   arbitrators,   where
each party will nominate one arbitrator and the
two arbitrators shall appoint a third arbitrator.
Arbitration   award   shall   be   binding   on   both
parties.  The   arbitration   shall   be   held   in
Mumbai and each party will bear the expenses
of their appointed arbitrator. The expense of the
third arbitrator shall be shared by the parties.
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The arbitration process will be governed by
the Arbitration & Conciliation Act, 1996.”
6. Till August 2016, the Applicant listed out various issues in
project   implementation   to   Respondent   No.   1   and   requested
Respondent no. 2 to intervene. Respondent No. 2, in turn, gave
certain assurances to the Applicant. As the contract could not
be  fulfilled  even  with  the  extended timelines and  additional
manpower, the contractual framework pertaining to SAP Hybris
Solution   was   rescinded   on   15.11.2016   after   which   the
Respondents  immediately  withdrew  their  resources  from  the
said project. Pursuant to the same, the Applicant demanded a
refund  of Rs. 45 crores  that  was paid  towards the  License
Agreement, Annual Maintenance Charges, and implementation
services. Respondent No. 2 in response to the said demand
proposed a solution which was rejected by the Applicant. 
7. Finally, after several correspondences and meetings, the matter
could not be settled amicably. On 29.10.2017, Respondent No.
1 issued a notice invoking arbitration for the alleged wrongful
termination of the contract and demanded payment of Rs. 17
crores. An Arbitral Tribunal comprising of Hon'ble Mr. Justice
Madan   B.   Lokur   (Retd.),   Hon'ble   Mr.   Justice   Dilip   Bhosale
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(Retd.),   and   Hon'ble   Mr.   Justice   V.   C.   Daga   (Retd.)   was
constituted to adjudicate the disputes between the parties.
8. Respondent No. l initiated proceedings under Clause 15.7 of the
GTC entered between the parties on 30.10.2015. It may be
noted here that Respondent No. 2 was not made a party in the
aforesaid proceedings. During these proceedings, the Applicant
herein filed an application under Section 16 of the Arbitration
Act,   before   the   Hon'ble   Tribunal,   contending   that   the   four
agreements   entered   between   the   parties   are   a   part   of   a
composite  transaction  and the  same  should  be  a part of  a
singular proceeding.
9. Meanwhile,   on   22.10.2019,   NCLT,   admitted   an   application
under Section 7 of the Insolvency and Bankruptcy Code, 2016
preferred   against   the   Applicant   and   appointed   an   Interim
Resolution Professional. On 05.11.2019, the NCLT directed the
parties to adjourn the arbitration proceedings sine die in view of
the moratorium imposed upon the claims against the Applicant
due to the initiation of the Corporate Insolvency Resolution
Process (CIRP).
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10. On   07.11.2019,   the   Applicant   sent   a   fresh   notice   invoking
Arbitration   arraying   Respondent   No.   2   in   the   Arbitration
Proceedings. In the said Notice, the Applicant appointed Hon'ble
Dr. Justice Arijit Pasayat as its nominated arbitrator and called
upon   the   Respondents   to   appoint   their   Arbitrator   for   the
constitution of the Tribunal. However, there was no response
from the Respondents. Hence, the Applicant has preferred this
Application  under Section 11 of the Arbitration Act seeking
appointment of the Arbitrator in an International Commercial
Arbitration. 
11. Mr. Kailash Vasdev, learned Senior Advocate appearing on
behalf of the Applicant made the following submissions: 
i. Respondent No. 1 is a wholly owned subsidiary and
proprietary   concern   of   Respondent   No.   2.   Since   the
software is licensed by Respondent No. 2 to Respondent
No. 1, the customisation would not be possible without
the aid of Respondent No. 2. Therefore, all the four
agreements together form a composite agreement and
are a part of a single, interlinked transaction by both
Respondent Nos. 1 and 2.
ii. The   agreements   and   email   correspondences   clearly
show that Respondent Nos. 1 and 2 and the Applicant
were   in  ad   idem  for   the   implementation   and   the
execution   of   the   agreements.   Especially,   when
Respondent   No.   1   failed   to   execute   the   agreement,
Respondent No. 2 took the responsibility to resolve the
grievances of the applicant.
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iii. Considering   the   holding   in   the   three   Judge   Bench
decision of Chloro Controls India Private Limited v.
Severn Trent Water  Purification Inc.,  (2013) 1 SCC
641, arbitration can be invoked even against the nonsignatories,  if the  circumstances demonstrate that  it
was the mutual intention of the parties. 
iv. There is no commonality of claims between the present
arbitration proceedings and the earlier proceedings. 
v. Considering, the limited scope under Section 11 of the
Arbitration Act, the intervention of the Court should be
as minimal as the Court is only required to examine the
existence of the arbitration agreement. 
12. Mr. Ritin Rai, learned Senior Advocate appearing on behalf of
the Respondent No. 1 made the following submissions: 
i. The Applicant has suppressed material facts regarding
its   previous   attempts   to   resist   constitution   of   an
Arbitral   Tribunal.   It   ought   to   be   noted   that   when
Respondent No. 1 had earlier invoked Clause 15.7 of
the GTC, it was the Applicant who had challenged the
same for being void ab initio. Now, the Applicant himself
is invoking the same provision seeking the appointment
of an Arbitrator. 
ii. Immediately one day after the commencement of the
CIRP and the consequent imposition of the moratorium,
the   Applicant   has   chosen   to   raise   similar   claims
through   a   fresh   notice   and   has   obliquely   arrayed
Respondent No. 2 as a party to inflate its claim. It is a
settled principle of law that the principle of res­judicata
applies to arbitral proceedings as well.
13. Mr. Neeraj Kishan Kaul, learned Senior Advocate appearing on
behalf of Respondent No. 2 made the following submissions: 
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i. Respondent No. 2 is neither a signatory, nor has it ever
agreed   (expressly   or   impliedly)   to   be   bound   by   the
agreements between the Applicant and the Respondent
No. 1. Respondent No. 2, being a foreign entity does not
have any business dealings in India and is a separate
and independent legal entity from Respondent No. 1.
ii. The emails relied upon by the Applicant do not indicate
any undertaking by Respondent No. 2. Especially, when
the   Applicant   himself   approached   Respondent   No.   2
seeking   assistance   much   after   the   execution   of   the
License Agreement and Service Agreement. Admittedly,
Respondent   No.   2   was   not   involved   in   the   contract
negotiation process.
iii. The “Group of Companies” doctrine is not applicable in
the present case. Respondent No. 2 is not only a nonsignatory but also never participated in the negotiation
process during the drafting of the contract. Moreover,
there is no consensus of the parties to be bound by the
contract. 
14. After  hearing  the   counsel   appearing   on   both   sides   and
considering the ramifications it may have by the adjudication of
the subject matter, this Court must examine the ambit of the
“Group of Companies” doctrine. Ever since this doctrine was
expounded in the  Chloro   Control  (supra) case, it has been
utilised in a varied manner. It is in this context we felt that
there is a further need to examine the rationality behind the
doctrinal approach taken by this Court in the Chloro Control
(supra) case.
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15. Arbitration is a creature of contract which has been provided
statutory backing under the Arbitration Act, to usher in party
autonomy,   quick   disposal,   and   an   efficacious   alternative
remedy.   Arbitration   has   been   a   great   boon   for   Indian
jurisprudence,   wherein   numerous   cases   have   been
methodically dealt with in an effective manner without taking
the meandering course of litigation before Courts.
16. One of the most challenging areas of Arbitration practice, both
theoretical and practical, relates to multi­party and multi­claim
proceedings.   Usually,   arbitration   involves   parties   who   have
explicitly entered into an arbitration agreement, or parties with
successor interests, claiming under them. In some cases, it
happens that third parties are bound by an arbitration clause
by tacit consent, etc.
17. Doctrine   of   group   of   companies   is   one   such   area   which   is
utilized   to   bind   third   parties   to   an   arbitration   agreement.
Theoretically, the policy consideration of efficiency is argued to
allow such joinders. However, until a legal basis for the same is
provided, efficiency cannot itself be the sole ground to bind a
party to arbitration.
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18. Section   7   of   the   Arbitration   Act   defines   an   arbitration
agreement. Being a creature of contract, the realm of arbitration
is one of consent. The bare reading of the aforesaid provision
indicates that parties must reduce their intention to submit
their existing or future disputes to arbitration, in writing. The
statute does not mandate a particular form for an arbitration
agreement. The intention of the parties can be inferred from an
exchange of letters, telex, telegram, and even electronic means.
The existence of the arbitration agreement can be deduced once
it is ascertained that the parties were at ad idem either through
a contract, conduct or correspondences. (See  Govind  Rubber
Ltd. v. Louis  Dreyfus  Commodities  Asia  (P)  Ltd.,  (2015) 13
SCC   477).   Therefore,   the   question   of   the   extension   of   an
arbitration   agreement   to   non­signatories   necessarily   also
involves the question of the extension of the scope and the
effects of the jurisdiction of the arbitration tribunal over such
companies.1
1  Pietro   Ferrario,   'The   Group   of   Companies   Doctrine   in   International
Commercial Arbitration: Is There any Reason for this Doctrine to Exist?',
Journal of International Arbitration, (© Kluwer Law International; Kluwer
Law International 2009, Volume 26 Issue 5) pp. 647 ­ 673 
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19. This doctrine can be clearly stated to have originated in the
Dow   Chemical   France,   the   Dow   Chemical   Company   v.
Isover Saint Gobain, (ICC Case No. 4131). In the case of Dow
Chemicals  (supra), it was the subsidiaries of Dow Chemicals
which initiated Arbitration proceedings against Isover. In that
case, Isover objected to the basis on which the subsidiaries of
Dow Chemicals chose to arbitrate, without some of them having
entered a valid arbitration agreement with Isover. The Tribunal,
while   disregarding   the   contention   of   Isover,   held   that   Dow
Chemicals Group operated as a single economic reality and
thus the non­signatories were also bound by the arbitration
agreement. We may note that the Dow Chemicals (supra) case
related   to   a   situation   where   a   non­signatory   did   not   resist
arbitration. Rather they wished to join an arbitration already
initiated by its affiliates. The effect of this position has not been
evaluated  in  any  precedents  of  this  Court  and  needs  to  be
examined.
20. The first case which dealt with group of companies doctrine for
domestic   arbitrations   was  Sukanya   Holdings   Pvt.   Ltd.   v.
Jayesh  H.  Pandya, (2003) 5 SCC 531. In that case, disputes
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had arisen between multiple parties over the same transaction.
Some   of   the   parties   in   the   dispute   were   not   a   part   of   the
arbitration agreement. The appellant was claiming relief against
some of these parties who were not party to the agreement. The
Court held, under Section 8 of the Arbitration Act, that causes of
action cannot be bifurcated in an arbitration, and non­parties to
an   arbitration   agreement   cannot   be   included   in   the   same
arbitration.
21. The   next   important   case   which   dealt   with   the   group   of
companies doctrine was the Chloro Control (supra) case. The
Court   at   the   outset   acknowledged   that   there   were   various
school of thoughts when it came to the doctrine in arbitration
jurisprudence. It was in this context that the Court had to
formulate an opinion to provide a best fit for the doctrine for
Indian jurisdiction under part II of the Arbitration Act. As many
foreign parties were involved, the Court had to invoke Section
45   of   the   Arbitration   Act   for   appointment   of   an   arbitrator.
Section 45 of the Arbitration Act stood as under: 
“45.   Power   of   judicial   authority   to   refer
parties   to   arbitration.—Notwithstanding
anything contained in Part I or in the Code of
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Civil Procedure, 1908 (V of 1908), a judicial
authority, when seized of an action in a matter
in respect of which the parties have made an
agreement referred to in Section 44, shall, at
the request of one of the parties or any person
claiming   through   or   under   him,   refer   the
parties to arbitration, unless it finds that the
said agreement is null and void, inoperative or
incapable of being performed.”
22. The Court compared Section 45 of the Arbitration Act to Article
2   of   UNCITRAL   Model   Law   and   formulated   the   following
ingredients for a Judicial Authority to examine at a referral
stage:
“1. Does the arbitration agreement fall under
the scope of the Convention?
2.   Is   the   arbitration   agreement   evidenced   in
writing?
3.  Does the arbitration agreement exist and is
it substantively valid?
4. Is there a dispute, does it arise out of a
defined   legal   relationship,   whether
contractual   or   not,   and   did   the   parties
intend to have this particular dispute settled
by arbitration?
5. Is the arbitration agreement binding on the
parties   to   the   dispute   that   is   before   the
court?
6. Is this dispute arbitrable?”
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23. The Court noticed distinction in the language under Section 45
and Section 8 of the Arbitration Act in the following manner:
“69.  We   have   already   noticed   that   the
language   of   Section   45   is   at   a   substantial
variance to the language of Section 8 in this
regard.  In  Section  45,  the  expression   “any
person”   clearly   refers   to   the   legislative
intent  of  enlarging  the  scope  of  the  words
beyond   “the  parties”  who  are   signatory  to
the  arbitration  agreement. Of  course,  such
applicant   should   claim   through   or   under
the   signatory   party.   Once   this   link   is
established, then the court shall refer them to
arbitration. The use of the word “shall” would
have   to   be   given   its   proper   meaning   and
cannot be equated with the word “may”, as
liberally understood in its common parlance.
The   expression   “shall”   in   the   language   of
Section 45 is intended to require the court to
necessarily make a reference to arbitration, if
the conditions of this provision are satisfied.
To that extent, we find merit in the submission
that   there   is   a   greater   obligation   upon   the
judicial authority to make such reference, than
it was in comparison to the 1940 Act. However,
the   right   to   reference   cannot   be   construed
strictly as an indefeasible right. One can claim
the   reference   only   upon   satisfaction   of   the
prerequisites stated under Sections 44 and 45
read with Schedule I of the 1996 Act. Thus, it
is a legal right which has its own contours and
is   not   an   absolute   right,   free   of   any
obligations/limitations.
70. Normally, arbitration takes place between
the persons who have, from the outset, been
parties to both the arbitration agreement as
well  as the  substantive  contract  underlining
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(sic underlying) that agreement.  But,   it  does
occasionally happen that the claim is made
against or by someone who is not originally
named  as  a  party.  These  may  create  some
difficult   situations,  but  certainly,  they  are
not   absolute   obstructions   to   law/the
arbitration   agreement.  Arbitration,   thus,
could be possible between a signatory to an
arbitration agreement and a third party. Of
course,   heavy   onus   lies   on   that   party   to
show that, in fact and in law, it is claiming
“through” or “under” the signatory party as
contemplated under Section 45 of the 1996
Act.  Just   to   deal   with   such   situations
illustratively,   reference   can   be   made   to   the
following   examples   in   Law   and   Practice   of
Commercial Arbitration in England (2nd Edn.)
by Sir Michael J. Mustill:
“1. The claimant was in reality always a party
to the contract, although not named in it.
2. The claimant has succeeded by operation of
law to the rights of the named party.
3. The claimant  has  become a party to  the
contract in substitution for the named party by
virtue of a statutory or consensual novation.
4.   The   original   party   has   assigned   to   the
claimant   either   the   underlying   contract,
together with the agreement to arbitrate which
it incorporates, or the benefit of a claim which
has already come into existence.”
(emphasis supplied)
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From  the  above  it  is  clear  that   the  Court  was  of  the  firm
opinion that there must be a legal relationship between the
non­signatory and the party to the arbitration agreement. 
24. While expounding on the legal relationship, the Court accepted
the   group   of   companies   doctrine   as   a   sufficient   basis   to
establish this legal relationship. However, while expounding on
the   ingredients   of   doctrine   itself,   the   Court   brought   in   the
intention of the parties as to whether they were  ad­idem  to
treat   a   non­signatory   as   being   a   party   to   the   arbitration
agreement.   This   postulation   conflates   a   contractual
understanding of the group of companies doctrine, which has
evolved within the framework of arbitration, without alluding to
contractual principles. 
25. On one hand, this Court reduced the threshold of arbitration
being a consensual affair. On the other, the doctrine of group of
companies is transposed on requirements under contract law
to bind a party to an arbitration. 
26. An attempt was made by the Court to find a basis for reading
the group of companies doctrine within the language of Section
45 of the Arbitration Act in the following manner:
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“99.  Having examined both the above stated
views, we are of the considered opinion that it
will be the facts of a given case that would act
as  precept  to   the  jurisdictional  forum  as  to
whether any of the stated principles should be
adopted or not. If in the facts of a given case, it
is   not   possible   to   construe   that   the   person
approaching   the   forum   is   a   party   to   the
arbitration   agreement   or   a   person   claiming
through or under such party, then the case
would not fall within the ambit and scope of
the provisions of the section and it may not be
possible for the court to permit reference to
arbitration at the behest of or against such
party.
100.  We   have   already   referred   to   the
judgments of various courts that  state   that
arbitration   could   be   possible   between   a
signatory   to   an   agreement   and   a   third
party.   Of   course,   heavy   onus   lies   on   that
party to show that in fact and in law, it is
claiming   under   or   through   a   signatory
party, as contemplated under Section 45 of
the 1996 Act.”
(emphasis supplied)
27. It   is   interesting   to   note   that   this   Court   discusses   some
judgments from the United Kingdom in this regard. In RousselUclaf v. G.D. Searle & Co. Limited and G. D. Searle & Co.,
[1978]   F.S.R   95, the   Court   interpreted   the   term   ‘claiming
through or under’ while staying a case against a company that
was neither party nor privy to an arbitration agreement. Here,
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the non­signatory was a fully owned subsidiary, and its parent
company  was  a   signatory  to   an   arbitration   agreement.   The
subsidiary had claimed that it had the right to sell patented
articles   which   it   had   obtained   from   the   parent   company
because   the   parent   company   had   ordered   the   sale   of   the
patented articles. A stay on the litigation was granted, but the
Court concluded that the subsidiary was ‘claiming through or
under’   the   parent   company.   This   meant   that   if   the   parent
company was entitled under the license agreement to sell the
articles, then the same right flowed to the subsidiary company
as   well.   Although   this   case   did   not   explicitly   indicate   the
acceptance of group of companies doctrine under the English
Law, the wordings can only be said to have left the door open to
possibility of such inclusion. 
28. In any case, the Court of Appeal in the case of The Mayor and
Commonalty  &   Citizens   of   the   City   of   London   v.   Ashok
Sancheti,  [2008] EWCA Civ 1283 overruled the  Uclaf   Case
(supra). The Court pronounced that a ‘mere legal or commercial
connection is insufficient’. In essence, this restricted the phrase
‘claiming through or under’ to only those third persons who
18
assert their right on the basis of the rights of a signatory to an
arbitration agreement. It is noticed that this Court in  Chloro
Control  (supra),   while   observing   both   cases   as   persuasive,
however,   does   not   provide   reasoning   to   favour   one
interpretation over the other, in the following manner:
“98. In Roussel­Uclaf v. G.D. Searle & Co. Ltd.
[(1978) 1 Lloyd's Rep 225] the Court held:
“The   argument   does   not   admit   of
much   elaboration,   but   I   see   no
reason why these words in the Act
should be construed so narrowly as
to   exclude   a   wholly­owned
subsidiary   company   claiming,   as
here, a right to sell patented articles
which it has obtained from and been
ordered   to   sell   by   its   parent.   Of
course,   if   the   arbitration
proceedings   so   decide,   it   may
eventually turn out that the parent
company is at fault and not entitled
to sell the articles in question at all;
and,   if   so,   the   subsidiary   will   be
equally at fault. But, if the parent is
blameless,   it   seems   only   common
sense that the subsidiary should be
equally blameless. The two parties
and   their   actions   are,   in   my
judgment,   so   closely   related   on
the facts in this case that it would
be   right   to   hold   that   the
subsidiary can establish that it is
within   the   purview   of   the
arbitration   clause,   on   the   basis
19
that   it   is   ‘claiming   through   or
under’ the parent to do what it is
in   fact   doing   whether   ultimately
held to be wrongful or not.”
However, the view expressed by the Court in
Roussel­Uclaf case [(1978) 1 Lloyd's Rep 225]
does not find approval in the decision of the
Court of Appeal in City of London v. Sancheti
[2008 EWCA Civ 1283 : (2009) 1 Lloyd's Rep
117 (CA)] . In para 34, it was held that the view
in   Roussel­Uclaf   [(1978)   1   Lloyd's   Rep   225]
need not be followed and stay could not be
obtained   against   a   party   to   an   arbitration
agreement   or   a   person   claiming   through   or
under   such   a   party,   as   mere   local   or
commercial connection is not sufficient. But
the Court of Appeal hastened to add that, in
cases   such   as   the   one   of   Mr   Sancheti,
Corporation of London was not party to the
arbitration agreement, but the relevant party is
the United Kingdom Government. The fact that
in   certain   circumstances,   the   State   may   be
responsible   under   international   law   for   the
acts of one of its local authorities, or may have
to take steps to redress wrongs committed by
one of the local authorities, does not make the
local   authority   a   party   to   the   arbitration
agreement.”
29. This   Court   ultimately   concluded   that  Sukanya   Holdings
(supra) was not applicable for interpreting Section 45 of the
Arbitration Act. The ratio of the  Sukanya   Holdings  (supra)
was restricted to arbitrations under Part I of the Arbitration Act
as such. 
20
30. It may be noted that following the ratio in  Chloro   Control
(supra), the 246th  Law Commission Report recommended an
amendment to Section 2(1)(h) and 8 of the Arbitration Act to
modify the definition of ‘party’ under Part I of the Arbitration
Act, to “a party to an arbitration agreement or any person
claiming or through or under such party” to cure the anomaly
pointed out by this Court in the Chloro Control  (supra) case.
The relevant observations by the 246th Law Commission Report
are extracted below:
“61…   It   would   thus   be   incongruous   and
incompatible   with   this   “consensual”   and
“agreement based” status of arbitration as a
method of dispute resolution, to hold persons
who   are   not   “parties”   to   the   arbitration
agreement to be bound by the same. 
62.However,   a   party   does   not   necessarily
mean   only   the   “signatory”   to   the
arbitration   agreement.   In   appropriate
contexts,   a   “party”   means   not   just   a
signatory,   but   also   persons   “claiming
through   or   under”   such   signatory   –   for
instance,   successors­of­interest   of   such
parties, alter­ego’s of such parties etc. This
is   particularly   true   in   the   case   of
unincorporated entities, where the issue of
“personality”   is   usually   a   difficult   legal
question  and  raises  a  host  of  other  issues.
This   principle   is   recognized   by   the   New
York  Convention,  1985  which   in   article   II
(1) recognizes an agreement between parties
21
“in  respect  of  a  defined   legal  relationship,
whether contractual or not.” 
63.The Arbitration and Conciliation Act, 1996
under section 7 borrows the definition of the
“arbitration agreement” from the corresponding
provision at article 7 of the UNCITRAL Model
Law which in turn borrows this from article II
of   the   New   York   Convention.  However,   the
definition of the word “party” in section 2(1)(h)
refers   to   a   “party”   to   mean   “a   party   to   an
arbitration   agreement.”   This   cannot   be   read
restrictively to imply a mere “signatory” to an
arbitration   agreement,   since   there   are   many
situations   and   contexts   where   even   a   “nonsignatory” can be said to be a “party” to an
arbitration agreement. This was recognized by
the Hon’ble Supreme Court in Chloro Controls
v.  Severn   Trent  Water  Purification,  (2013) 1
SCC 641, where the Hon’ble Supreme Court
was dealing with the scope and interpretation
of section 45 of the Act and, in that context,
discussed the scope of the relevant doctrines
on the basis of which “non­signatories” could
be   said   to   be   bound   by   the   arbitration
agreement, including in cases of inter­related
contracts, group of companies doctrine etc. 
64.This   interpretation   given   by   the   Hon’ble
Supreme   Court   follows   from   the   wording   of
section 45 of the Act which recognizes the right
of   a   “person   claiming   through   or   under   [a
party]” to apply to a judicial authority to refer
the parties to arbitration. The same language
is also to be found in section 54 of the Act.
This   language   is   however,   absent   in   the
corresponding provision of section 8 of the Act.
It   is   similarly   absent   in   the   other   relevant
provisions, where the context would demand
that a party includes also a “person claiming
through  or  under such  party”. To   cure  this
anomaly,   the   Commission   proposes   an
22
amendment to the definition of “party” under
section 2 (h) of the Act.”
(emphasis supplied)
We   must   here   also   state   that   the   Law   Commission   did   not
examine the interpretation of ‘claiming through or under’. Rather,
it simply recognized that there may be a need to extend the same
to arbitrations under Part I of the Arbitration Act.
31. Pursuant   to   the   aforesaid   recommendation,   the   legislature
made   the   following   amendment   to   Section   8(1)   of   the
Arbitration Act.
SECTION 8(1) PRIOR TO ACT 3 OF 2016 SECTION 8(1) AFTER ACT 3 OF 2016
“8. Power   to   refer   parties   to
arbitration   where   there   is   an
arbitration   agreement.—(1)   A
judicial   authority   before   which   an
action is brought in a matter which is
the subject of an arbitration agreement
shall, if a party so applies not  later
than   when   submitting   his   first
statement   on   the   substance   of   the
dispute,   refer   the   parties   to
arbitration.
8. Power   to   refer   parties   to
arbitration   where   there   is   an
arbitration   agreement.—(1)   A
judicial authority, before which an
action is brought in a matter which
is   the   subject   of   an   arbitration
agreement  shall,  if  a  party  to the
arbitration   agreement or   any
person   claiming   through   or
under him, so applies not later than
the   date   of   submitting   his   first
statement  on  the   substance   of  the
23
dispute, then,  notwithstanding  any
judgment,   decree   or   order   of   the
Supreme   Court   or   any   court,   refer
the   parties   to   arbitration   unless   it
finds   that   prima   facie   no   valid
arbitration agreement exists.
The 2015 Amendment brought in four amendments to Section
8(1).   Firstly,   the   scope   of   the   concept   of   “party”   has   been
expanded   to   include   persons   claiming   “through   or   under”.
Secondly, the amendment also clarified the scope of judicial
interference, and that the same is to be limited only to the prima
facie  examination   regarding   the   existence   of   the   arbitration
agreement.  Thirdly, the  cut­off for submitting an  application
under Section 8 of the Arbitration Act has been stated to be “the
date of” submitting the first statement on the substance of the
dispute.   Fourthly,   the   aforesaid   amendment   shall   apply
notwithstanding prior judicial precedent.   However, it may be
observed   that   the   Parliament   has   not   carried   out   any
amendment to Section 2(1)(h) of the Arbitration Act. The impact
of   the   absence   of   such   an   amendment   needs   to   be   clearly
examined   by   this   Court.   This   has   created   an   anomalous
situation   wherein   potentially   a   party   “claiming   through   or
24
under” could be referred to an arbitration, but would not have
the right to seek relief under Section 9 of the Arbitration Act.
This is merely an illustrative example to indicate a potentially
anomalous result. 
32. In   the   case   of  Ameet   Lalchand   Shah  v.  Rishabh
Enterprises, (2018) 15 SCC 678, this Court had to deal with a
case wherein four parties had executed four agreements for the
single purpose of commissioning a Photovoltaic Solar Plant in
Uttar   Pradesh.   A   Division   Bench   of   this   Court   treated   the
contracts   as   interconnected.   Although   the   parties   were
different,   yet   the   agreements   were   effectuated   in   light   of   a
single commercial project. Thereafter, the Court applied the
amended Section 8(1) of the Arbitration Act and extended the
arbitration to non­signatory and opined that the dispute could
be resolved only by referring all four agreements and parties
thereon to arbitration. The Court observed therein:
“25. Parties   to   the   agreements,   namely,
Rishabh   and   Juwi   India:   (i)   Equipment   and
Material   Supply   Agreement;   and   (ii)
Engineering,   Installation   and   Commissioning
Contract and the parties to Sale and Purchase
Agreement between Rishabh and Astonfield are
one and the same as that of the parties in the
25
main   agreement,   namely,   Equipment   Lease
Agreement   (14­3­2012).   All   the   four
agreements are inter­connected. This is a case
where   several   parties   are   involved   in   a
single   commercial   project  (Solar   Plant   at
Dongri)  executed   through   several
agreements/contracts.   In   such   a   case,   all
the   parties   can   be   covered   by   the
arbitration   clause   in   the   main   agreement
i.e.   Equipment   Lease   Agreement  (14­3­
2012).
26. Since all the three agreements of Rishabh
with   Juwi   India   and   Astonfield   had   the
purpose   of   commissioning   the   Photovoltaic
Solar Plant project at Dongri, Raksa, District
Jhansi, Uttar Pradesh, the High Court was not
right   in   saying   that   the   Sale   and   Purchase
Agreement (5­3­2012) is the main agreement.
The   High   Court,   in   our   view,   erred   in   not
keeping in view the various clauses in all the
three   agreements   which   make   them   as   an
integral   part   of   the   principal   agreement,
namely,   Equipment   Lease   Agreement   (14­3­
2012)   and   the   impugned   order   of   the   High
Court cannot be sustained.”
(emphasis supplied)
33. The   interpretation   of  Chloro   Control  (supra)   was   further
expanded in the three Judge Bench decision of this Court in
Cheran  Properties  Ltd.   v.  Kasturi  &  Sons  Ltd.,  (2018) 16
SCC 413. In that case, this Court interpreted Section 35 of the
Arbitration Act to enforce an Award against a non­signatory,
even though it did not participate in the proceedings. 
26
34. This court in the case,  Reckitt  Benckiser  (India)  (P)  Ltd.  v.
Reynders  Label  Printing  (India)  (P)  Ltd.,  (2019) 7 SCC 62,
wherein the two­Judge Bench of this Court refused to apply the
“group of companies” doctrine as the applicant failed to prove
the commonality of intention of the Respondents to be bound
by the arbitration agreement:
“4. Keeping in mind the exposition in Chloro
Controls...  In   other   words,   whether   the
indisputable circumstances go to show that
the mutual intention of the parties was to
bind both the signatory as well as the nonsignatory   parties,   namely,   Respondent   1
and   Respondent   2,   respectively,   qua   the
existence   of   an   arbitration   agreement
between   the   applicant   and   the   said
    respondents.
12.Thus,  Respondent   2   was   neither   the
signatory to the arbitration agreement nor
did   have   any   causal   connection   with   the
process   of   negotiations   preceding   the
agreement   or   the   execution   thereof,
whatsoever.  If   the   main   plank   of   the
applicant,   that   Mr   Frederik   Reynders   was
acting for and on behalf of Respondent 2 and
had the authority of Respondent 2, collapses,
then   it   must   necessarily   follow   that
Respondent 2 was not a party to the stated
agreement   nor   had   it   given   assent   to   the
arbitration agreement and, in absence thereof,
27
even   if   Respondent   2   happens   to   be   a
constituent   of   the   group   of   companies   of
which Respondent 1 is also a constituent, that
will be of no avail. For, the burden is on the
applicant   to   establish   that   Respondent   2
had   an   intention   to   consent   to   the
arbitration   agreement   and   be   party
thereto,  maybe   for  the   limited  purpose  of
enforcing   the   indemnity   Clause   9   in   the
agreement,  which   refers   to  Respondent  1
and the supplier group against any claim of
loss,   damages   and   expenses,   howsoever
incurred  or   suffered  by  the   applicant   and
arising   out   of   or   in   connection   with
matters  specified therein. That burden has
not been discharged by the applicant at all.
On this finding, it must necessarily follow that
Respondent   2   cannot   be   subjected   to   the
proposed arbitration proceedings. Considering
the   averments   in   the   application   under
consideration, it  is not necessary  for  us to
enquire   into   the   fact   as   to   which   other
constituent   of   the   group   of   companies,   of
which   the   respondents   form   a   part,   had
participated in the negotiation process.”
(emphasis supplied)
35. In the Division Bench decision of this Court in  Mahanagar
Telephone Nigam Ltd. v. Canara Bank, (2020) 12 SCC 767,
it was observed that the group of companies doctrine can be
utilized   to   bind   a   third   party   to   an   arbitration,   if   a   tight
corporate group structure constituting a single economic reality
existed. The Court held as under:
28
“10.6. The circumstances in which the “group
of   companies”   doctrine   could   be   invoked   to
bind   the   non­signatory   affiliate   of   a   parent
company, or inclusion of a third party to an
arbitration,   if   there   is   a   direct   relationship
between the party which is a signatory to the
arbitration  agreement;  direct  commonality  of
the subject­matter; the composite nature of the
transaction between the parties. A “composite
transaction” refers to a transaction which is
interlinked   in   nature;   or,   where   the
performance   of   the   agreement   may   not   be
feasible   without   the   aid,   execution,   and
performance   of   the   supplementary   or   the
ancillary agreement, for achieving the common
object, and collectively having a bearing on the
dispute.
10.7. The group  of companies  doctrine has
also been invoked in cases where there is a
tight   group   structure   with   strong
organisational  and  financial   links,  so  as  to
constitute   a   single   economic   unit,   or   a
single economic reality. In such a situation,
signatory   and   non­signatories   have   been
bound   together   under   the   arbitration
agreement.   This   will   apply   in   particular
when the funds of one company are used to
financially   support   or   restructure   other
members of the group. [ ICC Case No. 4131 of
1982, ICC Case No. 5103 of 1988.]”
(emphasis supplied)
We may notice that these cases have been decided by this
Court, without referring to the ambit of the phrase ‘claiming
through   or   under’   as   occurring   under   Section   8   of   the
Arbitration Act.
29
36. The  ratio  of the  Chloro   Control  (supra) case alludes to the
subjective   intention   of   parties   to   be   bound   by   arbitration
agreement when the parties have clearly not been signatory to
the agreement. Reconciling the two is difficult and requires
exposition by this Court.
37. It may be noted that the doctrine, as expounded, requires the
joining of non­signatories as ‘parties in their own right’. This
joinder is not premised on non­signatories ‘claiming through or
under’.   Such   a   joinder   has   the   effect   of   obliterating   the
commercial   reality,   and   the   benefits   of   keeping   subsidiary
companies distinct. Concepts like single economic entity are
economic concepts difficult to be enforced as principles of law.
38. The   areas   which   were   left   open   by   this   Court   in  Chloro
Control  (supra)   case   has   created   certain   broad­based
understanding of this doctrine which may not be suitable and
would clearly go against distinct legal identities of companies
and   party   autonomy   itself.   The   aforesaid   exposition   in   the
above case clearly indicates an understanding of the doctrine
which cannot be sustainable in a jurisdiction which respects
party autonomy. There is a clear need for having a re­look at
30
the doctrinal ingredients concerning the group of companies
doctrine. 
39. Internationally,   the   group   of   companies   doctrine   has   been
accepted   in   varying   degrees.   Swiss   Courts   usually   do   not
recognize such a doctrine under their Switzerland de lege lata.
2
One English Court has observed as under:
“Mr.   Hoffmann   suggested   beguilingly   that   it
would   be   technical   for   us   to   distinguish
between   parent   and   subsidiary   company   in
this context; economically, he said, they were
one.  But   we   are   concerned   not   with
economics   but   with   law. The   distinction
between the two is, in law, fundamental and
cannot here be bridged.”3
(emphasis supplied)
40. Similarly,   in   the   case   of  Peterson   Farms   Inc.   v.   C   &   M
Farming Ltd.,
4
 an arbitral award was challenged wherein the
claimant received damages on its behalf as well as on behalf of
its   group   entities   before   the   Queen's   Bench   Division
(Commercial Court). The Court partly set aside the award and
stated that the group of companies doctrine does not form a
part of English law. It further stated that a corporate structure
2 Award in Geneva Chamber of Commerce Case of 24 March 2000, 21 ASA
Bull. 781 (2003).
3 Bank of Tokyo v. Karoon, [1987] AC 45
4 [2004] EWHC 121 (Comm) 
31
exists to create separate legal entities, and a general agency
relationship would defeat this purpose. The Court held therein:
“65.   In   commercial   terms   the   creation   of   a
corporate structure is by definition designed to
create   separate   legal   entities   for   entirely
legitimate purposes which would often if not
usually   be   defeated   by   any   general   agency
relationship between them…”
41. The High Court of Australia, in the case of Tanning Research
Laboratories Inc v. O'Brien, (1990) 169 CLR 332 interpreted
the   phrase   “claiming   through   and   under”   in   the   following
manner:
“…A person who claims through or under a
party   may   be   either   a   person   seeking   to
enforce   or   a   person   seeking   to   resist   the
enforcement   of   an   alleged   contractual   right.
The subject of the claim may be either a cause
of action  or a ground  of  defence. Next,  the
prepositions   ‘through’   and   ‘under’   convey
the notion of a derivative cause of action or
ground of defence, that is to say, a cause of
action   or   ground   of   defence   derived   from
the   party.   In   other   words,   an   essential
element  of  the  cause  of  action  or  defence
must   be   or  must   have   been   vested   in   or
exercisable  by  the  party  before  the  person
claiming   through   or   under   the   party   can
rely   on   the   cause   of   action   or   ground   of
defence…”
(emphasis supplied)
32
In the aforesaid case, a company and its creditor had entered a
contract having an arbitration clause. Subsequently, litigation
ensued, and a question arose as to whether the liquidator of
the company could rely on the arbitration clause. The Court
held that a liquidator may be a person who can claim through
or under the company because the grounds of defence and the
causes of action he depends on are vested in the company or
are exercisable by the company. This meant that an essential
element of a cause of action or defence must be, or have been,
vested or exercisable by the original party before the person
claiming through or under the said party can rely on the same.
42. Viewed from a different angle, this Court in the case of Vidya
Drolia v. Durga Trading Corporation, (2021) 2 SCC 1 noted
that ambit of judicial interference under Section 8 and Section
11 of the Arbitration Act is similar. The relevant observations of
this Court in the aforesaid case in relation to the power under
Section 8 and Section 11 is as follows:
239. Moreover, the amendment  to Section 8
now   rectifies   the   shortcomings   pointed   out
in Chloro Controls case [Chloro Controls (India)
(P) Ltd. v. Severn Trent Water Purification Inc.,
(2013) 1 SCC 641 : (2013) 1 SCC (Civ) 689]
33
with   respect   to   domestic   arbitration.
Jurisdictional   issues   concerning   whether
certain   parties   are   bound   by   a   particular
arbitration,  under   group­company  doctrine
or   good   faith,   etc.,   in   a   multi­party
arbitration   raises   complicated   factual
questions,   which   are   best   left   for   the
tribunal   to   handle.   The   amendment   to
Section  8  on   this   front   also   indicates   the
legislative   intention   to   further   reduce   the
judicial   interference   at   the   stage   of
reference.
240. Courts,   while   analysing   a   case   under
Section 8, may choose to identify the issues
which  require adjudication pertaining to  the
validity   of   the   arbitration   agreement.   If   the
court   cannot   rule   on   the   invalidity   of   the
arbitration agreement on a prima facie basis,
then   the   court   should   stop   any   further
analysis   and   simply   refer   all   the   issues   to
arbitration to be settled.
242. We are  cognizant  of  the  fact  that  the
statutory language of Sections 8 and 11 are
different,   however  materially   they   do   not
vary  and  both  sections  provide   for   limited
judicial   interference  at  reference   stage,   as
enunciated above.
244.1. Sections 8 and 11 of the Act have the
same   ambit   with   respect   to   judicial
interference.
244.3. The court, under Sections 8 and 11,
has   to   refer   a  matter   to   arbitration   or   to
34
appoint  an  arbitrator,  as  the  case  may  be,
unless a party has established a prima facie
(summary findings) case of non­existence of
valid   arbitration   agreement,   by   summarily
portraying a strong case that he is entitled
to such a finding.”
(emphasis supplied)
43. In   the   aforesaid   case   of  Vidya   Drolia  (supra),  this   Court
primarily   delineated   the   threshold   standard   of   reference   to
arbitration. The aforesaid case predominantly laid down that
when   an   application   is   made   under   Section   11   of   the
Arbitration Act, considering the scope of judicial intervention,
the Courts are only required to look into the prima existence of
an arbitration agreement.
44. The   aforesaid   case   pre­dominantly   dealt   with   the   scope   of
judicial interference at the referral stage. However, this Court
did not have an occasion to explore the jurisprudential basis of
group of companies doctrine and required ingredients to refer a
“non­signatory” to arbitration. Especially, the scope of judicial
reference at the stage of Sections 8 and 11 of the Arbitration
Act, needs to be relooked considering the ambit of unamended
Section 2(1)(h) of the Arbitration Act. 
35
45. An arbitration agreement may be binding on parties, whether
signatories or non­signatories, provided there is sufficient legal
basis   to   bind   them.   Most   legal   bases   for   binding   nonsignatories   to   an   arbitration   agreement   are   of   contractual
origin,   like   agency,   etc.   Jurisprudence   has   shown   that
arbitration being a creature of contract, does not sit very well in
binding non­signatories. Expounding on the same, Professor
William Park, in one of his key works, captures the dilemma
while   attaching   a   non­signatory   to   the   arbitral   process5
  as
under:
“For   arbitrators,   motions   to   join   nonsignatories   create   a   tension   between   two
principles:   maintaining   arbitration’s
consensual nature, and maximizing an award’s
practical   effectiveness   by   binding   related
persons.   Pushed   to   the   limit   of
their   logic,   each   goal   points   in   an   opposite
direction.   Resolving   the   tension   usually
implicates the two doctrines discussed below:
implied   consent   and   disregard   of   corporate
personality…
The   term   “non­signatory”   remains   useful
for what might be called “less­than­obvious”
parties to an arbitration clause: individuals
and   entities   that  never   put   pen   to   paper,
5  William   W.   Park,  Non­Signatories   and   International   Contracts:   An
Arbitrator’s   Dilemma,  in  Multiple   Parties   in   International   Arbitration
(Oxford University Press) (2009). 
36
but   still   should   be   part   of   the   arbitration
under   the   circumstances   of   the   relevant
business   relationship.   The   label   does   little
harm if invoked merely for ease of expression,
to designate someone whose right or obligation
to arbitrate may be real but not self­evident...
Most   significantly,   the   fact   that   a   “nonsignatory” might be bound to arbitrate does
not   dispense   with   the   need   for   an
arbitration   agreement.   Rather,   it   means
only   that   the   agreement   takes   its   binding
force   through   some   circumstance   other
than the formality of signature.”
(emphasis supplied)
46. It   is   evident   from   the   discussion   above   that   the   group   of
companies doctrine must be applied with caution and mere fact
that   a   non­signatory   is   a   member   of   a   group   of   affiliated
companies   will   not   be   sufficient   to   claim   extension   of   the
arbitration agreement to the non­signatory. In this context Gary
Born6
 notes as under:
“GROUP OF COMPANIES” DOCTRINE
Another   significant,   but   controversial,   basis
for binding non­signatories to an arbitration
agreement   is   the   “group   of   companies”
doctrine. Under this principle, non­signatories
of a contract may be deemed parties to the
associates arbitration clause based on factors
which are often roughly comparable to those
relevant to an alter ego analysis. In particular,
where   a   company   is   a   part   of   a   corporate
group, is subject to the control of (or controls)
a   corporation   affiliate   that   has   executed   a
6 Gary B.Born’s, International Commercial Arbitration, 3rd Edition, Volume I, Page 1558 ­ 
1559
37
contract and is involved in the negotiation or
performance   of   that   contract,   then   that
company may in some circumstances invoke
or   be   subject   to   an   arbitration   clause
contained   in   that   contract,   notwithstanding
the fact that it has not executed the contract
itself.
Unlike   other   bases   for   binding   a   nonsignatory to an arbitration agreement (such as
agency,   alter   ego,   estoppel,   third   party
beneficiary,   or   assignment),   the   group   of
companies doctrine was developed specifically
in the arbitration context and is not typically
invoked outside that context. At least thus far,
the group of companies doctrine has also been
explicitly accepted sin only a limited number
of   jurisdictions   (in   particular,   as   discussed
below, France). In part for that reason, the
doctrine   has   given   rise   to   substantial
controversy.
Gary B Born also refers (in footnotes 222 and 223) to the fact
that only a small number of jurisdictions France and India,
appear to have applied the group of companies doctrine in the
context   of   International   Arbitration   and   to   the   prevalent
criticism of the group of companies doctrine.
47. In view of the aforesaid discussion, we feel it appropriate to
refer the aspect of interpretation of ‘claiming through or under’
as occurring in amended Section 8 of the Arbitration Act qua
the doctrine of group of companies to a larger Bench to provide
clarity on this aspect.  The law laid down in  Chloro  Control
38
(supra) and the cases following it, appear to have been based,
more on economics and convenience rather than law. This may
not be a correct approach. The Bench doubts the correctness of
the   law   laid   down   in  Chloro   Control (supra)  and   cases
following it.
48. On a different note, we are cognizant that reference to a larger
Bench should not be made in a casual and cavalier manner.
However,   we   see   that   the   questions   raised   herein   are
fundamental to the arbitration practice in India and have large
scale repercussions.
49.  It is in this context that we deem it appropriate to refer the
matter to a larger Bench as the threshold laid down by Shah
Faesal v. Union of India,  (2020) 4 SCC 1 stands adequately
satisfied.
50. In view of the aforesaid discussion, we deem it appropriate to
refer   this   matter   to   a   larger   Bench   to   expound   on   the
intricacies of the Group of Companies doctrine and answer the
following questions:
39
a.   Whether phrase ‘claiming through or under’ in Sections
8   and   11   could   be   interpreted   to   include   ‘Group   of
Companies’ doctrine?
b.  Whether the ‘Group of companies’ doctrine as expounded
by  Chloro   Control Case  (supra)  and   subsequent
judgments are valid in law?
............................CJI.
(N. V. RAMANA)
.........…………….......J.
        (A.S. BOPANNA)
NEW DELHI;
MAY 06, 2022.
40
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
ARBITRATION PETITION NO. 38 of 2020
Cox and Kings Ltd. ..... Appellant
                                       VERSUS
SAP India Pvt. Ltd. & Anr. ..... Respondents
JUDGEMENT
Surya Kant, J:
1. I have had the advantage of going through a scholarly and selfspeaking order prepared by Hon’ble the Chief Justice, doubting the
correctness of a three judge bench judgment of this Court in Chloro
Controls India (P) Ltd. v. Severn Trent Water Purification Inc.&
Anr1
 and formulating the questions of law to be determined by a larger
bench. While at the outset, I concur that the contours of the Group of
Companies Doctrine need to be settled by a larger bench, my thoughts
are oriented in favour of the Doctrine as an integral part of Indian
arbitral jurisprudence for the reasons assigned below.
2. The question which has fallen for consideration in this case is
whether the parent company of Respondent No. 1, namely Respondent
1
 2013 1 SCC 641.
Page | 1
No. 2, should be joined to this arbitration petition regardless of the
fact that the Petitioner had entered into an SAT­Software End User
License Agreement and SAP­Enterprise Support Schedule with only
the   subsidiary.   Petitioner   sought   greenfield   solutions   for   its   ECommerce problems, for which Respondent No. 1 provided its Hybris
solution system. Overtime, disputes arose between the parties. During
this phase, the Petitioner had requested Respondent No. 2 to mediate
between the parties. However, the disputes could not be resolved.
Consequently, the Petitioner initiated arbitration proceedings and has
sought to bind Respondent No. 2 to the proceedings even though the
said Respondent is not a signatory to the arbitration agreement. 
3. On the issue of whether Respondent No. 2 may be roped into the
arbitration  pending  between  the  Petitioner and  Respondent  No.  1,
Hon’ble the Chief Justice has noted that the basis under Indian law
for joining non­signatories to arbitral proceedings has been the Group
of   Companies   Doctrine.   While   discussing   the   holdings   in  Chloro
Controls  and Cheran Properties Ltd. v. Kasturi and Sons Ltd. &
Ors2
, Hon’ble   the   Chief   Justice   felt   it   necessary   to   revisit   certain
aspects   of   these   decisions   and   determine   whether   the   manner   in
which they have invoked the Group of Companies Doctrine within
Indian jurisprudence is consistent and sound. 
2
 2018 16 SCC 413.
Page | 2
4. Hon’ble   the   Chief   Justice   has   very   eruditely   analysed   the
sustainability   of   the   Group   of   Companies   Doctrine   and  inter   alia
pointed out thati) The application of the Group of Companies Doctrine in Chloro
Controls  relies   upon   the   intent   of   the   parties   to   include   a   nonsignatory   to   the   arbitral   proceedings.   However,   the   Court   in   that
decision failed to adhere to contractual principles on the basis of
which such intent is interpreted;
ii) Joinder   of   non­signatories   based   on   the   notion   of   “single
economic   unit”   ignores   commercial   reality   and   the   importance   of
treating   different   parties   within   the   same   group   of   companies   as
separate legal entities;
iii) Following Chloro Controls there has been an expansion of the
Group of Companies Doctrine. A broad interpretation of the Doctrine
is at odds with the principle of party autonomy;
iv) The line of judgments by  this Court, beginning with  Chloro
Controls, seem to be premised more on convenience and economic
efficiency in resolution of disputes rather than a consistent and clear
legal doctrine which respects party autonomy and intent;
v) The phrase “claiming through or under” as provided in Section
8 of the Arbitration and Conciliation Act, 1996 (hereinafter, “the Act”),
as amended via the Arbitration Amendment Act, 2016, may not be a
legitimate basis for reading the Group of Companies Doctrine into
Indian law.
A. Origin of the Group of Companies Doctrine
Page | 3
5. The Group of Companies Doctrine has generally been invoked by
courts and tribunals in arbitrations to either ‘extend’ the arbitration
agreement or ‘bind’ a non­signatory affiliate of the contracting party to
the arbitration clause. As the name suggests, where an arbitration
agreement is entered into by one of the companies in a group, the
other   members   of   the   group   may   be   bound   by   the   arbitration
agreement if the facts and circumstances, including the conduct of the
parties, indicate that the true intention of parties was to bind the
signatories as well as the non­signatories. 
6. The Group of Companies Doctrine was first espoused explicitly
by an arbitral tribunal in the case of Dow Chemicals v. Isover Saint
Gobain3
. The International Chamber of Commerce (hereinafter “ICC”)
Tribunal opined that the scope and effect of the arbitration agreement
should be determined on the basis of the  “common   intent  of   the
parties”   as   ascertainable   from   the   circumstances   related   to
‘conclusion,   performance,   and   termination,   of   the   contract’.   The
Tribunal therein determined that the Dow Chemical Group had not
attached any significance to which of them performed the distribution
agreements   with   Saint   Gobain   and   the   common   intent   of   all   the
parties was that they would be playing a role in performance of the
contract. The Tribunal further held that the companies within the Dow
Chemical group had acted as a single ‘economic reality’ or unit and
3
 Rev Arb 137 1984; 110 JDI 899 (1983).
Page | 4
that the non­signatories to the distribution agreements with Saint
Gobain would be bound to the arbitration agreement, regardless of
whether they had performed the contract.
7. The   Tribunal   in  Dow   Chemicals  laid   down   the   elements
required to attract the Group of Companies Doctrines, which read as
follows: 
“…irrespective of the distinct juridical identity of each of its
members,  a  group of  companies  constitutes  one and  the
same   economic   reality   of   which   the   Arbitral   tribunal
should   take   account   when   it   rules   on   its   own
jurisdiction...”
xxx
Considering that the tribunal shall, accordingly, determine the
scope and effects of the arbitration clauses in question, and
thereby reach its decision regarding jurisdiction, by reference to
the common intent of the parties to these proceedings, such as
it appears from the circumstances that surround the conclusion
and characterize the performance and later the termination of
the contracts in which they appear.….
xxx
Considering,   in   particular,   that   the   arbitration   clause
expressly  accepted   by   certain   of   the   companies   of   the
group should bind the other companies which, by virtue
of   their   role   in   the   conclusion,   performance,   or
termination   of   the   contracts   containing   said   clauses,
and   in   accordance   with   the   mutual   intention   of   all
parties to the proceedings, appear to have been veritable
parties   to   these   contracts   or   to   have   been   principally
concerned by them and the disputes to which they may
give rise.”
      (Emphasis Supplied)
Page | 5
B. Group of Companies Doctrine in Foreign Jurisdictions 
8. It   is   important   to   recount   the   evolution   of   the   Group   of
Companies  Doctrine   in  France  and  other jurisdictions  in  order  to
understand some visible anomalies that have emerged in the Indian
context. 
9. The practice by Courts and tribunals in terms of usage of the
Group   of   Companies   Doctrine   has   gravitated   toward   being   a   fact
intensive exercise. In this context, what has emerged even in France
where   the  Doctrine  originated   is  that  the  existence   of   a  group   of
companies is not the sole sufficient condition for the joinder of a nonsignatory to arbitration proceedings. The Tribunal in ICC Case  Nos.
7604  &  76104
  had summed up the steps in the application of the
doctrine and held:
“…Although   the   existence   of   a   group   is   the   first
condition   for   joining   a   third   party   to   the   arbitration
proceedings,   it   is   also   necessary   to   determine   the
parties’  actual  intention  at  the  time of  the facts or,  at
the   very   least   the   intention   of   the  non­signatory   third
party.”
10. The Final Award in ICC Case No. 107585
 elaborated as follows,
“The   extension   of   an   arbitration   agreement   to   a   nonsignatory is not  a  mere  question  of corporate structure
or   control,   but   rather   one   of   the   non­signatory’s
participation   in   the   negotiations,   conclusion   or
4
 ICC award in Cases No. 7604 and 7610 of 1995, 125 J Droit Int’l 1027 (1998) and 4 ICC Awards 510.
5
 ICC award in Case No. 10758 of 2000, 6 ICC Ct Bull 87 (No. 2, 2005), 5 ICC Awards 537, JDI
2001, 1171.
Page | 6
performance of the contract, or its conduct towards the
other party that the Arbitral Tribunal can infer.”
11. Bernard   Hanotiau,   arguably   France’s   leading   scholar   on
international arbitration, while referring to French jurisprudence since
Dow Chemicals, has opined that,
“The   existence   of   a   group   of   companies   gives   a
special dimension to the issue of conduct or consent.
As several authors have pointed out, when there is a
group   of   companies,   one   may   presume   that   the
parent   company   binds   its   subsidiaries;   but   on   the
other   hand,   only   the   companies   that   have   been
substantially   involved   in   the   negotiation   and
performance   of   the   agreement   containing   the
arbitration clause  will  be  considered parties to  the
latter.  The case law is not always entirely clear in this
respect. In most cases, it seems that only a substantial
involvement is considered sufficient to constitute consent
or   ratification.   Some   cases,   however,   suggest   that   a
party’s conduct should not necessarily be regarded as an
expression of a party’s implied consent; rather a party’s
substantial   involvement   in   the   negotiation   and
performance   of   the   contract   and   the   knowledge   of   the
existence of the arbitration clause have a standing of their
own, as a substitute for consent”6
         (Emphasis Supplied)
6
 Bernard Hanotiau, ‘Who Are the Parties to the Contract(s) or to the Arbitration Clause(s) Contained Therein?
The Theories Applied by Courts and Arbitral Tribunals’ in Bernard Hanotiau (eds), Complex Arbitrations:
Multi-party, Multicontract, Multi-issue – A comparative Study (Kluwer Law International 2020).
Page | 7
12. Thus, the relevance of the Group of Companies Doctrine in its
jurisdiction of origin is that of being a special lens through which the
parties’   intentions   are   interpreted.   The   existence   of   a   close   group
structure would be only one of the considerations when determining
the implied consent of a third party to arbitrate. 
13. Subsequent French court decisions have taken a similar stance.
In Lakovoglou Prodomos and Co. v. SAS Amplitude7
, the Cour de
Cassation reiterated the requirement of involvement of the third party
in the performance of the main agreement in order it to be bound by
the arbitration agreement contained therein. Simply the existence of a
closely  knit  group  of  companies  would  be  insufficient.  In  Societe
Alcatel  Business  Systems  v.  Societe  Akmor  Technology8 as well,
the Cour de Cassation noted that arbitral proceedings may bind nonsignatories involved in the substantive dispute itself. 
14. In yet another ICC Award9
, the Tribunal held,“…There   is  no
general rule, in French international arbitration law, that would
provide that non­signatory parties members of a same group of
companies  would   be   bound   by   an   arbitration   clause,  whether
always or in determined circumstances.”
15. The   reception   to   the   Group   of   Companies   Doctrine   in   other
jurisdictions has been mixed. The Swiss Federal Tribunal rejected the
Group of Companies Doctrine10  but has accepted that a third party
7
 Cour de Cas, 1st Civ Ch, 27 Mar 2007, no 04-20842, JCP E 2007, 2018.
8
 Cour de Cas, 1st Civ Ch, 7 Nov. 2012, No. 11-25.891, JCP 2012, I, 1354 No 5.
9
 ICC Case No 11405, Interim award of 29 Nov 2001, Unpublished (Sole Arbitrator, Paris).
10 Judgment of 29 January 1996, 14 ASA Bull 496 (Swiss Fed Trib) (1996); Jean Francois Poudret, ‘The
Page | 8
may   ‘implicitly’   consent   to   be   bound   to   arbitration   in   certain
circumstances. In general, the involvement of the non­signatory in the
performance of the contract will be interpreted as intent to be bound
to   the   arbitration   agreement.11  However,   this   requires   an   active
involvement which shows clear and unambiguous intent, thus setting
a high threshold for a third party to be joined.12
16. The Swiss sentiment vis­à­vis the Group of Companies Doctrine
is   mirrored   by   British   jurisprudence   where   there   has   been   an
unequivocal   rejection   of   the   Doctrine.13  Further,   the   expression
“claiming under or through” in Sec. 82(2) of the English Arbitration
Act, 1996, which is similar to Sec. 8 of the amended Indian Act, 1996,
has been interpreted to refer to instances that are unrelated to the
Group of Companies Doctrine. British Courts have deemed it to mean
inter   alia  assignees14,   subrogated   insurer15,   novatees16,   and
successors17
.
17. American Courts usually do not refer to the Group of Companies
Doctrine and rely primarily on aspects of American Contract Law and
Agency Law.18 Company law principles such as alter ego and piercing
the   veil   are   additionally   invoked   by   American   Courts   though   the
Extension of the Arbitration Clause: French and Swiss Approaches’ 122 JDI (Clunet) 893 (1995).
11 Judgment of 19 August 2008, DFT 4A_128/2008 (Swiss Fed Trib) (2008).
12 Gabrielle Kaufmann-Kohler & A Rigozzi, International Arbitration: Law and Practice in Switzerland (OUP
2015).
13 Peterson Farms Inc v C&M Farming Ltd [2004] EWHC 121.
14 Through Transport Mutual Insurance Association (Euasia) Ltd v New India Assurance Co. Ltd [2005] EWHC
455 Moore-Bick J.
15 Starlight Shipping Co. and Anor v Tai Ping Insurance Co Ltd, Hubei Branch and Anor, [2007] EWHC 1893.
16 Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd (The Smaro) [1998] EWHC 1206.
17 Hanotiau (n 6).
18 Gary Born, ‘Parties to International Arbitration Agreements, International Commercial Arbitration’ in Gary
Born (eds) International Commercial Arbitration (Kluwer Law International 2021).
Page | 9
threshold   for   their   application   remains   relatively   high.19  American
Courts have sometimes reached conclusions through reasoning that
resembles the Group of Companies Doctrine but which are actually
based on the principle of equitable estoppel.20
18. The common theme among all these jurisdictions is that each of
them has negotiated a compromise with the formalistic requirement of
explicit   assent   through   a   signed   contract.   In   other   words,   these
jurisdictions have moved away from this need for explicit consent in
each   and   every   instance   and   have   instead   attempted   to   identify
constructive consent via examination of the  actions of the parties
when the circumstances of the case require it. In some instances,
these jurisdictions have even applied standards that are not based
upon consent at all such as equitable estoppel and piercing the veil. 
C. Evolution of the Group of Companies Doctrine in India 
19. Indian   arbitral   jurisprudence   with   respect   to   binding  a   nonsignatory   to   an   arbitration   agreement   has   seen   considerable
transformation. In Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya
& Anr21 certain disputes had arisen between multiple parties relating
to the same transaction, however, not all parties were signatories to
the agreement containing the arbitration clause. The Court therein,
relying upon the unamended Section 8 of the Act, held that it would
19 Hicks v. Bank of Am, NA, 218 F App’x 739, 746 (2007); Bridas SAPIC v. Turkmenistan, 447 F 3d 411, 416-
20 (2006).
20 Astra Oil Co v Rover Navigation, Ltd, 344 F 3d 276, 277 (2003); Choctaw Generation LP v. Am Home Assur
Co, 271 F 3d 403, 406-07 (2001).
21 2003 5 SCC 531.
Page | 10
not be possible to refer the non­signatories to arbitration. Thereafter,
in  Indowind   Energy   Ltd.   v.  Wescare   (I)   Ltd.&   Anr22  this Court
interfered with an order of the Madras High Court which had allowed
the application under Section 11 of the Act and joined Indowind to
proceedings   even   though   Indowind   was   not   a   signatory   to   the
agreement. This Court, while allowing the appeal, held: 
“18.   The   very   fact   that   the   parties   carefully   avoided   making
Indowind a party and the fact that the Director of Subuthi though a
Director of Indowind, was careful not to sign the agreement as on
behalf   of   Indowind,   shows   that   the   parties   did   not   intend   that
Indowind should be a party to the agreement. Therefore the mere
fact   that   Subuthi   described   Indowind   as   its   nominee   or   as   a
company promoted by it  or that  the agreement  was  purportedly
entered by Subuthi on behalf of Indowind, will not make Indowind a
party   in   the   absence   of   a   ratification,   approval,   adoption   or
confirmation of the agreement dated 24­2­2006 by Indowind.” 
20. With utmost respect, it  appears that the Court in  Indowind
adopted a rigid and restrictive understanding of the Act. In order to
hold   that   a   third   party   cannot   be   subjected   to   the   arbitration
proceedings, the two judge bench placed an undue emphasis on the
issue   of   formal   consent.   However,   as   noticed   earlier,   several
jurisdictions have recognized that formal consent to an arbitration
agreement is not a  sine qua non  to adduce the intention of a third
party   to   be   bound   to   an   arbitration   agreement.   In   fact,   certain
22 2010 5 SCC 306.
Page | 11
principles by which Courts across jurisdictions join non­signatories to
arbitration do not depend upon intent of the parties at all. 
21. The principle laid down in Indowind was then followed in S.N.
Prasad v. Monnet Finance & Ors23 as well. Eventually, this position
of   law   regarding   the   joinder   of   non­signatories   was   radically
transformed   after   the   decision   of   this   Court   in  Chloro   Controls,
whereby, the Group of Companies Doctrine was introduced into Indian
jurisprudence.   In   that   case,   there   was   a   Shareholders   Agreement
between   an   Indian   party   and   a   foreign   entity.   The   Shareholders
Agreement was the principal or the ‘parent’ agreement with English
law governing the transaction and the seat of arbitration as London.
Beyond the Shareholders Agreement, there were various other interlinked agreements but not all these agreements had the same parties.
These   other   agreements,   however,   were   part   of   a   ‘composite
transaction’ and all arose out of the mother agreement. The question
before the Court was whether all these parties could be referred to a
single and composite arbitral tribunal. Noting earlier precedents, this
Court stated that while  Sukanya  Holdings was decided under the
ambit of Section 8 of the Act, this case fell within the purview of
Section 45 of the Act which had a much wider scope. Relying upon the
expression “person claiming through or under” in Section 45, this
Court ruled that it had the power to refer parties in a multi­party
23 2011 1 SCC 320.
Page | 12
agreement   to   Arbitration   while   invoking   the   Group   of   Companies
Doctrine. It was further elucidated: 
“69. We   have   already   noticed   that   the   language   of
Section 45 is at a substantial variance to the language
of Section 8 in this regard. In Section 45, the expression
“any   person”   clearly   refers   to   the   legislative   intent   of
enlarging   the   scope   of   the  words   beyond   “the  parties”
who   are   signatory   to   the   arbitration   agreement.   Of
course,   such  applicant   should   claim   through   or  under
the  signatory  party.  Once  this  link  is  established,  then
the court shall refer them to arbitration. The use of the
word “shall” would have to be given its proper meaning
and cannot be equated with the word “may”, as liberally
understood   in   its   common   parlance.   The   expression
“shall”   in   the   language   of   Section   45   is   intended   to
require   the   court   to   necessarily   make   a   reference   to
arbitration,   if   the   conditions   of   this   provision   are
satisfied. To that extent, we find merit in the submission
that   there   is   a   greater   obligation   upon   the   judicial
authority   to   make   such   reference,   than   it   was   in
comparison   to   the   1940   Act.   However,   the   right   to
reference cannot be construed strictly as an indefeasible
right. One can claim the reference only upon satisfaction
of   the   prerequisites   stated   under   Sections   44   and   45
read with Schedule I of the 1996 Act. Thus, it is a legal
right which has its own contours and is not an absolute
right, free of any obligations/limitations.
xxx
72….In  other  words,   ‘intention  of  the  parties’  is  a  very
significant  feature which must be established before the
Page | 13
scope of arbitration can be said to include the signatory
as well as the non­signatory party.
73. A non­signatory or third party could be subjected to
arbitration  without   their  prior   consent,  but   this  would
only   be   in   exceptional   cases.   The   court   will   examine
these   exceptions   from   the   touchstone   of   direct
relationship   to   the   party   signatory   to   the   arbitration
agreement, direct commonality of the subject­matter and
the   agreement   between   the   parties   being   a   composite
transaction.   The   transaction   should   be   of  a   composite
nature where performance of the mother agreement may
not  be  feasible  without  aid, execution  and  performance
of   the   supplementary   or   ancillary   agreements,   for
achieving   the   common   object   and   collectively   having
bearing on the dispute. Besides all this, the court would
have to examine whether a composite reference of such
parties   would   serve   the   ends   of   justice.   Once   this
exercise is completed and the court answers the same in
the   affirmative,   the   reference   of   even   non­signatory
parties would fall within the exception afore­discussed.”
   (Emphasis Supplied)
22. To give legislative effect to the decision in Chloro Controls, the
Law   Commission   in   its   246th  Report   made   the   following
recommendation: 
“64. This  interpretation given  by the  Hon’ble  Supreme  Court
follows from the wording of section 45 of the Act which recognizes
the right of a “person claiming through or under [a party]” to apply
to a judicial authority to refer the parties to arbitration. The same
language is also to be found in section 54 of the Act. This language
Page | 14
is however, absent in the corresponding provision of section 8 of
the Act. It is similarly absent in the other relevant provisions,
where  the  context  would  demand  that  a  party includes also a
“person   claiming   through   or   under   such   party”.   To   cure   this
anomaly,   the   Commission   proposes   an   amendment   to   the
definition of “party” under section 2 (h) of the Act.”24
23. The Legislature in its wisdom did not amend the definition of
Section  2(1)(h)   of  the  Act  but  Section  8  of  the   Act  was   amended
through Act 3 of 2016, which now reads as follows: 
“(1). A judicial authority, before which an action is brought in a
matter which is the subject of an arbitration agreement shall, if a
party   to   the   arbitration   agreement  or   any   person   claiming
through   or   under   him,  so  applies  not  later  than  the date  of
submitting his first statement on the substance of the dispute,
then,   notwithstanding   any   judgment,   decree   or   order   of   the
Supreme Court or any court, refer the parties to arbitration unless
it finds that prima facie no valid arbitration agreement exists.”
(Emphasis Supplied)
24. Following   the   post   amendment   provision(s),   the   Group   of
Companies Doctrine in the Indian Context was further expanded by a
three judge bench of this Court in Cheran Properties Ltd. This Court
invoked the Group of Companies Doctrine and laid down that even
though Cheran was not a party to the arbitration agreement and had
not appeared before the Tribunal, the arbitral award could be enforced
against   it   as   Cheran   was   a   ‘party   claiming   under’   one   of   the
signatories   to   the   agreement.   Speaking   on   the   importance   of   this
doctrine in modern commercial transactions, the Court held that, “The
24 Law Commission of India, Amendments to the Arbitration and Conciliation Act 1996 ¶ 64.
Page | 15
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.”
25. In  Reckitt   Benckiser   (India)   (P)   Ltd.   v.   Reynders   Label
Printing  (India)  (P)  Ltd  &  Anr25, while acknowledging the Group of
Companies Doctrine, this Court refused to allow the joinder of a nonsignatory as it could not be proved that the non­signatory company
had negotiated the contract on behalf of the signatory. 
26. A   two   judge   bench   of   this   Court   in  Mahanagar   Telephone
Nigam  Limited  v.  Canara  Bank  &  Ors26
,  was concerned with the
joinder of CANFINA, which was a non­signatory to the agreement but a
wholly owned subsidiary of Canara Bank. Upon considering the nature
of transaction involved and the conduct of the parties, the Court held
that this was a case of “tacit or implied consent” and accordingly it
was necessary to join CANFINA to the arbitral proceedings. The Court
stated the principles governing the group of companies doctrine to be
as follows:
“10.7. The   group   of   companies   doctrine   has   also   been
invoked in cases where there is a tight group structure
with strong organisational and financial links, so as to
constitute   a   single   economic   unit,   or   a  single   economic
reality. In such a situation, signatory and non­signatories
have   been   bound   together   under   the   arbitration
25 2019 7 SCC 62.
26 2020 12 SC 767.
Page | 16
agreement. This will apply in particular when the funds of
one company are used to financially support or restructure
other members of the group. [ICC Case No. 4131 of 1982,
ICC Case No. 5103 of 1988.]”
27. A three judge bench of this Court (in which I was a member), has
in a very recent decision dated 27.04.2022 in Oil and Natural Gas
Corporation  Ltd.  v.  M/s  Discovery  Enterprises  Pvt.  Ltd.  &  Anr27
,
reiterated   the   deep   rooted   existence   of   the   Doctrine   in   the   Indian
context. The Court held that the following factors may be considered
when deciding whether a non­signatory company within a group of
companies would be bound by the arbitration agreement: 
“i) The mutual intent of the parties;
(ii) The relationship of a non­signatory to a party 
which is a signatory to the agreement; 
(iii) The commonality of the subject matter;
iv) The composite nature of the transaction; and 
(v) The performance of the contract.”
 (Emphasis Supplied)
D. Current State of the Group of Companies Doctrine
28. At the outset, it must be candidly acknowledged that certain
inconsistencies   do   exist   in   terms   of   the   judgments   of   this   Court
regarding the underlying basis for the Group of Companies Doctrine.
For   instance,   in  Chloro   Controls,   the   Court   seemed   to   adopt
27 Civil Appeal No 2042 of 2022.
Page | 17
contradictory positions in terms of when a third party may be bound to
the arbitration agreement. On the one hand, the Court emphasized on
the intention of the parties to include the non­signatory party, but on
other, it went on to add that non­signatories may be added to the
arbitration proceedings without their consent in “exceptional cases”.
Thus, it seems that while the Chloro Controls   places a premium on
the intent of parties, it also advocates taking an equity based approach
to discard intent completely if so required in the interest of justice. 
29. In  Mahanagar  Telephone  Nigam  Ltd.  the Court had applied
the Group of Companies Doctrine where a tight structure with deep
financial and organization links existed between a signatory and nonsignatory   to   the   extent   where   they   constituted   a   “single   economic
unit”. Such an approach has the tendency to overlook the principle of
separate legal entity and seems to dispense almost entirely with the
intent and/or consent of parties.  
30. It is also worth noting that in  Cheran  Properties, this Court
enforced an award against a party that had not even participated in
the arbitral proceedings, by relying on the phrase “persons claiming
under   them”   in   Section   35   of   the   Act.   This   presents   the   highest
expansion of the Group of Companies Doctrine, whereby, a party is
bound to the final award itself on the basis of the doctrine without
having a chance to present its case or defend itself in the arbitral
proceedings. This Court in Reckitt Benckiser fixed a higher threshold
Page | 18
of evidence for the Group of Companies Doctrine to apply as compared
to  earlier judgments.   Finally,  in  ONGC,  the  Court  has  upheld  the
necessity for a deeper probe to determine whether the Doctrine is
attracted in the facts and circumstances of a given case. This leads to
questions regarding which standard of proof must be fulfilled to apply
the Doctrine.
31. An   overall   analysis   of   the   above   cited   judgments   reveals   an
unwitting,   but   nonetheless   discordant   note   with   implicit
contradictions. However, in my humble view, the appropriate response
to such uncertainty would be an authoritative determination of the
contours of the Doctrine rather than a wholesale uprooting of it from
Indian arbitration law altogether. 
32. It is important to note that the Doctrine has now travelled a
reasonable distance in Indian law. While the opinion of Hon’ble the
Chief Justice correctly notes that the term “parties” under Section 2(1)
(h) has not been amended despite the changes introduced in Section 8
of the Act, it appears to me that one of the objectives in introducing
the amended Section 8 was to accord tacit recognition and acceptance
of the Group of Companies Doctrine in India. 
33. It may also be noted that the question as to which entities are
parties   to   the   arbitration   agreement   is   usually   left   to   judicial
discretion,   especially   when   there   is   a   limited   statutory   guidance.28
Thus, the perception regarding the questionable sourcing of the Group
28 Born (n 18).
Page | 19
of Companies Doctrine from the wording of Section 8 of the Act, does
not imply that it is barred from Indian arbitration law. Undoubtedly,
the   Courts   have   the   judicial   discretion   to   invoke   and   apply   the
Doctrine in Indian arbitral jurisprudence. 
34. The   earlier   analysis   on   the   interpretation   of   the   Group   of
Companies doctrine fortifies that when formulated in its most modern
sense, it does not affect the separate legal entity principle in company
law. Gary Born29 notes that the Doctrine,
“…is   ordinarily   a   means   of   identifying   the   parties’
intentions,   which   does   not   disturb   or   affect   the   legal
personality of the entities in question. Rather, as usually
formulated,  the  group   of   companies  doctrine  is   akin   to
principles   of   agency   or   implied   consent,   whereby  the
corporate   affiliations   among   distinct   legal   entities
provide   the   foundation   for   concluding   that   they   were
intended to be parties to an agreement, notwithstanding
their   formal   status   as   non­signatories.”   Commentators
have observed the same distinctions between the group of
companies doctrine and veil­piercing principles.”
   (Emphasis Supplied)
35. It   therefore   appears   that   the   current   interpretation   of   the
Doctrine  ‘does not disturb or affect’  the separate corporate form of
different entities within a group of companies. Neither does the act of
piercing the corporate veil necessarily cause the separate legal entity of
the third party to collapse. In this context, corporate law doctrines
such as piercing the veil and alter ego are a means by which to identify
29 Born (n 18).
Page | 20
fraudulent activity by a non­signatory which would then provide the
legal justification for application of the Group of Companies Doctrine
to bind that non­signatory to the arbitration. This is a departure from
the “single economic reality” approach which views the entire group of
companies   as   a   singular   entity   and   overrides   the   separate   legal
personalities of the different members of the group. 
36. Thus, in this approach, the separate legal form of the parent
company remains undisturbed and the application of veil piercing or
alter ego is merely for identification of duplicitous acts by a third party
which   would   then   lead   to   application   of   the   Group   of   Companies
Doctrine to bind them to arbitration. The function of this is to identify
parties which have no actual intent to be part of the arbitration and
deliberately use the corporate form as a shield to avoid being subjected
to the arbitration proceedings. For such scenarios, a formal intentbased approach to Group of Companies Doctrine may be insufficient to
address the dispute. 
37. From the analysis above, it appears that joining a third party to
arbitration based on the convergence of a group of companies as a
“single economic  unit” is no longer the norm under the Group of
Companies Doctrine. Instead, the standard is premised primarily on
implied consent drawn from the acts and conduct of an entity within
the   group   of   companies.   Where   a   closely   knit   group   exists,   the
interpretation of a third party’s intent to be bound to the arbitration
would   be  construed   from facts  and   circumstances  specific  to  that
Page | 21
group   and   the   manner   in   which   it   functions.   This   maintains   the
separate  legal   personality  of  the  non­signatory  and   joins  it  to  the
arbitration proceedings on the basis of its implied acceptance to be
bound. 
38. It must be emphasized that the Doctrine is an exception to the
general rule of arbitration. However, where the facts of a case indicate
that the intention of the parties was to bind the non­signatory, the
Courts,   after   exercising   due   care   and   caution,   will   be   justified   in
invoking the Doctrine to do substantial and complete justice. After the
2016 amendment to the Act, this Court has continued to acknowledge
and apply the Doctrine in exceptional cases. When all of these factors
are viewed in consonance, it emerges that the Doctrine has found firm
footing in Indian jurisprudence. 
39. This is not without reason. On a practical front, the Doctrine is a
means of grappling with complex multi­party business transactions
which   necessarily   involve   more   than   two   parties,   even   if   these
additional parties do not finally and formally sign the contract. To that
extent,  the  Doctrine  helps to  ensure  that arbitration as  a dispute
resolution mechanism is able to adapt to this reality. Failure to do so
would   make   arbitration   an   ineffective   dispute   resolution   forum   as
parties which are important for the complete and proper resolution of
the dispute will be left out of the adjudication. 
40. The Doctrine also ensures that multiplicity of proceedings are
avoided.   A   party   may   be   involved   in   the   negotiation   and   even
Page | 22
performance   of   an   agreement   but   still   be   able   to   circumvent   the
arbitral process on the ground that it did not sign the contract. Such a
party would then have to be proceeded against in court.
41. There are additional benefits of having the Group of Companies
Doctrine   in   Indian   jurisprudence.   These   arise   from   the   peculiar
circumstances and manner in which Indian business entities transact
with each other and establish commercial relations. A large chunk of
Indian business houses are composed of family run entities or groups.
The individuals running these entities often occupy multiple roles in
different companies within the group. Thus, the commonality in terms
of   key   managerial   personnel   and   the   preponderance   of   family
members occupying these positions moulds the way these companies
conduct   business.   Entering   into   commercial   transactions   involves
informal understandings based on familiarity with persons who run
the overall group of companies even if not the specific entity with
which a contract is formally executed. 
42. In this scenario it becomes even more relevant to have a doctrine
such as the Group of Companies in Indian arbitration law. A third
party outside the group of companies may transact with a subsidiary
due to its faith in the bona fides and commercial know­how of the
parent. The third party in question relies upon the stature or presence
of the larger parent company, either due to its reputation or personal
familiarity with its promoters, directors or executives. 
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43. The   Doctrine   itself   may   also   provide   greater   stimulus   for
business   with   new   entities   that   are   starting   out.   Due   to   the
aforementioned   peculiarities   in   Indian   business   relations,   newer
companies have significant difficulty in gaining traction. One of the
means by which such companies can then gain a foothold is by being
part of a large (often family held) group of companies. These new
entities are then able to feed off the goodwill or relations that the
larger group has with the rest of the business world. Given that the
connection   to   the   larger   group   is   intrinsic   to   the   way   in   which
business is conducted, arbitration law must acknowledge and address
this reality.
44. In fact, Tribunals have already recognized the reliance that is
often placed by a company upon the conduct of the non­signatory
parent company when entering into an agreement with its subsidiary.
The Tribunal  in  PetroAlliance   Services   Company   Ltd.   v.   Yukos
Oil30  under the aegis of the Arbitration Institute of the Stockholm
Chamber of Commerce is a prime example of international arbitration
grappling with this issue. 
45. Therein, the tribunal noted that Yukos Oil, via its actions, had
created an expectation in the mind of PetroAlliance that it was willing
and ready to back up/step into the shoes of its subsidiary YNG with
which PetroAlliance had entered into a contract. While there were
several factors that contributed to the decision of the tribunal to bind
30 SCC Case No 108/1997, 2000.
Page | 24
Yukos to the arbitral proceedings, the most relevant takeaway for our
purposes is the manner in which the tribunal enunciated the “theory
of trust” that exists under Swedish contract law. 
46. The   important   consideration   under   this   theory,   similar   to
company law principles such as alter ego, is not the actual intent of
the   party   as   the   non­signatory   may   be   acting   duplicitously   to
represent   itself   as   the   driver   of   the   contract   while   avoiding   any
liabilities arising from it by not signing the contract. Hence, what the
theory examines is what intent the non­signatory has conveyed to a
reasonable party in the same position as the contracting entity. The
decisive factor is the extent to which the contracting party has placed
“trust” in the other party, reasonably, and on the basis of the nonsignatory’s actions. 
47. To clarify, the wholesale adoption of the Swedish theory of trust
into Indian law is not being advocated. Rather, the notion of how we
may apply the Group of Companies Doctrine in situations where nonsignatory parties are acting in a fraudulent or deceitful manner can be
addressed   by examining the  impression  that  was  conveyed  to  the
contracting   parties   by   the   third   party.   This   is   in   addition   to   the
already well­established principles of piercing the veil and alter ego.
This may also address the legitimate critique of Chloro Controls and
Cheran   Properties, that   despite   placing   an   emphasis   on   legal
standards  of  intent, the  Court eventually resorted to  principles  of
Page | 25
equity and commercial/economic expediency to apply the Group of
Companies Doctrine in those cases. 
E. Conclusion
48. In view of the above discussion, respectfully, I am of the opinion
that the questions that are sought to be referred to a larger bench
deserve further elaboration. With all the humility at my command, the
following   substantial   questions   of   law   also   arise   for   authoritative
determination by a larger bench in addition and in conjunction with
those formulated by Hon’ble the Chief Justice:
A. Whether the Group of Companies Doctrine should be read into
Section 8 of the Act or whether it can exist in Indian jurisprudence
independent of any statutory provision?
B. Whether the Group of Companies Doctrine should continue to be
invoked on the basis of the principle of ‘single economic reality’?
C. Whether the Group of Companies Doctrine should be construed as
a means of interpreting the implied consent or intent to arbitrate
between the parties?
D. Whether the principles of alter ego and/or piercing the corporate
veil can alone justify pressing the Group of Companies Doctrine
into operation even in the absence of implied consent?
………..………………… J.
(SURYA KANT)
NEW DELHI
DATED :06.05.2022
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