Inclusion Of Non-Signatories To Arbitration Agreement In Arbitral Proceedings Is Justified If They Have Contractual Relationship With Claimants: Delhi HC
|The Delhi High Court observed that the inclusion of non-signatories to arbitration agreements in arbitral proceedings is justified if they have a contractual relationship with the claimants.
The Court was hearing a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, for reference to the disputes which have arisen between the parties in the context of the Work Order executed between them.
The bench of Justice C. Hari Shankar observed, “…another instance that justifies the inclusion of a non-signatory to an arbitration agreement in arbitral proceedings is a contractual relationship which makes a non-signatory also responsible to one extent or the other to the obligations towards the claimants.”
Advocate Tanya Karnwal appeared for the Appellant and Advocate Animesh Sinha appeared for the Respondent.
Brief Facts-
In the present case, Respondent 1, Bholasingh Jaiprakash Contruction Limited (BJCL), subcontracted part of a project, originally contracted by Respondent 3, Bharat Heavy Electricals Ltd (BHEL), at a site owned by Respondent 2, National Thermal Power Corporation (NTPC), to the petitioner. The petitioner claimed idling charges and damages from the respondents. Clause 36 of the Work Order mandates dispute resolution via a sole arbitrator, mutually appointed. The petitioner invoked arbitration, calling for a sole arbitrator's appointment. BJCL agreed to arbitration, but BHEL and NTPC opposed, citing no privity of contract with the petitioner, contending the Work Order was solely between the petitioner and BJCL. The petitioner approached the Court under Section 11(6) of the Arbitration and Conciliation Act, 1996.
The Court mentioned the doctrine of “Group of Companies” by which a non-signatory can be included in an arbitral proceeding.
The Court relied on the decision of the Supreme Court in O.N.G.C. v. Discovery Enterprises Pvt Ltd, where according to the Court SC held that “a non-signatory may be bound by the operation of the group of companies doctrine as well as by the operation of the principles of assignment, agency and succession.”
The Court said that the mere fact that the technical specifications and other details mentioned in the contract between BHEL and BJCL would apply to the sub-contract between BJCL and the petitioner cannot by itself justify the inclusion of BHEL in the arbitral proceedings. However, the Court noted that Clauses 21 and 28 of the Work Order suggest a prima facie case for including BHEL in the proposed arbitration. Therefore, the Court said that sans the approval by BHEL and release of payment by BHEL to BJCL, BJCL would not release the payments to the petitioner.
The Court further said that the mere fact that the petitioner has included NTPC in an omnibus fashion in the allegations contained in the Section 21 notice and also claimed the demanded amounts jointly and severally from all the respondents cannot, prima facie, justify the inclusion of NTPC in the arbitral proceedings.
Accordingly, the Court said that a clear case for referring the dispute to arbitration exists and went on to appoint Sr. Adv. Anant V. Palli as Arbitrator.
Cause Title: RBCL Piletech Infra v. Bholasingh Jaiprakash Construction Limited & Ors. (Neutral Citation: 2024:DHC:5415)
Appearance:
Appellant: Adv. Tanya Karnwal and Adv. Harshit Batra
Respondent: Adv. Animesh Sinha, Adv. Shubham Budhiraja, Adv. Ishita Pandey and Adv. K.K. Tyagi