2022 (11) TMI 1519 - HC - Indian Laws

Appointment of Presiding Arbitrator - nominee Arbitrators of the parties could not reach a consensus regarding the appointment of the Presiding Arbitrator - appointment of nominee Arbitrator of IIC Limited as the Arbitrator of Indiabulls Power Ltd. - HELD THAT - In the present case, admittedly, the contractual documents from which the petitioner says that disputes have arisen, were signed by and between the petitioner and respondent No. 1. However, since respondent No. 1 is presently undergoing corporate insolvency resolution process and a 'moratorium' is in force against respondent No. 1, the petitioner's legal remedy against respondent No. 1 is restricted for the time being and the petitioner can only file a claim before the Resolution Professional and/or avail remedies before the learned NCLT per Alchemist Asset Reconstruction Co. Ltd. vs. Hotel Gaudavan (P) Ltd. 2017 (12) TMI 1107 - SUPREME COURT . Upon a considered interpretation of the transaction in the documents cited by the petitioner in the present case, this court is of the opinion that the petitioner has failed to discharge the burden to establish consent on the part of respondent No. 2 to have any disputes arising from the transaction to arbitration. The petitioner's emphasis on certain documents and correspondence exchanged with respondent No. 2, are all post the execution of the contractual documents between the petitioner and respondent No. 1; and most importantly, even such post-hock correspondence does not establish the existence of an arbitration agreement between the petitioner and respondent No. 2. From another perspective, the petitioner's reliance upon the later documents and correspondence is also destructive of the petitioner's own averment that respondent No. 2 was involved in the negotiations between the petitioner and respondent No. 1. Thus, in the opinion of this court, the requirement of there having to be an arbitration agreement between the petitioner and respondent No. 2 is not fulfilled. The present petition cannot be allowed against respondent No. 2, much less only for the reason that respondent No. 1 is presently under moratorium - Petition dismissed.

Issues Involved:
1. Existence of an arbitration agreement between the petitioner and respondent No. 2.
2. Whether respondent No. 2 is bound by the arbitration agreement between the petitioner and respondent No. 1.
3. Application of the 'group of companies' doctrine.
4. Validity of the invocation notice issued to respondent No. 2.
5. Territorial jurisdiction of the court to entertain the petition.

Detailed Analysis:

1. Existence of an Arbitration Agreement Between the Petitioner and Respondent No. 2:

The court examined whether there was an arbitration agreement between the petitioner and respondent No. 2. The petitioner argued that respondent No. 2 was defined as the 'Owner' in the General Conditions of Contract (GCCs) and had participated in the negotiations culminating in the formation of the main contracts. However, the court found that the contractual documents were signed only between the petitioner and respondent No. 1, and respondent No. 2 was not a signatory to any of the arbitration clauses. The court concluded that the petitioner failed to establish the existence of an arbitration agreement with respondent No. 2.

2. Whether Respondent No. 2 is Bound by the Arbitration Agreement Between the Petitioner and Respondent No. 1:

The petitioner contended that respondent No. 2 was the alter-ego of respondent No. 1 and thus bound by the arbitration agreement. The court noted that while the petitioner provided several communications and documents indicating respondent No. 2's involvement in the project, these were all post the execution of the contractual documents and did not establish an arbitration agreement between the petitioner and respondent No. 2. The court emphasized that the burden to prove that a non-signatory party consented to arbitration lies with the applicant, which the petitioner failed to discharge.

3. Application of the 'Group of Companies' Doctrine:

The petitioner invoked the 'group of companies' doctrine, arguing that respondents Nos. 1 and 2 were related parties with a common director, and thus, respondent No. 2 should be referred to arbitration. The court, however, found that the doctrine was not applicable in this case as the contractual documents did not indicate a partnership or joint venture between the respondents. The court cited precedents stating that mere related party status under the Companies Act, 2013, does not suffice to invoke the doctrine.

4. Validity of the Invocation Notice Issued to Respondent No. 2:

The court scrutinized the invocation notices issued by the petitioner. The notice dated 26.10.2020 was addressed only to respondent No. 1 and did not raise any claims against respondent No. 2. The subsequent notice dated 27.08.2021 to respondent No. 2 did not call for arbitration but merely sought consent for a nominee arbitrator. The court held that a valid invocation notice under section 21 of the Arbitration and Conciliation Act, 1996, is a critical step in the arbitral process, which was not fulfilled in this case.

5. Territorial Jurisdiction of the Court to Entertain the Petition:

Both parties agreed that the court had territorial jurisdiction to entertain the petition as the arbitration proceedings were to be conducted in New Delhi. The court confirmed its jurisdiction to decide the petition.

Conclusion:

The court concluded that the petitioner failed to establish an arbitration agreement with respondent No. 2, and there were no arbitrable disputes between them. The invocation notice to respondent No. 2 was invalid, and the 'group of companies' doctrine was inapplicable. Consequently, the petition was dismissed. The court also noted that the petitioner could pursue other legal remedies available against respondents No. 1 and/or No. 2 before the appropriate forum. Pending applications were disposed of, and the petition was dismissed.

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