9911796707
TMI Blog2024 (9) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... greement, as stipulated under Section 11 of the Act, 1996, is satisfied - Once the arbitral tribunal is constituted, it shall be open for the respondents to raise all the available objections in law, and it is only after (and if) the preliminary objections are considered and rejected by the tribunal that it shall proceed to adjudicate the claims of the petitioner. Shri Justice Mohit S. Shah, former Chief Justice of the High Court of Judicature at Bombay is appointed to act as the sole arbitrator. The fees of the arbitrator including other modalities shall be fixed in consultation with the parties - petition allowed. - CJI (DR. DHANANJAYA Y. CHANDRACHUD) , JUSTICE (J.B. PARDIWALA) And JUSTICE (MANOJ MISRA) For the Petitioner : Mr. Hiroo Advani, Adv. Mr. Divyakant Lahoti, AOR Ms. Vindhya Mehra, Adv. Ms. Madhur Jhavar, Adv. Mr. Navdeep Dahiya, Adv. Ms. Praveena Bisht, Adv. Mr. Kartik Lahoti, Adv. Mr. Kumar Vinayakam Gupta, Adv. Ms. Samridhi Bhatt, Adv. Ms. Shreya Gokel, Adv. Ms. Anushka Awasthi, Adv. Ms. Ria Garg, Adv. For the Respondent : Mr. Ritin Rai, Sr. Adv. Mr. Farhad Sorabjee, Adv. Mr. Dheeraj Nair, AOR Mr. Kumar Kislay, Adv. Mr. Pratik Pawar, Adv. Mr. Siddhesh Pradhan, Adv. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner. It was further represented that the customisation of the balance 10% would take about 10 months from the date of execution of an agreement and that the customisation of the SAP Hybris Software would take lesser time than the time the petitioner may take in developing its own technological solution. 6. The transaction for the purchase, customisation and use of the SAP Hybris Software was divided into three separate agreements entered into between the petitioner and respondent no. 1: i. First, Software License and Support Agreement Software Order Form no. 3 (for short Order Form no. 3 ) dated 30.10.2015 for the purchase of SAP Hybris Software License by the petitioner. ii. Second, the Services General Terms and Conditions Agreement (for short GTC agreement ) dated 30.10.2015 containing the terms and conditions governing the implementation of the SAP Hybris Software. iii. Third, SAP Global Service and Support Agreement, Order Form no. 1 dated 16.11.2015 (for short Order Form no. 1 ) which was executed pursuant to the signing of the GTC agreement and contained the terms of payment between the parties for the services being rendered. 7. It is the case of the petitioner that as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ured to provide a framework for resolution of the challenges and completion of the project. 11. Respondent no. 2 vide email dated 07.10.2016 assured the petitioner that it would monitor the execution of the project and requested the petitioner for an opportunity to agree on the revised plan and delivery. As per the minutes of the meeting dated 14.11.2016, one of the suggestions given by respondent no. 2 as part of the revised proposal for the execution of the project was that a substantial part of the project work would be outsourced to the more experienced global team, and one representative of respondent no. 2 would overlook the progress of the project at the execution level. Arbitration Petition No. 38/2020 Page 6 of 26 12. Unable to resolve the issues, the contract for the SAP Hybris Software project ultimately came to be rescinded on 15.11.2016. In response to this, respondent no. 2, vide e-mail dated 23.11.2016, requested the petitioner for one last opportunity to complete the project, which the petitioner declined vide email dated 24.11.2016. 13. Respondent no. 2, vide email dated 09.12.2016 sent to the petitioner, communicated that there were shortcomings at the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor for the constitution of the tribunal. However, upon failure of the respondents to appoint an arbitrator in terms of the said notice, the petitioner has preferred the present petition. B. REFERENCE ORDER 18. This petition was heard by a three-Judge Bench of this Court. By an order dated 06.05.2022, Chief Justice N.V Ramana (as he then was) speaking for himself and Justice A.S. Bopanna doubted the correctness of the application of the Group of Companies doctrine by the Indian courts. Chief Justice Ramana criticised the approach of a three-Judge Bench of this Court in Chloro Controls India (P) Ltd v. Severn Trent Water Purification Inc reported in (2013) 1 SCC 641 which relied upon the phrase claiming through or under appearing in Section 45 of the Act, 1996 to adopt the Group of Companies doctrine. He noted that the subsequent decisions of this Court read the doctrine into Sections 8 and 35 of the Act, 1996 without adequately examining the interpretation of the phrase claiming through or under appearing in those provisions. He also observed that economic concepts such as tight group structure and single economic unit alone cannot be utilized to bind a non-signatory to an arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent no. 2 and the customisation of the SAP Hybris Software to meet the requirements of the petitioner was not feasible without the aid, execution and performance of respondent no. 2. He submitted that for such reason, it could be said that there exists a direct commercial relationship between the petitioner and both the respondents. 22. The counsel further submitted that the various emails exchanged between the petitioner and respondent no. 2 are indicative of the intention of respondent no. 2 to monitor the execution of the SAP Hybris Software project and to ensure the compliance of the contractual obligations on behalf of respondent no. 1. The counsel adverted to the contents of many such emails in support of his contention. 23. The counsel placed reliance on certain clauses of the License Agreement, Order Form no. 3 and GTC agreement to submit that although respondent no. 2 may not have been a signatory to the agreements, yet it had been entrusted with certain liabilities and obligations under the agreements entered into between the petitioner and respondent no. 1, thereby making it a veritable party to the transaction. 24. In the last, the counsel submitted that as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 2 was never part of the negotiation process between the petitioner and respondent no. 1. Respondent no. 2 did not by its conduct, agree, either impliedly or explicitly, to be bound by the terms and conditions of the agreements between respondent no. 1 and the petitioner. It is preposterous to suggest that by trying to address the concerns of a customer of the subsidiary company (who had voluntarily reached out), respondent no. 2 would become liable under the contracts executed solely between the petitioner and respondent no. 1. Respondent no. 2 entered the fray only when the petitioner, of its own accord, approached it and levelled certain allegations and raised issues concerning the SAP Hybris Software project with its management in August, 2016. There is nothing on record either in the contractual framework or otherwise to indicate that the project was to be performed by respondent no. 2. The only communication with respondent no. 2 in respect of the SAP Hybris Software project arose after the escalation emails in August, 2016 where the petitioner itself requested the management of respondent no. 2 company to help with the alleged issues plaguing the SAP Hybris Software projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner to inflate amounts that it claims are due from respondent no. 1 and respondent no. 2. This is sought to be done by the petitioner to portray and provide a false view of its financial position to the creditors and subvert the due process of law through colourable actions. The petitioner is indulging in forumshopping by once again attempting to appoint an arbitrator under the GTC agreement, a right which both the Bombay High Court and this Court, in two separate lengthy proceedings, under Sections 11 and 14 respectively of the Act, 1996, had decisively held to be forfeited by the petitioner for all times to come. The petitioner failed to disclose that respondent no. 1 had challenged the notice of arbitration before the NCLT, Mumbai. E. SUBMISSIONS ON BEHALF OF THE INTERVENOR, UNCITRAL NATIONAL COORDINATION COMMITTEE FOR INDIA (UNCCI) 26. Mr George Pothan Poothicote and Ms Manisha Singh, the learned counsel appearing on behalf of the intervenors in I.A. no. 69863 of 2023, made the following submissions: i. UNCITRAL Model Law on International Commercial Arbitration ( model law ) was amended in 2006 to address the concerns about the formal requirements necessary for constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81. One of the main objectives behind the enactment of the Arbitration Act was to minimise the supervisory role of Courts in the arbitral process by confining it only to the circumstances stipulated by the legislature. For instance, Section 16 of the Arbitration Act provides that the Arbitral Tribunal may rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of the arbitration agreement . The effect of Section 16, bearing in view the principle of minimum judicial interference, is that judicial authorities cannot intervene in matters dealing with the jurisdiction of the Arbitral Tribunal. Although Sections 8 and 11 allow Courts to refer parties to arbitration or appoint arbitrators, Section 5 limits the Courts from dealing with substantive objections pertaining to the existence and validity of arbitration agreements at the referral or appointment stage. A Referral Court at Section 8 or Section 11 stage can only enter into a prima facie determination. The legislative mandate of prima facie determination ensures that the Referral Courts do not trammel the Arbitral Tribunal's authority to rule on its own jurisdiction. 30. In a rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itral Tribunal to rule on its own jurisdiction, including any ruling on any objections with respect to the existence or validity of arbitration agreement. Section 16 is an inclusive provision which comprehends all preliminary issues touching upon the jurisdiction of the Arbitral Tribunal. [Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455 : (2020) 1 SCC (Civ) 570] The doctrine of competence-competence is intended to minimise judicial intervention at the threshold stage. The issue of determining parties to an arbitration agreement goes to the very root of the jurisdictional competence of the Arbitral Tribunal. xxx xxx xxx 160. In Pravin Electricals (P) Ltd. v. Galaxy Infra Engg. (P) Ltd. [Pravin Electricals (P) Ltd. v. Galaxy Infra Engg. (P) Ltd., (2021) 5 SCC 671 : (2021) 3 SCC (Civ) 307] , a Bench of three Judges of this Court was called upon to decide an appeal arising out of a petition filed under Section 11(6) of the Arbitration Act for appointment of sole arbitrator. The issue before the Court was the determination of existence of an arbitration agreement on the basis of the documentary evidence produced by the parties. This Court prima fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and whether the non-signatory is a veritable party to the arbitration agreement. In view of the complexity of such a determination, the referral court should leave it for the Arbitral Tribunal to decide whether the nonsignatory party is indeed a party to the arbitration agreement on the basis of the factual evidence and application of legal doctrine. The Tribunal can delve into the factual, circumstantial, and legal aspects of the matter to decide whether its jurisdiction extends to the non-signatory party. In the process, the Tribunal should comply with the requirements of principles of natural justice such as giving opportunity to the non-signatory to raise objections with regard to the jurisdiction of the Arbitral Tribunal. This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of determination of true parties to an arbitration agreement to be decided by the Arbitral Tribunal under Section 16. 165. In view of the discussion above, we arrive at the following conclusions: (l) At the referral stage, the referral court should leave it for the Arbitral Tribunal to decide whether the non-signatory is bound by the arbitration agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
