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TMI Blog2024 (9) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... nt contained a Clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement i.e., the existence of the arbitration agreement, nothing more, nothing less. A two Judge-Bench of this Court in Garware Wall Ropes Ltd. v. Coastal Marine Constructions Engineering Ltd. [ 2019 (4) TMI 716 - SUPREME COURT] considered the effect of Section 11(6A) which confined the jurisdiction of the Court to examine the existence of an arbitration agreement on an arbitration agreement contained in an unstamped document or contract. The Court was of the opinion that its enquiry as to whether a compulsorily stampable document, which contains the arbitration clause, is duly stamped or not, is only an enquiry into whether such an arbitration agreement exists in law and this does not in any manner amount to deciding preliminary question(s) that arise between the parties. The recent Constitution Bench decision of this Court in Cox and Kings Limited v. SAP India Private Limited and Another [ 2023 (12) TMI 427 - SUPREME COURT (LB)] , specifically dealt with the question of impleading a non-signatory as a party in the arbitration proceedings and the correspo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rishbhai Sanjanwala, AOR Mr. Kunal Vyas, Adv. Ms. Shubhangi Agarwal, Adv. Mr. Abhishek Jamalpur, Adv. Mr. Prabhakar Yadav, Adv. For the Respondent : Mr. Anuj K. Trivedi, Adv. Ms. Anushree Prashit Kapadia, AOR M/S. Karanjawala Co., AOR JUDGMENT J. B. PARDIWALA , J. For the convenience of exposition, this judgment is divided in the following parts: INDEX A. FACTUAL MATRIX .................................................................................. 3 B. SUBMISSIONS ON BEHALF OF THE PETITIONER (AMP GROUP) ............................................................................................................ 25 C. SUBMISSIONS ON BEHALF OF THE RESPONDENT (JRS GROUP) ............................................................................................................ 31 D. SUBMISSIONS ON BEHALF OF THE RESPONDENT (SRG GROUP) ............................................................................................................ 32 E. ANALYSIS ................................................................................................. 38 i. Scope of jurisdiction of the referral court under Section 11(6) of the Act, 1996............................................. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Patel Respondent No. 3 JRS 18. Finhelp Investments and Consultants (Mumbai) Pvt. Ltd. Rep. by its Director Respondent No. 4 JRS 19. Greenbiz Holdings and Consultants Pvt. Ltd. Rep. by its Director Respondent No. 5 JRS 20. Jyotrindra S. Patel and Sanjay S. Patel (Holding for and on behalf of J S Associate AOP) Rep. by its Member Respondent No. 6 JRS 21. Millenium Estates Pvt. Ltd. Rep. by its Director Respondent No. 7 SRG 22. Deegee Software Pvt. Ltd. Rep. by its Director Respondent No. 8 SRG 23. Samarjitsinh R. Gaekwad (Shareholder Director of Millenium Estates Pvt. Ltd. and Deegee Software Pvt. Ltd.) Respondent No. 9 SRG 24. Radhikaraje S. Gaekwad (Shareholder of Deegee Software Pvt. Ltd.) Respondent No. 10 SRG 25. Subhanginiraje R. Gaekwad (Shareholder of Deegee Software Pvt. Ltd.) Respondent No. 11 SRG 26. Gaekwad Services Ltd. now known as Gaekwad Enterprise Pvt. Ltd. Rep. by its Managing Director (Shareholder of Deegee Software Pvt. Ltd.) Respondent No. 12 SRG 27. Samarjitsinh Gaekwad HUF (Shareholder of Deegee Software Pvt. Ltd.) Respondent No. 13 SRG 28. Rajesh C. Patel (Shareholder of Deegee Software Pvt. Ltd.) Respondent No. 14 JRS 29. Shilpa R. Patel (Shareholder of De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AMP Group on one side and the JRS and SRG Groups on the other which led to the filing of several proceedings before various forums including the National Company Law Tribunal (hereinafter, NCLT ) at New Delhi, Mumbai and Ahmedabad by the AMP Group. The same are still pending before the respective forums. It is pertinent to note that, of the aforesaid disputes, the respondent No.9 of the SRG Group is one of the respondents in CP/383/2017 pertaining to Deegee, filed by the AMP Group before the NCLT at Mumbai. 9. The Best Value Chem. Ltd. (hereinafter, BVC ) is an entity involved in the business of manufacturing aroma chemicals co-owned by the AMP and JRS Groups. The Premji Group had initiated a proposal to buyout BVC and indicated that the deal could only go through if the litigations filed against BVC were withdrawn. Therefore, the parties thought it fit to resolve all the issues between them once and for all with the understanding that the AMP Group would completely takeover various entities and that the JRS and SRG Groups would co-own other entities. 10. During negotiations that preceded the execution of the FAA, the following events/communications took place; Vide emails dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in pursuance of the settlement contemplated therein. 12. It is pertinent to observe that the present petition relates primarily to the dispute arising from specific clauses wherein the SRG Group is also required to undertake certain steps and actions specified viz, (a) Clause 2.1.4 read with Schedule 7 on Millenium Exit (presently AMP Group holds 36% while SRG Group holds 40%) where AMP Group is required to exit and SRG Group is required to purchase additional shares; (b) Clause 2.1.5 requiring Amendment of Lease Deed executed between Millenium, the Lessor and Aurosagar Estates Pvt. Ltd. (hereinafter, Aurosagar ), the Lessee and; (c) Clause 2.1.6 read with Schedule 8 on Deegee Exit where JRS and SRG Groups are required to completely exit and AMP Group would purchase the shares. The relevant clauses of the FAA are reproduced hereinbelow: 2.1.4 Exit of AMP Group from Millenium (a) Within 30 (thirty) days from the Trigger Date( Millenium Transfer Date ), Parties shall execute duly stamped agreement(s) with SRG to record and finalize their understanding with respect to exit of AMP Group from Millenium by way of transfer/ buy back of all Class A equity shares in Millenium ( Millenium E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es duly stamped agreement(s) to record their understanding with regards to exit of JRS Group and SRG from Deegee Software, including (i) transfer of all shares held by JRS Group and SRG in Deegee Software ( AMP Deegee Transfer ); (ii) resignation of directors appointed by JRS Group/SRG from the board of directors of Deegee Software; and (iii) repayment of loan by Deegee Software to its lenders including the interest accrued thereon in the manner set out in Schedule 8 ((i), (ii) and (iii) are collectively referred as Deegee Exit ) (b) AMP Group shall complete due diligence of Deegee Software within 20 (twenty) Business Days from the Execution Date, in the event, there are any findings requiring indemnity by AMP Group from JRS Group and/or SRG the same will be mutually agreed between the parties. (c) Parties shall co-operate with each other for any actions required to be undertaken or documents required to be executed for giving effect to the actions contemplated under this Clause, including but not limited to exercising their voting rights to provide necessary board or shareholders' approval, execution and stamping of share transfer forms, endorsement of share certificates, fili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d SRG along with interest at the rate of 14.50% p.a. compounded annually; and (ii) shares of Deegee Software held by JRS Group and SRG shall also be transferred to AMP Group. 5. The above exercise to be completed within 12 months from the execution of relevant documents in this regard. ( Emphasis supplied ) 13. Post the execution of the FAA and in pursuance of the implementation thereof, the following communications were exchanged: Vide emails dated 12.03.2020 and 13.03.2020 sent to the AMP Group, Mr. Pankaj Agarwal shared documents required for the due diligence of Deegee which were marked to Mr. Kalpesh Parmar and the latter email was additionally marked to the respondent No.9 of SRG Group. Vide emails dated 24.04.2020 and 04.05.2020 sent to the AMP Group, the JRS Group lawyers shared the FAA Closing Tracker reflecting the status of implementation of the FAA which included the pending transfer of Deegee and Millenium. The same were marked to Mr. Kalpesh Parmar. Vide email dated 08.05.2020 sent to a shareholder of BVC, Mr. Kalpesh Parmar acted as the representative of the SRG Group on discussions pertaining to the amendment of the Aurosagar lease deed. The said excerpt from the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Millenium shall simultaneously execute the following: (i) duly stamped amendment deed to the Aurosagar Lease Deed in the format set out in Annexure 1; (ii) duly stamped irrevocable special power of attorney in favour of Aurosagar in the format set out in Annexure 1A; and (iii) duly stamped deed of indemnity in the format set out in Annexure 1B. 6. Clause 2.1.6(b) stands deleted in its entirety and is substituted with the following: AMP Group shall complete due diligence of Deegee Software on or before June 30, 2020. In the event, there are any findings requiring indemnity by AMP Group from JRS Group and/or SRG the same will be mutually agreed between the parties in writing. xxx xxx xxx 12. Paragraph 27 in Schedule 4 stands deleted in its entirety and is substituted with the following : Transaction Documents means this Agreement, the Settlement Escrow Agreement and any and every document executed in connection with the transaction contemplated under or in connection with this Agreement. ( Emphasis supplied ) 15. In continuation of the implementation of the FAA, the following communications were exchanged; Emails dated 01.07.2020, 10.04.2021 and 15.04.2021 were exchanged between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... occurrence of the event, matter or thing which is the subject of such Dispute and in such notice, such Party shall provide particulars of the circumstances and nature of such Dispute and of its claim(s) in relation thereto and shall designate a Person as its representative for negotiations relating to the Dispute, which Person shall have authority to settle the Dispute. The other Parties shall, within 7 (seven) days of such notice, each specify in writing its position in relation to the Dispute and designate as their representative in negotiations relating to the Dispute, a Person with similar authority. 17. The first round of mediation was held between the representatives of the AMP and JRS Groups on 19.01.2022. However, the discussions on the issues did not lead to any conclusion. While the minutes of the same were shared with Mr. Kalpesh Parmar, he denied its contents and stated that the draft minutes do not correctly record the events which occurred at the meeting. 18. For the purpose of initiating the second round of mediation, an email dated 06.05.2022 was sent by the JRS Group to the AMP Group invoking Clause 7.1.2 and they nominated Mr. Anuj Trivedi or Mr. Kalpesh Parmar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is expecting compensation of Rs.25 crores (b) Millennium and SRG are also expecting interest 14.50% till repayment of the amount lent to AMP JRS Group has suggested that we may have another meeting and try to take it forward . ( Emphasis supplied ) 20. Further on 21.11.2022, the JRS Group sent another WhatsApp message to the AMP Group stating that it had spoken to the SRG Group and that if the AMP Group was not ready to recognise SRG s contribution in the growth of Deegee, it would be difficult for them to agree with the AMP Group on any point. The contents of the message are reproduced hereinbelow: Talked with SRG and here is the response- As he understands from me that AMP group is looking forward for meeting with SRG to discuss the points forwarded by SRG, however AMP Grp would not like to give any compensation for Deegee to SRG. As per SRG, if AMP Grp is not even ready to recognize his contribution in growth of Deegee, then it would be difficult for him to meet AMP Grp for any point and thereby the points sent by SRG shall be considered as non existent and should not be referred any time in future. ( Emphasis supplied ) 21. Vide email dated 16.05.2023 sent to the AMP Group, Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in this Agreement shall remain in full force and effect pending issuance of the award in such arbitration proceedings, which award, if appropriate, shall determine whether and when any termination shall become effective. 7.3 The arbitral tribunal shall consist of a sole arbitrator mutually agreed upon and appointed by the Parties. Failing such agreement, either Party shall be at liberty to seek appointment of a sole arbitrator by preferring an appropriate application in accordance with the Arbitration Act before the jurisdictional Court or arbitral institution, as the case may be, at Ahmedabad. 23. On 12.01.2024, the AMP Group gave its reply to the aforesaid notice and sent it to both the JRS and SRG Groups. The AMP Group, while denying the contents of the Arbitration Notice, alleged, inter alia, that, it is the JRS Group that had failed to perform their part of the obligations under various pretext despite the AMP Group pursuing the same. It stated that the assertion on the part of the JRS Group that SRG Group was not bound by the terms of the FAA since it is not a signatory to the said document was completely contrary to what had been represented to AMP during the nego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implementation of the FAA. Even after the execution of the FAA, important emails dated 13.03.2020, 27.11.2020, 26.03.2021 and 03.04.2021 respectively were sent by the JRS Group/Kalpesh Parmar wherein SRG (Respondent No.9) was marked and has not objected to the contents thereof or raised any grievance. During the mediation process, the SRG Group had communicated through a JRS Group representative that it is ready and willing to perform its obligations under the FAA if its demand for an additional consideration of Rs. 25 Crore for exit from Respondent No. 8 company is accepted by the AMP Group. 28. The Counsel submitted that the execution of the terms of the FAA required the involvement and action of the SRG Group while also benefitting them. It was submitted that a perusal of the following clauses and schedules of the FAA would indicate that the transaction was one of separation of shareholding and businesses of the three groups viz AMP, JRS and SRG: Clause 2.1.4 read with Schedule 7 provides that AMP Group would exit from Respondent No. 7 Company i.e. Millenium (where the SRG Group already holds 40%) and that out of the 36% shares held by the AMP Group, 11% will be purchased by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-signatory parties will involve agreements, the terms of which do not expressly include the non-signatory. In support of the aforesaid, the counsel placed reliance on the decision of this Court in Sasan Power Ltd. v. North American Coal Corporation (India) Private Ltd. reported in (2016) 10 SCC 813 where it was settled that the nomenclature of an agreement is not determinative of its character. 32. The counsel submitted that while on many occasions the representatives of JRS Group were there to take care of the interests, suggestions and comments of the SRG Group, it was understood by all the parties that the SRG Group although not a signatory to the FAA yet would be a part of the execution of and compliance of the terms and conditions thereof. Therefore, there was commonality of subject matter and composite transactions, in view of which SRG is a veritable party liable to be referred to arbitration. 33. By placing a strong reliance on the decision of this Court in Cox and Kings Ltd. v. SAP India Pvt. Ltd. reported in (2024) 4 SCC 1, the counsel submitted that the settled position is that the referral court should leave it for the Arbitral Tribunal to decide whether the non-sig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gorically states that the FAA superseded any and all prior oral and written agreements. Therefore, the case of the AMP Group that SRG Group was effectively a part of the negotiations and is privy to the transactions is inconsequential. 39. The counsel finally submitted that the AMP Group and JRS Group have fulfilled part of their respective obligations under the FAA and are in a position to fully execute the FAA without the presence or role of the SRG Group. Clause 8.7 dealing with Partial Validity empowers the severance of invalid or unenforceable provisions of the FAA. D. SUBMISSIONS ON BEHALF OF THE RESPONDENT ( SRG GROUP ) 40. Mr. Huzefa Ahmadi, the learned senior counsel appearing on behalf of the Respondent SRG Group submitted that the present petition is merely a device to embroil strangers into an agreement entered into between two groups of the same family since the SRG Group is admittedly neither a party nor signatory or confirming party to the FAA or the alleged arbitration agreement contained therein. The AMP and JRS Groups who are signatories thereto are ad idem about the terms of the FAA, including their mutual intention to refer the disputes arising from it to arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consequently, there is no privity of contract between the Petitioners and SRG Group in any manner whatsoever. 44. It was also submitted that bringing non-signatories within the scope of the arbitration agreement is an exception and not the rule. In support of this, the counsel relied on the decision of this Court in Cox Kings (supra). Further, it was submitted that a dual test has to be satisfied to compel the SRG Group to be a party to the present arbitration proceedings i.e., (a) SRG Group should be shown to have agreed to the underlying contract and (b) SRG Group should also be shown to have agreed to be bound by the arbitration agreement. Both the conditions are not satisfied. A vague awareness of the JRS and AMP Groups being in negotiations or the mere marking of emails relating thereto to a member of the SRG Group cannot imply consent. It was submitted that the SRG Group is neither a consensual or non-consensual participant in the arbitration proceedings arising out of the FAA nor have any of the aforementioned consensual or non-consensual theories been invoked by the petitioners. To compel a party to arbitration in respect of a family arrangement despite the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, either the JRS Group or Mr. Kalpesh Parmar to undertake any actions or make any representations on its behalf or bind it to any agreement that has been entered into by and between the AMP and JRS Groups either expressly or impliedly. It was submitted that even as per the petitioners own case, the so called joint meeting dated 14.01.2020 that was arranged by Mr. Kalpesh Parmar was done so by him representing the JRS Group and was attended by Mr. Ashit Patel for AMP Group and Respondent No.9 of the SRG Group . Therefore, the petitioners cannot blow hot and cold and allege that Mr. Parmar also attended in the capacity of a representative of the SRG Group. Further, the JRS Group itself nominated Mr. Kalpesh Parmar as its representative for mediation vide email dated 26.12.2021 and therefore, it is not proper for the petitioners to contend that the SRG Group was represented by Mr. Kalpesh Parmar or the JRS Group. 49. The counsel submitted that the Notice invoking arbitration sent by the JRS Group on 11.12.2023 was not addressed to the SRG Group. Only in the Reply to the Arbitration Notice issued by the AMP Group on 12.01.2024, the SRG Group was marked and this is the first instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arbitrator or arbitrators. The Chief Justice or the designated Judge would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the designated Judge. xxx xxx xxx (ix) In a case where an Arbitral Tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act. xxx xxx xxx (xii) The decision in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. [(2002) 2 SCC 388] is overruled. ( Emphasis supplied ) 54. While further reinforcing the view taken in SBP Co. (supra), this Court in National Insurance Company Limited v. Boghara Polyfab Private Ltd reported in (2009) 1 SCC 267 identified and segregated the three categories of preliminary issues that may arise for consideration in an application under Section 11 as follows: 22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1996 omitted Section 11(6A), such an omission was not notified and therefore Section 11(6A) still remains in force and reads thus: (6A) The Supreme Court or, as the case may be, the High Court, while considering any application Under Sub-section (4) or Sub-section (5) or Sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement. ( Emphasis supplied ) 57. The crucial question that arose for consideration by this Court in Duro Felguera S.A. v. Gangavaram Port Limited reported in (2017) 9 SCC 729 was the effect of the change introduced by the 2015 Amendment to the Act, 1996 which inserted Section 11(6A). The Court held that all that needs to be looked into is whether the agreement contained a Clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement i.e., the existence of the arbitration agreement, nothing more, nothing less. The relevant observations are extracted hereinbelow: 48[ ] From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, while considering any application under Sections 11(4) to 11(6) is to confine itself to the examination of the existence of an arbitration agreement and leave all other preliminary issues to be decided by the arbitrator. [ ] ( Emphasis supplied ) 59. Once again, a three-judge bench of this Court in Vidya Drolia and Ors. v. Durga Trading Corporation reported in (2021) 2 SCC 1 held that Sections 8 and 11 respectively must be read as laying down a similar standard on the scope of the referral court s powers. It was stated that the questions as regards the existence and validity being intertwined, an arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. The decision endorsed the application of a prima facie test in examining the existence and validity of an arbitration agreement both under Sections 8 and 11. This prima facie examination was not a full review but a primary first review to weed out manifest and ex-facie non-existent and invalid arbitration agreements and non-arbitrable disputes. However, it was clarified that the Court should not get lost in thickets and decide debatable questions of fact. The relevant extract is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal can rule on its jurisdiction, including the existence and validity of an arbitration agreement. It was also stated that any prima facie opinion rendered by the Court under Section 11 need not bind the arbitral tribunal. The relevant observations are extracted hereinbelow: 164. The 2015 Amendment Act has laid down different parameters for judicial review under Section 8 and Section 11. Where Section 8 requires the Referral Court to look into the prima facie existence of a valid arbitration agreement, Section 11 confines the Court's jurisdiction to the examination of the existence of an arbitration agreement. Although the object and purpose behind both Sections 8 and 11 is to compel parties to abide by their contractual understanding, the scope of power of the Referral Courts under the said provisions is intended to be different. The same is also evident from the fact that Section 37 of the Arbitration Act allows an appeal from the order of an Arbitral Tribunal refusing to refer the parties to arbitration under Section 8, but not from Section 11. Thus, the 2015 Amendment Act has legislatively overruled the dictum of Patel Engg. [SBP Co. v. Patel Engg. Ltd., (2005) 8 SCC 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be left to the Arbitral Tribunal. This position of law can also be gauged from the plain language of the statute. 167. Section 11(6-A) uses the expression examination of the existence of an arbitration agreement . The purport of using the word examination connotes that the legislature intends that the Referral Court has to inspect or scrutinise the dealings between the parties for the existence of an arbitration agreement. Moreover, the expression examination does not connote or imply a laborious or contested inquiry. [ P. Ramanatha Aiyar, The Law Lexicon (2nd Edn., 1997) 666.] On the other hand, Section 16 provides that the Arbitral Tribunal can rule on its jurisdiction, including the existence and validity of an arbitration agreement. A ruling connotes adjudication of disputes after admitting evidence from the parties. Therefore, it is evident that the Referral Court is only required to examine the existence of arbitration agreements, whereas the Arbitral Tribunal ought to rule on its jurisdiction, including the issues pertaining to the existence and validity of an arbitration agreement.[ ] xxx xxx xxx 169. When the Referral Court renders a prima facie opinion, neither the Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an application under Section 11 is filed, arbitration cannot commence until the arbitral tribunal is constituted by the referral court. This Court, on various occasions, has given directions to the High Courts for expeditious disposal of pending Section 11 applications. It has also directed the litigating parties to refrain from filing bulky pleadings in matters pertaining to Section 11. Seen thus, if the referral courts go into the details of issues pertaining to accord and satisfaction and the like, then it would become rather difficult to achieve the objective of expediency and simplification of pleadings. 125. We are also of the view that ex-facie frivolity and dishonesty in litigation is an aspect which the arbitral tribunal is equally, if not more, capable to decide upon the appreciation of the evidence adduced by the parties. We say so because the arbitral tribunal has the benefit of going through all the relevant evidence and pleadings in much more detail than the referral court. If the referral court is able to see the frivolity in the litigation on the basis of bare minimum pleadings, then it would be incorrect to doubt that the arbitral tribunal would not be able to ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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. 170. In view of the discussion above, we arrive at the following conclusions: xxx xxx xxx (170.12) At the referral stage, the referral court should leave it for the Arbitral Tribunal to decide whether the nonsignatory is bound by the arbitration agreement [ ] ( Emphasis supplied ) 64. Therefore, on the pivotal issue whether the non-signatories can be referred to arbitration, this Court took the view that the referral court is required to prima facie rule on the existence of the arbitration agreement and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complicated questions of fact which are best left to the tribunal to decide. In In Re: Interplay (supra) the position taken in Vidya Drolia (supra) was clarified to state that the scope of examination under Section 11(6) should be confined to the existence of the arbitration agreement under Section 7 of the Act, 1996 and the validity of an arbitration agreement must be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. Therefore, substantive objections pertaining to existence and validity on the basis of evidence must be left to the arbitral tribunal since it can rule on its own jurisdiction. Krish Spinning (supra) cautioned that the Courts delving into the domain of the arbitral tribunal at the Section 11 stage run the risk of leaving the claimant remediless if the Section 11 application is rejected. Further, it was stated that a detailed examination by the courts at the Section 11 stage would be counterproductive to the objective of expeditious disposal of Section 11 application and simplification of pleadings at that stage. Cox and Kings (supra) specifically dealt with the scope of inquiry under Section 11 when it comes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignatory parties if there is a defined legal relationship between the signatory and non-signatory parties. Therefore, the issue as to who is a party to an arbitration agreement is primarily an issue of consent. Actions or conduct could be an indicator of the consent of a party to be bound by the arbitration agreement. This aspect is also evident from a reading of Section 7(4)(b) which emphasises on the manifestation of the consent of persons or entities through actions of exchanging documents. The relevant observations made in Cox and Kings (supra) are extracted hereinbelow: 83. Reading Section 7 of the Arbitration Act in view of the above discussion gives rise to the following conclusions : first, arbitration agreements arise out of a legal relationship between or among persons or entities which may be contractual or otherwise; second, in situations where the legal relationship is contractual in nature, the nature of relationship can be determined on the basis of general contract law principles; third, it is not necessary for the persons or entities to be signatories to the arbitration agreement to be bound by it; fourth, in case of non-signatory parties, the important determinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement; 170.3. The requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding non-signatory parties;[ ] ( Emphasis supplied ) 69. The fact that a non-signatory did not put pen to paper may be an indicator of its intention to not assume any rights, responsibilities or obligations under the arbitration agreement. However, the courts and tribunals should not adopt a conservative approach to exclude all persons or entities who intended to be bound by the underlying contract containing the arbitration agreement through their conduct and their relationship with the signatory parties. The mutual intent of the parties, relationship of a non-signatory with a signatory, commonality of the subject matter, composite nature of the transactions and performance of the contract are all factors that signify the intention of the non-signatory to be bound by the arbitration agreement. 70. An important factor to be considered by the Courts and Tribunals is the participation of the non-signatory in the performance of the underlying contract. In this regard, it was observed in Cox and Kings (supra) as follows: 123. [ ] The intention of the parties to be b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive evidence. ( Emphasis supplied ) 71. It is evident that the intention of the parties to be bound by an arbitration agreement can be gauged from the circumstances that surround the participation of the non-signatory party in the negotiation, performance, and termination of the underlying contract containing such an agreement. Further, when the conduct of the non-signatory is in harmony with the conduct of the others, it might lead the other party or parties to legitimately believe that the non-signatory was a veritable party to the contract containing the arbitration agreement. However, in order to infer consent of the non-signatory party, their involvement in the negotiation or performance of the contract must be positive, direct and substantial and not be merely incidental. Thus, the conduct of the non-signatory party along with the other attending circumstances may lead the referral court to draw a legitimate inference that it is a veritable party to the arbitration agreement. 72. Of the several entities pertaining to which settlement is contemplated under the FAA dated 28.02.2020 executed between the AMP Group and JRS Group, clauses 2.1.4 and 2.1.6 relate to Millenium and De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f JRS and SRG Groups from Deegee. Recognising the interdependent nature of the transactions contemplated with respect to Millenium and Deegee, clause 2.1.4(a) also states that the exit of Millenium and Deegee should be endeavoured to be undertaken simultaneously on the same day. 76. Further Clause 2.1.7 requires the AMP Group to irrevocably and unconditionally withdraw all litigations including CP/383/2017 filed in connection with Deegee by the AMP Group before the NCLT at Mumbai wherein Respondent No.9 of the SRG Group is one of the respondents. 77. All that has been stated aforesaid gives an impression, though prima facie, that the SRG Group may be connected to the FAA and forms part of the settlement contemplated therein. However, this aspect should be looked into more closely by the Arbitral Tribunal. 78. Moreover, on the question whether the non-signatory party i.e., the SRG Group intended or consented to be bound by the arbitration agreement or the underlying contract containing the arbitration agreement through their acts or conduct, elaborate submissions have been made on behalf of all three groups, by placing reliance on the terms of the agreement, several email exchanges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arbitral tribunal to take a call on the question after taking into consideration the evidence that may be adduced by the parties before it and the application of the legal doctrine as elaborated in the decision in Cox and Kings (supra). 81. We also prima facie find force in the contention of the petitioner AMP Group that the nomenclature of the agreement is not determinative of its character as held by this Court in Sasan Power Ltd. (supra). Therefore, the fact that the underlying contract is called the Family Arrangement Agreement by itself may not preclude the impleadment of the SRG Group in arbitration. 82. 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 rejected that the tribunal shall proceed to adjudicate the claims of the Petitioners. F. CONCLUSION 83. In view of the aforesaid, the present petition is allowed. We appoint Mr. Akil Kureshi (Former Chief Justice, High Court of Rajasthan) to act as the sole arbitrator. The fees of the arbitrator including other modalities shall be fixed in consultation with the parties. 84. It is made clear ..... X X X X Extracts X X X X X X X X Extracts X X X X
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