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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 ..... NS 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......................................................................................................... 38 ii. Whether on a prima facie view, the SRG Group being a nonsignatory to the FAA, can be referred to arbitration? .............................. 55 F. CONCLUSION .......................................................................................... 66 1. The present petition has been filed under Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, 1996 (hereinafter, "the Act, 1996") seeking appointment of a Sole Arbitrator to adjudicate the disputes between the Petitioners and the Respondents in terms of Clauses 7.2 and 7.3 respectively of the Family Arrangement Agreement dated 28.02.2020 (hereinafter, "the FAA") read with the Amendment Agreement dated 15.05.2020 (hereinafter, "Amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Deegee Software Pvt. Ltd.) Respondent No. 15 JRS 30. Aditya Patel (Director of Deegee Software Pvt. Ltd.) Respondent No. 16 SRG 31. Nitin Shripadbhai Pujari (Director of Deegee Software Pvt. Ltd.) Respondent No. 17 SRG 4. The Petitioners herein are collectively referred to as the "AMP Group". The Petitioner Nos. 1 to 9 & 14 respectively are individuals and family members of Mr. Ashit Patel, who are a part of the AMP Group in the FAA. The Petitioner Nos. 10 to 13 respectively are companies described as a part of the AM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 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 12.12.2019 and 02.01.2020, several internal documents required for the valuation of Millenium and Deegee were shared by Mr. Pankaj Agarwal with the AMP Group wherein a copy was marked to Mr. Kalpesh Parmar. * Vide email dated 14.01.2020 sent to the AMP Group, Mr. Kalpesh Parmar confirmed that the matters pertaining to Millenium and Deegee even after its valuation may have to be discussed with Mr. Samarjitsinh (hereinafter, "Respondent No. 9") of the SRG Group before finalisation. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Exit") in the manner set out in Schedule 7. The Parties agree that the valuation of Millenium for the purposes of the Millenium Exit shall be INR 130,00,00,000 (Rupees One Hundred Thirty Crores). It is hereby clarified that AMP Group will continue to hold Class B equity shares in Millenium in accordance with the provisions set out in the articles of association of Millenium. (b) Notwithstanding anything contained herein, Parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, filing forms with the registrar of companies and the Reserve Bank of India, making entries in statutory registers, providing all necessary information and documents necessary for preparing necessary documents, etc required to be complied by Deegee Software under Applicable law. AMP Group shall be responsible for all compliances/filings under foreign exchange laws of India in relation to the AMP Deegee Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance 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 contents of the email are reproduced hereinbelow: "....On Aurosagar point, this email I am sending to put forward views of Samarjitsinh (SRG) and not JRS. SRG is clear that Millenium can give POA to AMP and his immediate family and as agreed in FAA draft, PL can work on language without disturbing the construct / concept. SRG is not going to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 AMP Group and Mr. Kalpesh Parmar pertaining to the due diligence of Deegee. * Vide email dated 09.10.2020 sent to the AMP Group, the JRS lawyers shared drafts of the Share Purchase Agreements (hereinafter, "SPAs") pertaining to Millenium and Deegee and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 act as their representatives. In response to the same, on 23.05.2022, the AMP Group nominated Mr. Keyur Gandhi and/or Mr. Upen Shah and/or Mr. Nihar Mehta as their representatives. The first mediation meeting was convened on 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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. Kalpesh Parmar conveyed that he would discuss with SRG and try to resolve all matters pertaining to Deegee and would also intimate the outcome of his discussion. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 negotiations and at the time of execution of the FAA and further the same was made only for the purpose of raising an extra mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the SRG Group and the remaining 25% will be bought back by Respondent No. 7 Company. The valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-signatory party is indeed a party to the arbitration agreement on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arbitration. Had the SRG Group been involved i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, 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 they are ..... 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 instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the qualifications of the 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 Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -obstante clause incorporated in Section 11(6A). Although the 2019 Amendment to the Act, 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] required a relook, as a result of which, so far as Section 11 is concerned, the Supreme Court or, as the case may be, the High 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. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the expression "examination" under Section 11 does not connote or imply a laborious or contested inquiry. 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. 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 arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the evidence in regard to the existence or validity of an arbitration agreement. The determination of the existence and validity of an arbitration agreement on the basis of evidence ought 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 application is rejected. 124. Section 11 also envisages a time-bound and expeditious disposal of the application for appointment of arbitrator. One of the reasons for this is also the fact that unlike Section 8, once 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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. 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 [. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribunal has the authority to decide disputes including the question of jurisdiction. It was further stated that jurisdictional issues concerning whether certain parties are bound by a particular arbitration under the group-company doctrine etc. in a multi-party arbitration raise 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 detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who have not formally signed the arbitration agreement or the underlying contract containing the arbitration agreement may also intend to be bound by the terms of the agreement. Further, the requirement of a written agreement under Section 7 of the Act, 1996 does not exclude the possibility of binding non-signatory 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 relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, we arrive at the following conclusions: 170.1. The definition of "parties" under Section 2(1)(h) read with Section 7 of the Arbitration Act includes both the signatory as well as non-signatory parties; 170.2. Conduct of the non-signatory parties could be an indicator of their consent to be bound by the arbitration agreement; 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 int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l involvement in the negotiation or performance of the contract is not sufficient to infer the consent of the non-signatory to be bound by the underlying contract or its arbitration agreement. The burden is on the party seeking joinder of the non-signatory to the arbitration agreement to prove a conscious and deliberate conduct of involvement of the non-signatory based on objective 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short, while the AMP Group is supposed to exit from Millenium and acquire shares in Deegee, the JRS and SRG Groups are supposed to exit from Deegee and, the SRG Group would acquire shares in Millenium. It is also provided that agreements are to be executed with or by the SRG Group to record and finalize the understanding with respect to the exit of AMP Group from Millenium and the exit of 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the considered view that the same requires a much more detailed examination of the evidence that may be adduced by the parties which can only be gone into by the Arbitral Tribunal. 80. Therefore, considering the complexity involved in the determination of the question whether the SRG Group is a veritable party to the arbitration agreement or not, we are of the view that it would be appropriate for the 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 preli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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