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TMI Blog2024 (3) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... o conduct an in-depth inquiry as to whether the disputes sought to be raised by the petitioner/DLF afford any valid cause of action to the petitioner on the basis of the provision of SPA or not. This is an aspect which necessarily requires an in-depth examination on merits and necessarily required to be gone into by a duly constituted arbitral tribunal. The existence of a valid arbitration agreement, of sufficient width and amplitude, is not in doubt - As held in Interplay between Arbitration Agreements under the Arbitration Conciliation Act, 1996 the Indian Stamp Act, 1899, In re, [ 2023 (12) TMI 897 - SUPREME COURT (LB) ] the scope of examination under Section 11(6A) should be confined to the existence of an arbitration agreement on the basis of Section 7. Similarly, the validity of an arbitration agreement, in view of Section 7, should be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. Signatories to Arbitration Agreement - HELD THAT:- Prima facie, despite assignment of the SPA to Omkara, PNBHFL would be a necessary party as regards pre-assignment disputes, including dispute/s relating to non-acceptance of the offer of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pta and Manjira, Advs. For the Respondent : Akhil Sibal, Sr. Adv., Shalaka Patil, Paulomi Mehta, Srishti Khare, Kartikeya Jha, Porus Titina, Bahuli Sharma, Advs., Arunabh Chaudhary, Sr. Adv., Ashish Kr. Singh, Palak Tyagi, Muskan Malhotra, Amit K. Singh, Rishabh Sharma, Ritvik Bhardwaj, Advs., Parag Tripathi, Dayan Krishnan, Sr. Advs., Vijay Nair, Rajat Joneja, Arpit Dwivedi, Sakshi Kapoor, Anmol Kumar, Vasundhara, Amshi Mishra, Advs., Saurabh Kirpal, Sr. Adv., Nishit D., Yash, Advs., Arun Kathpalia, Pratik Seksariya, Sr. Advs., Sajit Suvarma, Nirau Shah, Aneesha Cheema, Shivani Khanwilkar, Varun Kalra, Nikunj Mahajan, Rohit Aggarwal, Advs., Sandeep Sethi, Sr. Adv., Kanika Agnihotri, Jasmeet Singh, Mahinder Singh Hura, Divjot Singh Bhatia, Saif Ali, Pushpendra S. Bhadoriya, Rusheet Saluja, Sonam Mhatre, Amit Mishra, Sumer Dev Seth, Shreya Sethi, Riya Kumar, Advs., Harin P. Raval, Sr. Adv., Karan Bharihoke, Siddhant Sharma, Shreshtha, Advs., Nakul Dewan, Sr. Adv., Aditya Dewan and Parth Tiwari, Advs. JUDGMENT SACHIN DATTA, J. 1. The present petition has been filed by DLF Limited ( DLF / petitioner ) seeking appointment of a sole arbitrator to adjudicate the disputes between itself a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e secured assets and for the said purpose it had taken recourse to mechanism under the SARFAESI Act, 2002; however, to no avail. 5. A Memorandum of Understanding (MOU) dated 27.10.2022 (placed on record by Omkara) was executed between DLF Home Developers Ltd., a subsidiary of DLF and PNBHFL, to purchase the entire shareholding of JHL against complete discharge of dues of PNBHFL. 6. PNBHFL had also issued a default notice dated 02.11.2022 read with letter dated 08.11.2022, in terms of the SPA, whereby PNBHFL sought reconstitution of JHL board and further indicated its intention to invoke the pledge and sell the pledged shares at enterprise value. Vide the said notice, PNBHFL further offered/invited offers from existing shareholders of JHL to purchase 100% pledged shares of JHL, with a reserve price of Rs. 1075 crores. 7. DLF, in response to PNBHFL default notice vide its letter dated 10.11.2022 offered an amount of Rs. 1450 crores for 100% of the legal ownership of the pledged shares and 100% of the control of JHL . 8. Thereafter, for removal of the nominee directors of existing shareholders of JHL and replacing them with the nominee directors of PNBHFL an Extra-ordinary General Mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the outstanding dues of the JHL, without disclosing the party to whom the shares have been sold. As no further amount remained due to be recovered and payable, JHL was released from its liability including release of securities that were created in respect of the loan account. Notably, 25% of the pledged shares (i.e. shares of Hubtown) were not sold purportedly because the said shares were in physical form and blank transfer deeds for the same were not furnished by Hubtown. 16. Thereafter, petitions under Section 9 of the A C Act came to be filed by DLF and Chinsha seeking certain interim orders. In the said petitions, vide common order dated 18.09.2023, it was inter alia directed as under: 42. Prayer (b) is inchoate in view of Prayer (a) since the identity of the transferee is not known yet, in view of which, no order can be passed against the unknown transferees. However, it would be appropriate if pledged shares sold to a third party by Omkara are kept in a suspended animation by directing JHL not to recognise further sale, if any, undertaken by Omkara transferees. If any request is received by JHL by further transferees the same shall not be acted upon by JHL and further tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000 equity shares having face value of Rs. 100/-, aggregating to Rs. 40,00,00,000/-to Akruti. Vide a separate board resolution of the same date, JHL also approved allotment of 200 optionally convertible debentures at face value Rs. 1 crore each to Akruti for a consideration of Rs. 200 crores. 22. Vide letter dated 09.10.2023, Chinsha has invoked the arbitration clause contained in the SPA. A petition [Arb. P. 1191/2023] under Section 11 of the A C Act also came to be filed by Chinsha, which was heard alongside the present petition, however, the said petition was later withdrawn by Chinsha. Disputes between the parties 23. The disputes sought to be raised by DLF inter alia include: a. The legal effect of the DLF's acceptance dated 10.11.2022 of the proposal made by PNBHFL vide letter dated 02.11.2022 read with letter dated 08.11.2022, to sell 100% shares of JHL, at an enterprise value (reserve price) of over Rs. 1075 Crores. b. The legal effect of PNBHFL proceeding to invoke the pledge and simultaneously seeking to assign the debt without responding to or repudiating DLF's aforesaid acceptance of the proposal of PNBHFL. c. Legal validity of Omkara's sale of only 75% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res and a direct beneficiary of the illegal actions of PNBHFL, Omkara, and Hubtown, is bound by the arbitration clause. Similarly, Akruti, as the ultimate beneficiary of the illegal actions of PNBHFL, Omkara, and Hubtown, is also bound by the arbitration clause. Furthermore, it is emphasized that there is no specific denial of the allegations regarding the interconnection between Hubtown, Twenty-Five South, and Akruti in the replies filed by the said parties. It is argued that DLF is neither a party to the MOU dated 27.10.2022 nor is not aggrieved by it. Therefore, any reliance placed on this MOU by Omkara is misplaced. It is again asserted that the offer to purchase JHL's shares was made in accordance with the provisions of the SPA. It is emphasized that the jurisdiction of the referral court is extremely limited. Once the existence of an arbitration clause is prima facie established, all issues and contentions raised by the parties are to be deferred for determination by the arbitral tribunal. Furthermore, it is argued that the inclusion of non-signatories in arbitration proceedings is contingent upon specific facts and can be justified under various legal theories and doctri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is factually incorrect. Furthermore, it is submitted that, both under the terms of the SPA as well as in terms of provisions of SARFAESI Act and RBI Master Directions, upon assignment of JHL's debt to Omkara, PNBHFL is no longer a party either to the SPA or the arbitration agreement contained therein. Therefore, on the date of the invocation no arbitration agreement existed between PNBHFL and DLF. It is submitted that both assignor and assignee cannot co-exist as parties in the proposed arbitration since an assignee becomes successor to the signatory party's interests under the arbitration agreement and derives a derivative right to arbitrate and not an independent right to arbitrate. It is submitted that all claims therefore, whatever be their merits, are to be pursued against the assignee, post the assignment. In support of these submissions reliance has been placed on Cox Kings (supra), Interplay between Arbitration Agreements under the Arbitration Conciliation Act, 1996 the Indian Stamp Act, 1899, In re (supra), R.N. Gosain v. Yashpal Dhir, (1992) 4 SCC 683 Union of India v. N. Murugesan and Ors. (2022) 2 SCC 25, Gurmeet Singh v. Essel Finance Business Loans Ltd. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kanth Paper Industries (P) Ltd. v. RBI 2018 SCC OnLine Del 13502, Ravi Development v. Shree Krishna Prathistha (2009) 7 SCC 462, PTC India Financial Services Ltd. v. Venkateswarlu Kari and Anr. (2022) 9 SCC 704, Magic Eye Developers (P) Ltd. v. Green Edge Infrastructure (P) Ltd. (2023) 8 SCC 50 and Cox and Kings (supra). 28. Learned senior counsel for JHL has submitted that JHL is in no manner concerned with the disputes raised by DLF in present Section 11 petition. It is submitted that no allegation has been made against JHL in the present petition, and no dispute arises between JHL either with DLF or Chinsha which is required to be referred to arbitration. It is submitted that JHL was merely a confirming party to the SPA and had neither any right nor any obligation under the said agreement. It is submitted that disputes if any between JHL and DLF/Chinsha would arise under the Memorandum of Understanding and Shareholders Agreement both dated 15.04.2004, in respect of which DLF has already invoked arbitration. It is further submitted that under the SPA, DLF could have only redeemed its 37.5% pledged shares by paying the outstanding dues under the loan account. The SPA does not, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co Developing Markets Fund v. Zee Entertainment Enterprises Limited and Anr. 2022 SCC OnLine Bom 630, Umesh Cimechel Consortium v. IIC Limited and Anr. 2022 SCC Online Del 4128, NN Global Mercantile Pvt. Ltd. v. Indo Unique Flame Limited and Ors. 2023 7 SCC 1, and Jaswantrai Manilal Akhaney v. State of Bombay. 1956 SCC OnLine SC 46 30. Learned senior counsel for the Twenty-Five South has submitted that there exists no legal relationship or agreement between Twenty-Five South and DLF/Chinsha, and consequently, there is no arbitration agreement between them. It is contended that Twenty-Five South's acquisition of 75% shares of JHL from Omkara stands as an independent transaction entirely separate and unrelated to the SPA. Additionally, it is asserted that DLF/Chinsha's right to redeem pledged shares is extinguished upon the actual sale. It is asserted that the criteria set forth by the Supreme Court to bind non-signatories to an arbitration agreement are not fulfilled in this case, as Twenty-Five South was not envisioned as a party to the arbitration agreement when SPA was executed. Furthermore, Twenty-Five South was not involved in the original negotiations, execution, or te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnatories New York Law Journal (28-3-2022) , MAG Portfolio Consult, GMBH v. Merlin Biomed Grp. LLP 268 F.3d 58 (2d Cir. 2001), Cox Kings (supra), Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641, PTC India (supra), NTPC Ltd. v. SPML Infra Ltd. (2023) 9 SCC 385, Magic Eye Developers (supra) Deloitte Noraudit AIS v. Deloitte Haskins Sells MANU/FESC/0481/1993, Thomson CSF v. American Arbitration Association MANU/FESC/0094/1995, Duro Felguera, SA v. Gangavaram Port Ltd. (2017) 9 SCC 729, Ameet Lalchand Shah Ors. v. Rishabh Enterprises Ors. (2018) 15 SCC 678, Cheran Properties Ltd. v. Kasturi Sons Ltd.,(2018) 16 SCC 413 Reckitt Benckiser (India) (P) Ltd. v. Reynders Label Printing (India) (P) Ltd. (2019) 7 SCC 62, MTNL v. Canara Bank (2020) 12 SCC 767, and Sudhir Gopi v. Indira Gandhi National Open University Anr. 2017 SCC Online Del 8345 Analysis and Findings The scope of the examination in these proceedings 32. At the outset, it is noticed that the scope of inquiry by a referral court in a petition under Section 11 of the A C Act is confined to examination of the existence of an arbitration agreement. The referral proceedings are preliminary and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of competence-competence, only prima facie proof of the existence of an arbitration agreement must be adduced before the referral court. The referral court is not the appropriate forum to conduct a mini-trial by allowing the parties to adduce 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. 164. Section 11(6A) 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 scrutinize 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. 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 part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V. Ramana (as the learned Chief Justice then was) held that the amendment to Section 8 rectified the shortcomings pointed out in Chloro Controls (supra) with respect to domestic arbitration. He further observed that the issue of determination of parties to an arbitration agreement is a complicated exercise, and should best be left to the arbitral tribunals: 239. [...] Jurisdictional issues concerning whether certain parties are bound by a particular arbitration, under group-company doctrine or good faith, etc. in a multi-party arbitration raises complicated factual questions, which are best left for the tribunal to handle. The amendment to Section 8 on this front also indicates the legislative intention to further reduce the judicial interference at the stage of reference. 167. In Pravin Electricals Pvt Ltd. v. Galaxy Infra and Engineering Pvt Ltd., 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 partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tsche Post Bank Home Finance Ltd. v. Taduri Sridhar, a two-Judge Bench of this Court held that when a third party is impleaded in a petition under Section 11(6) of the Arbitration Act, the referral court should delete or exclude such third party from the array of parties before referring the matter to the tribunal. This observation was made prior to the decision of this Court in Chloro Controls (supra) and is no longer relevant in light of the current position of law. Thus, when a non-signatory person or entity is arrayed as a party at Section 8 or Section 11 stage, the referral court should prima facie determine the validity or existence of the arbitration agreement, as the case may be, and leave it for the arbitral tribunal to decide whether the nonsignatory is bound by the arbitration agreement. 171. In case of joinder of non-signatory parties to an arbitration agreement, the following two scenarios will prominently emerge : first, where a signatory party to an arbitration agreement seeks joinder of a non-signatory party to the arbitration agreement; and second, where a non-signatory party itself seeks invocation of an arbitration agreement. In both the scenarios, the referral c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f or in connection with or the performance of the SPA is to be referred to arbitration thereunder. Given the width of the arbitration agreement, it cannot be said that the various facets with regard to which DLF has sought to raise disputes are unconnected with the SPA. 37. At this stage, this Court is not required to conduct an in-depth inquiry as to whether the disputes sought to be raised by the petitioner/DLF afford any valid cause of action to the petitioner on the basis of the provision of SPA or not. This is an aspect which necessarily requires an in-depth examination on merits and necessarily required to be gone into by a duly constituted arbitral tribunal. 38. The contention of the learned senior counsel for the Hubtown and Omkara that clause 17.12 of the SPA has the effect of whittling down or denuding the scope of the arbitration clause is misconceived. Clause 17.12 reads as under: 17.12 The Pledgors further agree that all claims, difference and disputes, arising out of or in relation to dealings/transaction made in pursuant to this Agreement including any question of whether such dealing, transaction have been entered into or not, shall be subject to the exclusive juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 386, Dr. D.Y. Chandrachud, J. in his separate opinion observed that: 53. The Arbitration and Conciliation Act, 1996, should in my view be interpreted so as to bring in line the principles underlying its interpretation in a manner that is consistent with prevailing approaches in the common law world. Jurisprudence in India must evolve towards strengthening the institutional efficacy of arbitration. Deference to a forum chosen by parties as a complete remedy for resolving all their claims is but part of that evolution. Minimising the intervention of courts is again a recognition of the same principle. 24. In Govind Rubber Ltd. v. Louids Dreyfus Commodities Asia (P) Ltd., (2015) 13 SCC 477, it has been held as under:- 17. We are also of the opinion that a commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it. On the principle of construction of a commercial agreement, Scrutton on Charter Parties (17th Edn., Sweet Maxwell, London, 1964) explained that a commercial agreement has to be construed, according to the sense and meaning as collected in the first place from the terms used and understo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess to civil justice and the natural judge of the contract, and that such derogations must be construed narrowly. Thus, in an older decision, a French appellate court declared that [t]he arbitration agreement must be strictly interpreted as it departs from the norm-and in particular from the usual rules as to the jurisdiction of the courts. 'This restrictive interpretative presumption is archaic and out of step with the ordinary intentions of commercial parties; it is generally not applied in contemporary decisions. 40. As such, the existence of a valid arbitration agreement, of sufficient width and amplitude, is not in doubt. As held in Interplay between Arbitration Agreements under the Arbitration Conciliation Act, 1996 the Indian Stamp Act, 1899, In re, (supra) the scope of examination under Section 11(6A) should be confined to the existence of an arbitration agreement on the basis of Section 7. Similarly, the validity of an arbitration agreement, in view of Section 7, should be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. Signatories to Arbitration Agreement 41. Admittedly, the petitioner/DLF alongwith PNBHFL, JH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses of assignments. As a rule obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities. On the other hand rights under a contract are assignable unless the contract is personal in its nature or the rights are incapable of assignment either under the law or under an agreement between the parties. 46. Prima facie, despite assignment of the SPA to Omkara, PNBHFL would be a necessary party as regards pre-assignment disputes, including dispute/s relating to non-acceptance of the offer of DLF and/or dispute/s concerning purported irregularities in the assignment of debt. 47. The judgment of Singapore Court of Appeal in BXH vs BXI (supra), relied upon by the PNBHFL is clearly distinguishable inasmuch as the said judgment was rendered in a challenge to an award passed by the arbitral tribunal and not at the referral stage. Furthermore, in the said case, it was the assignor who had invoked the arbitration clause after having assigned the right to a debt and right to arbitrate in relation to that particular debt to the assignee. It was in the said context the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccessors assigns). accorded in the SPA itself, it is a party to the arbitration agreement contained in the SPA. There is no impediment to the impleadment of Omkara in the proposed arbitration proceedings. 51. The law is also well settled that where there is an assignment of a contract containing an arbitration agreement, the assignee will be bound by the arbitration agreement. The assignee would take both the benefit and burden of the arbitration agreement i.e., the assignee can invoke the arbitration agreement to pursue a claim and can be compelled to arbitrate a dispute raised by another party. Therefore, Omkara would be bound by the arbitration clause contained in the SPA. In Cox Kings (supra), it has been inter alia held as under: 135. The Arbitration Act does not define the phrase person claiming through or under a party. A person claiming through or under a party is not a signatory to the contract or agreement, but can assert a right through or under the signatory party. Russel on Arbitration states that an assignee can invoke the arbitration agreement as a person claiming through or under a party to the arbitration agreement. An assignee takes the assigned right under a cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the beneficial owner of the demat securities and 25 South and that too for valuable consideration of Rs. 894 Crores. 53. It is further contended that even if it be assumed that disputes exist in respect of assignment of debt together with the underlying security, the same would be in relation to the loan agreement entered into between respondent no.3/JHL and respondent no.1/PNBHFL or its assignee. Further, it is contended that even for the purpose of invoking the doctrine of group of companies, as explained by the Constitution Bench in the case of Cox Kings (supra), the non-signatories in the context of the transaction in the present case, must be a group company of the assignee i.e. Omkara, which is not the case here. 54. Likewise, it has been submitted on behalf of respondent no.7/Akruti that the legal test for binding non-signatories, is not satisfied in the case of respondent no.7. It is contended that the direct benefit estoppel theory has no applicability to respondent no.7 as the same applies only where a third party invokes specific terms/clauses of the main contract (SPA) to its direct benefit and does not apply when the third party merely benefits out of the situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the arbitration agreement. In Cox Kings (supra), the Supreme Court has itself made it clear that any authoritative determination given by this Court pertaining to the group of companies doctrine should not be interpreted to exclude the application of other doctrines and principles for binding non-signatories to the arbitration agreement. Furthermore, in Cox Kings (supra), it has been specifically held as under: 91. In case of group companies, there may arise situations where a holding company completely dominates the affairs of the subsidiary company, to the extent of misusing its control, to avoid or conceal liability. In such situations, the courts apply the doctrine of alter ego or piercing the corporate veil to disregard the corporate separateness between the two companies and treat them as a single entity. In LIC v. Escorts Ltd., a Constitution Bench of this Court noted that the principle of distinct legal personality may be ignored where the associate companies are inextricably connected as to be, in reality, part of one concern. Speaking for the Bench, Justice O Chinnappa Reddy observed: 90. [...] Generally and broadly speaking, we may say that the corporate veil may be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mlets London Borough Council, Lord Denning held that a group of three companies should be treated as a single economic entity on the basis of two factors : first, the parent company owned all the shares of the subsidiary companies to the extent that it controlled every movement of the given subsidiary companies; and second, all the three companies in the group virtually acted as partners and could not be treated separately. Thus, the determination of whether two or more companies constitute a single economic entity depends upon the concerted efforts of the companies to act in pursuance of a common endeavour or enterprise. 94. From the above discussion, we can infer that entities within a corporate group have separate legal personality, which cannot be ignored save in exceptional circumstances such as fraud. The distinction between a parent company and its subsidiary is fundamental, and cannot be easily abridged by taking recourse to economic convenience. Legally, the rights and liabilities of a parent company cannot be transferred to the subsidiary company, and vice versa, unless, there is a strong legal basis for doing so. 59. Therefore, the ambit of non-consensual theories like a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses. The wealth of practice already accumulated on the subject in municipal law indicates that the veil is lifted, for instance, to prevent misuse of the privileges of legal personality, as in certain cases of fraud or malfeasance, to protect third persons such as creditor or purchaser, or to prevent the evasion of legal requirements or of obligations. 29. Gary B. Born in his book, International Commercial Arbitration, Volume I, (Third Edition), p. 1546, had explained the concept of alter ego as under: Definitions of alter ego vary materially in different legal systems, and are applied in a number of different contexts. Nonetheless, the essential theory of the alter ego doctrine in most jurisdictions is that one party so thoroughly dominates the affairs of another party, and has sufficiently misused such control, that it is appropriate to disregard the two companies' separate legal forms, and to treat them as a single entity. In the context of arbitration agreements, demonstrating an alter ego relationship under most developed legal systems requires convincing evidence that one entity dominated the day-to-day actions of another and/or that it exercised this power to work fraud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. American Arbitration Association : 64 F.3d 773 (2d Cir. 1995), it was held that the corporate parent must exert a degree of control over the subsidiary that there is abandonment of separate corporate structures, intermingling of corporate finances and directorship and in essence, the subsidiary must cease to function as a distinct entity. A similar view was expressed in Craig v. Lake Asbestos of Quebec Ltd. 843 F.2d 145 (3rd Cir. 1988). 64. In Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc. 933 F.2d 131, 32 Fed R. Evid Serv. 1218 (2d Cir. 1991), the Court listed some grounds on which piercing the corporate veil would be justified, such as, where the parent and subsidiary are run by common officers, do not deal at arm's length with each other, are not treated as separate profit centres and share common office space. The law in this regard has been summarised in ARW Exploration Corp. v. Aguirre 45 F.3d 1455 (10th Cir, 1995), where the Court held that a corporation will be bound to arbitrate when it is merely the alter ego of an individual or previously established corporation that has entered into the arbitration agreement. 65. Given the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n viz. invocation of the pledge and the legality of the assignment. The intertwined estoppel theory which can be used to bind a non-signatory has been expressly recognized in ONGC v. Discovery Enterprises (supra) and Gaurav Dhanuka (supra). 64. No doubt, the theories sought to be asserted by the petitioner for the purpose of impleading the respondent Nos. 6 and 7 are required to be tested and merit a more thorough factual inquiry. As held in Cox Kings (supra), in these proceedings, it is neither incumbent nor desirable for this Court to embark upon a detailed and an elaborate fact-finding exercise, which requires evidence to be adduced by the parties to come to a conclusive finding as regards above aspects. 65. In Cox Kings (supra), the Supreme Court has gone to the extent of holding that if the referral court cannot decide the issue, it should leave it to be decided by the arbitration tribunal . Reference may once again be made to the observations in para 168 and 171 of the said judgment, wherein it is stated as under:- 168. The above position of law leads us to the inevitable conclusion that at the referral stage, the court only has to determine the prima facie existence of an ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 arbitral tribunal under Section 16. 66. In case the petitioner is right in its assertions as regards the collusive nature of the transaction/s, certainly the arbitration mechanism cannot be allowed to be frustrated on account thereof. However, the same would require an intricate factual inquiry, which can only be done in the proposed arbitration proceedings. 67. Further, on a prima facie conspectus, for the purpose of these proceedings, the various transactions with which the petitioner is aggrieved viz alleged illegal invocation of the pledge, alleged assignment of the SPA, alleged illegal sale of pledged shares by Omkara and the consequent issuance of shares to respondent no.7 on the strength of the shareholding acquired from Omkara, can be said to be all intertwined transactions/inter-related transactions entitling the petitioner to invoke the direct benefit/intertwined estoppel theory. However, while referring the parties to arbitration, this Court is not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, which are best left for the tribunal to handle. The amendment to Section 8 on this front also indicates the legislative intention to further reduce the judicial interference at the stage of reference. 69. In these circumstances, at this stage, this Court is inclined to refer respondent Nos. 6 and 7 to arbitration, however, granting liberty to the said respondents to raise appropriate jurisdictional objections as regards substantive existence of the arbitration agreement qua the said respondents. All contentions of the said respondents in this regard shall be duly considered by the arbitral tribunal. Other issues raised by the Respondents 70. Apart from the aforesaid aspects, learned senior counsel for the respondents have raised various other extremely germane and relevant issues as regards the merits of the disputes sought to be raised by the petitioner. In particular, it has been contended that: (i) At no point did DLF sought to exercise any rights to redeem its pledged shares; the offer to purchase 100% shareholding of the JHL by DLF, cannot tantamount in law to redemption. (ii) The assignment in favour of Omkara cannot be questioned by virtue of Section 5(3) of the SARFAESI ..... 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