India: Impleading Foreign Company In An Arbitration Proceeding

Last Updated: 19 July 2019
Article by AMLEGALS  

IN THE SUPREME COURT OF INDIA
RECKITT BENCKISER (INDIA) PVT LTD V. REYNDERS LABEL PRINTING (INDIA) PVT LTD & ANR
2019 SCC ONLINE SC 809    DATED: 01.07.2019

FACTS

In this case, the Respondents are constituents of a group of companies known as "Reynders Label Printing Group".

Respondent No. 1 and the Applicant had signed an agreement dated 1st May, 2014. Disputes arose between both the parties and pursuant to which notice of arbitration was issued.

The parties could not agree on a common arbitrator and hence a Section 11 application was filed.

It is the contention of the Applicant that it should be considered an international commercial arbitration by impleading the foreign company, from the same group of companies involved in the negotiation process of the Contract as Respondent No. 2 and hence this Application has been filed before the Supreme Court.

ISSUE BEFORE THE SC

The sole issue that came for consideration before the Hon'ble Apex Court was:

Whether the foreign company can be impleaded in the arbitration proceedings and consider the arbitration as international commercial arbitration?

OBSERVATION

To conclusively determine the first issue, the Court considered the arguments of both the parties in grave detail.

The Court took note of both the parties' submissions and also considered relevant case laws relied on by both the parties.

The Applicant had relied upon emails of one Mr. Frederik Reynders who was involved in the negotiation process of the agreement between them and Respondent No. 1. The Applicant assumed that Mr. Frederik was an employee of Respondent No. 2 and hence Respondent No. 2 must be impleaded as a party in the arbitration proceedings.

It was also mentioned by Applicant in it's submissions that Respondent No. 2 is the foreign holding company of Respondent No. 1.

This assumption of Mr. Frederick being an employee of Respondent No. 2 was denied by them in their Affidavit.

Respondent No. 2 also clarified that it was not the holding company whereas both Respondents were part of the same group of companies having a common holding company.

Thus, the Court having taken the above facts into consideration observed that:

"Thus, respondent No.2 was neither the signatory to the arbitration agreement nor did have any causal connection with the process of negotiations preceding the agreement or the execution thereof, whatsoever. If the main plank of the applicant, that Mr. Frederik Reynders was acting for and on behalf of respondent No.2 and had the authority of respondent No.2, collapses, then it must necessarily follow that respondent No.2 was not a party to the stated agreement nor had it given assent to the arbitration agreement and, in absence thereof, even if respondent No.2 happens to be a constituent of the group of companies of which respondent No.1 is also a constituent, that will be of no avail."

The Supreme Court also opined that the Applicant had the burden to prove that both the Respondents were connected in order to implead Respondent No. 2 in the arbitration proceedings and appoint an arbitrator for an international commercial arbitration. However, the Applicant was unable to do the same.

CONCLUDING VIEW

The Supreme Court, at the outset had observed that it was only going to justify the existence of a valid arbitration agreement under Section 11.

The Supreme Court concluded that both the Respondents were not connected to each other and were only part of the same group of companies. Hence, the arbitration would be governed according to it being a domestic commercial arbitration.

The Supreme Court, on getting to know the facts of the case held that they had no jurisdiction to appoint an arbitrator for a domestic arbitration under the Arbitration and Conciliation Act, 1996. However, to save time they went on to appoint an arbitrator for a domestic commercial arbitration regardless.

For the above reasons, the Supreme Court held the following:

"13. ....... The arbitration application is dismissed as against respondent No.2. However, we appoint Mr. Justice Badar Durrez Ahmed (Former Chief Justice, Jammu & Kashmir High Court) as the sole arbitrator to conduct domestic commercial arbitration at New Delhi, between the applicant and respondent No.1 on the terms and conditions as specified in the Act of 1996.

14. Application stands disposed of in the above terms. No costs. All pending interim applications are also disposed of."

REASON OF JURISPRUDENCE

The Court accepted the Respondent's reliance on the case of Godhra Electricity Co. Ltd & Another v. State of Gujarat & Another [(1975) 1 SCC 199].

The Apex Court on basing its findings on the judgment, held as under:

"The respondent No.2 has justly relied upon the exposition in Godhra Electricity Co. Ltd. and Anr. v. State of Gujarat and Anr. to buttress the argument that post negotiations in law would not bind the respondent No.2 qua the arbitration agreement limited between applicant and respondent No.1. In any case, even this plea is based on the assumption that Mr. Frederik Reynders was associated with and had authority to transact on behalf of respondent No.2, which assertion has been refuted and rebutted by respondent No.2. It is clearly stated that Mr. Frederik Reynders was neither connected to nor had any authority of respondent No.2, but was only an employee of respondent No.1 and acted only in that capacity."

The Supreme Court thus found that post negotiations involvement will not make the party to be impleaded in the arbitration proceedings.

AMLEGALS REMARKS

In the present case, the Court clarified that only because a person/company is involved in the negotiation stage, it does not open a gateway to implead the party in the arbitration proceedings; even when they are a part of the same group of companies.

The ongoing debate with respect to this judgment is whether more weightage is to be given to the practicalities and speedy resolution of disputes versus the jurisdiction provided in the Act to specific courts.

In this judgment, the Supreme Court agreed to the fact that the arbitration concerned was a domestic arbitration and a Section 11 application was to be filed in the relevant High Court. However, in order to not waste time by transferring the application to the Delhi High Court and then the parties waiting for it to be called out for weeks; the Supreme Court considered it fit to instead appoint the arbitrator themselves. Whether such an action was appropriate ignites a conversation in the legal circuit. Judicial support versus judicial interference has always been a topic of concern in the Indian framework of courts.

On the positive side of things, this judgment can also be a guiding light to various future instances where the Applicant decides to coerce and/or create pressure on the Respondent by trying to make the Respondent's familiar parties a party to the arbitration proceedings.

Hence, its safe for us to say that the Indian courts have the right spirit in mind when it comes to arbitration. Foreign companies who are part of the same group of companies need not worry anymore to be forcefully entering into disputes, when there is no connection to the company concerned.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions