1. A plethora of judgments have discussed the issue relating to lifting of corporate veil and claims brought against group companies in an arbitration matter. The principle that emerges from such cases is that a non-signatory group company can be impleaded in the arbitration if the group company has shown its intention to be bound by the arbitration clause.1 Such intention is to be evinced from the communications between the parties at the time of negotiation of the contract.2 Further, if the non-signatory group company is intricately involved in the process of performance of the contract then it shall be bound by the arbitration clause contained in the contract executed by the signatory group company.3 Our recent piece which discusses the divergence of opinion on the issue of lifting of corporate veil can be accessed here.
  2. This piece:

(a) discusses the case of Ahlcon Parenterals India Ltd v. Scan Biotech Ltd4 ("Ahlcon Case") wherein Ahlcon's claims against Scan Biotech's sister entities (viz. M/s Rowtech Ltd. and M/s Alter Ego Ltd., collectively "Sister Entities") were disallowed by the arbitral tribunal on the ground that the Sister Entities were not party to the contract; and

(b) highlights certain alternate arguments for maintaining Ahlcon's claims directly against Scan Biotech for all the supplies made to Scan Biotech and the Sister Entities based on the legal principles available under the Indian Contract Act, 1872 ("ICA") and the Sale of Goods Act, 1930 ("SOGA").


  1. Ahlcon claimed that it supplied finished goods to Scan Biotech and to other entities at the instance of Scan Biotech. It argued that Scan Biotech used to accept deliveries of the formulations supplied in India at Ahlcon's manufacturing facility and for the exports the same were dispatched to the Sister Entities at the instance of Scan Biotech.
  2. This dispute between the parties arose regarding the payments claimed by Ahlcon for the products exported to the Sister Entities. Ahlcon claimed that Scan Biotech was also liable to pay for the supplies made by Ahlcon to the Sister Entities. Scan Biotech disputed the same and argued that supplies made to the Sister Entities were made against invoices raised by them and that Scan Biotech had no liability for such supplies. It argued that the Sister Entities were liable to pay the dues against such supplies made to them against the invoices raised by them.


Arbitral Tribunal:

  1. The arbitral tribunal disallowed the claims of Ahlcon against the Sister Entities5 by holding that although, the arbitral tribunal did have powers to lift the corporate veil, the grounds for lifting of corporate veil had not been established and it would be against the principles of natural justice to pass an award against the Sister Entities who are not a party in the arbitration. It is noteworthy that Ahlcon had not made a plea to implead the Sister Entities to the arbitration.6

High Court of Delhi ("DHC"):

  1. The holding of the Arbitral Tribunal was challenged by Ahlcon and the DHC was constrained to uphold the award of the arbitral tribunal, since the same was a plausible view and based on cogent reasons and could not be interfered with at the challenge stage under Section 34 of the Arbitration and Conciliation Act, 1996 ("Act"). The apparent frustration of the DHC is also visible in the text of the ruling. In paragraphs 22 and 23, the DHC held:

22. It appears that there is ample evidence on record to show that Scan Biotech, Rowtech and Alter Ego are connected. ..........................Scan Biotech also claims that Rowtech and Alter Ego had been clearing consignments on behalf of Scan Biotech at the final destination. They also arranged for storing of the goods till the same were sold. Ahlcon claims that Rowtech and Alter Ego had also acted as intermediaries for negotiating and concluding sales of goods on behalf of Scan Biotech.

23. Undisputedly, the material produced by Ahlcon regarding the connection between Scan Biotech and Rowtech and Alter Ego is not insubstantial. However, even if it is accepted that a conclusion different from that reached by the Arbitral Tribunal, is plausible; the same cannot be a ground to interfere with the impugned award. As observed earlier, this Court does not act as the first appellate court and reappreciate the evidence led by parties. This Court cannot reevaluate the evidence and supplant its opinion over that of the Arbitral Tribunal.


  1. While the Ahlcon Case revolved around the arguments of Ahlcon regarding lifting of the corporate veil, the following discusses alternative legal perspectives which may have been instrumental in holding Scan Biotech liable for the supply of goods by Ahlcon to the Sister Entities without requiring the need to lift the corporate veil.

Delivery of goods as per instructions of Scan Biotech:

  1. In the judgment, the DHC has noted that Scan Biotech themselves had issued instructions to Ahlcon to supply to goods overseas to its Sister Entities. The arguments of Scan Biotech (which seem to have found favour with the arbitral tribunal) is that the orders were placed by the Sister Entities and receipt was issued by the Sister Entities. Hence, the claims for supplies made to the Sister Entities were beyond the scope of the contract between Ahlcon and Scan Biotech. However, in case these supplies were being made under the contract with Scan Biotech, it would not matter whether the bills or receipts are raised on the Sister Entities.
  2. Reference is made here to Section 50 (Performance in manner or at time prescribed or sanctioned by promisee) of the ICA which deals with manner and time of performance of a contract. Section 50 of ICA provides that the performance of the contract may be made in the manner and time prescribed by the promisee. Hence, once the promisee has indicated the manner of performance of the contract, the contract has to be performed in the form so prescribed.
  3. Reference is also made to Section 33 (Delivery) of the SOGA which deals with deliveries. This section provides that delivery is complete when the goods are put in the possession of the buyer or any other person authorised to hold them on his behalf. Thus, where the buyer of a motor car requested the seller to deliver it directly to a sub-purchaser from the buyer, and it was so delivered, it was held that the buyer had obtained the constructive possession of the vehicle.7
  4. It is submitted that the supply of goods was being made by Ahlcon of the quantities defined under the contract between Ahlcon and Scan Biotech, then the same would be covered under Section 50 of the ICA and Section 33 of the SOGA and the supplies made to the Sister Entities were, legally speaking, deliveries to Scan Biotech based on its instructions. It would not even be required to show that Rowtech and Alter Ego were Sister Entities or to lift the corporate veil.
  5. Accordingly, it is permissible for Scan Biotech to instruct Ahlcon to deliver even to any third party and the deliveries made as such would remain in compliance of the contract and would likely make Scan Biotech liable for payment to Ahlcon. We, therefore, see no reason why Ahlcon could not have claimed the outstanding amount for the supplies made to the Sister Entities directly from Scan Biotech.

Sister Entities as 'agents' of Scan Biotech:

  1. In the judgment, DHC also stated that Scan Biotech itself claimed that the Sister Entities had been clearing consignments on behalf of Scan Biotech at the final destination. They also arranged for storing of the goods till the same were sold. Further, the consignments in India were collected by Scan Biotech itself whereas the consignment to be sent overseas was sent to the Sister Entities. It is on this basis, Ahlcon claims that the Sister Entities had acted as intermediaries for negotiating and concluding sales of goods on behalf of Scan Biotech.
  2. The facts as stated above suggest that the Sister Entities acted as agents of Scan Biotech. ICA provides that there can be an implied or explicit agency that may exist between the agent and the principal to carry out the work of the principal.8 Further any acts of the agents binds the principal in the same form and manner as contract between a third party and the agent.9 It is not even necessary for the principal to be named and it is sufficient if the principal can be identified.10 In this case, it appears from the facts that the Sister Entities have been acting as the agents and had the power to bind Scan Biotech as the principal for the acts committed by them as agents. The argument of Scan Biotech that it is not liable for the supplies made to the Sister Entities on receipts raised by them does not hold good in light of Section 226 (Enforcement and consequences of agent's contracts) of the ICA.
  3. Section 226 of the ICA clearly states that any contract entered into by the agent may be enforced in the same manner against the principal. Even if the agent has entered into any obligations due to its actions on behalf of the principal, the same may be enforced and will have the same legal consequences as if the contracts have been entered into by the principal in person. Since, Scan Biotech is the principal as discussed above, it does not matter whether the supplies were made under a separate contract or under separate receipts raised by the Sister Entities. The Sister Entities were acting as agents of Scan Biotech, would have made Scan Biotech liable for the actions of the Sister Entities and make Scan Biotech liable to pay for the goods supplied to them.


  1. The lack of case law jurisprudence in India surrounding the aforesaid legal principles should not be of concern when the legislative principle supporting the position is straightforward and applicable. Arbitration law may have developed several hoops to jump through and may make it near impossible to bring claims against non-parties to the contract, however contract law and in its principles may help parties like Ahlcon having supporting facts to bring claims against the contracting party for deliveries made under the contract as per the directions of the contracting party and received by the perceived agents of the contracting party. Such a factual situation would allow the claims for non-payment of deliveries to be brought against the contracting party as the principal to such agents itself. It being not necessary for the Sister Entities or agents to be a party to the contract or the arbitration agreement as the claims are not being brought against such agents. This would thus relieve the innocent parties the burden of proving the elements of group companies' doctrine to implead such Sister Entities in arbitrations.
  2. Additionally, it would be well within the rights of the parties to include a clause in the supply contract, indicating the mode and manner of delivery beforehand. This will provide sufficient safeguard to the supplier that any delivery shall only be made under the contract as per the form and manner prescribed and that any subsequent instruction by the buyer have to be given in writing and that the delivery to any third party on such instructions would make the contracting party liable for the payment irrespective of the delivery made to unknown third parties.


1. Chloro Controls India Private Limited v. Severn Trent Water Purifications Inc. and Others (2013) 1 SCC 641; Ameet Lal Chand Shah v. Rishabh Enterprises, (2018) 15 SCC 678.

2. Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited and Anr (2019) 7 SCC 62;

3. Mahanagar Telephone Nigam Ltd. v. Canara Bank and Others, (2020) 12 SCC 767

4. Ahlcon Parenterals India Ltd v. Scan Biotech Ltd, O.M.P (Comm) 91/2021 (High Court of Delhi, 4 March 2021) ( accessed on 22.04.2021.

5. Id at paragraph 16

6. Id at paragraph 18

7. Four Point Garage Ltd v. Carter [1985] 3 All. E.R. 12; E&S Ruben Ltd. v. Faire Bros. & Co. Ltd. [1949] 1 All.E.R. 215; European Grain and Shipping Ltd. v. Davind Geddes (Proteins) Ltd. (1977) 2 Lloyds Rep 591 as cited in Akshay Sapre, Pollock and Mulla - The Sale of Goods Act (10 Ed., 2018 Lexis Nexis) at page 274

8. Section 186 and 187, Indian Contract Act, 1872

9. Ram Chandra Marwari v. Rani Keshobati Kumari (1909) 36 IA 85 (PC)

10. Mackinnon Mckenzie & Co. v. Lang Moir & Co. (1880-81) ILR 5 Bom 584 cited in R. Yashod Vardhan, Pollock and Mulla - Indian Contract Act, 1872 (15th Ed. 2018, Lexis Nexis) at page 1714

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.