THE GROUP OF COMPANIES DOCTRINE IN REINSURANCE: ASF BUILDTECH (P) LTD v SHAPOORJI PALLONJI & CO (P) LTD[1]
We have written about the Group of Companies doctrine before. The Supreme Court has recently extended the doctrine to reinsurance arrangements.
Background
ASF Group and Shapoorji Pallonji entered into a construction contract. Shapoorji originally contracted with ASF Insignia SEZ Pvt Ltd (AISPL), but the contract was later novated to a sister concern, Black Canyon SEZ (BCSPL), another ASF entity.
Disputes arose between BCSPL and Shapoorji and BCSPL commenced arbitration. Shapoorji countersued and sought to implead AISPL and ASF Buildtech (ABPL), saying that the ASF entities acted as a single economic entity. AISPL and ABPL challenged the Tribunal's jurisdiction right up to the Supreme Court.
Decision
The Supreme Court upheld the impleadment and said:
- Arbitral tribunals can bind non-signatories if they are actively involved in the negotiation, performance, or outcome of a contract.
- Complex contractual structures in areas such as construction, financing and reinsurance have resulted in a need for the law to evolve accordingly.
- The actions of the ASF entities indicated an intent to be bound by the contract.
Conclusion
The Supreme Court has for the first time mentioned the possibility of extending the Group of Companies doctrine to reinsurance arrangements, but as this case did not relate to reinsurance, the practical impact of this decision on reinsurers is yet to be seen.
Footnote
1 2025 SCC OnLine SC 1016.
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