ARB.P./716/2019 of SHAPOORJI PALLONJI AND CO. PVT. LTD Vs RATTAN INDIA POWER LTD & ANR.

IN THE HIGH COURT OF DELHI AT NEW DELHI

%Judgment delivered on: 07.04.2021

+ARB. P. 716/2019 and I. A. No. 7836/2020

SHAPOORJI PALLONJI AND CO. PVT. LTD

..... Petitioner

versus

RATTAN INDIA POWER LTD & ANR.

..... Respondents

Advocates who appeared in this case:

For the Petitioner: Mr Ciccu Mukhopadhaya, Senior Advocate: with Mr Abhijeet Sinha, Mr Ravi Tyagi,: Mr Shubhanshu Gupta and Ms Rashmi: Gogoi, Advocates: with Mr Abhijeet Sinha, Mr Ravi Tyagi,: Mr Shubhanshu Gupta and Ms Rashmi: Gogoi, Advocates

For the Respondents

: Mr Gopal Jain, Senior Advocate with: Mr Karan Batura, Advocates.: Mr Karan Batura, Advocates.

CORAM

HON’BLE MR JUSTICE VIBHU BAKHRU

JUDGMENT

VIBHU BAKHRU, J

1.The petitioner (hereafter referred to as ‘Shapoorji’), companyincorporated under the Companies Act, 1956, has filed the presentpetition under Section 11 of the Arbitration and Conciliation Act, 1996(hereafter the ‘A&C Act’), inter alia, praying as under:-

“Appoint Hon'ble Mr. Justice C. K. Prasad(Retd.) Former Judge, Supreme Court of India,the Nominee Arbitrator already appointed byRespondent No.2 for the BTG contract, or anyother person, as this Hon'ble Court may deemfit and proper as the Nominee Arbitrator onbehalf of the Respondents for adjudication ofthe disputes that have arisen between theparties;”

2.Respondent no.1, previously known as Indiabulls Power Limited,(hereafter referred to as ‘Indiabulls’) was desirous of developing a5x270 MW thermal power plant at Amravati, Maharashtra (hereafterreferred to as the ‘Project’). Respondent no. 2 (hereafter ‘Elena’) is awholly owned subsidiary of Indiabulls.

3.On 19.05.2008, Indiabulls invited bids for execution of Civil andStructural Works, Boiler Turbine Generator Package (hereafter ‘BTGWorks’), which was part of the Project. Shapoorji submitted its bid inresponse to the said invitation, which was subsequently revised. Therevised bid was accepted and Letter of Award (hereafter ‘the LoA’)dated 06.02.2010 for the contract of execution of the BTG Works at anestimated price of ₹180 Crores, was awarded to Shapoorji. The LoA was signed on behalf of Elena but the letterhead carried the name“Indiabulls”.

4.Thereafter, on 26.03.2010 Shapoorji and Elena entered into the‘Contract for BTG Civil and Structural Works’ (hereafter ‘BTGContract’) for execution of BTG Works. The BTG Contract expressly

included the LoA as one of the contract documents. The initial scope ofwork for the BTG Works was subsequently increased through twenty-onedifferent amendments issued by Elena and the contract price for BTGContract was changed to ₹189,18,87,147.07/- (Rupees One Hundred andEighty-Nine Crores Eighteen Lakh Eighty-Seven Thousand One HundredForty-Seven and Seven Paisa only). The Work Order bearing AmendmentNo. 21 is dated 31.05.2017. The said Work Order also included anarbitration clause.

5.On 03.01.2012, Work Order for Civil and Structural work forBalance of Plant (BoP Contract) was issued to Shapoorji. Prior to that,on 29.10.2010, the contract for Civil and Structural work for theBalance of Plant (BoP Works) was entered into with Gannon Dunkerley& Co. Ltd. The respondents claim that Gannon Dunkerley & Co. couldnot complete the BoP Works. Shapoorji agreed to complete it; therefore,the same was offloaded to Shapoorji. Shapoorji claims that the BoPContract was supplemental to BTG Works and therefore, is coveredwithin the Dispute Resolution Clause under the BTG Contract.

6.On 14.01.2014, Letter of Intent dated 14.01.2014 was issued byIndiabulls to Shapoorji for civil construction for RCC Bridges.

7.On 18.10.2012, Work Order bearing No. 332003859 (DGContract) was awarded to Shapoorji for arrangement of DG Sets.

8.Disputes have arisen in respect of execution of the works andrendering of services under the aforementioned Contract(s). In view ofthe said disputes, Shapoorji issued notice invoking arbitration in

respect of (i) Letter of Award dated 06.02.2010 (BTG Contract); (ii)Work Order no. 3451000221 dated 03.01.2012 (BoP Contract),awarded to Shapoorji for Balance of Plant Works (BoP Works); (iii)Work Order bearing No. 3382003859 dated 18.10.2012, awarded toShapoorji for arrangement of DG Sets (DG Contract); and (iv) Letter ofIntent dated 14.01.2014 issued by Indiabulls to Shapoorji for civilconstruction of 4 RCC Bridges (RCC Contract).

9.Shapoorji nominated Justice (Retd.) A.K. Sikri, former Judgeof the Supreme Court as an arbitrator and called upon Indiabulls andElena to jointly nominate an arbitrator.

10.Indiabulls responded to the said notice by letter dated23.10.2019 contending that the Contract(s)/ Work Orders/ LOIsreferred to by Shapoorji in its notice invoking arbitration were fourseparate and independent contracts and, except the Work Order dated18.10.2012forarrangementofDGSets,noneofthesaidContract(s)/Work orders were entered into by Indiabulls and therefore,there was no arbitration agreement existing between Indiabulls andShapoorjiforreferenceofdisputesarisingoutofthesaidContract(s)/Work Orders, to arbitration. Indiabulls further stated thatinsofar as, the Work Order dated 18.10.2012 is concerned, the saidWork Order did not include any arbitration clause. Further the amountpayable under the said Work Order had been paid and its obligations inrespect of the said Work Order stood discharged.

11.Elena also responded simultaneously by sending letter dated

23.10.2019 through common advocate, inter alia, stating that “theContract(s)/Work Orders/LOIs mentioned by Shapoorji in its noticeinvoking arbitration were separate and distinct”.Whilst Elenaadmitted existence of the arbitration agreement for reference of disputesunder the BTG Contract (LoA dated 06.02.2010, Contract dated26.03.2010, and Work Order dated 29.03.2010) for execution of BTGWorks, it disputed the existence of any arbitration agreement forreferring the disputes arising in relation to Work Order dated03.01.2012. In addition, it is stated that it had no connection with theLetter of Intent dated 14.01.2014 for construction of 4 RCC Bridges, asthe same was issued by another company – IIC Limited. Elena statedthat IIC Limited was neither sister concern nor an associate of Elena.Further, it was not group company or subsidiary of Indiabulls.Similarly, it disputed that it had any concern with the Work Order dated18.10.2012 issued by Indiabulls for arranging DG Sets. Elena furtheralleged that Shapoorji was in breach of its obligations under theContract(s) and had failed to complete the construction work within thetime, as stipulated. It also sets out its claim against Shapoorji. It alsostated that the said reply be treated as its notice of invocation ofarbitration in respect of all the claims under the LoA dated 06.02.2010and the Contract dated 26.03.2010. Elena appointed Justice (Retd.) C.K.Prasad, former Judge of the Supreme Court of India as its nomineearbitrator in respect of disputes arising out of letter of Award dated06.02.2010 and the Contract dated 26.03.2010.

12.During the course of arguments, Mr Mukhopadhaya, learned

Senior Counsel appearing for Shapoorji submitted that disputes relatingto the Work Order dated 18.10.2012 for arranging DG Sets on hire aswell as disputes relating to the Letter of Intent dated 14.01.2014 issuedby IIC Limited be excluded from the scope of the present petition. Heconfined the present petition to seeking constitution of an ArbitralTribunal to adjudicate disputes in relation to the BTG Contract (whichincluded the LoA dated 06.02.2010) for execution of BTG Works andWork Order dated 03.01.2012 (BoP Contract) for the execution of BoPWorks.

13.In view of the above, the limited controversy required to beaddressed in this petition is whether prima facie an arbitrationagreement exists between Indiabulls and Shapoorji in respect of theBTG Contract for execution of BTG Works and BoP Contract forexecution of the BoP Works.

Submissions

14.Mr Mukhopadhaya referred to the LoA dated 06.02.2010 (forBTG Works) and stated that the LoA expressly provided that Shapoorjiwould enter into formal contract within one month from the date ofissuance of the LoA with “Indiabulls Power Ltd. (Elena Power andInfrastructure Limited) (EPIL), for the subject work”. He contendedthat this clearly implied that Elena was acting on behalf of Indiabulls.Although the BTG Contract was signed by Elena, it was on behalf ofIndiabulls. Second, he submitted that the revised offer made byShapoorji to Indiabulls was part of the BTG Contract and the said offer

was obviously, accepted by Indiabulls as Elena could not haveindependently accepted the revised offer that was not made to it. Sincethere is no dispute that Shapoorji’s offer to Indiabulls was accepted andthe said offer formed part of the contract, it was not open for Elena tocontend to the contrary.

15.Next, he submitted that in terms of the BTG Contract, the BankGuarantees for due performance of the works were issued by Shapoorji.However, they were not in favour of Elena but in favour of Indiabulls.This also indicated that, Indiabulls was the true beneficiary of the workscontracted to Shapoorji. In addition, the Free Issue Material was to bemade at the rates approved by Indiabulls.The payments for thecontracts were made directly by Indiabulls to Shapoorji. He submittedthat in the circumstances, even though Indiabulls had not signed theBTG Contract, it would nonetheless, be bound by the arbitration clause.

16.He submitted that the BTG Contract also included clause whichcontemplated an obligation to perform extra works. He submitted thatthe Work Order for the BoP Works was issued in respect of workrelating to the coal handling plant, which was an integral part of theProject and thus was required to be construed as extra work under theBTG Contract. He submitted that the works to be executed under theBoP Work Order were supplemental to the BTG Works and thus, wereclearly part of the BTG Contract. He also pointed out that the BoPWork Order used the terms ‘Contractor’, ‘Engineer In Charge’ and alsocontemplated ‘Owner’s Approval’. He submitted that none of thoseterms were defined under BoP Contract but were defined under the BTG

Contract. Thus, it was obvious that the BoP Work Order wassupplemental to and was required to be read in conjunction with theBTG Contract and not on stand-alone basis. He submitted that theparties always conducted themselves in manner so as to acceptarbitration as one-step method of resolving their, inter se, disputes. Itwould not make any commercial sense for the parties to agree to referdisputes regarding the main contract to arbitration and not includedisputes regarding the supplemental and connected contracts.

17.Mr Jain, learned senior counsel appearing for Indiabullssubmitted that Indiabulls was not signatory to the BTG Contract and,therefore, could not be compelled to arbitrate. He further submitted thatthe notice invoking arbitration was composite notice in respect of fourseparate contracts and thus, the same was invalid. He submitted thatsince the contracts were independent, composite notice could not beissued. He submitted that Elena was an EPC Contractor and Indiabullshad entered into three separate Contract Agreements, all dated25.03.2010, with Elena. One was for awarding the civil and relatedworks at the project; the second was for supply of equipment andmaterials for the project; and, the third, for erection, testing,commissioning and handing over the project. He submitted that Elenahad entered into sub-contracts with various parties for procurement ofmaterial and services and, the BTG Contract was one such sub-contractentered into by it.

Reasons and Conclusion

18.There is no dispute that the BTG Contract was signed byShapoorji and Elena. Elena was referred to as the ‘Employer’.TheGeneral Conditions of the Contract (hereafter ‘GCC’) defined the term‘Employer’ as under:

“1.12 Employer

EmployershallmeanELENAPOWER&INFRASTRUCTURELIMITEDacompanyincorporated under the Companies Act, 1956 having itsregistered office at E-29, First Floor, Connaught Place,New Delhi-110001 and corporate office at IndiabullsHouse, 448-451, Udyog Vihar, Phase V, Gurgaon,Haryana-122001, to whom the work of construction of5x270 MW Power plant is awarded by the Owners,which expression shall, unless repugnant to the contextor contrary to the meaning thereof, include itssuccessors, executors and permitted assignees.”

19.The GCC referred to Indiabulls as the ‘Owner’. Thus, theessential question to be addressed is whether Indiabulls can becompelled to arbitrate even though it is not signatory to the BTGContract.

20.Undisputedly, Sub-section (3) of Section 7 of the A&C Actrequires the arbitration agreement to be in writing. Sub-section (4) ofSection 7 of the A&C Act further provides that that an arbitrationagreement is in writing if it is contained in (a) document signed by

parties; (b) an exchange of letters, telex, telegrams or other means oftelecommunication(includingcommunicationthroughelectronicmeans), which provide record of the agreement; or (c) an exchange ofstatements of claim and defence in which the existence of the agreementis alleged by one party and not denied by the other. Sub-section (5) ofSection 7 of the A&C Act also provides that reference in contract toa document containing the arbitration clause would also constitute anArbitration Agreement if the contract is in writing and reference to theArbitration Agreement is such so as to make the arbitration clause partof the contract. The legislative intent in postulating that an ArbitrationAgreement must be in writing is to ensure that the existence of theAgreement is not brought into question and the same is firmlyestablished. Indisputably, arbitration is an alternate dispute resolutionmechanism that rests on consent between the parties. Undeniably, therule is that non-signatory cannot be compelled to arbitrate on theassumption that the said party has not acceded to arbitration. However,the said rule is not without exceptions.21.In Cheran Properties Ltd. v. Kasturi & Sons Ltd.: (2018) 16 SCC413, the Court had noted that “the evolving body of academic literatureas well as adjudicatory trends indicate that in certain situations, anarbitration agreement between two or more parties may operate to bindother parties as well.” The Courts in different jurisdictions have evolvedvarious principles on the basis of which, in certain exceptionalcircumstances non-signatories may be compelled to arbitrate.TheCourts in United States of America and France have been liberal in their

approach. The Courts in United States of America have largely drawnon principles of contractual law to compel non-signatories to arbitrate.However, the Courts in Germany and Switzerland have adopted anarrower approach on the issue of compelling non-signatories toarbitrate.

22.In Chloro Controls (supra), the Supreme Court had referred totwo theories that could be applied to compel non-signatories to anarbitration agreement to arbitrate, as under:

“103.1The first theory is that of implied consent,third party beneficiaries, guarantors, assignment andother transfer mechanisms of contractual rights. Thistheory relies on the discernible intentions of the partiesand, to large extent, on good faith principle. They applyto private as well as public legal entities.

103.2Thesecondtheoryincludesthelegaldoctrines of agent-principal relations, apparent authority,piercing of veil (also called “the alter ego”), joint venturerelations, succession and estoppel. They do not rely onthe parties’ intention but rather on the force of theapplicable law.”

23.In addition to the above, the Supreme Court had also referred tothe Group of Companies doctrine and applied the same for compellingcertain parties to arbitrate in that case.

24.According to Gary B. Born, the principal legal basis for holdingthat non-signatory be bound by an arbitration agreement is to “includeboth purely consensual theories (Eg. agency, assumption, assignment)

andnon-consensualtheories(Eg.estoppel,alterego)”.(seeInternational Commercial Arbitration, Volume I, (Third Edition), p.1531).

25.In several cases, implied consent is used as basis to hold thatnon-signatories are bound by the arbitration agreement. It is well settledthat in cases where the signatory is an agent of the principal (non-signatory), the principal can be compelled to arbitrate even though it isnot party to the agreement. This rests on the principle that thearbitration agreement may not have been signed by the non-signatorybut was executed on its behalf. This principle is applied, essentially, incases where the agent-principal relationship is established between thesignatory and non-signatory and it is established that the signatories hadacted under the authority of the principal. There are several cases wherethe Courts have found the conduct of the signatory and its principal tobe sufficient evidence of their relationship.

26.The Courts/Arbitral Tribunals have also in some cases imputedimplied consent on the part of the non-signatory and held the non-signatory to be bound by the arbitration agreement. These are typicallycases where the Courts/Arbitral Tribunals have found that the non-signatories have played an active role in negotiations and are directlyinvolved in the contract. In Gvozdenovic v. United Air Lines, Inc.,: 933F.2d 1100, 1105 (2d. Cir. 1991) the Court held that “where partyconducts itself as it were party to commercial contract, by playing asubstantial role in negotiations and/or performance of the contract, it

may be held to have the impliedly consented to be bound by thecontract”.

27.There are also cases where third party beneficiaries of contractmay be compelled to arbitrate. Similarly, in cases such as assignment orsuccession, the assignees or successors interest may be compelled toarbitrate although, they were not original signatories to the arbitrationagreement.

28.There exists another set of cases where the Courts have compellednon-signatories to arbitrate by disregarding their corporate facade orwhere the Courts have found the signatory to be an alter ego of the non-signatory or vice versa.In Barcelona Traction, Light and PowerCompany Ltd.: (1970) ICJ Rep. 3, the International Courts of Justicehad explained the doctrine of piercing the corporate veil in the followingwords:

“the process of ‘lifting the corporate veil’ or ‘disregardingthe legal entity’ has been found justified and equitable incertain circumstances or for certain purposes. The wealthof practice already accumulated on the subject inmunicipal law indicates that the veil is lifted, for instance,to prevent misuse of the privileges of legal personality, asin certain cases of fraud or malfeasance, to protect thirdpersons such as creditor or purchaser, or to prevent theevasion 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 alterego as under:

“Definitions of “alter ego” vary materially in differentlegal systems, and are applied in number of differentcontexts. Nonetheless, the essential theory of the “alterego” doctrine in most jurisdictions is that one party sothoroughly dominates the affairs of another party, and hassufficiently misused such control, that it is appropriate todisregard the two companies’ separate legal forms, and totreat them as single entity. In the context of arbitrationagreements, demonstrating an “alter ego” relationshipunder most developed legal systems requires convincingevidence that one entity dominated the day-to-day actionsof another and/or that it exercised this power to work fraudor other injustice or inequality on third party or to evadestatutory or other legal obligations.

The “alter ego” doctrine differs from principles of agencyor implied consent in that the parties’ intentions are notdecisive;rather,thedoctrinerestsonoverridingconsiderations of equity and fairness, which mandatedisregarding an entity’s separate legal identity in specifiedcircumstances.”

30.Courts in several jurisdictions have drawn heavily on theprinciple of estoppel and have compelled non-signatories to arbitrate.

31.In Avila Group Inc. v. Norma J. of California: 426 F. Supp.537 (S.D.N.Y. 1977) the court found that party cannot assert theexistence of valid contract to base its claims and at the same time denythe contract's existence to avoid arbitration. The court observed that "toallow [plaintiff] to claim the benefit of [a] contract and simultaneously

avoid its burdens would both disregard equity and contravene thepurposes underlying enactment of the Arbitration Act."

32.In Life Techs. Corp. v. AB Sciex Prop. Ltd.: 803 F.Supp. 2d270, 273-274 (S.D.N.Y. 2011) it was held that “a non-signatory may beestopped from avoiding arbitration where it knowingly accepted thebenefits of an agreement with an arbitration clause. The benefits mustbe direct – which is to say, flowing directly from the agreement”.

33.In addition to the above, the Courts have also applied the Groupof Companies doctrine to compel non-signatory to an Agreement toarbitrate. The Group of Companies Doctrine was first applied in the caseof Dow Chemical v. Isover-Saint-Gobain (1984 Rev Arb 137). The saiddoctrine rests on the concept of ‘single economic reality’.

34.Dow Chemical Venezuela and Dow Chemical Europe, were bothdirectly or indirectly owned and controlled by parent company DowChemicalCo.Theyenteredintodistributionagreementswithseveral companies the rights of which were subsequently assumed by acompany - Isover-Saint-Gobain. Subsequently, distribution contractwith Dow Chemical Venezuela was assigned to another Dow subsidiary,Dow Chemical AG. During the course of coperations, Dow ChemicalFrance performed the obligation under the distribution agreementsinstead of the formal signatories and took other action necessary to makeuse of business trademarks utilized under the agreements as well. Eachagreement contained an ICC arbitration clause. When dispute arose,arbitration proceeding was commenced against Isover-Saint-Gobain by

not only the two signatory Dow Chemical companies, but also by theirparent company Dow Chemical Co. and Dow Chemical France, neitherof which had signed the agreements or the arbitration clauses containedtherein. The reasons for binding the non-signatory siblings were several.The court stated:

“Considering that it is indisputable – and in fact not disputed– that Dow Chemical Company has and exercises absolutecontrol over its subsidiaries having either signed the relevantcontracts or, like Dow Chemical France [one of the subsidiarycompanies], effectively and individually participated in theirconclusion, their performance, and their termination” and“irrespective of the distinct juridical identity of each of itsmembers, group of companies constitutes one and the sameeconomic reality of which the arbitral tribunal should takeaccount when it rules on its own jurisdiction”

35.The award was subsequently upheld by the Paris Cour d’appel;and it rejected Isover-Saint-Gobain’s application for annulment of theaward.[See: Société Isover-Saint-Gobain v. Société Dow Chem.France, 1984 Rev. arb. 98 (Paris Cour d’appel), Judgement of 21October 1983].

36.Several judicial decisions in the United States have alsoapproved this view, albeit not always specifically relying upon theGroup of Companies doctrine. [See also: Freeman v. ComplexComputing Company, Inc., U.S. District Court for the SouthernDistrict of New York, 979 F.Supp. 257, 14 October 1997; FederatedTitle Insurers, Inc. v. Ward, District Court of Appeal of Florida,

Fourth District, 538 So.2d 890, 15 March 1989; Coastal StatesTrading, Inc. v. Zenith Navigation SA, 446 F.Supp. 330].

37.Recently, the United States Supreme Court in GE Energy PoweConversion France SAS, Corp. v. Outokumpu Stainless USA, LLC:140 S.Ct. 1637, 1640 (2020), held that nothing in the Convention on theRecognition and Enforcement of Foreign Arbitral Awards (New YorkConvention) or the domestic law (Federal Arbitration Act) prohibitscourts from deciding that non-signatories may be bound by or enforcearbitration agreements based on contract, agency, equity or relatedprinciples. The Supreme Court referred to the drafting history of theNew York Convention and concluded that: “Nothing in the draftinghistory suggests that the Convention sought to prevent contractingstates from applying domestic law that permits nonsignatories toenforce arbitration agreements in additional circumstances.” TheCourt found that the New York Convention does not address whethernon-signatories may enforce arbitration agreements under domesticdoctrines such as equitable estopped and according held that “silence isdispositive here because nothing in the text of the Convention could beread to otherwise prohibit the application of equitable estoppeldoctrines.” The Supreme Court also found support in citation to casesfrom several New York Convention contracting states’ courts that hadpermitted enforcement of arbitration agreements by non-signatories.

38.The said doctrine was also applied by the Supreme Court inChloro Controls (supra) to compel certain companies to arbitrate

disputes that arose in connection with agreements to which they werenot signatories.

39.In Mahanagar Telephone Nigam ltd. v. Canara Bank: (2020) 12SCC 767, Canara Bank had preferred Writ Petition before this Courtchallenging MTNL’s decision to cancel the bonds and also sought adirection for payment of accrued interest by MTNL. The said WritPetition was initially disposed of. It was subsequently revived. Duringthe proceedings, the parties agreed for the issues to be referred toarbitration. The parties suggested the name of former Chief Justice ofthis Court as sole arbitrator and he was, accordingly, appointed as asole arbitrator to resolve the disputes between the parties.In theproceedings before the learned Arbitrator, the wholly owned subsidiaryof Canara Bank – CANFINA, was joined in as party. This was objectedto by Canara Bank. The learned Arbitrator ruled in favour of CanaraBank and passed an interim award holding that CANFINA had notappeared before this Court when the disputes were referred to arbitrationand thus, was not party to the Arbitration Agreement. MTNL filed anapplication before this Court seeking clarification of the order wherebythis Court had referred the parties to arbitration. The said applicationwas withdrawn. Thereafter, MTNL filed another application forrecalling certain orders passed in the Writ Petition. The said applicationwas also dismissed by this Court. Aggrieved by certain orders passedby this Court, MTNL filed Special Leave Petition before the SupremeCourt. One of the principal controversies raised before the SupremeCourt was, whether CANFINA, who was subsidiary of Canara Bankand was also the initial subscribers to the bonds issued to MTNL, shouldbe made party to the arbitration. The Supreme Court applied thedoctrine of ‘Group of Companies’ and held that CANFINA wasundoubtedly necessary and proper party to the arbitration proceedings.The relevant extract of the said decision is set out below:

“10.2. As per the principles of contract law, an agreemententered into by one of the companies in group, cannot bebinding on the other members of the same group, as eachcompany is separate legal entity which has separate legalrights and liabilities. The parent, or the subsidiary company,entering into an agreement, unless acting in accord with theprinciples of agency or representation, will be the only entityin group, to be bound by that agreement. Similarly, anarbitration agreement is also governed by the same principles,and normally, the company entering into the agreement,would alone be bound by it.

10.3. non-signatory can be bound by an arbitrationagreement on the basis of the “group of companies” doctrine,where the conduct of the parties evidences clear intentionof the parties to bind both the signatory as well as the non-signatory parties. Courts and tribunals have invoked thisdoctrine to join non-signatory member of the group, if theyare satisfied that the non-signatory company was by referenceto the common intention of the parties, necessary party tothe contract.

10.4. The doctrine of “group of companies” had its origins inthe 1970s from French arbitration practice. The “group ofcompanies” doctrine indicates the implied consent to anagreement to arbitrate, in the context of modern multi-partybusiness transactions. It was first propounded in DowChemical v. Isover-Saint-Gobain [Dow Chemical v. Isover-Saint-Gobain, 1984 Rev Arb 137 : (1983) 110 JDI 899] ,where the Arbitral Tribunal held that:

“… the arbitration clause expressly acceptedby certain of the companies of the group should bindthe other companies which, by virtue of their role inthe conclusion, performance, or termination of thecontracts containing said clauses, and in accordancewith the mutual intention of all parties to theproceedings, appear to have been veritable parties tothese contracts or to have been principally concernedby them and the disputes to which they may giverise.”

10.5. The group of companies doctrine has been invoked bycourts and tribunals in arbitrations, where an arbitrationagreement is entered into by one of the companies in thegroup; and the non-signatory affiliate, or sister, or parentconcern, is held to be bound by the arbitration agreement, ifthe facts and circumstances of the case demonstrate that itwas the mutual intention of all parties to bind both thesignatories and the non-signatory affiliates in the group. Thedoctrine provides that non-signatory may be bound by anarbitration agreement where the parent or holding company,or member of the group of companies is signatory to thearbitration agreement and the non-signatory entity on thegroup has been engaged in the negotiation or performance ofthe commercial contract, or made statements indicating itsintention to be bound by the contract, the non-signatory willalso be bound and benefitted by the relevant contracts. [Interim award in ICC Case No. 4131 of 1982, IX YB CommArb 131 (1984); Award in ICC Case No. 5103 of 1988, 115JDI(Clunet)1206(1988).SeealsoGaryB.Born: International Commercial Arbitration, Vol. I, 2009,pp. 1170-1171.]

10.6. The circumstances in which the “group of companies”doctrine could be invoked to bind the non-signatory affiliateof parent company, or inclusion of third party to an

arbitration, if there is direct relationship between the partywhich is signatory to the arbitration agreement; directcommonality of the subject-matter; the composite nature ofthetransactionbetweentheparties.A“compositetransaction” refers to transaction which is interlinked innature; or, where the performance of the agreement may notbe feasible without the aid, execution, and performance of thesupplementary or the ancillary agreement, for achieving thecommon object, and collectively having bearing on thedispute.

10.7. The group of companies doctrine has also been invokedin cases where there is tight group structure with strongorganisational and financial links, so as to constitute singleeconomic unit, or single economic reality. In such asituation, signatory and non-signatories have been boundtogether under the arbitration agreement. This will apply inparticular when the funds of one company are used tofinancially support or restructure other members of the group.[ ICC Case No. 4131 of 1982, ICC Case No. 5103 of 1988.]

10.8. The “group of companies” doctrine has been invokedand applied by this Court in Chloro Controls (India) (P)Ltd. v. SevernTrentWaterPurificationInc. [ChloroControls (India) (P) Ltd. v. Severn Trent Water PurificationInc., (2013) 1 SCC 641 : (2013) 1 SCC (Civ) 689The MadrasHigh Court has invoked the group of companies doctrine in aforeign seated arbitration in SEI Adhavan Power (P)Ltd. v. Jinneng Clean Energy Technology Ltd., 2018 SCCOnLine Mad 13299 : (2018) 4 CTC 464.] , with respect to aninternational commercial agreement. Recently, this Courtin AmeetLalchandShah v. RishabhEnterprises [AmeetLalchand Shah v. Rishabh Enterprises, (2018) 15 SCC 678 :(2019) 1 SCC (Civ) 308] , invoked the group of companies

doctrine in domestic arbitration under Part I of the 1996Act.”

40.In Ameet Lalchand Shah and Ors. v. Rishabh Enterprises andAnr.: (2018) 15 SCC 678, the Supreme Court took liberal view on theissue of compelling non-signatory to arbitration.In that case,respondent no.1, Rishabh Enterprises, had entered into two agreementswith Juwi India Renewable Energies Pvt. Ltd. One was an equipmentand material supply contract for purchase of power generatingequipment and the second was an engineering, installation andcommissioning contract, for installation and commission of the solarplant. Both the agreements included an arbitration clause. Thereafter,Rishabh Enterprises entered into an agreement with AstonfieldRenewable Pvt. Ltd. (appellant no.2) for purchasing CIS Photovoltaicproducts, which were to be leased to Dante Energy Pvt. Ltd. (appellantno. 3). Dante Energy Pvt. Ltd. agreed to pay lease rent for theequipment. This agreement included an arbitration clause.Disputesarose between the parties. Ameet Lal Chand (appellant no.1 before theSupreme Court), an individual, was stated to be the promoter of bothAstonfield Renewables Pvt. Ltd. and Dante Energy Pvt. Ltd. He alsoexercised control over both companies. It is also material to note thatthe arbitration clause contained in the agreements were identical. TheSupreme Court found that all four agreements were inter-connected.The Court referred to its earlier decision in Chloro Controls (supra) andobserved as under:“24. In case like the present one, though there are differentagreements involving several parties, as discussed above, it isa single commercial project, namely, operating 2 MWpPhotovoltaic Solar Plant at Dongri, Raksa, District Jhansi,Uttar Pradesh. Commissioning of the Solar Plant, which is thecommercial understanding between the parties and it has beeneffected through several agreements. … What is evident fromthe facts and intention of the parties is to facilitateprocurement of equipments, sale and purchase of equipments,installation and leasing out the equipments to Dante Energy.The dispute between the parties to various agreements couldbe resolved only be referring all the four agreements and theparties thereon to arbitration.”

41.The controversy in the present case – that is, whether Indiabullscan be compelled to arbitrate regarding the disputes that have arisen withShapoorji –must be addressed in view of the principles as noted above.

42.In the present case, it is evident that Indiabulls had fullyparticipated in the formation of the BTG Contract. It is material to notethat the thermal power plant in question was being developed byIndiabulls as its undertaking. Undisputedly, Indiabulls is beneficiaryof the works being executed by Shapoorji. As noted above, whether anon-signatory is direct beneficiary of the contract containing thearbitration clause is material in determining whether the said beneficiarycan be compelled to arbitrate even though it is not signatory to theAgreement.However, this is coupled with the condition that suchbenefit should be direct and not indirect.

43.In the present case, Indiabulls (and not Elena) had invited offersfor BTG Works. Shapoorji had submitted its bid (revised offer) directlyto Indiabulls pursuant to the invitation issued by Indiabulls. The said bidwas accepted and such acceptance constituted binding contract.Concededly, on Shapoorji’s bid (revised offer) being accepted, it was nolonger open for Shapoorji to resile from its commitments. In this view,there is ample evidence to show that Indiabulls had directly participatedin the negotiations and formation of the contract for execution of theBTG Works even though it was not signatory to the BTG Contract thatwas executed subsequently.

44.There is also ample material on record to show that Indiabulls hada direct involvement in the BTG Contract. It is not disputed that in termsof Clause 6 of the LoA, Shapoorji was obliged to provide BankGuarantees to Indiabulls. It is also not disputed that in terms of the LoA,Shapoorji had furnished Bank Guarantees against the advances receivedas well as Performance Bank Guarantee and the same were in favourof Indiabulls and not Elena. Thus, Indiabulls had secured itself againstperformance of the BTG Contract by Shapoorji.

45.It is also not disputed that Indiabulls had directly issued Lettersof Credit to Shapoorji and made certain payments to Shapoorji, whichwere due under the BTG Contract. In the given facts, this Court finds itdifficult to accept that Indiabulls can avoid its obligation to arbitrateeven though it has been direct beneficiary of the BTG contract and tosome extent been directly involved with Shapoorji in negotiating andexecution of the contract.

46.As noted above, Shapoorji had submitted its offer to Indiabulls on01.02.2010 and the same was followed by revised offer dated06.02.2010.Shapoorji’sbidwasacceptedandthesamewascommunicated by the LoA dated 06.02.2010. It is important to note thatthe LoA was issued on letterhead carrying the name ‘Indiabulls’.However, it was signed on behalf of Elena.

47.Clause 8 of the said LoA is relevant and is set out below:

“8.0 CONTRACT AGREEMENT

The Contractor shall enter into formal contractagreement within one month from the date of issuance ofthe LOA with Indiabulls Power Ltd. (Elena Power andInfrastructure Limited (EPIL), for the subject work,incorporating detailed terms and conditions, whichforms part of Bid Document. The following documentsshall govern the execution of the said Contract tillagreement is signed:

(i)This Letter of Award along with the Annexures(ii)Special conditions of Contract (forms part of BidDocument)(ii)Special conditions of Contract (forms part of BidDocument)

(iii)General Conditions of Contract (GCC) (forms partof Bid Document)of Bid Document)

(iv)Technical Specifications (forms part of BidDocument)Document)

(v)Construction Safety, Health and Environment

(SHE) manual (fonns part of Bid Document)

(vi)AllApplicablecommercial/technicalrequirements, specifications, data sheets anddrawingsrequirements, specifications, data sheets anddrawings

(vii) All relevant codes and standards

(viii) Your Offer letter dated 6th Feb 2010

All conditions and deviations/exceptions, explicit orimplicit, contained in your offer or any subsequentcommunication/ discussions, unless specifically agreedduring meetings and recorded herein, shall be deemed tobe withdrawn and considered invalid.”

Subsequent to the signing of the contract agreement,documents mentioned in the contract agreement and thisLOA shall govern the Contract.”

48.The opening sentence of Clause 8 required Shapoorji to enter intoa formal contract agreement within one month from the date of issuanceof the said LoA with Indiabulls. The name of Elena was mentioned inparenthesis.Parenthesis is used to provide an explanation orclarification.

49.In Fuerst Day Lawson Limited v. Jindal Exports Limited:(2011) 8 SCC 333, the Supreme Court referred to meaning of brackets/parenthesis as defined in various dictionaries and held as under:

“45. According to The New Oxford Dictionary of English,1998 Edn., brackets are used to enclose words or figures soas to separate them from the context.

46.Oxford Advanced Learner's Dictionary, 7th Edn.,defines “bracket” to mean

“either of pair of marks, ( ) placed around extrainformation in piece of writing or part of problem inmathematics.”

47.The New Oxford Dictionary of English, 1998 Edn.,gives the meaning and use of parenthesis as:

“Parenthesis.—noun (pl. parentheses) word, clause,or sentence inserted as an explanation or afterthought intoa passage which is grammatically complete without it, inwriting usually marked off by brackets, dashes, orcommas.

—(usu. Parentheses) pair of round brackets ( ) used toinclude such word, clause, or sentence.”

(emphasis supplied)

48.Oxford Advanced Learner's Dictionary, 7th Edn.,defines the meaning of parenthesis as:

“a word, sentence, etc. that is added to speech orpiece of writing, especially in order to give extrainformation. In writing, it is separated from rest of thetext using brackets, commas or dashes.”

49.The Complete Plain Words by Sir Ernest Gowers, 1986Revised Edn. by Sidney Greenbaum and Janet Whitcut,gives the purpose of parenthesis as follows:

“Parenthesis.—The purpose of parenthesis isordinarily to insert an illustration, explanation, definition,or additional piece of information of any sort into asentence that is logically and grammatically completewithout it. parenthesis may be marked off by commas,dashes or brackets. The degree of interruption of the mainsentence may vary from the almost imperceptible one ofexplanatory words in apposition, to the violent one of aseparate sentence complete in itself.”

(emphasis supplied)

50. The Merriam-Webster Online Dictionary defines“parenthesis” as follows:

“1 : an amplifying or explanatory word, phrase, orsentence inserted in passage from which it is usually setoff by punctuation : remark or passage that departsfrom the theme of discourse : DIGRESSION

2: INTERLUDE, INTERVAL

3: one or both of the curved marks ( ) used in writingand printing to enclose parenthetical expression or togroup symbolic unit in logical or mathematicalexpression.”

51.TheLawLexicon,TheEncyclopaedicLawDictionary by P. Ramanatha Aiyar, 2000 Edn., defines“parenthesis” as under:“Parenthesis.—a parenthesis is defined to be anexplanatory or qualifying clause, sentence, or paragraph,inserted in another sentence, or in course of longerpassage, without being grammatically connected with it.(Cent. Dist.)

Parenthesis is used to limit, qualify or restrict themeaning of the sentence with which it is connected, and itmay be designated by the use of commas, or by dash, orby curved lines or brackets (United States v. Schilling [53Fed 81 : 3 CCA 440] ).

52. Having regard to the grammatical use of brackets orparentheses, if the words “(and from no others)” occurringin Section 39 of the 1940 Act or Section 37 of the 1996 Actare viewed as “an explanation or afterthought” or extrainformation separate from the main context, then, there maybe some substance in Mr Dave's submission that the wordsin parenthesis are surplusage and in essence the provisionsof Section 39 of the 1940 Act or Section 37 of the 1996 Actare the same as Section 50 of the 1996 Act. Section 39 ofthe 1940 Act says no more and no less than what isstipulated in Section 50 of the 1996 Act. But there may be

different reason to contend that Section 39 of the 1940 Actor its equivalent Section 37 of the 1996 Act arefundamentally different from Section 50 of the 1996 Act andhence, the decisions rendered under Section 39 of the 1940Act may not have any application to the facts arising underSection 50 of the 1996 Act. But for that we need to take alook at the basic scheme of the 1996 Act and its relevantprovisions.”

50.In Dozco v. Doosan Infracore Co. Ltd: (2011) 6 SCC 179 theSupreme Court has taken similar view. In that case, the question wasof interpreting the arbitration agreement between the parties, which hasbeen set out in paragraph 4 of the aforesaid decision and reads as follows:

4. The petition is countered on behalf of the respondent whoopposes the same on account of maintainability. Accordingto the respondent, only the rules of arbitration of theInternational Chamber of Commerce would apply inaccordance with the agreement between the parties. It iscontended by the respondent that this Court will have nojurisdiction much less under Section 11(6) of the Act toappoint an arbitrator, particularly, because it has beenspecifically agreed in Articles 22 and 23 which are as under:

“Article 22. Governing Laws — 22.1: This agreement shallbe governed by and construed in accordance with the laws ofThe Republic of Korea.

Article 23. Arbitration — 23.1: All disputes arising inconnection with this agreement shall be finally settled byarbitration in Seoul, Korea (or such other place as the partiesmay agree in writing), pursuant to the rules of agreement thenin force of the International Chamber of Commerce.”

51.While interpreting the words in the brackets as appearing inArticle 23.1, the Supreme Court held as under:

“15. If we see the language of Article 23.1 in the light ofArticle 22.1, it is clear that the parties had agreed that thedisputes arising out of the agreement between them would befinally settled by the arbitration in Seoul, Korea. Not only that,but the rules of arbitration to be made applicable were theRules of the International Chamber of Commerce. This givesthe prima facie impression that the seat of arbitration was onlyin Seoul, South Korea. However, Ms Mohana, learned counselappearing on behalf of the petitioner drew our attention to thebracketed portion and contended that because of the bracketedportion which is to the effect “or such other place as the partiesmay agree in writing”, the seat could be elsewhere also. It isbased on this that Ms Mohana contended that, therefore, thereis no express exclusion of Part I of the Act. It is not possible toaccept this contention for the simple reason that bracketcould not be allowed to control the main clause. The bracketedportion is only for the purposes of further explanation. In myopinion, Shri Gurukrishna Kumar, learned counsel appearingon behalf of the respondent, is right in contending that thebracketed portion is meant only for the convenience of theArbitral Tribunal and/or the parties for conducting theproceedings of the arbitration, but the bracketed portion doesnot, in any manner, change the seat of arbitration, which is onlySeoul, Korea.”

52.It can be discerned from the aforesaid decisions that words,clauses or sentence appearing in parenthesis are inserted in passageas an explanation, which is otherwise also, grammatically completewithout it. In other words, the purpose of parenthesis is ordinarily toinsert an illustration, explanation, definition or additional piece ofinformation of any sort in sentence that is logically and grammaticallycomplete without it. The clause clearly indicated that the formal contractwould be with Indiabulls. This court is of the view that mentioning Elena

between brackets was done to indicate that Indiabulls and Elena wereone and the same. Thus, the formal contract with Indiabulls may beentered by Elena. The facts and circumstances also bear out that Elenais an Alter-Ego of Indiabulls.

53.The LoA formed part of the BTG Contract. It is relevant to notethat Clause 7 of the LoA also contained an arbitration clause. Clause 7of the LoA is set out below:

“7.0GOVERNING LAW AND ARBITRATION

This LoA shall be construed in accordance with andgoverned by the laws of India and the parties havedecided that in the event of any litigation the courts inNew Delhi shall have exclusive jurisdiction.

All disputes arising out of this LoA shall be resolvedamicably. In the event that the dispute cannot be resolvedamicably, the same shall be referred for arbitration inaccordance with the Arbitration and Conciliation Act,1996 as prevalent in India. Each party shall nominate oneArbitrator and the two Arbitrators so nominated shalljointly nominate third presiding Arbitrator. TheArbitrators shall give reasoned Award. The place ofarbitration shall be New Delhi, India and the Language ofarbitration shall be English.

The Parties agree that any arbitration award shall be finaland binding upon the Parties. The Parties hereto agreethat the Contractor shall be obliged to carry out itsobligations under the Contract even in the events disputeis referred to Arbitration.”

54.In view of the above, there is material on record to impute thatIndiabulls is party to the arbitration agreement. There is also merit inMr Mukhopadhyay’s contention that since Shapoorji had made revisedoffer to Indiabulls and it is not disputed that the same was accepted, itmust follow that the resultant contract was also made with Indiabulls.Clearly, third party cannot accept an offer to constitute bindingcontractual obligations and it is not disputed before this Court that theLoA did give rise to contract that bound Shapoorji to the termscontained therein. The LoA was accepted by Shapoorji. Thus, it alsoagreed to the terms thereof which are stated above, which included aspecific condition that it would enter into formal contract agreementwith Indiabulls.

55.The BTG Contract was amended several times. The last amendedWork Order bearing Amendment No. 21 for executing the BTG Worksfor total consideration of ₹189,18,87,147.07/- was issued on 31.05.2017. The said Work Order specifically contemplated referenceof disputes between Shapoorji and the “Owner” to arbitration. The term‘Owner’ is defined to mean Indiabulls under the BTG Contract. Theterms and conditions as included in Amendment No. 21 as well as thearbitration clause is set out below:

"Terms & Condition:

Note : For Detailed Terms & Conditions refer to theContract Agreement (With Annexer)

1. Payment Terms

XXXX

The contractor shall be entitled to receive the payment infollowing manner, subject to such adjustments/ variationsas allowed in the SCC and GCC:

I)5% of the contract prince shall be paid asmobilization advance on acceptance of LOA andsubmission of necessary Bank Guarantee/Security.Another 5% advance shall be paid on completionof initial mobilization duly approved by EngineerinchargeatSiteandsubmissionofL-2SCHEDULE.mobilization advance on acceptance of LOA andsubmission of necessary Bank Guarantee/Security.Another 5% advance shall be paid on completionof initial mobilization duly approved by EngineerinchargeatSiteandsubmissionofL-2SCHEDULE.

II)85% of the contract price shall be paid on Pro-ratedbasis against monthly RA Bills.basis against monthly RA Bills.

III)Balance 5% of Contract price shall be paid afterdefect liability period.defect liability period.

All payments shall be made within 30days uponsubmission of invoice and all necessary documents dulycertified by owner’s Engineer in charge at site.

All free issue materials as specified in the specialconditions of the contract and schedule of quantities shallbe arranged by the contractor at predetermined rates dulyapproved by the owner. The payment of such material canbe done either to the contractor or directly to vendor asper mutual agreement. No extra payment shall be payableto the contractor on this account."

XXXX

"3.0 ARBITRATION

3.1 If any dispute or difference of any kind whatsoevershall arise between the Owner and the Supplier, arisingout of the Contract for the performance of the Workswhether during the progress of the Works or after itscompletion or whether before or after the termination,abandonment or breach of the Contract, it shall, in the

first place, be referred to and settled by the Owner, who,within period of 30 (thirty) days after being requestedto do so, shall give written notice of his decision to theSupplier.

3.2 Save as hereinafter provided, such decision in respectof every matter so referred shall be final and binding uponthe parties and the completion of the entire work underthe Contract and shall forthwith be given effect to by theSupplier who shall comply with all such decisions, withall due diligence, whether he requires conciliation and/orarbitration as hereinafter provided or not.

3.3 If after the Owner has given written notice of hisdecision to the Supplier and no claim to conciliationand/or arbitration has been communicated to him by theSupplier within 30 (thirty) days from the receipt of suchnotice, the said decision shall become final and bindingon the Supplier.

3.4 in the event of the Owner failing to notify hisdecision, as aforesaid, within 30 (thirty) days after beingrequested, or in the event of the Supplier beingdissatisfied with any such decision, or within 30 (thirty)days after the expiry of the first mentioned period of 30(thirty) days, as the case may be, either party may requirethat the matters in dispute be referred to arbitration ashereinafter provided.

3.5 All disputes or differences in respect of which thedecision, if any, of the Owner has not become final andbinding as aforesaid, shall be settled by arbitration, underand in accordance with the provisions of the Arbitrationand Conciliation Act, 1996 or any statutory modification,

in the manner hereinafter provided. The venue ofarbitration shall be New Delhi, India.

3.6 The arbitration shall be conducted by sole arbitratorappointed by the Owner.

3.7 The decision of the sole arbitrator shall be final andbinding upon the parties. The expense of the arbitrationshall be paid as may determined by the arbitrator. Thearbitrator may, from time to time, with the consent of bothparties increase the time for the award.

3.8Duringsettlementofdisputesandarbitrationproceedings, both parties shall be obliged to carry outtheir respective obligations under the Contract.”

56.Indiabulls cannot claim that was not aware of the terms of the saidAmendment considering it had made payments/issued LCs; approvedrates of certain material; and also issued the Final AcceptanceCertificate. The Final Bill for the BTG Contract was also submitted toand received by Indiabulls. It is not the case of Indiabulls that it hadobjected to Amendment No.21 at any time during the execution of theBTG Works or thereafter. Indiabulls is thus estopped from contendingto the contrary.

57.Estoppel principles have frequently been applied by Courts in theUnited States of America to hold that party is bound by the arbitrationclause associated with the substantive contractual agreement.

58.In Life Techs Corp.v. AB Sciex Prop. Ltd: 803 F.Supp.2d 270,273-74 (S.D.N.Y. 2011) it was held that “a non-signatory may be

estopped from avoiding arbitration where it knowingly accepted thebenefits of an agreement with an arbitration clause.” Even in DeloitteNoraudit v. Deloitte Haskins Sells: 9 F.3d 1060 (2d Cir. 1993)], thecourt held that non-signatory can be compelled to arbiter underequitable estoppel principles, because it received copy of the contract,did not object to it, offered no persuasive reason for its inaction andknowingly accepted benefits of contract.

59.The next aspect to be examined is whether the relationshipbetween Indiabulls and Elena and their conduct, is sufficient to compelIndiabulls to be party to the arbitration regarding the disputes raisedby Shapoorji. In this regard, it is not disputed that Elena is whollyowned subsidiary of Indiabulls. Indisputably, Elena is separate legalentity by virtue of it being incorporated as company. However, it iswell settled that the corporate veil can be pierced in certaincircumstances as noticed hereinbefore. In the present case, Shapoorjihad claimed that Elena was Special Purpose Vehicle (SPV) forexecuting the Project. Therefore, it had no other purpose but to facilitatesetting up the Thermal Power Plant.Although, this averment wasdenied by the respondents; they have not produced any material whichwould effectively counter the said assertion. There is no assertion thatElena is engaged in any other business other than its participation inexecution of the projects for Indiabulls. This Court is inclined to acceptthe contention that Elena is Special Purpose Vehicle and it would beapposite to treat Elena as an extended division of Indiabulls as it is notinvolved in any other business other than executing the projects for

Indiabulls. Although it is contended that Elena is an independentcontractor and was awarded three separate contracts by Indiabulls, thereis no material on record to indicate that Elena and Indiabulls function asindependent and separate organisations. On the contrary, there ismaterial to indicate that Elena is not organized and staffed separatelyand is independent of Indiabulls.

60.It was also pointed out that one Mr Shanker Dutt who was theGeneral Manager of Indiabulls, had issued the Work CompletionCertificate for both the BTG and BoP Works on behalf of Elena. Hehad also signed letter dated 24.01.2017 as an authorized signatory ofIndiabulls. It does appear that Indiabulls and Elena share commonresources. It is also seen from the affidavits placed on record that bothIndiabulls and Elena share common office space (at A-49, GroundFloor Road No. 4, Mahipalpur, New Delhi-110037). Further asmentioned above, the LoA was issued on the letterhead mentioningIndiabulls even though it was signed on behalf of Elena. It would bereasonable to draw an inference that Elena also used stationery whichprominently mentions “Indiabulls”.

61.In Fisser v. Int’l Bank: 282 F.2d 231, 238 (2[nd]Cir. 1960), theCourt analysed the situation in which claimant alleged that therespondent is just an alter ego of its mother company. It held that, ifthere is valid arbitration agreement between the claimant andrespondent, but respondent is mere puppet of the mother company,such corporate mother must be bound by arbitration as well.

62.Similarly, in Builders Federal (Hong Kong) v. Turner Const.:655 F. Supp. 1400, 1406 (S.D.N.Y. 1987), the court considered aconstruction case involving foreign project where the sub-contractorssought to compel the American corporate parents to enter arbitrationabroad of dispute involving claims against the main contractor. TheCourt considered that the allegations that the parent corporationexercised dominance and control over the main contractor weresufficient to “state claim for alter ego liability” even in the absence ofany allegation of fraud. The relevant extract of the said decision is setout below:

“The petition is replete with allegations that defendantsexercised dominance and control over TEA, and thatTEA was under-capitalized. Those allegations are notsufficient of themselves to “pierce corporate veil” soas to visit upon parent corporations the obligations of asubsidiary. Walkovszky v. Carlton, 18 N.Y.2d 414, 276N.Y.S.2d 585, 223 N.E.2d 6 (1966). But the petitionalleges more than that. It alleges that the subcontractbetween plaintiff's and TEA obligated TEA to makecertain payments to plaintiffs upon termination of themain contract; and that defendants decided that TEAwould breach those obligations, sending implementinginstructions to TEA. Petition, ¶ 38. These allegations,even in the absence of allegations of fraud requiringRule 9(b) particularity, are sufficient to state claim foralter ego liability. Gorrill v. Iceland Air/Flugleidir, 761F.2d 847, 853 (2d Cir.1985) (construing New Yorklaw).”

63.In Thomson-CSF, S.A. v. American Arbitration Association: 64F.3d 773 (2d Cir. 1995), it was held that the corporate parent must exerta degree of control over the subsidiary that there is abandonment ofseparate corporate structures, intermingling of corporate finances anddirectorship and in essence, the subsidiary must cease to function as adistinct entity. similar view was expressed in Craig v. Lake Asbestosof Quebec Ltd.: 843 F.2d 145 (3[rd]Cir. 1988).

64.In Wm. Passalacqua Builders, Inc. v. Resnick DevelopersSouth, Inc.: 933 F.2d 131, 32, 32 Fed. R. Evid. Serv. 1218 (2d Cir.1991), the Court listed some grounds on which piercing the corporateveil would be justified, such as, where the parent and subsidiary are runby common officers, do not deal at arm’s length with each other, are nottreated as separate profit centres and share common office space. Thelaw in this regard has been summarised in ARW Exploration Corp. v.Aguirre: 45 F.3d 1455 (10[th]Cir, 1995), where the Court held that “acorporation will be bound to arbitrate when it is merely the “alter ego”of an individual or previously established corporation that has enteredinto the arbitration agreement”.

65.Given the facts and circumstances of the case, this Court is of theview that it would be apposite to compel Indiabulls to arbitrate as thereis sufficient material to show that Elena is its alter ego. This is evidentfrom the fact that Elena’s name has been mentioned in parenthesisagainst the name of Indiabulls in the LoA. The shareholding patternconfirms that Indiabulls does exercise complete control as shareholderover Elena. The fact that the officials of Indiabulls acted on behalf of

Elena also indicate that Indiabulls exercises substantial and dominantdirect control over the affairs of Elena.

66.In addition, Indiabulls has direct involvement in the BTGContract.

67.Shapoorji has raised claims against Indiabulls as well as Elena.These claims arose from the same contract (BTG Contract). Clearly, thisCourt is unable to hold that, Shapoorji’s claim that Indiabulls is liable topay its dues, is unsubstantial or frivolous and should be rejected at thethreshold. In the circumstances, rejecting Shapoorji’s prayer to compelIndiabulls to arbitrate would effectively relegate Shapoorji to instituteseparate proceedings against Indiabulls on the same cause of action.This would not be an apposite recourse and the cause of action cannotbe split. Considering the above, and the fact that Indiabulls was directlyinvolved in the contract, this Court is of the view that Indiabulls shouldalso be referred to arbitration for adjudication of the subject disputesrelating to or arising from the BTG Contract.

68.Insofar as the BoP Works is concerned, it is admitted that the saidcontracts for plant works were awarded to another agency (GannonDeunkerley Co. Ltd. The said contract was terminated midway as it wasalleged that Gannon Dunkerley Co. Ltd. was unable to perform thesame. The remaining part of the BoP Work was thereafter awarded toShapoorji. It appears that quotes were invited from Shapoorji and aWork Order was issued. Admittedly, that was not part of the BTGContract as initially awarded but part of separate contract awarded

to Gannon Dunkerley & Co. Ltd. The said contract does not include anarbitration clause.

69.It is also important to note that the amounts due against the BoPWorks were not included in the Final Bill for the BTG Contract.Shapporji had submitted separate Final Bill for the BoP Contract andtherefore the contention that works executed under the BoP Contract,should be considered as additional items under the BTG Contract cannotbe readily accepted. In this view, this Court is unable to accept that anagreement exists between the parties for referring the disputes relatingto the BoP Contract to arbitration.

70.Before concluding, it is apposite to clarify that none of thefindings recorded in this order would preclude the parties from agitatingtheir respective contentions before the Arbitral Tribunal. As indicatedby the Supreme Court in Vidya Drolia v Durga Trading Corporation:(2021) 2 SCC 1, this Court has conducted an “intense yet summaryprima facie review” of the controversy involved.None of theobservations made in the present petition should be construed asforeclosing the rights of the parties to full contest before the ArbitralTribunal.

71.Elena had appointed Justice C.K. Prasad as its nomineearbitrator. He would also be considered as the nominee Arbitrator ofIndiabulls.He, along with the learned Arbitrator nominated byShapoorji, shall nominate the third Arbitrator to constitute an ArbitralTribunal within further period of two weeks from date, failing which

the parties are at liberty to approach this Court for appointment of thethird Arbitrator.

72.The petition is allowed in the aforesaid terms. The pendingapplication is also disposed of.

APRIL 07, 2021

PKV/RK

VIBHU BAKHRU, J