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Arbitration Lawyer: Non-party joined in arbitration, inter alia, by invoking doctrine of Group of Companies by SC.

Supreme Court of India

Justice Indu Malhotra and Justice Abhay Manohar Sapre

The SC was seized of two issues, that is, existence of a valid arbitration agreement between the three parties, and the second issue was non-party to the arbitration agreement whether can be impleaded in the arbitration proceedings.

The SC {Mahanagar Telephone Nigam Limited v. Canara Bank and Others} holds that the arbitration agreement between the parties, as recorded in a judicial order, is final and conclusive of the agreement entered into between the parties. It was further held that MTNL after giving its consent to refer the disputes to arbitration before the Delhi High Court, is now estopped from contending that there was no written agreement to refer the parties to arbitration. It was further held that there can be an arbitration agreement in the form of exchange of statement of claims and defence, in which existence of the agreement is asserted by one party and not denied by the other. It was held that MTNL has not denied the existence of arbitration agreement while submitting  reply to the statement of claim, and even the MTNL has submitted a counter claim against Canara Bank before the arbitrator, therefore,  the MTNL cannot now raise an objection regarding absence of arbitration clause. The objection was accordingly rejected by SC.

It was further held that the present case is one of employed or tacit consent by respondent no. 2 (alleged non-party to the arbitration agreement), which is evident from the conduct of the parties, as respondent no. 2 has throughout participated in the proceedings, before the committee on disputes, before the High Court, before the Sole arbitrator,  and was represented by its separate Counsel before the SC in the present appeal. The SC further invokes the group of companies doctrine to join respondent no. 2 the wholly owned subsidiary of respondent no. 1 in the pending arbitration proceedings before the Sole Arbitrator. As per the said doctrine, the non-signatory may be bound by an arbitration agreement where the parent, or holding company, or a member of the group of companies, is a signatory to the arbitration agreement. Therefore, in the present case, the SC holds that there is a valid arbitration agreement, and all three parties were referred to arbitration before the Sole Arbitrator.

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