JSA represented SAP India Private Limited (“Respondent No. 1”) and SAP SE GmBH (“Respondent No. 2”) (‘Respondents’) before the Supreme Court of India in a petition filed by Cox and Kings Limited (“Petitioner”) through its Resolution Professional under Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint an arbitrator on behalf of the Respondents in order to constitute an international commercial arbitral tribunal.
Amongst various issues, the Petitioner sought joinder of Respondent No. 2, a non-signatory to the arbitration agreement and the foreign parent of Respondent No. 1, to arbitration proceedings invoked by the Petitioner. The Petitioner placed strong reliance upon the ‘Group of Companies’ doctrine laid down by the Supreme Court in Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc. & Anr. (“Chloro Controls”) to advance its arguments on this issue.
By its judgement dated 06 May 2022, a three judge bench of the Supreme Court of India (headed by the CJI) considered the jurisprudence on the issue of the ‘Group of Companies’ doctrine in India with emphasis on the standards/principles laid down in Chloro Controls, the landmark decision which currently holds the field on the issue of enjoining a non-signatory foreign parent to arbitration proceedings.
The 3-judge bench expressed concern about the correctness of Chloro Controls on this issue and referred certain issues on the subject to the larger bench.
Questions referred to the larger bench by the CJI and Bopanna, J.
- Whether phrase ‘claiming through or under’ in Sections 8 and 11 could be interpreted to include ‘Group of Companies’ doctrine?
- Whether the ‘Group of companies’ doctrine as expounded by Chloro Control Case (supra) and subsequent judgments are valid in law?
Questions referred to the larger bench by Surya Kant, J.
- Whether the Group of Companies Doctrine should be read into Section 8 of the Act or whether it can exist in Indian jurisprudence independent of any statutory provision?
- Whether the Group of Companies Doctrine should continue to be invoked on the basis of the principle of ‘single economic reality’?
- Whether the Group of Companies Doctrine should be construed as a means of interpreting the implied consent or intent to arbitrate between the parties?
- Whether the principles of alter ego and/or piercing the corporate veil can alone justify pressing the Group of Companies Doctrine into operation even in the absence of implied consent?
This decision and the questions in respect of the doctrine of ‘Group of Companies’ referred by the Supreme Court to the larger bench are fundamental to the practice of arbitration in India, and are likely to have a significant impact on both procedures as well as jurisprudence.
JSA Deal team comprised Lead Partners – Farhad Sorabjee and Dheeraj Nair, Partner – Pratik Pawar, Principal Associates – Shanaya Cyrus Irani and Kumar Kislay, and Senior Associate – Siddhesh Pradhan.