Reckitt Benckiser (India) Private Limited Versus Reynders Label Printing India Private Limited and Anr.
Invoking the doctrine of “group of companies”, it went on to observe that an arbitration agreement entered into by a company, being one within a group of corporate entities, can, in certain circumstances, bind its non-signatory affiliates BRIEF FACTS &amp; ISSUE BEFORE THE COURT: Whether respondent No.2 a company established under the laws of Belgium, having its principal place of business at Belgium, could be impleaded in the proposed arbitration proceedings despite the fact that it is a non-signatory party to the agreement dated 1st May, 2014, executed between the applicant and respondent No.1 a company established under the Companies Act, 2013 merely because it (respondent No.2) is one of the group companies of which respondent No.1 also is a constituent? RATIO OF THE COURTIn the case of Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors. a three JudgeBench of this Court opined thatordinarily, an arbitration takes place between the persons who have been parties to both the arbitration agreement as well asthe substantive contract underlying it. Invoking the doctrineof “group of companies”, it went on to observe that anarbitration agreement entered into by a company, being onewithin a group of corporate entities, can, in certaincircumstances, bind its non-signatoryaffiliates.In the wake of the amended Section 11(6) read withSection 11(6A) of the Act, the enquiry by this Court mustconfine itself to the examination of existence of an arbitrationagreement. No more and no less.In the backdrop of the averments in the application and the correspondence exchanged between the parties adverted to by the applicant, it is obvious that the thrust of the claim of the applicant is that Mr. Frederik Reynders was acting for and on behalf of respondent No.2, as a result of which the respondent No.2 has assented to the arbitration agreement. This basis has been completely demolished by respondent No.2 by stating, on affidavit, that Mr. Frederik Reynders was in no way associated with respondent No.2 and was only an employee of respondent No.1, who acted in that capacity during the negotiations preceding the execution of agreement.Thus, respondent No.2 was neither the signatory to the arbitration agreement nor did have any causal connection with the process of negotiations preceding the agreement or the execution thereof, whatsoever. If the main plank of the applicant, that Mr. Frederik Reynders was acting for and on behalf of respondent No.2 and had the authority of respondent No.2, collapses, then it must necessarily follow that respondent No.2 was not a party to the stated agreement nor had it given assent to the arbitration agreement and, in absence thereof, even if respondent No.2 happens to be a constituent of the group of companies of which respondent No.1 is also a constituent, that will be of no avail.For, the burden is on the applicant to establish that respondent No.2 had an intention to consent to the arbitration agreement and be party thereto, maybe for the limited purpose of enforcing the indemnity clause 9 in the agreement, which refers to respondent No.1 and the supplier group against any claim of loss, damages and expenses, howsoever incurred or suffered by the applicant and arising out of or in connection with matters specified therein. That burden has not been discharged by the applicant at all. On this finding, it must necessarily follow that respondent No.2 cannot be subjected to the proposed arbitration proceedings.Considering the averments in the application under consideration, it is not necessary for us to enquire into the fact as to which other constituent of the group of companies, of which the respondents form a part, had participated in the negotiation process.Suffice it to observe that respondent No.2 was never involved in the negotiation process concerning the stated agreement dated 1st May, 2014. On this finding, the application must fail as against respondent No.2 and as a consequence whereof, the provisions for making reference to the sole arbitrator, on the assumption that it is an international commercial arbitration, cannot be taken forward. As respondent No.1 is a company having been established under the provisions of the Indian Companies Act and having its registered office in India, the applicant can pursue its remedy against respondent No.1 for appointment of a sole arbitrator to conduct arbitration proceedings, as a domestic commercial arbitration. In the case of Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors. a three JudgeBench of this Court opined thatordinarily, an arbitration takes place between the persons who have been parties to both the arbitration agreement as well asthe substantive contract underlying it. Invoking the doctrineof “group of companies”, it went on to observe that anarbitration agreement entered into by a company, being onewithin a group of corporate entities, can, in certaincircumstances, bind its non-signatoryaffiliates. In the wake of the amended Section 11(6) read withSection 11(6A) of the Act, the enquiry by this Court mustconfine itself to the examination of existence of an arbitrationagreement. No more and no less. In the backdrop of the averments in the application and the correspondence exchanged between the parties adverted to by the applicant, it is obvious that the thrust of the claim of the applicant is that Mr. Frederik Reynders was acting for and on behalf of respondent No.2, as a result of which the respondent No.2 has assented to the arbitration agreement. This basis has been completely demolished by respondent No.2 by stating, on affidavit, that Mr. Frederik Reynders was in no way associated with respondent No.2 and was only an employee of respondent No.1, who acted in that capacity during the negotiations preceding the execution of agreement. Thus, respondent No.2 was neither the signatory to the arbitration agreement nor did have any causal connection with the process of negotiations preceding the agreement or the execution thereof, whatsoever. If the main plank of the applicant, that Mr. Frederik Reynders was acting for and on behalf of respondent No.2 and had the authority of respondent No.2, collapses, then it must necessarily follow that respondent No.2 was not a party to the stated agreement nor had it given assent to the arbitration agreement and, in absence thereof, even if respondent No.2 happens to be a constituent of the group of companies of which respondent No.1 is also a constituent, that will be of no avail. For, the burden is on the applicant to establish that respondent No.2 had an intention to consent to the arbitration agreement and be party thereto, maybe for the limited purpose of enforcing the indemnity clause 9 in the agreement, which refers to respondent No.1 and the supplier group against any claim of loss, damages and expenses, howsoever incurred or suffered by the applicant and arising out of or in connection with matters specified therein. That burden has not been discharged by the applicant at all. On this finding, it must necessarily follow that respondent No.2 cannot be subjected to the proposed arbitration proceedings. Considering the averments in the application under consideration, it is not necessary for us to enquire into the fact as to which other constituent of the group of companies, of which the respondents form a part, had participated in the negotiation process. Suffice it to observe that respondent No.2 was never involved in the negotiation process concerning the stated agreement dated 1st May, 2014. On this finding, the application must fail as against respondent No.2 and as a consequence whereof, the provisions for making reference to the sole arbitrator, on the assumption that it is an international commercial arbitration, cannot be taken forward. As respondent No.1 is a company having been established under the provisions of the Indian Companies Act and having its registered office in India, the applicant can pursue its remedy against respondent No.1 for appointment of a sole arbitrator to conduct arbitration proceedings, as a domestic commercial arbitration. DECISION HELD BY COURT: The arbitration application is dismissed as against respondent No.2. However, we appoint Mr. Justice Badar Durrez Ahmed (Former Chief Justice, Jammu &amp; Kashmir High Court) as the sole arbitrator to conduct domestic commercial arbitration at New Delhi, between the applicant and respondent No.1 on the terms and conditions as specified in the Act of 1996. Application stands disposed of in the above terms. No costs. All pending interim applications are also disposed of.
The singular question involved in this application filed under Sections 11(5) 11(9) and 11(12)(a) of the Arbitration and Conciliation Act 1996 seeking principal place of business at Nijverheldsstraat 3 2530 Boechout Belgium could be impleaded in the proposed arbitration proceedings despite the fact that it is a non­ signatory party to the agreement dated 1st May 2014 executed between the applicant and respondent No.1 ­ a res integra. In the case of Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors. 1 a three­Judge Bench of this Court opined that of “group of companies” it went on to observe that an within a group of corporate entities can in certain circumstances bind its non­signatory affiliates. That exposition has been followed and applied by another three­ decision the Court after analysing the earlier decisions and “23. As the law has evolved it has recognised that modern entered into them may reflect an intention to bind both In holding a non­signatory bound by an arbitration the transactions a meaning consistent with the business weigh in the balance. The group of companies doctrine is held intent between the parties where the circumstances indicate that the intent was to bind both signatories and business arrangement and to unravel from a layered structure of commercial arrangements an intent to bind In the present case it is not in dispute that the as “Reynders Label Printing Group”. The constituent Keeping in mind the exposition in Chloro Controls whether it is manifest from the indisputable correspondence dated 1st May 2014 that the transactions between the parties to bind both the signatory as well as non­signatory parties read with Section 11(6A) of the Act the enquiry by this Court must Be it noted that respondent No.1 has not filed any counter application under consideration. Respondent No.1 however through its counsel has urged that respondent No.2 has no and as a result thereof it would give rise to a domestic commercial arbitration and not an international commercial arbitration. Respondent No.1 has also made it amply clear through its counsel that it will have no objection whatsoever dispute between the applicant and respondent No.1 who the Act in Delhi as a domestic commercial arbitration Be that as it may reverting to the averments in the application under consideration it is mentioned that the dispute arises out of the agreement dated 1st May 2014 executed between the applicant and respondent No.1 but attempt in good faith to resolve any dispute by way of negotiation between senior executives of the parties who have authority to settle such dispute. A copy of any Notice pursuant to this Agreement). Provided however that the negotiations shall be In the event the dispute is not resolved within a period of 30 days from the with Indian Arbitration Act 1996 as amended from time to time or any re­enactment loss damage etc. caused to the applicant on account of acts and omissions of respondent No.1. Respondent No.2 is an integral party to the stated agreement which contains an arbitration agreement in the form of clause 13.2. The to the applicant provide the record of an arbitration agreement within the meaning of Section 7(4)(b) of the Act the applicant with an offer to print labels for the applicant including for booklets and leaflets and labels required for 9.1 The Supplier and the Supplier group shall indemnify RB against any claims losses damages and expenses howsoever incurred or suffered by RB fact that Mucinex supply is meant for USA market. The May 2013 between the officials of the applicant and the quality of their product. The applicant asserts that the respondents had held exhaustive negotiations in relation to Based on negotiations the applicant by e­mail dated 23rd April 2014 circulated a draft of the agreement along with the applicant asserts that the respondents replied to the same of 23rd April 2014 at 12:00 PM. The said e­mail sent by Mr April 2014 at 12:10 PM. Further Mr. Frederik Reynders by his e­mail of 23rd April 2014 at 4:09 PM attached a copy of of the respondents in Belgium and numbering of each label to ensure Respondents further specifically emphasised that such booklet labels contain a multi­page booklet glued at the purpose of adhering and maintaining strict quality control measures the Respondents represented that inspection of “500 100% camera controlled inspection system online numbering on back side and units for offline numbering” Further in relation to quality assurance the Respondents represented to the Applicant that they provide standard dated NIL made by the Respondents is annexed as In the interregnum the Applicant entered into a India viz. RB Healthcare. True typed copy of the Supply Agreement executed between the Applicant and RB 7.10 The Applicant and Respondents held detailed negotiations in relation to execution of an agreement Applicant by email dated April 23 2014 circulated a draft of the Agreement along with the Code of Conduct and Anti­ is annexed as ANNEXURE A­5 by his email responded on April 23 2014 at 12:00 pm. True typed copy of the email The said email sent by Mr. Frederik Reynders was pm. True typed copy of the email dated April 23 2014 addressed by the Applicant to Mr. Frederik Reynders is annexed as ANNEXUXRE A­7 of Respondent No.2 executed the Agreement on May 1 2014 and sent the Respondent No.1 had addressed an email dated June 6 2014 to the Applicant enclosing the signed copy of the Agreement and further stating that hard copy shall be delivered to the Applicant. True typed copy of the email dated June 6 2014 sent by the Respondent No.1 to the 6. We deem it apposite to reproduce the correspondence referred to in the aforesaid paragraphs of the application assented or had an intention to become party to the arbitration agreement by its conduct without being a signatory to the agreement dated 1st May 2014. Annexures­5 mandatory for RB to sign­off a commercial agreement all of our suppliers. Accordingly please find the following 3. Commercial agreement will discuss on the lead­times align on some buffer days and publish the official lead times to Wednesday April 23 2014 4:09 PM Subject: RE: Commercial Agreement sign­off RB For 9.1. I will provide you with an document of our Waiting for your feedback. Feel free to call in case of any Friday June 06 2014 4:38 PM Subject: FW: Commercial Agreement sign­off RB Attached you find the signed agreement with Company Respondent No.2 has filed its counter affidavit and respondent No.2 is the parent or holding company of respondent No.1. It is stated that respondent No.1 and respondent No.2 both are part of Reynders Label Printing Group. This group is an internationally operating group of own separate legal entities and operates in different offices independently. Further these companies only share a common parent entity namely Reynesco NV which is also the holding company of both respondent companies. First India and was not involved in the negotiation execution Mr. Frederik Reynders was not the promoter of respondent No.2. However Mr. Frederik Reynders was an employee of Kari Vandenbussche had neither exercised any managerial functions for respondent No.2 nor was he an authorized representative or a director of respondent No.2 with any It is incorrect to state that the answering Respondent was at any point in time involved in the negotiations with respect to the Agreement. The representations to the Applicant. From the documents the answering Respondent ever made any presentation 16. Contrary to what has been alleged by the Applicant the answering Respondent did not provide any comments on the draft of the Agreement. The e­mail dated 23.04.2014 as alleged by the Applicant Respondent No.1 did not forward e­mail dated 23.04.2014 or any such e­mail to the answering Respondent seeking comments of the answering to HQ in Belgium is not a reference to the answering Respondent. As explained above the answering Respondent is but one of seven subsidiaries of the The answering Respondent submits that it was not signatory to the Agreement Mr. Karl Vandenbussche and Mr. Frederik Reynders who is alleged to have carried out the negotiations with respect to the Agreement were not representing or acting in any way for the answering Respondent and they had no authority to bind the the negotiation execution or enforcement of the Agreement. AGREEMENT ON BEHALF OF THE ANSWERING The signatory to the Agreement is Mr. Karl Vandenbussche who at no point time exercised any Vandenbussche has never been an authorized representative or a director of the answering Further Mr. Frederik Reynders who is alleged to have carried out the negotiations with respect to the Agreement has incorrectly been described as the promoter of the answering Respondent. Mr. Frederik Reynders was not and has never been an employee and the answering Respondent is the parent company of Respondent No.1 binds the answering Respondent to the submitted that the answering Respondent is not the parent company of Reynders India and at no point in time was Mr. Frederik Reynders ever employed by the Clearly Mr. Frederik Reynders was not acting for the answering Respondent and had no authority to bind the answering Respondent. From the communication and documents annexed by the Applicant there is nothing to show that Mr. Vandenbussche or Mr. Frederik Reynders represented themselves to be the agents of the answering any capacity to the negotiation execution or enforcement of the Agreement. Therefore the Applicant’s submission that of Respondent No.2 is incorrect. As demonstrated above the answering Respondent was never a participant in the the said affidavit in response to the stand taken by matter of record that the Respondents had approached the common banner of ‘Reynders Label Printing’ and in that the Respondents market themselves as a label printing a matter of record that Respondent No.2 had actively participated in the negotiation of the Agreement. It is a that Respondent No.1 was taking directions from Respondent No.2 during the stage of negotiations of the The same Mr. Kristof Vandenbroucke subsequently participated in the escalation meeting held in not Respondent No.2 participated in negotiations of the Agreement. As elaborated in the Preliminary Submissions there is irrefutable evidence that Respondent No.2 has matter of record that Mr. Frederik Reynders during the stage of negotiations of the Agreement was taking directions from representatives of Respondent No.2. In any case as demonstrated hereinabove Respondent No.2 Additionally Respondent No.2 had participated in the escalation meetings held in Amsterdam under the on behalf of respondent No.2 as a result of which the respondent No.2 has assented to the arbitration agreement This basis has been completely demolished by respondent No.2 by stating on affidavit that Mr. Frederik Reynders was employee of respondent No.1 who acted in that capacity Thus respondent No.2 was neither the signatory to the the process of negotiations preceding the agreement or the execution thereof whatsoever. If the main plank of the No.2 collapses then it must necessarily follow that had it given assent to the arbitration agreement and in absence thereof even if respondent No.2 happens to be a constituent of the group of companies of which respondent No.1 is also a constituent that will be of no avail. For the the indemnity clause 9 in the agreement which refers to loss damages and expenses howsoever incurred or suffered by the applicant and arising out of or in connection with matters specified therein. That burden has not been discharged by the applicant at all. On this finding it must the proposed arbitration proceedings. Considering the averments in the application under consideration it is not necessary for us to enquire into the fact as to which other constituent of the group of companies of which the 10. Suffice it to observe that respondent No.2 was never involved in the negotiation process concerning the stated agreement dated 1st May 2014. On this finding the application must fail as against respondent No.2 and as a the sole arbitrator on the assumption that it is an As respondent No.1 is a company having been established its registered office in India the applicant can pursue its remedy against respondent No.1 for appointment of a sole arbitrator to conduct arbitration proceedings as a domestic Indeed the applicant had vehemently relied upon the circumstances and correspondence post­contract but that cannot be the basis to answer the matter in issue. The respondent No.2 has justly relied upon the exposition in transact on behalf of respondent No.2 which assertion has been refuted and rebutted by respondent No.2. It is clearly stated that Mr. Frederik Reynders was neither connected to nor had any authority of respondent No.2 but was only an 12. For the view that we have taken it is unnecessary to dilate on other contentions. Suffice it to observe that the application must fail against respondent No.2 and on that it is a case of international commercial arbitration. Despite the appointment of a sole arbitrator by this Court for respondent No.1 as domestic commercial arbitration. This to the applicant as against respondent No.2 we proceed to 13. The arbitration application is dismissed as against respondent No.2. However we appoint Mr. Justice Badar arbitration at New Delhi between the applicant and 14. Application stands disposed of in the above terms. No