(1) Introduction:
Arbitration is based on the autonomy of the parties, or l'autonomie de la volonte, as its guiding principle. Consent is the central tenet of the arbitration process, according to the Texas Supreme Court. When the parties themselves make the decision to submit themselves to the authority of an arbitrator or arbitral tribunal, which derives its adjudicatory mandate from an arbitration agreement or arbitration clause, arbitration officially begins.
In Stolt Nielsen SA v. Animal Feeds International Corporation, the Supreme Court stated that arbitration is a matter of consent rather than coercion because of the significance of consent in arbitration proceedings. It is difficult to determine the position of non-signatories to arbitration agreements and to represent them in arbitration proceedings due primarily to this principle.
It is assessed that over 40% of global discretion cases include multiple gatherings, this difficulties the traditional thought that mediation is a bi-polar question.
Chloro Controls v. Severn Trent Water Purification Inc. Ors. laid the groundwork for the extension of non-signatories in India. Although the Group of Companies Doctrine has been recognized by numerous decisions of the Apex Court and High Court, this case introduced the doctrine to some extent in India. However, despite its recognition, the doctrine has not yet been fully implemented in the Indian legal system.
(2) Alter Ego:
There is no one way to define Alter Ego, and there are many different terms that can be used to describe it. Alter Ego is referred to as "durchgriff" in Germanic law, "levee du voile social" in France, and "piercing/lifting the corporate veil" in English law, among other names.
Although it is difficult to provide a concise definition of the principle, certain underlying principles can be identified. When a Court or Tribunal determines that one entity is the alter ego of another, the question of whether or not the two corporate bodies possess distinct corporate identities arises.
We are aware, however, that for the concept of alter ego to be used in arbitration or any other legal situation, there must be a discernible element of fraudulent activity. In the Indian situation this isn't generally the situation as the Indian Courts have taken an enormously ace Mediation position by broadening the domain of the Discretion arrangements to Non-Signatory Parent Organizations too.
However, we need to be aware of what sets them apart, as Gary Born explains in his statement:
The alter ego theory is a legal principle used to disregard or nullify the effects of separate legal personality or incorporation. The result is that one element is considered non-existent or just a unincorporated piece of another substance.
I will accordingly endeavor to clarify the separating variables of this hypothesis with the Gathering of Organizations Regulation in the ensuing passages of this Article.[1]
(3) Group of Companies:
This Tenet has earned respect because of the instance of Dow Synthetic compounds.
In this case, the Interim Award determined that the group of Companies are a part of the same economic reality and took into account factors indicating that:
organizations in the gathering because of their part in the end, execution and end of agreements containing the mediation statement
the normal goal of the gatherings to incorporate them as concerned gatherings to the agreement made the intervention statement restricting on them.
Gary Brought into the world in his evaluation of the Precept succinctly sums up the case Regulation on this Convention, and keeping in mind that he keeps up with that the Dow Substance meaning of the equivalent would incorporate the gatherings expectations to tie and be bound, late Arbitral Honors propose that a takeoff from the customary methodology , and holding the Non-Signatory parent Organization destined for such reasons like security of Global Business Discretions which would be compromised in the event that the financial truth isn't considered.
We can infer that the Group of Companies Doctrine would include a two-part evaluation of whether the company is a member of a closely knit commercial group that functions as a single economic entity and whether both parties intended the parent company to be bound by the arbitration within the scope of arbitration.
The Indian Adventure:
There are a number of case law decisions that shed light on this issue, including those from the Supreme Court and the High Court, that Indian courts have frequently struggled with. Through these Supreme Court of India judicial pronouncements, which have clarified and broadened the doctrine's scope, we will attempt to clarify it.[2]
(4) The Regime of Chloro Control:
This is maybe the most Milestone Legal profession in Indian Statute relating to expansion to non-signatories, wherein a 3 Adjudicator Seat of the High Court gave acknowledgment to the standards of change self image and the Gathering of Organizations Teaching .
The inquiry was whether non-signatories to an understanding containing the discretion statement was tended to according to Lawful standards and the Court depending on Global Academic assessment gave its declaration.
The Court held that the Group of Doctrines Doctrine will bind both signatory and non-signatory companies if the circumstances demonstrate that the parties' mutual intention was to bind both signatory and non-signatory companies. The Court also noted that the Group of Doctrines Doctrine can bind a non-signatory affiliate company to a contract entered into by another company within the group.
The Indian courts have extended this doctrine in a variety of factual situations on the basis of this legal proposition and principles.[3]
(5) Ongoing Case Regulation:
In this piece of the Article we will investigate the methodology taken by the High Court comparable to this Regulation in 2 late case Regulations . The Legitimate standards articulated in the Chloro Controls case Regulations have been recognized and used in these Decisions .
On account of Cherian Properties versus Kasturi and Children Ltd and Ors which was conveyed by a 3 Appointed authority Seat of the High Court , Equity Chandrachud left on a nitty gritty investigation of the Chloro Controls Judgment. The Appellants in this case argued in front of the Court that the Chloro Controls precedent would only apply in the real-world situation of a Joint Venture Agreement and a Mother Agreement with arbitration clauses. Additionally, they argued that the Chloro Controls cases would only apply in international arbitration rather than domestic arbitration.
The following was written by Justice Chandrachud as an explanation of the earlier judgment's scope:
The circumstances under which they have entered into them may reflect an intention to bind both signatory and non-signatory in modern business transactions, which are effected through multiple layers and agreements.[4]
(6) The elements like:
connection among signatory and non-signatory,
shared characteristic of the topic,
composite nature of exchange are referenced in contemplations while deciding cases on augmentation to non-signatories.
The Judgement also draws parallels between the Group of Companies Doctrine and Alter Ego by citing works by Gary Born in order to elaborate on the meaning of this Doctrine and establish these:
While the modify self image guideline is a law and order which dismisses the impact of joining or separate Legitimate character, as opposed to the Gathering of Organizations Regulation is a method for distinguishing the goals of the gatherings and doesn't upset the lawful characters.
The second Key Judgment propounded by the High Court is the situation of Ameet Lalchand Shah and Ord versus Rishabh Endeavors, a Division Seat managing the expansion of whether a discretion understanding under one agreement can be reached out to non-signatories. The real-world scenario is detailed below.
In this instance, three contracts were signed in 2012 by Rishabh businesses and other businesses and service providers. It emerged from a project concerning the installation of a solar power project in Uttar Pradesh. The first was a contract between Rishabh Enterprises and M/S Juwi India for the supply of equipment and materials as well as a commissioning contract.
Rishabh Endeavors had likewise gone into a Deal and Buy Concurrence with Aston Renewables Pvt Ltd for acquisition of Photograph voltaic items to be rented to Litigant No.3 Dante Energy Pvt Ltd to be introduced in the Sunlight based Planet.
A dispute arose between the parties regarding the Sale and Purchase Agreement, and one party requested arbitration based on the Equipment Lease Agreement's arbitration provision.
Respondents argued that the Chloro Controls Judgement would not apply because all parties are not signatories to the agreement (here Asttonfield to the Sale and Purchase Agreement).
The court decided that even though the Sale and Purchase Agreement did not have an arbitration clause, it was still closely related to the project at hand. As a result, the arbitral clause in the Equipment Lease Agreement was considered to have been extended to the Sale and Purchase Agreement because of the Group of Companies Doctrine.[5]
(7) Conclusion:
In conclusion, arbitration has emerged as the preferred method of dispute resolution worldwide, particularly in the business sector. Over 80% of commercial disputes contain arbitration clauses, according to a recent Boston Consulting Group study, and a growing number of businesspeople prefer to resolve disputes through arbitration.
State run administrations all over the planet have perceived this pattern, including the Public authority of India which has corrected the Mediation Act to make on top of the UNICTRAL model Regulation on Discretion, and other model regulations. It is possible for the Legislative Assembly to take a number of measures to ensure that India's extension regime complies with international standards and does not make it difficult to choose arbitration to remove the uncertainty of outcomes brought on by the arbitrary inclusion or exclusion of Non-Signatory Companies.
The Governing body should give a base norm to use of this Teaching and should determine through correction to The Mediation and Placation Act, 1996 and classify the standards previously articulated by the Zenith Court and the High Courts comparable to the Tenet around the country in the Demonstration.
In a revivalist manner, the Legislature must also ensure that consent, the arbitration process's foundation, is not undermined. Consent confers legitimacy on the arbitration process.
In conclusion, we need to consider whether India should take the same approach to the extension regime as the United States and Britain. If India adopts these nations' approach to the extension regime, it will make India an arbitration-friendly jurisdiction, so the answer to that should be yes.
(8) Citation:
1. Advait, Rendevous with Group of Companies Doctrine , available at: https://www.legalserviceindia.com/legal/legal/legal/article-1985-rendevous-with-group-of-companies-doctrine.html (last visited on December 3 2023).
2. Ibid.
3. Ibid.
4. Ibid.
5. Ibid.
