CASE TITLE:
Oil and Natural Gas Corporation Ltd. vs Discovery Enterprises Pvt. Ltd
DATE OF ORDER:
23RD April, 2022
JUDGE(S):
Hon’ble Justices DY Chandrachud, Surya Kant and Vikram Nath
PARTIES:
PETITIONER: OIL AND NATURAL GAS CORPORATION
RESPONDENT: DISCOVERY ENTERPRISES
SUBJECT
Applicability group of companies Doctrine.The failure of the Arbitral Tribunal to allow for discovery and inspection goes to the root of the process in as much as it disabled ONGC from pursuing its fundamental claim based on the application of the group of companies doctrine.
IMPORTANT PROVISION
Arbitration and Conciliation Act, 1996.
BRIEF FACTS
- In this case, the Arbitral Tribunal ruled that Jindal Drilling and Industries Limited (JDIL) was not a party to the arbitration agreement and should be removed from the list of parties.
- The interim award was appealed, but the appeal was rejected. The Bombay High Court rejected an appeal filed under the Arbitration and Conciliation Act. Angry, ONGC sued the Supreme Court.
ISSUE RAISED
- Whether there was sufficient material to establish the application of the group of companies doctrine or not?
ARGUMENT ADVANCED BY THE PETITIONERS
- ONGC argued before the Supreme Court that DEPL and JDIL are one commercial company and that ONGC is thus entitled to compel JDIL to participate in the arbitration proceedings to enforce the judgement against it.
- A non-signatory to the arbitration agreement cannot be impleaded as a party. That is, the group of businesses theory applies here.
ARGUMENT ADVANCED BY THE RESPONDENT
However, the respondents argued that the group of businesses concept cannot be used to prosecute JDIL for DEPL's claimed omissions.
ANALYSIS BY THE COURT
- The bench noted that in Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. &Ors (2013) 1 SCC 641, Cheran Properties Ltd. v. Kasturi & Sons Ltd. &Ors; (2018)16 SCC 413, and MTNL v. Canara Bank &Ors (2020) 12 SCC 767, the principle of binding non-signatories by application of the group of companies doctrine was invoked.
- The Tribunal omitted to assess the application for discovery and inspection, preventing it from determining whether the group of businesses doctrine was applied.
CONCLUSION
- The court ruled that the first Arbitral Tribunal's interim award is void because it failed to decide on ONGC's request for discovery and inspection; failed to determine the legal foundation for the application of the group of companies doctrine; and failed to decide on the applications filed by ONGC.
- A non-signatory may be bound by an arbitration agreement if: (i) a group of companies exists; and (ii) the parties have engaged in behaviour or made comments suggesting a purpose to bind a non-signatory.
- The bench, ruled that the following factors must be considered before applying the doctrine:
(i) The parties' mutual intent (ii) The relationship of a non-signatory to a party that is a signatory to the agreement (iii) The subject matter's commonality (iv) The transaction's composite nature (v) Contract performance
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