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SC Declines To Apply 'Group Of Companies' Doctrine To Implead Foreign Company In Arbitration With Its Indian Affiliate
The Apex Court declined to invoke the ‘group of companies’ doctrine on the application of Reckitt Benckiser (India) Private Limited who wanted to implead a Belgian Company of the Reynders Group. Certain disputes arose out of an agreement between Reckitt Benckiser (India) Pvt. Ltd and Reynders Label Printing (India) Pvt. Ltd and the former filed an application under Section 11 of the Arbitration and Conciliation Act for the appointment of an arbitrator. It was stated that since Reynders Belgium was the parent company of Reynders India, the agreement was binding on the Belgian Company and hence there was a need for international commercial arbitration.
The ‘group of company’s doctrine’ was elucidated by the Supreme Court in 2013 decision in Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors. It held that “an arbitration agreement entered into by a company within the group of companies can bind its non signatory affiliates”.
It was contended by the applicant that there was intention to bind the Belgian Company by the agreement. Emails exchanged with Frederik Reynders, who was claimed to be the promoter of the Reynders Group, were produced to prove the same. However, The SC bench comprising of Justices AM Khanwilkar and Ajay Rastogi rejected the plea of impleading the Belgian Company as no sufficient intention to bind the company could be shown.
The respondent stated that, Reynders Label Printing Group is an international group comprising of seven independently operating printing companies each having their own separate legal entity. Reynders Belgium and Reynders India were both part of this Group and all seven companies under the Reynders Group operate under one common parent company called, Reynesco NV. It was also stated that Frederik Reynders was not the propmoter of the Reynders Group but only an employee of its Indian affiliate.
On the acceptance of Reynders India, to settle the disputes by domestic arbitration, the court appointed Mr. Justice Badar Durrez Ahmed (Former Chief Justice, Jammu & Kashmir High Court) as the sole arbitrator in resolving the disputes between the parties.
