The court emphasized minimal judicial interference in arbitration, supporting the Group of Companies Doctrine.
In a significant judgment, the Karnataka High Court, comprising Justices Jayant Banerji and Umesh M. Adiga, upheld the Arbitral Tribunal's decision to include Mantri Developers Pvt Ltd as a party in arbitration proceedings despite its non-signatory status. The case, involving Mantri Developers and Gokulam Shelters Private Limited, revolved around the Group of Companies Doctrine under the Arbitration and Conciliation Act, 1996.
The court dismissed the writ petition filed by Mantri Developers, which sought to overturn the Arbitral Tribunal's order dated November 28, 2024. The Tribunal had allowed the impleadment of Mantri Developers based on its substantial involvement and financial exposure in the project, despite not being a signatory to the arbitration agreement. The Tribunal's decision was guided by the Supreme Court's judgments in M/s. ONGC Limited v. Discovery Enterprises Pvt. Ltd. and Cox and Kings Ltd. v. SAP India Pvt. Ltd.
Mantri Developers argued against its inclusion, claiming a lack of direct contractual relationship with the Joint Development Agreement (JDA) executed between Gokulam Shelters and Castles Vista, a subsidiary of Mantri Developers. However, the court noted Mantri Developers' significant financial and operational involvement in the project, including providing guarantees for loans and actively participating in project-related communications and developments.
The court emphasized the importance of minimal judicial interference in the arbitral process, as outlined under Articles 226/227 of the Constitution and supported by various Supreme Court rulings. It highlighted that the Arbitral Tribunal is empowered to determine its jurisdiction under Section 16 of the Arbitration and Conciliation Act, thus validating the Tribunal's decision to implead Mantri Developers.
The judgment underscores the evolving interpretation of arbitration laws in India, particularly regarding the inclusion of non-signatory parties based on their involvement and mutual intent, aligning with global arbitration practices.
Bottom Line:
Arbitration - Group of Companies Doctrine - Non-signatory party to arbitration agreement can be bound by the arbitration agreement based on mutual intent, relationship with signatory, commonality of subject matter, composite nature of transactions, and performance of the contract.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 2(1)(h), 7, 16; Articles 226/227 of the Constitution of India
