Non-Signatory Group Companies Cannot Be Automatically Impleaded In Arbitration: Bombay High Court

The Bombay High Court has recently held that every group company connected to a commercial transaction cannot automatically be dragged into arbitration just because it belongs to the same corporate group as a signatory party or played some role in the underlying transaction.

Explaining the scope of the “group of companies” doctrine, Justice Somasekhar Sundaresan held, “What becomes clear is that whether a non-signatory is a veritable party to the arbitration agreement is the subject matter of assessment. The doctrine does not relate to the underlying agreement and the transactions contracted therein, but to the arbitration agreement. The doctrine is not that every group company that had any role at all to play must be subjected to arbitration proceedings. The enquiry is always meant to be fact-specific. In any operating contract, there could be multiple other parties with which one of the contracting parties has a contract. They would not become liable to action in any arbitration that a group company has with any third party.”

The ruling came while dismissing a petition challenging an arbitral tribunal's refusal to implead Planet Support Services India Private Limited in an arbitration between Hind Offshore Private Limited and OCS Services (India) Private Limited arising from vessel charter agreements linked to an ONGC rig-painting contract.

OCS Services had entered into two charter party agreements with Hind Offshore on July 27, 2021 for the supply of vessels required for painting ONGC rigs. According to OCS Services, non-compliance by the vessels with applicable regulatory standards led ONGC to terminate its underlying contract, prompting arbitration claims against Hind Offshore.

During the arbitration, Hind Offshore sought to implead Planet Support, contending that it was involved in negotiations, execution and continued coordination relating to the agreements. It also argued that Planet Support and OCS Services were part of the same corporate group under common ownership.

Hind Offshore argued before the High Court that the arbitral tribunal wrongly rejected its plea at the threshold without permitting evidence to be led on Planet Support's actual role. It also alleged that a services agreement relied upon by OCS Services to explain Planet Support's involvement was fabricated and backdated.

Opposing the plea, OCS Services contended that Planet Support merely provided support and vendor management services, and was neither a party to the charter agreements nor bound by the arbitration clause. It argued that such involvement could not amount to consent to arbitrate.

The High Court first dealt with the question of maintainability. It held that the challenge was maintainable under Section 37(2)(a) of the Arbitration and Conciliation Act since the arbitral tribunal had accepted the non-signatory's objection to jurisdiction.

However, on merits, the Court found no reason to interfere with the tribunal's order.

It held that the emails relied upon by Hind Offshore merely reflected a support and coordination role. They did not demonstrate any intention on Planet Support's part to be bound by the arbitration agreement.

The Court also found that Hind Offshore had failed to clearly plead the specific cause of action it sought to pursue against Planet Support.

On this aspect, the Court said, “It is for the party seeking to bring in a non-signatory party to frame that mixed question of fact and law. What Hind Offshore has done is frame a question of Planet Support being a group company without pleading material facts of how it is vital to make Planet Support a party to the arbitration proceedings.”

The Court noted that even if Planet Support was not a party to the arbitration, it could still be called as a witness if necessary.

“Planet Support could well be a witness in the proceedings and reliance on Section 27 of the Act may be placed to force Planet Support to lead evidence, of course with the leave of the Learned Arbitral Tribunal,” the Court said.

Finding no perversity in the arbitral tribunal's order, the High Court dismissed the petition and left the issue of costs to be determined by the arbitral tribunal during the ongoing proceedings.

For Petitioner (Hind Offshore Private Limited): Advocates Dr. Veerendra Tulzapurkar, Senior Advocate, Nitin Parkhe, instructed by Jacob Kadantot.

For Respondent (OCS Services (India) Private Limited): Advocates Fereshte Sethna, Prakalathan Bathaye, Sushmita Singh, instructed by DMD Advocates.