OIL AND NATURAL GAS CORPORATION LTD. versus M/S DISCOVERY ENTERPRISES PVT. LTD. & ANR.

Citation: [2022] 4 S.C.R. 926 · Decided: 27-04-2022 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · cites 10 · see the full citation network in Lexace

Judgment (excerpt)

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926
SUPREME COURT REPORTS
[2022] 4 S.C.R.
[2022] 4 S.C.R. 926
926
OIL AND NATURAL GAS CORPORATION LTD.
 v.
M/S DISCOVERY ENTERPRISES PVT. LTD. & ANR.
(Civil Appeal No. 2042 of 2022)
APRIL 27, 2022
[DR. DHANANJAYA Y CHANDRACHUD, SURYA KANT
AND VIKRAM NATH, JJ.]
Arbitration – Group of companies doctrine – Invocation of –
Held: An arbitration agreement entered into by a company within a
group of companies, can bind its non-signatory affiliates or sister
concerns if the circumstances demonstrate a mutual intention of the
parties to bind both the signatory and affiliated, non-signatory
parties – A non-signatory may be bound by the arbitration
agreement where: (i) there exists a group of companies; and (ii)
parties have engaged in conduct or made statements indicating an
intention to bind a non-signatory – In deciding whether a company
within a group of companies which is not a signatory to arbitration
agreement would nonetheless be bound by it, the law considers the
following factors: (i) mutual intent of the parties; (ii) relationship
of a non-signatory to a party which is a signatory to the agreement;
(iii) commonality of the subject matter; (iv) composite nature of the
transaction; and (v) performance of the contract.
Arbitration and Conciliation Act, 1996 – s.37 – Decision of
Arbitral Tribunal that it lacks jurisdiction – Challenge to – Held: If
the arbitral tribunal accepts a plea that it lacks jurisdiction, the
order of the tribunal is amenable to a challenge in appeal u/s.37(2)(a)
– In exercise of the appellate jurisdiction, the court must have due
deference to the grounds which weighed with the tribunal in holding
that it lacks jurisdiction having regard to the object and spirit
underlying the statute which entrusts the arbitral tribunal with the
power to rule on its own jurisdiction – Decision of the tribunal that
it lacks jurisdiction is not conclusive because it is subject to appellate
remedy u/s.37(2)(a) – However, in exercise of this appellate power,
the court must be mindful of the fact that the statute has entrusted
the arbitral tribunal with the power to rule on its own jurisdiction
with the purpose of facilitating the efficacy of arbitration as an
institutional mechanism for resolution of disputes.
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Allowing the appeal, the Court
HELD: 1. A signed written agreement to submit a present
or future dispute to arbitration does not exclude the possibility
of an arbitration agreement binding a third party. A non-signatory
may be bound by the operation of the group of companies doctrine
as well as by the operation of the principles of assignment, agency
and succession. A party, which is not a signatory to a contract
containing an arbitration clause, may be bound by the agreement
to arbitrate if it is an alter ego of a party which executed the
agreement. This constitutes a departure from the ordinary
principle of contract law that every company in a group of
companies is a distinct legal entity. A non-signatory may be bound
by the arbitration agreement where: (i) There exists a group of
companies; and (ii) Parties have engaged in conduct or made
statements indicating an intention to bind a non-signatory.
[Para 23][955-H; 956-A-C]
2. In deciding whether a company within a group of
companies which is not a signatory to arbitration agreement would
nonetheless be bound by it, the law considers the following factors:
(i) The mutual intent of the parties; (ii) The relationship of a non-
signatory to a party which is a signatory to the agreement; (iii)
The commonality of the subject matter; (iv) The composite nature
of the transaction; and (v) The performance of the contract.
Consent and party autonomy are undergirded in Section 7 of the
Act of 1996. However, a non-signatory may be held to be bound
on a consensual theory, founded on agency and assignment or
on a non-consensual basis such as estoppel or alter ego.
[Para 26][957-G-H; 958-A-C]
3.1. In the present case, ONGC’s attempt at the joinder of
JDIL to the proceedings was rejected without adjudication of
ONGC’s application for discovery and inspection of documents
to prove the necessity for such a joinder. By failing to consider
the application for discovery and inspection, the Tribunal
foreclosed itself from inquiring into whether there was sufficient
material to establish the application of the group of companies
doctrine. The application for discovery and inspection was indeed
relevant to the exercise which was being carried out 

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