BENCKISER (INDIA) PRIVATE LIMITED versus REYNDERS LABEL PRINTING INDIA PRIVATE LIMITED AND ANR. on 1 July 2019

1. The singular question involved in this application filed underGSections 11(5), 11(9) and 11(12)(a) of the Arbitration and ConciliationAct, 1996 (for short “the Act”) seeking appointment of a sole arbitrator,is whether respondent No.2 - a company established under the laws ofBelgium, having its principal place of business at Nijverheldsstraat 3,2530 Boechout, Belgium, could be impleaded in the proposed arbitrationproceedings despite the fact that it is a non-signatory party to theH

agreement dated 1[st] May, 2014, executed between the applicant andrespondent No.1 - a company established under the Companies Act,2013 - merely because it (respondent No.2) is one of the group companiesof which respondent No.1 also is a constituent. The legal position as towhen a non-signatory to an arbitration agreement can be impleaded andsubjected to arbitration proceedings is no more res integra. In the caseof Chloro Controls India Private Limited Vs. Severn Trent WaterPurification Inc. and Ors.,[1] a three-Judge Bench of this Court opinedthat ordinarily, an arbitration takes place between the persons who havebeen parties to both the arbitration agreement as well as the substantivecontract underlying it. Invoking the doctrine of “group of companies”, itwent on to observe that an arbitration agreement entered into by acompany, being one within a group of corporate entities, can, in certaincircumstances, bind its non-signatory affiliates. That exposition has beenfollowed and applied by another three-Judge Bench of this Court inCheran Properties Limited Vs. Kasturi and Sons Limited and Ors.[2]In paragraph 23 of this decision, the Court, after analysing the earlierdecisions and including the doctrine expounded in Chloro Controls IndiaPrivate Limited (supra), concluded as follows:

“23. As the law has evolved, it has recognised that modern businesstransactions are often effectuated through multiple layers andagreements. There may be transactions within a group ofcompanies. The circumstances in which they have entered intothem may reflect an intention to bind both signatory and non-signatory entities within the same group. In holding a non-signatorybound by an arbitration agreement, the court approaches the matterby attributing to the transactions a meaning consistent with thebusiness sense which was intended to be ascribed to them.Therefore, factors such as the relationship of a non-signatory to aparty which is a signatory to the agreement, the commonality ofsubject-matter and the composite nature of the transaction weighin the balance. The group of companies doctrine is essentiallyintended to facilitate the fulfilment of a mutually held intent betweenthe parties, where the circumstances indicate that the intent wasto bind both signatories and non-signatories. The effort is to findthe true essence of the business arrangement and to unravel from 1 (2013) 1 SCC 641

2 (2018) 16 SCC 413

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Aa layered structure of commercial arrangements, an intent to bindsomeone who is not formally a signatory but has assumed theobligation to be bound by the actions of a signatory.”

2. In the present case, it is not in dispute that the respondents areconstituents of a group of companies known as “Reynders Label PrintingBGroup”. The constituent companies of the said group of companies canbe described in the form of a chart appended to the written submissionfiled by respondent No.1 as Annexure R-1/1, which reads thus:

Reynders Label Printing Group

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3. Keeping in mind the exposition in Chloro Controls (supra) andDCheran Properties (supra), the crucial question is whether it is manifestfrom the indisputable correspondence exchanged between the parties,culminating in the agreement dated 1[st] May, 2014, that the transactionsbetween the applicant and respondent No.1 were essentially with thegroup of companies and whether there was a clear intention of the partiesEto bind both the signatory as well as non-signatory parties (respondentNo.1 and respondent No.2, respectively). In other words, whether theindisputable circumstances go to show that the mutual intention of theparties was to bind both the signatory as well as the non-signatory parties,namely, respondent No.1 and respondent No.2, respectively, qua theexistence of an arbitration agreement between the applicant and theFsaid respondents.

4. In the wake of the amended Section 11(6) read with Section11(6A) of the Act, the enquiry by this Court must confine itself to theexamination of existence of an arbitration agreement. No more and noless. For that, we must revert to the assertion made by the applicant inGthe present application. Be it noted that respondent No.1 has not filedany counter affidavit to refute the assertions made by the applicant inthe application under consideration. Respondent No.1, however, throughits counsel has urged that respondent No.2 has no concern with thesubject agreement dated 1[st] May, 2014. That agreement is only between H

the applicant and respondent No.1 and as a result thereof, it would giverise to a domestic commercial arbitration and not an internationalcommercial arbitration. Respondent No.1 has also made it amply clearthrough its counsel that it will have no objection, whatsoever, if the Courtwere to appoint a sole arbitrator for resolving the dispute between theapplicant and respondent No.1, who would conduct the arbitrationproceedings in accordance with the Act, in Delhi, as a domesticcommercial arbitration between the applicant and respondent No.1 alone.

5. Be that as it may, reverting to the averments in the applicationunder consideration, it is mentioned that the dispute arises out of theagreement dated 1[st] May, 2014, executed between the applicant andrespondent No.1, but respondent No.2 has been impleaded because it isthe parent/ holding company of respondent No.1. The agreement, in theform of clause 13,[3] contains an arbitration agreement between the parties.In terms of clause 9[4] thereof, respondent No.2 has assumed the liabilityto indemnify the applicant in case of any loss, damage etc., caused tothe applicant on account of acts and omissions of respondent No.1.

3 “13. Dispute Resolution

13.1 Prior to the beginning of any arbitration process the parties hereby undertake toattempt in good faith to resolve any dispute by way of negotiation between seniorexecutives of the parties who have authority to settle such dispute. A copy of anyEscalation Notice shall be given to the Regional Senior Vice President (or equivalentperson of seniority) of each party or their Affiliates (which copy shall state that it is anEscalation Notice pursuant to this Agreement). Provided, however, that the negotiationsshall be completed within thirty (30) days of the date of the Escalation Notice or withinsuch longer period as the parties may agree in writing prior to the expiration of theinitial thirty-day period.

13.2 In the event the dispute is not resolved within a period of 30 days from thecommencement of such dispute, the dispute shall be referred to arbitration and theparties shall mutually appoint a Sole arbitrator who shall conduct the proceedings inaccordance with Indian Arbitration Act, 1996 as amended from time to time or any re-enactment thereof. The arbitration shall be held in Delhi and the proceedings shall beconducted in English.

13.3 The existence of a dispute with respect to this Agreement between the partiesshall not relieve either party from performance of its obligations under this Agreementthat are not the subject of such dispute.”

4 “9. Indemnity

9.1 The Supplier and the Supplier group shall indemnify RB against any claims, losses,damages and expenses howsoever incurred or suffered by RB (and whether direct orconsequential or economic loss) arising out of or in connection with

(i) defective workmanship, quality or materials;

(ii) an infringement or alleged infringement of any intellectual property rights causedby the use, manufacture, or supply of the products; and A

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ARespondent No.2 is an integral party to the stated agreement whichcontains an arbitration agreement in the form of clause 13.2. The applicanthas relied upon e-mails exchanged which, according to the applicant,provide the record of an arbitration agreement within the meaning ofSection 7(4)(b) of the Act. According to the applicant, the respondentshad approached the applicant with an offer to print labels for the applicant,Bincluding for booklets and leaflets and labels required for Mucinex,exported to USA. The ‘Drug Facts’ and other details which were to beprinted on the back-label were in accordance with the laws of USA andthe respondents were aware of the fact that Mucinex supply is meantfor USA market. The applicant relied upon the minutes of the meetingCheld on 29[th] May, 2013, between the officials of the applicant and theofficials of respondent No.1. Pursuant thereto, the respondents made apresentation to the applicant about their capability to print labels for theapplicant, including the booklet and leaflet labels as desired and madeseveral representations about the quality of their product. The applicant

asserts that the respondents had held exhaustive negotiations in relationDto the execution of agreement whereby the respondents were to providepackaging material to the applicant and its affiliates. Based on negotiations,the applicant, by e-mail dated 23[rd] April, 2014, circulated a draft of theagreement along with the code of conduct and anti-bribery policy of theapplicant. The applicant asserts that the respondents replied to the sameEthrough Mr. Frederik Reynders (promoter of respondent No.2 which isthe parent company of respondent No.1) by his e-mail of 23[rd] April,2014 at 12:00 PM. The said e-mail sent by Mr. Frederik Reynders wasresponded to by the applicant on 23[rd] April, 2014 at 12:10 PM. Further,Mr. Frederik Reynders, by his e-mail of 23[rd] April, 2014 at 4:09 PM,attached a copy of the draft with some attached comments from theFheadquarters of the respondents in Belgium (respondent No.2 herein).According to the applicant, the comments related to clause 9 of the draftagreement relating to the indemnity of respondent Nos.1 & 2. It is then

(iii) negligent performance or failure or delay in performance of the terms of thisAgreement by this Supplier.G9.2 Supplier shall indemnify and hold harmless RB and their respective officers, directors,agents, and employees against any and all claims:

i. Arising out of an alleged breach of the terms and conditions of other provision of thisAgreement.

ii. based upon any allegations that the material produced by RB using Product wasdefective (including, but not limited to, manufacturing or refining defects);H These provisions shall survive termination or expiry of this Agreement.”

stated that in the same e-mail, Mr. Frederik Reynders gave a counterproposal, concerning clause 9.1 of the draft agreement, of providing adocument of insurance to inform the applicant about their maximumcoverage. On this basis, it is asserted that respondent No.2 was awareof the fact that indemnity is being extended to the applicant and thatrespondent No.2 was the disclosed principal on whose behalf therespondent No.1 was executing the agreement. It is further assertedthat the arbitration agreement was an integral part of the agreementexecuted between the applicant and respondent No.1, on its behalf andon behalf of its disclosed principal, namely, respondent No.2. Theapplicant has then asserted that respondent No.1 addressed an e-maildated 6[th] June, 2014, to the applicant enclosing a signed copy of theagreement and further stating that hard copy would be delivered to theapplicant. The relevant averments in the application referred to abovehave been articulated in paragraphs 7.7 to 7.12, which read thus:

“7.7 The Applicant states that the Respondents had approached itwith its offer to print labels for the applicant, including booklet andleaflet labels (required for Mucinex exported to USA). The DrugFacts and other details which were to be printed on the back labelwere in accordance with the laws of USA and the Respondentswere aware of the fact that the Mucinex supply is meant forUSA market. True typed copy of the Minutes of Meeting held onNovember 22, 2013 between the officials with the respondentNo.1 are annexed as ANNEXURE A-2 (at pages 133 to 134).

7.8 The Respondents subsequently made a presentation abouttheir capability to print labels for the Applicant, including bookletand leaflet labels (required for Mucinex exported to USA). Duringpersonal meeting and in the presentation, the Respondentsrepresented that they are the market leaders in label printing acrossthe globe and they provide creativity and innovation for self-adhesive labels. Further, the Respondents represented thatReynders label printing in India offers tailor made solutions to fitall needs of the Respondent including perfect adhesion on vialsconforming to ISO 15010), every single label is printed as perspecifications) and numbering of each label, to ensure qualitycontrol. The Respondents offered to print booklet & leaflet labels“to put extra information on a packaging where the availablespace for text or images is rather limited”. The Respondents A

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further specifically emphasised that such booklet labels contain amulti-page booklet, glued at the back, having application inpharmaceutical industry. For the purpose of adhering andmaintaining strict quality control measures, the Respondentsrepresented that inspection of printed labels is conducted througha system consisting of “500 100% camera controlled inspectionsystem, online numbering on back side and units for offlinenumbering”. Further, in relation to quality assurance, theRespondents represented to the Applicant that they providestandard quality assurance and in addition, they also provide qualitycheck by camera control. True typed copy of the Presentationdated NIL made by the Respondents is annexed as ANNEXUREA-3 (at pages 135 to 156).

7.9 In the interregnum, the Applicant entered into a SupplyAgreement dated April 16, 2014 with its affiliate in India viz., RBHealthcare. True typed copy of the Supply Agreement executedbetween the Applicant and RB Healthcare dated 16.04.2014 isannexed as ANNEXURE A-4 (at pages 157 to 189).

7.10 The Applicant and Respondents held detailed negotiations inrelation to execution of an agreement, whereby the Respondentswere to provide packaging material to the Applicant and itsaffiliates. Based on negotiations, the Applicant by email datedApril 23, 2014, circulated a draft of the Agreement along with theCode of Conduct and Anti-Bribery policy, of the Applicant. Truetyped copy of the email 23.04.2014 addressed by the Applicant tothe Respondents is annexed as ANNEXURE A-5 (at pages 190to 191). The applicant also requested the Respondents to attach acopy of the executed specifications of Mucinex labels and signedcopy of the pricing/costing agreement for Mucinex Labels. It isrelevant to state that Clause 9 of the draft Agreement, specificallystated “The Supplier and the Supplier group shall indemnifyRB against any claims, losses, damages and expenseshowsoever incurred or suffered by RB (and whether direct orconsequential or economic loss) arising out of or in connectionwith……negligence performance or failure or delay inperformance of the terms of this agreement by the Supplier”.

7.11 In response, the Respondents through Mr. FrederikReynders (promoter of Respondent No.2 which is a parent

of Respondent No.1) by his email responded on April 23,2014 at 12:00 pm. True typed copy of the email dated April 23,2014 addressed by Mr. Frederik Reynders to the Applicant isannexed as ANNEXURE A-6 (at page 192). The said emailsent by Mr. Frederik Reynders was responded by theApplicant on April 23, 2014 at 12:10 pm. True typed copy ofthe email dated April 23, 2014 addressed by the Applicant to Mr.Frederik Reynders is annexed as ANNEXUXRE A-7 (at page193). Further, Mr. Frederik Reynders by his email of April23, 2014 at 04.09 pm attached a copy of the draft Agreementwith “some comments of our HQ in Belgium (RespondentNo.2 herein)”. True typed copy of the email dated April 23,2014 with the commented Agreement sent by Mr. FrederikReynders to the Applicant is annexed as ANNEXURE A-8 (atpage 194). The comments related to Clause 9 of the draftAgreement relating to Indemnity extended by the RespondentNos.1 and 2. In the same email, Mr. Reynders also statedthat for Clause 9.1 of the draft Agreement, “I will provideyou with an document of our Insurance to inform you aboutour maximum coverage”. From the above, it is clear thatRespondent No.2 was aware of the fact that indemnity is beingextended to the Applicant and the fact that Respondent No.2 isthe disclosed principal, on whose behalf the Respondent No.1 isexecuting the Agreement. In this regard, it is relevant to state thatthe arbitration agreement is an integral part of the Agreementexecuted between the Applicant and the Respondent No.1. Hence,the arbitration agreement also has been executed by RespondentNo.1 on its behalf and on behalf of its disclosed principal i.e. theRespondent No.2.

7.12 After further discussions, the Respondent No.1, onits behalf of and on behalf of its parent and disclosedprincipal – Reynders Belgium) of Respondent No.2,executed the Agreement on May 1, 2014 and sent the sameto the Applicant. In this context it is stated that the RespondentNo.1 had addressed an email dated June 6, 2014 to the Applicantenclosing the signed copy of the Agreement and further statingthat hard copy shall be delivered to the Applicant. True typedcopy of the email dated June 6, 2014 sent by the RespondentNo.1 to the Applicant is annexed as ANNEXURE A-9 (at page AB

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976SUPREME COURT REPORTS

A195). The Agreement was subsequently executed by the Applicantand a hard copy, was sent to the Respondents.”

6. We deem it apposite to reproduce the correspondence, referredto in the aforesaid paragraphs of the application under consideration, forBexamining the case made out by the applicant as to whether respondentNo.2 can be said to have assented or had an intention to become partyto the arbitration agreement by its conduct, without being a signatory tothe agreement dated 1[st] May, 2014. Annexures-5 to 9 referred to by theapplicant read thus:

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“ANNEXURE A-5

From : Joshi, Sonu [mail to:[REDACTED]]

Sent : woensdag 23 april 2014 10:38

To : Frederic Reynders

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Subject:Commercial Agreement sigh-off-RB & Reynders Dear Frederik, As per our Global procurement policies and procedures, it ismandatory for RB to sign-off a commercial agreement, documentEon code of conduct and Anti-Bribery policies with all of oursuppliers. Accordingly, please find the following documents forimmediate sign-off.

1. Code of Conduct

2. Anti-Bribery and

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3. Commercial agreement (Packing material Supply Agreement)Along with the above, please attach a copy of the signed-off specsof Mucinex labels and the signed copy of our pricing/costingagreement on the Mucinex labels.

Please go through the commercial agreement, provide all relevantdetails i.e. Company Name, Address, Supply/Mfg. location, Detailsof Products manufactured/supplied, Agreed payment terms etc.and send us the duly signed (by the authorized signatory) &company stamped copy along with the signed & stamped copiesof the Code of Conduct and Anti Bribery policies.

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RECKITT BENCKISER (I) PVT. LTD. v. REYNDERS LABELPRINTING (I) PVT. LTD. [A. M. KHANWILKAR, J.]

For any information or clarifications, please contact me.

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Request you to email/send us all the documents latest by 30[th]April 2014 and if earlier it would be really appreciated.

Regards,

Sonu Dev JoshiManager Procurement –Packing Material B

RB

Plot – 48, Institutional Area, Sector-32, Gurgaon – 122001

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Direct-91-124-4028197; Mobile +91 85273-99487

www.reckittbenckiser.com

On 23-Apr-2014, at 12:00 pm., “Frederik Reynders”

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<[REDACTED]> wrote:

Dear Sonu,

We will provide you with all complete documents before 30[th].

A lead time of 14 days is highly requested and recommended aleaflet label after receival of PO till delivery at RB factory inEBaddi.

Please confirm.

Best regards,

Frederik Reynders

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Reynders_Label Printing India Pvt. Ltd.

From : Joshi, Sonu [mail to: [REDACTED]]Sent : woensdag 23 april 2014 12:10

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To : Frederic Reynders

Cc : Kari Vandenbussche

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[2019] 8 S.C.R.

ASubject: Re: Commercial Agreement sign-off – RB & ReyndersHi Frederik Thanks.

We (me and you) will discuss on the lead-times, align on someBbuffer days and publish the official lead times to BADDI planningteam.

The unofficial or real/crash/squeeze lead time must remainbetween the three of us.

Regards

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Sonu Dev Joshi

Manager-PM Procuremen

RB

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From : Frederic Reynders [mail to:[REDACTED]]

Sent :Wednesday, April 23, 2014 4:09 PM

To : Joshi, Sonu

Cc : Kari VandenbusscheE

Subject: RE: Commercial Agreement sign-off – RB & Reynders Dear Sonu, Please find attached the contract with some comments of ourHQ in Belgium. We will discuss & agree on a realistic andFnecessary lead time between the 3 of us.

For 9.1. I will provide you with an document of our insurance toinform you about our maximum coverage.

Waiting for your feedback. Feel free to call in case of anyquestions.

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Frederik Reynders

Reynders_Label Printing India Pvt. Ltd.

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ANNEXURE A-9

From : Kari Vandenbussche [mail to:[REDACTED]]

Sent : Friday, June 06, 2014 4:38 PM

To : Joshi, Sonu

Cc : Frederic Reynders

Subject: FW: Commercial Agreement sign-off – RB & ReyndersDear Mr. Sonu Joshi, Attached you find the signed agreement with Company stamp,hard copies will be delivered today at your R&B office in Gurgaon.

Best regards,

Kari Vandenbussche

Site Manager

Plot no. F 686 – Chopanki Ind. AreaChopanki 301019 – Bhiwadi – Rajasthan T + 91 987 1024 467M + 91 987 102 4467F + 91 149 330 5403www.reynders.com”

7. Respondent No.2 has filed its counter affidavit and emphaticallyrefuted the assertions made by the applicant that respondent No.2 is theparent or holding company of respondent No.1. It is stated that respondentNo.1 and respondent No.2 both are part of Reynders Label PrintingGroup. This group is an internationally operating group of seven printingcompanies and each of these companies has its own separate legal entitiesand operates in different offices independently. Further, these companiesonly share a common parent entity, namely, Reynesco NV which is alsothe holding company of both respondent companies. First, respondentNo.2 had no presence or operation whatsoever in India and was notinvolved in the negotiation, execution and/or performance of theagreement. There is no privity of contract between the applicant and A

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Arespondent No.2. Second, respondent No.2 in its counter affidavit hasclearly stated that Mr. Frederik Reynders was not the promoter ofrespondent No.2. However, Mr. Frederik Reynders was an employeeof respondent No.1. The signatory to the stated agreement, Mr. KariVandenbussche, had neither exercised any managerial functions forrespondent No.2, nor was he an authorized representative or a directorBof respondent No.2 with any authority to appoint the said respondent.The relevant extract of the counter affidavit reads thus:

“THE ANSWERING RESPONDENT DID NOTPARTICIPATE IN THE NEGOTIATIONS PERTAININGTHE AGREEMENT

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15. It is incorrect to state that the answering Respondentwas at any point in time involved in the negotiations withrespect to the Agreement. The answering Respondent didnot make any presentation or representations to theApplicant. From the documents annexed by the Applicant,there is nothing to show that the answering Respondentever made any presentation to the Applicant or was presentat any meeting prior to the date of the alleged Agreement.

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16. Contrary to what has been alleged by the Applicant, theanswering Respondent did not provide any comments onthe draft of the Agreement. The answering Respondentsubmits that it is not aware of the e-mail dated 23.04.2014,as alleged by the Applicant. Respondent No.1 did notforward e-mail dated 23.04.2014 or any such e-mail to theanswering Respondent seeking comments of the answeringRespondent on the draft of the Agreement. The referenceto HQ in Belgium is not a reference to the answeringRespondent. As explained above, the answeringRespondent is but one of seven subsidiaries of the holdingcompany Reynesco NV.

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17. The answering Respondent submits that it was not party toany negotiations pertaining to the Agreement. The signatory tothe Agreement, Mr. Karl Vandenbussche, and Mr. FrederikReynders, who is alleged to have carried out thenegotiations with respect to the Agreement, were notrepresenting (or purporting to represent) or acting in any G

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way for the answering Respondent, and they had noauthority to bind the answering Respondent.

18. The answering Respondent has no connection to the presentdispute not having been a party in any capacity to the negotiation,execution, or enforcement of the Agreement.

RESPONDENT NO.1 HAD NO AUTHORITY TO BINDTHE ANSWERING RESPONDENT AND DID NOTEXECUTE THE AGREEMENT ON BEHALF OF THEANSWERING RESPONDENT.

19. The signatory to the Agreement is Mr. KarlVandenbussche, who at no point time exercised anymanagerial functions for the answering Respondent. Mr.Vandenbussche has never been an authorizedrepresentative or a director of the answering Respondent,having any authority to bind the answering Respondent.

20. Further, Mr. Frederik Reynders, who is alleged to havecarried out the negotiations with respect to the Agreement,has incorrectly been described as the promoter of theanswering Respondent. Mr. Frederik Reynders was not andhas never been an employee, officer or representative ofthe answering Respondent.

21. The Applicant contends that the fact that Mr. FrederikReynders was acting on behalf of the answering Respondent andthe answering Respondent is the parent company of RespondentNo.1 binds the answering Respondent to the Agreement andconsequently the arbitration Agreement. It is submitted thatthe answering Respondent is not the parent company ofReynders India and at no point in time was Mr. FrederikReynders ever employed by the answering Respondent orfor that matter Reynesco NV. Clearly, Mr. Frederik Reynderswas not acting for the answering Respondent, and had no authorityto bind the answering Respondent. From the communication anddocuments annexed by the Applicant, there is nothing to showthat Mr. Vandenbussche or Mr. Frederik Reynders representedthemselves to be the agents of the answering Respondent orauthorized persons acting for the answering Respondent.

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A22. It is submitted that the answering Respondent has no connectionto the present dispute not having been a party in any capacity tothe negotiation, execution, or enforcement of the Agreement.Therefore, the Applicant’s submission that the Agreement wasexecuted by Respondent No.1 on behalf of Respondent No.2, isincorrect. As demonstrated above, the answering Respondent wasBnever a participant in the negotiations between the Applicant andRespondent No.1.”

8. The applicant has filed a rejoinder affidavit in which it is vaguelyCstated that Mr. Frederik Reynders, during the stage of negotiation of theagreement, was taking directions from the representatives of respondentNo.2. In paragraphs 10 to 12 of the said affidavit, in response to thestand taken by respondent No.2, the applicant has stated thus:

“10. The contents of Para 15 are wrong and denied. It is a matterDof record (Annexure – A3 at Page 135 of the Application) thatthe Respondents had approached the Applicant at the time ofnegotiation of Agreement under the common banner of ‘ReyndersLabel Printing’ and in that capacity had made a presentation tothe Applicant. In fact, the Respondents market themselves as alabel printing company, the printing being executed through variousEsites around the world.

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11. The contents of Para 16-18 are incorrect and denied. It is amatter of record that Respondent No.2 had actively participatedin the negotiation of the Agreement. It is a matter of record(Annexure A-8 at Page 194 of Application) that Respondent No.1Fwas taking directions from Respondent No.2 during the stage ofnegotiations of the Agreement. In fact, Respondent No.2through Mr. Kristof Vandenbroucke had shared commentson the Agreement. The same Mr. Kristof Vandenbrouckesubsequently participated in the escalation meeting heldGin Amsterdam for amicable resolution of the disputes thathave arisen between the parties. Without prejudice to the same,it is submitted that it is inconsequential whether or not RespondentNo.2 participated in negotiations of the Agreement. As elaboratedin the Preliminary Submissions, there is irrefutable evidence thatRespondent No.2 has assented to the Agreement.

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12. The contents of Para 19-22 are wrong and denied. It is amatter of record (Annexure A-8 at Page 194 of theApplication) that Mr. Frederik Reynders, during the stageof negotiations of the Agreement, was taking directionsfrom representatives of Respondent No.2. In any case, asdemonstrated hereinabove, Respondent No.2 has admitted to itsliability under the Indemnity Clause, its limited objection being theextent of its liability thereunder. Additionally, Respondent No.2had participated in the escalation meetings held in Amsterdamunder the Arbitration Clause. Clearly the paragraphs under replyare an afterthought.”

9. In the backdrop of the averments in the application and thecorrespondence exchanged between the parties adverted to by theapplicant, it is obvious that the thrust of the claim of the applicant is thatMr. Frederik Reynders was acting for and on behalf of respondent No.2,as a result of which the respondent No.2 has assented to the arbitrationagreement. This basis has been completely demolished by respondentNo.2 by stating, on affidavit, that Mr. Frederik Reynders was in no wayassociated with respondent No.2 and was only an employee of respondentNo.1, who acted in that capacity during the negotiations preceding theexecution of agreement. Thus, respondent No.2 was neither the signatoryto the arbitration agreement nor did have any causal connection with theprocess of negotiations preceding the agreement or the execution thereof,whatsoever. If the main plank of the applicant, that Mr. Frederik Reynderswas acting for and on behalf of respondent No.2 and had the authorityof respondent No.2, collapses, then it must necessarily follow thatrespondent No.2 was not a party to the stated agreement nor had itgiven assent to the arbitration agreement and, in absence thereof, evenif respondent No.2 happens to be a constituent of the group of companiesof which respondent No.1 is also a constituent, that will be of no avail.For, the burden is on the applicant to establish that respondent No.2 hadan intention to consent to the arbitration agreement and be party thereto,maybe for the limited purpose of enforcing the indemnity clause 9 in theagreement, which refers to respondent No.1 and the supplier groupagainst any claim of loss, damages and expenses, howsoever incurredor suffered by the applicant and arising out of or in connection withmatters specified therein. That burden has not been discharged by the AB

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Aapplicant at all. On this finding, it must necessarily follow that respondentNo.2 cannot be subjected to the proposed arbitration proceedings.Considering the averments in the application under consideration, it isnot necessary for us to enquire into the fact as to which other constituentof the group of companies, of which the respondents form a part, hadparticipated in the negotiation process.B

10. Suffice it to observe that respondent No.2 was never involvedin the negotiation process concerning the stated agreement dated 1[st]May, 2014. On this finding, the application must fail as against respondentNo.2 and as a consequence whereof, the provisions for making referenceto the sole arbitrator, on the assumption that it is an internationalCcommercial arbitration, cannot be taken forward. As respondent No.1 isa company having been established under the provisions of the IndianCompanies Act and having its registered office in India, the applicantcan pursue its remedy against respondent No.1 for appointment of asole arbitrator to conduct arbitration proceedings, as a domesticDcommercial arbitration.

11. Indeed, the applicant had vehemently relied upon thecircumstances and correspondence post-contract but that cannot be thebasis to answer the matter in issue. The respondent No.2 has justlyrelied upon the exposition in Godhra Electricity Co. Ltd. and Anr. Vs.EState of Gujarat and Anr.,[5] to buttress the argument that post-negotiations in law would not bind the respondent No.2 qua the arbitrationagreement limited between applicant and respondent No.1. In any case,even this plea is based on the assumption that Mr. Frederik Reynderswas associated with and had authority to transact on behalf of respondentNo.2, which assertion has been refuted and rebutted by respondent No.2.FIt is clearly stated that Mr. Frederik Reynders was neither connected tonor had any authority of respondent No.2, but was only an employee ofrespondent No.1 and acted only in that capacity.

12. For the view that we have taken, it is unnecessary to dilate onother contentions. Suffice it to observe that the application must failGagainst respondent No.2 and on that conclusion, no relief can be grantedto the applicant who has invoked the jurisdiction of this Court on theassumption that it is a case of international commercial arbitration. Despitethat, respondent No.1 through counsel has urged that as the subject H5 (1975) 1 SCC 199

agreement between the applicant and respondent No.1 contains anarbitration clause (clause 13) and since disputes have arisen betweenthem, the respondent No.1 would agree to the appointment of a solearbitrator by this Court for conducting arbitration proceedings betweenthe applicant and respondent No.1, as domestic commercial arbitration.This stand has been reiterated in the written submissions filed on behalfof respondent No.1, filed after the conclusion of the oral arguments.Resultantly, even though no relief can be granted to the applicant asagainst respondent No.2, we proceed to pass the following order in theinterest of justice.

13. The arbitration application is dismissed as against respondentNo.2. However, we appoint Mr. Justice Badar Durrez Ahmed (FormerChief Justice, Jammu & Kashmir High Court) as the sole arbitrator toconduct domestic commercial arbitration at New Delhi, between theapplicant and respondent No.1 on the terms and conditions as specifiedin the Act of 1996.

14. Application stands disposed of in the above terms. No costs.All pending interim applications are also disposed of.

Ankit Gyan

Application disposed of.

A

B

C

D

E

F

G

H