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Applying doctrine of 'Group of Companies' in arbitration

IN PETITION FOR ARBITRATION (CIVIL) NO. 65 OF 2016, Reckitt Benckiser (India) Private Limited vs Reynders Label Printing India Private Limited and Anr., the singular questiont before the Supreme Court was whether respondent No.2 ­a company established under the laws of Belgium, having its principal place of business at Nijverheldsstraat 3, 2530 Boechout, Belgium, could be impleaded in the proposed arbitration proceedings despite the fact that it is a non­ signatory party to the agreement dated 1st May, 2014, executed between the applicant and respondent No.1 ­ a company established under the Companies Act, 2013 ­ merely because it (respondent No.2) is one of the group companies of which respondent No.1 also is a constituent.

The Supreme Court referring to Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. and Ors., observed that as per the doctrine of 'Group of Companies' an arbitration agreement entered into by a company, being one within a group of corporate entities, can, in certain circumstances, bind its non­signatory affiliates. In the present case, it is not in dispute that the respondents are constituents of a group of companies known as “Reynders Label Printing Group”. the crucial question is whether it is manifest from the indisputable correspondence exchanged between the parties, culminating in the agreement dated 1st May, 2014, that the transactions between the applicant and respondent No.1 were essentially with the group of companies and whether there was a clear intention of the parties to bind both the signatory as well as non-­signatory parties (respondent No.1 and respondent No.2, respectively).

The Supreme Court decided that the burden was on the applicant to establish that respondent no. 2 was a party to the agreements to which they have failed.

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