Bombay High Court
Oil And Natural Gas Corporation Ltd vs M/S.Jindal Drilling And Industries Ltd on 28 April, 2015
Author: R.D. Dhanuka
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.587 OF 2014
along with
ARBITRATION PETITION NO.767 OF 2014
along with
ARBITRATION PETITION NO.768 OF 2014
along with
ARBITRATION PETITION NO.1045 OF 2014
Oil and Natural Gas Corporation Ltd. )
A public sector undertaking incorporated )
under the Companies Act, 1956 having )
its Registered Office at Jeevan Bharti
Building Tower-II, 124 Indira Chowk,
)
)
New Delhi- 100 001 and Mumbai )
Regional Business Centre Office at )
NSE PLAZA, 1st Floor, 'A' Wing, )
Bandra Kurla Complex, Bandra (E), )
Mumbai - 400 051. ) .. Petitioners
Vs.
M/s.Jindal Drilling and Industries Limited )
a company incorporated under )
the Companies Act, 1956, having their )
Registered Office at 1107, )
Vikram Towers, 16m Rajendra Place, )
New Delhi 110 008 and having their )
Operations office at Keshva Building, )
rd
3 Floor, Bandra Kurla Complex, )
Bandra (E), Mumbai - 400 051 ) .. Respondents
---
Mr.Dipen Merchant, Senior Advocate a/w Mr.Prakash Shinde a/w Ms.
Ambreen Saheed i/by M/s.MDP & Partners for the petitioners.
Mr.Rahul Narichania, Senior Advocate a/w Ms.Pratiksha Avhad a/w Ms.
Pooja Kapadia i/by M/s.Mulla & Mulla & Craigie Blunt & Caroe for the
respondents.
---
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CORAM : R.D. DHANUKA, J.
RESERVED ON : 22nd April 2015
PRONOUNCED ON : 28th April 2015
JUDGMENT :-
. By these petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short "the said Arbitration Act), the petitioners have impugned the arbitral award dated 9 th October 2013 allowing some of the claims made by the respondents. By consent of the parties, all the aforesaid petitions were heard together and are being disposed of by a common judgment in view of the identical facts and being common award rendered by the arbitral tribunal. The petitioners herein were the original respondents in the arbitration proceedings whereas the respondents herein were the original claimants. Some of the relevant facts for the purpose of deciding these petitions are as under :
2. Some time in the month of October 2005, the petitioners floated a tender for charter hire of a Floating Production, Storage and Off-loading vessel (FPSO). Pursuant to the said notice inviting tender, Messrs. Discovery Enterprises Pvt. Ltd. (hereinafter referred to as 'the said DEPL') submitted its bid with the petitioners. On 22 nd March 2006, the petitioners awarded the said contract in favour of the said DEPL and executed a contract agreement with the said DEPL.
3. It is the case of the petitioners that pursuant to the said contract between the petitioners and the said DEPL, the said DEPL imported the vessel FPSO 'Crystal Sea' for oil and gas processing in the Bombay High in the offshore fields of the petitioners. It is the case of ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 3 arbp-587.14 & ors.(j).doc the petitioners that the petitioners paid the customs duty on the said vessel on behalf of the said DEPL as assessed at Rs.55,78,12,857/- with clear and express understanding that the vessel would be exported under the duty drawback scheme and the said DEPL would complete all the formalities required to be completed as per the Customs Act, 1962 to avail of the benefit of duty drawback. The said DEPL, however, did not comply with their part of the obligation and accordingly, the petitioners terminated the said contract on 12th November 2006. The petitioners issued a notice on 12th February 2007 to the said DEPL and demanded various amounts towards compensation. The said dispute between the petitioners and the said DEPL was referred to the arbitral tribunal.
4. In the said arbitration proceedings between the petitioners and the said DEPL, the petitioners had impleaded the respondents herein also as respondents. The respondents filed an application on 23 rd August 2008 in the arbitration proceedings under Section 16 of the Arbitration Act, inter alia, praying for deletion of their name from the said arbitration proceedings as respondents and raised an issue of jurisdiction. By an order passed by the arbitral tribunal on 27 th October 2010, the arbitral tribunal accepted the plea of the respondents and directed the petitioners to strike of the name of the respondents from the array of parties. Being aggrieved by the said order dated 27 th October 2010, the petitioners filed an appeal (Arbitration Petition No.814 of 2011) under Section 37 of the Arbitration Act before this Court. By an order dated 27 th June 2012, the learned Single Judge (Shri S.J. Kathawalla, J) dismissed the said appeal filed by the petitioners, inter alia, challenging the said order dated 27th October 2010. The petitioners ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 4 arbp-587.14 & ors.(j).doc have filed a Special Leave Petition against the said order dated 27 th June 2012 before the Supreme Court which is pending. In the meanwhile, the arbitral tribunal rendered final award on 6 th June 2013 in the said arbitral proceedings in favour of the petitioners and against the said DEPL. It is not in dispute that the said DEPL did not challenge the said final award dated 6th June 2013.
5. In the meanwhile, the petitioners entered into an agreement with the respondents on 2nd December 2006 and took on hire the drilling unit RIG Noble Charlie Yester from the respondents to conduct drilling operations in the offshore waters of India. The petitioners also executed three more contracts with the respondents dated 9th December 2004, 17th August 2006 and 23 rd December 2003 for three other works. It is not in dispute that these four contracts awarded to the respondents by the petitioners were independent contracts and were not related to each other or they did not have any connection of whatsoever nature with the contract awarded by the petitioners in favour of the said DEPL. The respondents had carried out those works awarded under the said four contracts and submitted various bills to the petitioners.
6. The petitioners have not disputed the claim made by the respondents. The petitioners, however, refused to pay the dues of the respondents on the ground that since the said DEPL was liable to compensate the petitioners as claimed in the said pending arbitration proceedings at the relevant time between the petitioners and the said DEPL, the petitioners had adjusted/appropriated and/or exercised lien on the amount of Rs.63,87,38,070.76 which was kept by the respondents with the petitioners by treating it as a security to satisfy the award to be ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 5 arbp-587.14 & ors.(j).doc passed in favour of the petitioners in the said then pending arbitration proceedings between the petitioners and the said DEPL.
7. Since the petitioners refused to pay the undisputed dues of the respondents under the aforesaid four contracts, the dispute arose between the parties arising out of those four contracts and was referred to arbitration. The arbitral tribunal framed separate points for determination in all four arbitral proceedings. The respondents led oral evidence in the arbitral proceedings. The petitioners, however, relied upon the oral evidence led by the petitioners in the arbitral proceedings filed by the petitioners against the said DEPL as evidence in the present proceedings.
8. On 9th October 2013, the arbitral tribunal rendered a common award in all four matters and directed the petitioners to pay to the respondents various amounts with interest and costs. The said common award has been impugned by the petitioners in these four petitions under Section 34 of the Arbitration Act.
9. Mr.Merchant, learned senior counsel for the petitioners submits that the said DEPL was a Group Company and part of the D.P. Jindal Group and on the representation of the respondents herein at the time of finalisation of the bid received from the said DPEL, the petitioners awarded the said contract dated 22nd March 2006 to the said DEPL. He submits that the said DEPL was an extension of the activities of the respondents who had set up the said DEPL as an agency to carry out its activities and the doctrine of Group Company ought to have been applied in this case.::: Downloaded on - 29/04/2015 00:00:17 :::
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10. It is submitted that the respondents had all throughout acted on behalf of the DEPL in respect of the contract which was awarded by the petitioners in favour of the said DEPL. It is submitted that the Directors of the said DEPL were the sons and daughters-in-law of the Managing Director of the respondents and both the companies for some time shared a common office and telephone numbers. It was the case of the petitioners that the DEPL was incorporated in order to defraud the creditors. Based on such allegations, learned senior counsel for the petitioners submits that the arbitral tribunal was required to lift the corporate veil in order to treat the said DEPL and the respondents herein as one company and ought to have rejected the claims made by the respondents. He submits that the petitioners were entitled to claim lien on the amount of the respondents in respect of the amounts recoverable from the said DEPL by the petitioners and to appropriate the same. He submits that the Special Leave Petition filed by the petitioners against the order passed by this Court under Section 37 of the Arbitration Act dismissing the appeal filed by the petitioners against the order of the arbitral tribunal passed under Section 16 of the Arbitration Act in favour of the respondents herein in the case of the arbitration proceedings which were filed by the petitioners against the said DEPL is pending.
11. Mr.Narichania, learned senior counsel for the respondents, on the other hand, submits that the respondents were incorporated in the year 1983 whereas the said DEPL was incorporated some time in the year 2003. He submits that even prior to the date of awarding contract in favour of the said DEPL by the petitioners on 22nd March 2006, the petitioners had awarded two out of the four contracts i.e. on 23 rd ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 7 arbp-587.14 & ors.(j).doc December 2003 and on 9th December 2004 to the respondents herein.
He submits that it is an admitted position that those four contracts awarded to the respondents by the petitioners were independent contracts and had no nexus whatsoever with the contract awarded by the petitioners to the said DEPL. He submits that the petitioners had not disputed their liabilities to the respondents arising out of the said four contracts.
12. He submits that the respondents-company is a separate and independent legal entity and thus alleged dues of the petitioners against the said DEPL could not have been appropriated and/or no lien could have been claimed by the petitioners against the amounts due and payable to the respondents by the petitioners under four separate and independent contracts.
13. Learned senior counsel submits that though the petitioners had alleged that the respondents and the said DEPL were part of the D.P. Jindal Group and based on the representation made by the respondents herein, the petitioners had awarded the said contract dated 22th March 2006 in favour of the said DEPL, the petitioners did not lead any evidence to show that either the petitioners had awarded the said contract dated 22nd March 2006 to the said DEPL based on any such alleged representation and did not prove that the petitioners had awarded these four contracts to the respondents on the ground that the respondents were part of the D.P. Jindal Group.
14. Learned senior counsel for the respondents invited my attention to oral evidence led by the petitioners in the arbitration proceedings filed by the petitioners against the DEPL which was adopted ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 8 arbp-587.14 & ors.(j).doc in the present proceedings and would submit that the said witness examined by the petitioners had failed to prove that the said DEPL was awarded the contract by the petitioners on the premise that the said DEPL was part of the D.P. Jindal Group or the same was awarded based on any representation of the respondents. He submits that the witness examined by the petitioners admitted that he had accessed the website of DEPL only in the year 2008 though the said contract was awarded as far back as 22nd March 2006. He submits that though there was correspondence exchanged between the petitioners and the said DEPL during the period between 2006 and 2008 in respect of the alleged dues under the alleged agreement dated 22nd March 2006 entered into between the petitioners and the said DEPL, the petitioners raised demand notice for the first time on 25 th April 2008 in respect of the said transactions upon the respondents.
15. Learned senior counsel submits that the petitioners' witness failed to produce the Minutes of Meeting of the Executive Purchase Committee which gave its approval for awarding the contract to the said DEPL. He submits that the said witness examined by the petitioners was not even present the said meeting. He submits that since the petitioners had suppressed the best evidence which could have been made available by the petitioners in support of their case against the respondents, the arbitral tribunal was empowered to draw adverse inference against the petitioners. In support of this submission, learned senior counsel placed reliance on the judgment of the Supreme Court in the case of Gopal Krishnaj Ketkar Vs. Mohamed Haji Latif and Ors., reported in AIR 1968 SC 1413 and in particular paragraph 5 thereof.
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16. Learned senior counsel for the respondents invited my attention to the order dated 27th June 2012 passed by this Court in Arbitration Petition No.814 of 2011 rejecting the appeal filed by the petitioners herein inter alia impugning the order passed by the arbitral tribunal accepting the plea of the respondents herein. He submits that the issue raised by the petitioners in these arbitration proceedings about lifting of corporate veil and the alleged nexus in the contracts awarded to the respondents herein and the said DEPL was also urged in the said proceedings.
17. Learned senior counsel submits that the arbitral tribunal accepted the plea of the respondents in the said matter by holding that the respondents were separate legal entity and thus the respondents being not parties to the agreement between the petitioners and the said DEPL could not have been impleaded as party-respondents. He submits that this Court has already dealt with the issues raised by the petitioners in these proceedings, in the said Arbitration Petition No.814 of 2011 and rejected all such submissions in the said order dated 27 th June 2012.
He submits that the said judgment of this Court between the same parties on the said issue and on the same subject matter is final, conclusive and is binding on the parties as well as this Court.
18. Learned senior counsel for the respondents placed reliance on the judgment of this Court delivered on 22 nd December 2008 in draft notice of motion in Admiralty Suit (L) No.3547 of 2008 in the case of Polestar Maritime Ltd. Vs. M.V. QI LIN MEN & Ors. and more particularly paragraph 14 and would submit that merely because the shareholders are common or their holding in two different companies ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 10 arbp-587.14 & ors.(j).doc duly registered under the Companies Registration Act are identical, it would not make the two companies one and the same entity. Paragraph 14 of the said judgment of the learned Single Judge of this Court in the case Polestar Maritime Ltd. (supra) reads thus :-
"14. defendant no.1 has filed on record a xerox copy of the certificate of registration (page 7 of the compilation of documents of the defendant. The certificate shows that the defendant no.1 ship, at the relevant time belonged to YFM Shipping Co.Ltd. The certificate is dated 6th October 2008. This shows that on the date of the filing of the suit, defendant no.1 ship was not owned by the defendant nos.2 or 3. Learned counsel for the plaintiff however submitted that YFM Shipping Co.Ltd which is shown to be the owner of the defendant no.1 ship and YHM Shipping Co.Ltd, (who is the defendant no.2) are one and the same in as much as the shareholders of the former and the latter are the same and they hold share capital in the same proportion. In my view, merely because the shareholders are common or their holding in two different companies duly registered under the Companies Registration Act, is identical would not make the two companies one and the same entity. It is elimentary principle of law when a company is incorporated it becomes a separate legal entity different from the persons constituting it. Therefore assuming for the sake of argument that the shareholders of the two companies are common, (presently there is no material on record that the shareholders of the two companies are identical) that would not make the defendant no.2 the owner of the defendant no.1 ship. As the defendant no.1 vessel is not owned by defendant nos.2 or 3, plaintiff cannot arrest the defendant no.1 vessel for the alleged maritime claim against defendant nos.2 or 3. The maritime claim is neither against the defendant no.1 ship nor there is any maritime claim against the owner of the defendant no.1 ship."
19. Learned senior counsel also placed reliance on the judgment of Division Bench in Appeal (L) No.772 of 2008 delivered on 6 th January 2009 dismissing the appeal arising out of the said order dated 22nd December 2008.
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20. Learned senior counsel also placed reliance on the
paragraphs 9 and 10 to 15 of the judgment of the Division Bench in the case of Lufeng Shipping Company Ltd. Vs. M.V. Raiwbow ACE & Anr. in Appeal (L) No.228 of 2013 in support of the submission that the respondents were separate and distinct legal entity from its shareholders and other companies.
21. Learned senior counsel for the respondents also placed reliance on the judgment of the Supreme Court in the case of Indowind Energy Limited Vs. Wescare (India) Limited & Anr., reported in (2010) 5 SCC 306 and the judgment of the Delhi High Court in the case of K.K. Modi Investment and Financial Services Pvt. Ltd. Vs. Apollo International INC. & Ors., reported in 2009 (2) Arb.L.R. 499 (Delhi) in support of the aforesaid submission.
22. Learned senior counsel for the respondents submits that the petitioners have also filed a suit (294 of 2011) for the same reliefs against the said DEPL and the respondents arising out of the same cause of action raising the same contentions which suit is pending for hearing and final disposal.
23. Learned senior counsel for the respondents invited my attention to the cross-examination of the witness examined by the respondents who deposed that there were no composite transactions between the parties. There was no joint venture agreement between the parties. Learned senior counsel appearing for the respondents placed reliance on the judgment of the Supreme Court in the case of Balwant Rai Saluja & Anr. Vs. AIR India Limited & Ors., reported in (2014) ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 12 arbp-587.14 & ors.(j).doc 9 SCC 407 and would submit that at the first instance, the arbitral tribunal has no power to lift the corporate veil of the company and in the alternative would submit that no case was made out by the petitioners before the arbitral tribunal by leading appropriate evidence for lifting the corporate veil of the respondents or of the said DEPL. Paragraphs 69, 71 and 74 of the said judgment in the case of Balwant Rai Saluja & Anr.
(supra) read thus :-
"69. The Vodafone case (supra), further made reference to a decision of the US Supreme Court in United States v. Bestfoods [141 L Ed 2d 43: 524 US 51 (1998)]. In that case, the US Supreme Court explained that as a general principle of corporate law a parent corporation is not liable for the acts of its subsidiary. The US Supreme Court went on to explain that corporate veil can be pierced and the parent company can be held liable for the conduct of its subsidiary, only if it is shown that the corporal form is misused to accomplish certain wrongful purposes, and further that the parent company is directly a participant in the wrong complained of. Mere ownership, parental control, management, etc. of a subsidiary was held not to be sufficient to pierce the status of their relationship and, to hold parent company liable.
71. In recent times, the law has been crystallized around the six principles formulated by Munby J. in Ben Hashem v. Ali Shayif , [2008] EWHC 2380 (Fam). The six principles, as found at paragraphs 159- 164 of the case are as follows- (i) ownership and control of a company were not enough to justify piercing the corporate veil; (ii) the Court cannot pierce the corporate veil, even in the absence of third party interests in the company, merely because it is thought to be necessary in the interests of justice; (iii) the corporate veil can be pierced only if there is some impropriety; (iv) the impropriety in question must be linked to the use of the company structure to avoid or conceal liability; (v) to justify piercing the corporate veil, there must be both control of the company by the wrongdoer(s) and impropriety, that is use or misuse of the company by them as a device or facade to conceal their wrongdoing; and (vi) the ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 13 arbp-587.14 & ors.(j).doc company may be a 'facade' even though it was not originally incorporated with any deceptive intent, provided that it is being used for the purpose of deception at the time of the relevant transactions. The Court would, however, pierce the corporate veil only so far as it was necessary in order to provide a remedy for the particular wrong which those controlling the company had done.
74. Thus, on relying upon the aforesaid decisions, the doctrine of piercing the veil allows the Court to disregard the separate legal personality of a company and impose liability upon the persons exercising real control over the said company.
However, this principle has been and should be applied in a restrictive manner, that is, only in scenarios wherein it is evident that the company was a mere camouflage or sham deliberately created by the persons exercising control over the said company for the purpose of avoiding liability. The intent of piercing the veil must be such that would seek to remedy a wrong done by the persons controlling the company. The application would thus depend upon the peculiar facts and circumstances of each case."
24. Learned senior counsel for the respondents placed reliance on the judgment of the Supreme Court in the case of Associate Builders Vs. Delhi Development Authority, reported in (2015) 3 SCC 49 and more particularly paragraphs 28, 30, 32, 33, 34 and 52 to 62 and would submit that the petitioners have not made out any ground under Section 34 of the Arbitration Act. The arbitral tribunal has rendered findings of facts which are not perverse and thus cannot be interfered with under Section 34 of the Arbitration Act by this Court. He submits that this Court cannot re-appreciate the evidence considered by the arbitral tribunal in the impugned award.
REASONS AND CONCLUSIONS:
25. It is not in dispute that the respondents were incorporated in the year 1983 whereas the said DEPL was incorporated in the year ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 14 arbp-587.14 & ors.(j).doc 2003. The respondents were already awarded the two contracts out of the said four contracts i.e. on 23rd December 2003 and 9th December 2004 i.e. much prior to the said contract dated 22 nd March 2006 awarded by the petitioners to the said DEPL. It is not in dispute that both the companies were incorporated under the provisions of Companies Act, 1956. There was no reference to the participation, if any, of the respondents in the contract entered into between the petitioners and the said DEPL. There was no involvement of any nature whatsoever of the respondents in the award of the said contract by the petitioners in favour of the said DEPL on 22nd March 2006.
26. It is not in dispute that in respect of the said contract awarded to the said DEPL by the petitioners, the dispute had arisen between the parties. The said dispute was separately referred to the arbitration in the said proceedings filed by the petitioners against the said DEPL. The respondents herein were impleaded as party-respondents along with the said DEPL. The respondents herein had filed an application under Section 16 of the Arbitration Act before the said arbitral tribunal hearing the arbitral proceedings filed by the petitioners against the said DEPL and the respondents herein raising the plea of the jurisdiction. The arbitral tribunal in the said matter accepted the plea raised by the respondents and directed the petitioners to delete the name of the respondents from the array of the parties. The said order passed by the arbitral tribunal was impugned by the petitioners herein by filing the arbitration petition (814 of 2011).
27. A perusal of the said order dated 27 th June 2012 passed by this Court in the said arbitration petition clearly indicates that the plea ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 15 arbp-587.14 & ors.(j).doc raised by the respondents herein in the said arbitration proceedings before the arbitral tribunal that the respondents were not parties to the arbitration agreement entered into the said contract and consequently, could not be dragged to the arbitration. The said plea of the respondents was accepted by the arbitral tribunal. It is clear that the plea of the petitioners in the said proceedings was that the said DEPL was the altered ego of the respondents herein and because of the alleged nexus between the two companies, the petitioners had awarded the said contract to the said DEPL.
28.
It was also contended by the petitioners in the said proceedings that Mr.Manav Kumar and Mrs.Shilpa Agarwal were son and daughter-in-law of Mr.Naresh Kumar who was the Managing Directors of the respondents were the directors of the said DEPL at the relevant time. It was also contended that the said DEPL and the respondents herein were operating out the said premises situated at 3rd Floor, Keshav Building, Bandra Kurla Complex, Bandra (East), Mumbai
- 400 051 having telephone numbers. It was contended by the petitioners that the said contract awarded to the said DEPL was because of the relation with the petitioners enjoyed by the respondents and, therefore, the respondents could not avoid the liabilities in respect of the dues of the said DEPL and could be made liable and bound to meet and answer the petitioners dues recoverable from said DEPL.
29. A perusal of the said judgment indicates that this Court has held that the respondents herein were admittedly not parties to the contract dated 22nd March 2006 which was entered into between the petitioners and the said DEPL and also to the said arbitration agreement.
::: Downloaded on - 29/04/2015 00:00:17 :::ppn 16 arbp-587.14 & ors.(j).doc This Court also accepted and approved the findings rendered by the arbitral tribunal in that matter between the petitioners and the said DEPL. On the issue of commonality of interests between the said DEPL and the respondents herein and plea of common economic unit, the arbitral tribunal held that there was not a 'tickle of evidence' on record to show that the respondents, a distinct incorporated legal entity ever played any role to bind itself in the contract between the petitioners and the said DEPL. It is held that the Executives of the respondents assuming they assisted the said DEPL in the bid process and finalisation, their contribution was on behalf of DEPL as the signatures reflected 'on behalf of M/s.DEPL' in the Minutes of Meeting and not on behalf of the respondents.
30. It is held that merely because son and daughter-in-law of the Managing Director of the respondents were the Directors of the DEPL, the same could not take the claim of the petitioners any further to pin down the respondents in respect of the contractual obligations between the petitioners and the said DEPL. In the said judgment, this Court held that there was no evidence tendered before the arbitral tribunal that the said DEPL and the respondents herein had common shareholders and common Board of Directors. This Court after adverting to the judgment of the Supreme Court in the case of Indowind Energy Limited Vs. Wescare (India) Limited & Anr. (supra) and the judgment of the Delhi High Court in the case of K.K. Modi Investment and Financial Services Pvt. Ltd. Vs. Apollo International INC. & Ors. (supra) held that merely because the two companies may, at one point of time, had a common address and telephone number, it did not make them one economic unit. The mere fact that son and daughter-in-law of the ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 17 arbp-587.14 & ors.(j).doc Managing Director of the respondents herein were the Directors in the said DEPL also did not and could not establish that those companies were one and the same.
31. It is held by this Court that there was also no credible evidence to show that because of the alleged nexus between the two companies, the petitioners had awarded the said contract to the said DEPL. It is held that even assuming that to be correct, it did not take the case of the petitioners any further. The respondents herein were admittedly not parties to the contract and could not be liable under the said contract which was only between the petitioners and the said DEPL. It is held that if the petitioners wanted to bind the respondents to the said contract, it should have asked the respondents to be a party to the said contract.
32. Learned advocate appearing for the petitioners in that matter had no answer to the query raised by this Court as why the petitioners did not insist on the respondents signing the said contract when admittedly there were other contracts which were entered into between the petitioners and the respondents. This Court after rendering the aforesaid findings and upholding the findings rendered by the arbitral tribunal in favour of the respondents herein and against the petitioners in the said arbitration proceedings dismissed the said arbitration petition filed by the petitioners under Section 37 of the Arbitration Act. It is not in dispute that the said judgment of this Court between the same parties on the same issue has not been stayed by the Supreme Court till the date of conclusions of the hearing of this matter. In my view, the parties as well as this Court is bound by the said order ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 18 arbp-587.14 & ors.(j).doc passed by this Court on 27 th June 2012 in Arbitration Petition No.814 of 2011 which was filed by the petitioners against the said DEPL and the respondents herein.
33. It is not in dispute that in the said arbitral proceedings in which the application of the respondents herein under Section 16 was allowed by the arbitral tribunal and the appeal arisen therefore has been rejected by this Court, the arbitral tribunal has already rendered final award against the said DEPL and in favour of the petitioners. It is also not in dispute that the petitioners herein have already filed a civil suit against the said DEPL and the respondents herein, inter alia, praying for the same reliefs under the contract in question and the said suit is pending. The said DEPL has not challenged the said final award and the same has achieved finality.
34. It is submitted by Mr.Narichania, learned senior counsel for the respondents that the petitioners had relied upon the oral evidence led by the petitioners in the said arbitral proceedings filed by the petitioners against the said DEPL in which the respondents were impleaded as one of the respondents, in the present proceedings also and did not lead any other evidence. The petitioners have not disputed this position.
35. Be that as it may, a perusal of the affidavit of evidence filed by Anindya Bhattacharya who was examined as a witness by the petitioners in the said arbitral proceedings between the petitioners and the said DEPL and the respondents indicates that in the examination-in- chief, it was deposed by the said witness that in response to the expression of interests invited by the petitioners, the respondent no.1 i.e. ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 19 arbp-587.14 & ors.(j).doc DEPL had responded expression of interests along with several other bidders. In the pre-bid conference, the said DEPL was represented by Mr.Mohan Ramnathan along with two others. It was deposed in the examination-in-chief that Mr.Ramnathan, who was senior most of the three persons who attended the said meeting, was an employee of the respondent no.2 i.e. respondents herein. The expression of interests was signed by Mr.G.D. Sharma on behalf of the said DEPL. The letterhead of the respondent no.1 represented that the respondent no.1 was a part of Jindal Group.
36. In the cross-examination of the said the witness examined by the petitioners, he deposed that he had accessed the website of DEPL for the first time in June 2008 whereas the contract was awarded to the said DEPL admittedly in the month of March 2006. The witness deposed that the petitioners had addressed a letter or communication to the respondents herein for the first time in relation to the dispute between the petitioners and the said DEPL on 25 th April 2008. The said witness admitted that he was not present when the Executive Purchase Committee gave its approval for awarding the said contract to the said DEPL. The said witness could not produce any Minutes of Meeting of the Tender Committee and the Executive Purchase Committee in relation to the deliberations and the award of contract though the same were available according to the said witness with the petitioners.
37. A perusal of the impugned award on this issue indicates that the arbitral tribunal has rendered findings of facts that there was hardly any evidence to support the plea of the petitioners that the said ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 20 arbp-587.14 & ors.(j).doc DEPL and the respondents were one and the same company. It is held that although the Directors of the said DEPL were the son and daughter- in-law of the Managing Director of the respondents herein and the two companies for some time had shared a common office and telephone numbers that did not make two companies as one entity. Both were subsidiaries of the main company and both had independent legal existence. The said DEPL was incorporated in the year 2003 whereas the respondents herein were public limited company listed on the stock exchange and were incorporated in the year 1983.
38. The arbitral tribunal has also rendered finding that there was no material to show that the petitioners had awarded the said contract to the said DEPL because it was in fact the respondents herein and/or was supported by the respondents. The petitioners did not produce Minutes of Meeting held by the petitioners for short listing of the bidders in respect of that contract awarded to the DEPL. The witness who was the only witness produced by the petitioners was not present at the meeting held by the Executive Purchase Committee when deliberations on the award of the said contract to the recommended bidders took place. The arbitral tribunal has held that there was no evidence to show that in order to secure the said contract, the said DEPL represented that it was a part of the group of the respondents.
39. The arbitral tribunal also considered the oral evidence led by the respondents and more particularly Ms. Dalvi (CW-2) who had deposed that Mr.Ramnathan had attended the pre-bid meeting and customs hearing at the request of the DEPL and as a representative of ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 21 arbp-587.14 & ors.(j).doc the DEPL on account of her expertise in those areas. She also deposed that she was asked by Mr.Ramnathan to attend the customs duty hearing on behalf of the DEPL. It was also pointed out that Mr.G.D. Sharma, an employee of the respondents attended certain meetings and signed letters etc. expressly on behalf of the DEPL. The arbitral tribunal has rendered finding that there was no guarantee or letter of comfort from the respondents to the petitioners in respect of the liabilities, if any, of DEPL under its contract with the petitioners. The arbitral tribunal also rejected the allegations of the petitioners that the said DEPL was incorporated in order to defraud the creditors on the ground that there was no basis for that allegations, no particulars of the alleged fraud had been set out anywhere nor any evidence was produced in support of such allegations.
40. In my view, the arbitral tribunal has considered the evidence led by the parties in the impugned award independently and have rendered findings of facts that i) the petitioners had failed to prove that the said DEPL and the respondents herein were one and the same company; ii) both the companies had independent legal existence; iii) the petitioners had failed to produce any evidence to prove that the petitioners had awarded the said contract to DEPL because it was in fact the respondents herein and/or was supported by the respondents;
iv) there was no evidence to show that in order to secure the said contract, DEPL had represented that it was a part of the respondents group; v) the witness examined by the petitioners was not present in the meeting held by the Executive Purchase Committee and did not produce Minutes of Meeting held by the said Committee for short listing of the bidders; vi) the respondents herein had not issued any guarantee or ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 22 arbp-587.14 & ors.(j).doc letter of comfort from the respondents to the petitioners in respect of the liabilities, if any, of DEPL under its contract with the petitioners and
vii) the petitioners had failed to provide any particulars of the alleged fraud or that the said DEPL was incorporated in order to defraud the creditors. In my view, all the aforesaid findings rendered by the arbitral tribunal are based on the pleadings, documents and the evidence led by the parties and are not perverse and thus no interference with such findings of facts is permissible under Section 34 of the Arbitration Act.
41. Supreme Court in the case of Gopal Krishnaj Ketkar (supra) has held that the Court ought to draw an adverse inference against the parties in case of suppression of the best evidence which would throw light upon the issues in controversy and to rely upon the abstract doctrine of onus of proof. In my view, though the petitioners had deposed that the Minutes of Meeting in which the bids of various bidders were scrutinised and approved were though available was not produced by the petitioners which would have thrown light upon the issues in controversy whether the said DEPL had represented on behalf of the petitioners and that it was forming part of the Jindal Group or not. The petitioners have thus suppressed and withheld the best evidence before the arbitral tribunal. The arbitral tribunal, in my view, has thus rightly rendered findings that the petitioners could not prove the said allegations against the respondents.
42. Supreme Court in the case of Indowind Energy Limited (supra) has held that each company is a separate and distinct legal entity and the mere fact that two companies have common shareholders or common Board of Directors, will not make the two companies a single ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 23 arbp-587.14 & ors.(j).doc entity nor will existence of common shareholders or Directors lead to an inference that one company will be bound by the acts of the other. Paragraph 17 of the said judgment of Indowind Energy Limited (supra) reads thus :-
"17. It is not in dispute that Subuthi and Indowind are two independent companies incorporated under the Companies Act, 1956. Each company is a separate and distinct legal entity and the mere fact that two companies have common shareholders or common Board of Directors, will not make the two companies a single entity. Nor will existence of common shareholders or Directors lead to an inference that one company will be bound by the acts of the other. If the Director who signed on behalf of Subuthi was also a Director of Indowind and if the intention of the parties was that Indowind should be bound by the agreement, nothing prevented Wescare insisting that Indowind should be made a party to the agreement and requesting the Director who signed for Subuthi also to sign on behalf of Indowind."
43. In my view, the petitioners have in this case failed to prove that there were any common shareholders. It is not in dispute that the respondents herein were not parties to the said contract awarded by the petitioners to the said DEPL. No letter of comfort or guarantee has been obtained from the respondents making them liable in case of any liability of the said DEPL under the said contract awarded by the petitioners to the said DEPL. The respondents being separate legal entity, in my view, thus could not be made liable for the liabilities, if any, of the said DEPL against the petitioners unless the same was under any agreement independently between the petitioners and the respondents herein. The judgment of the Supreme Court in the case of Indowind Energy Limited (supra) squarely applies to the facts of this case. I am respectfully bound by the said judgment.
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44. The Delhi High Court in the case of K.K. Modi Investment and Financial Services Pvt. Ltd. (supra) has also taken a similar view which has been taken in the case of Indowind Energy Limited (supra). I am in agreement with the views expressed by the Delhi High Court in the case of K.K. Modi Investment and Financial Services Pvt. Ltd. (supra). This Court in the case of Polestar Maritime Ltd. (supra) has held that merely because the shareholders are common or their holding in two different companies registered under the Companies Registration Act, is identical would not make the two companies one and the same entity. It is held that elementary principle of law is that when a company is incorporated, it becomes a separate legal entity different from the persons constituting it. The said judgment of the learned Single Judge of this Court in the case of Polestar Maritime Ltd. (supra) has been upheld by the Division Bench in its order dated 6 th January 2009. The Division Bench of this Court in the case of Lufeng Shipping Company Ltd. (supra) after adverting to the judgment of the Supreme Court in the case of Indowind Energy Limited (supra) has taken a similar view and has refused to lift the corporate veil in the admiralty suit.
45. Mr. Narichania, learned senior counsel appearing for the respondents invited my attention to the contentions raised by the petitioners in the arbitration petition based on the judgment of the Supreme Court in the case of Chloro Controls India Private Limited Vs. Severn Trent Water Purification Inc. & Ors., reported in (2013) 1 SCC 641 and in particular paragraphs 70, 73, 105 to 108, 133, 140, 148 and 165.2 and would submit that the agreement entered into between the petitioners and the respondents herein were not inter dependent on each other. He submits that the petitioners themselves have admitted that ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 25 arbp-587.14 & ors.(j).doc the agreement between the petitioners and the respondents had nothing to do with the contract between the petitioners and the said DEPL.
46. Learned senior counsel submits that the petitioners have not made any averments that there was any mutual intention of all the parties to bind both the signatories and the non-signatory affiliates. The respondents had never agreed to bind itself with the liabilities and obligations of the said DEPL under the said agreement dated 22 nd March 2006 awarded in favour of the DEPL by the petitioners. In my view, the said judgment of the Supreme Court in the case of Chloro Controls India Private Limited (supra) referred to by the petitioners in the arbitration petition and before the arbitral tribunal is not at all relevant for the purpose of deciding this matter and reliance placed thereon by the petitioners is thus misplaced.
47. The petitioners had canvassed before the arbitral tribunal that the arbitral tribunal shall lift the corporate veil to find out that the said DEPL and the respondents herein were forming part of the said Jindal Group and were one and the same entity and thus the respondents were liable for the liabilities of the said DEPL. In my view, the arbitral tribunal has no power to lift the corporate veil. Only a Court can lift the corporate veil of a company if the strongest case is made out. In my view, the prayer of the petitioners for lifting the corporate veil of the said DEPL was itself not maintainable in the arbitration proceedings. The said DEPL was not a party to these proceedings. Be that as it may, a perusal of the arbitral award clearly indicates that the arbitral tribunal has refused to lift the corporate veil after considering the evidence produced by both the parties and has rendered finding of fact that no ::: Downloaded on - 29/04/2015 00:00:17 ::: ppn 26 arbp-587.14 & ors.(j).doc such case was made out by the petitioners for lifting the corporate veil which are not perverse and thus cannot be interfered with by this Court under Section 34 of the Arbitration Act.
48. Supreme Court in the case of Balwant Rai Saluja (supra) has dealt with the issue of lifting the corporate veil by Court in detail.
In my view, even if the arbitral tribunal had no power to lift the corporate veil of a company, the petitioners did not satisfy the criteria laid down by the Supreme Court in the its judgment in the case of Balwant Rai Saluja (supra) for lifting the corporate veil. It is not the case of the petitioners that there was any impropriety which was linked to the use of the company structure to avoid or conceal liability. It is held by the Supreme Court that to justify piercing the corporate veil, there must be both control of the company by the wrongdoers and impropriety, that is use or misuse of the company by them as a device or facade to conceal their wrongdoing; and the company may be a 'facade' even though it was not originally incorporated with any deceptive intent. The Supreme Court has held that the Court cannot pierce the corporate veil, even in the absence of third party interests in the company, merely because it is thought to be necessary in the interests of justice. In my view, the petitioners had failed to prove that either the said DEPL or the respondents-company was a mere camouflage or sham or were deliberately created by the persons exercising control over the said company for the purpose of avoiding liability. The petitioners have not made out any case for lifting the corporate veil. I am respectfully bound by the judgment of the Supreme Court in the case of Balwant Rai Saluja (supra) which squarely applies to the facts of this case.
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49. Mr. Narichania, learned senior counsel for the respondents rightly placed reliance on the Supreme Court in the case of Associate Builders Vs. Delhi Development Authority (supra) and submits that if findings of facts rendered by the arbitral tribunal are not perverse and is based on the appreciation of the evidence, this Court cannot interfere with such findings of facts and cannot re-appreciate the evidence under Section 34 of the Arbitration Act. In my view, in this case, the arbitral tribunal has considered the evidence led by both the parties and also pleadings, documents and has rendered findings of facts which are not perverse and thus no interference is permissible with such findings of facts under Section 34 of the Arbitration Act.
50. It is a common ground that the claims made by the respondents herein (original claimants) were not denied by the petitioners. Learned senior counsel for the petitioners could not dispute this position and accordingly did not make any submission on merits of the claim awarded by the arbitral tribunal. In my view, the petition is devoid of merits.
51. I, therefore, pass the following order :-
a) Arbitration Petition Nos.584 of 2014, 767 of 2014, 768 of 2014 and 1045 of 2014 are dismissed.
b) There shall be no order as to costs.
R.D. DHANUKA, J.
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