Gujarat High Court
Imc Limited vs Board Of Trustees Of Deendayal Port ... on 28 September, 2018
Author: R.Subhash Reddy
Bench: R.Subhash Reddy, Vipul M. Pancholi
C/LPA/1059/2018 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 1059 of 2018
In
SPECIAL CIVIL APPLICATION NO. 5694 of 2018
With
CIVIL APPLICATION NO. 1 of 2018
And
CIVIL APPLICATION NO. 2 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MR. R.SUBHASH REDDY sd/-
and
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI sd/-
==========================================================
1 Whether Reporters of Local Papers may be allowed to Yes see the judgment ?
2 To be referred to the Reporter or not ? Yes 3 Whether their Lordships wish to see the fair copy of the No judgment ?
4 Whether this case involves a substantial question of law Yes as to the interpretation of the Constitution of India or any order made thereunder ?
========================================================== IMC LIMITED Versus BOARD OF TRUSTEES OF DEENDAYAL PORT TRUST ========================================================== Appearance:
MR SN SOPARKAR, SENIOR ADVOCATE WITH MR DHAVAL SHAH(2354), MS SONALI MATHUR, MR.RISHIR DAULAT, MR.ASADULLA THANGAL AND MR. MOHANISH PATKOR, ADVOCATES for the APPELLANT MR MIHIR THAKORE, SENIOR ADVOCATE, MR PRAKASH JANI, SENIOR ADVOCATE WITH MR DHAVAL D VYAS(3225) for RESPONDENT No. 1 MS GARGI R VYAS(7983) for RESPONDENT No. 2 ========================================================== CORAM: HONOURABLE THE CHIEF JUSTICE MR. R.SUBHASH REDDY and HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI Page 1 of 66 C/LPA/1059/2018 CAV JUDGMENT Date : 28/09/2018 C.A.V. JUDGMENT (PER : HONOURABLE THE CHIEF JUSTICE MR. R.SUBHASH REDDY)
1. This Letters Patent Appeal is filed under Clause 15 of the Letters Patent by the original petitioner in Special Civil Application No.5694 of 2018 aggrieved by the judgment of the learned Single Judge dated 24.07.2018. The said petition was filed with the prayers which read as under:
"a) That this Hon'ble Court be pleased to issue a Writ of Certiorari/ a Writ in the nature of Certiorari and/or any other appropriate writ, order, or direction calling for the records and proceedings relating to Impugned Order dated March 14, 2018 (with reasons as recorded on March 26, 2018) and be pleased to quash and set aside the same;
b) Pending the hearing and final disposal of this Petition, this Hon'ble Court be pleased to stay the proceedings before the Hon'ble Arbitral Tribunal qua the Petitioner;
c) Pending the hearing and final disposal of this Petition, this Hon'ble Court be pleased to stay the effect, implementation and operation of the Impugned Order dated March 14, 2018 (with reasons as recorded on March 26, 2018);Page 2 of 66 C/LPA/1059/2018 CAV JUDGMENT
d) For ad-interim reliefs in terms of prayer clauses (b) and (c) above....."
2. The factual matrix of the case which relates to filing of this appeal, in brief, is as under:
2.1 The 1st respondent Kandla Port Trust (renamed as Deendayal Port Trust - referred to as "the DPT" hereinafter) is a Major Port constituted under Section 3A of the Major Port Trusts Act, 1963. Vide Resolution 08.12.2005, 1st respondent -
Trust has decided to develop Berth Nos.13 to 16 by private participation on Build, Operate and Transfer ("BOT" basis). Acting on the Resolution, notice inviting tenders was published inviting bids from the prospective parties for the respective berths in two-stage process for selection. Request for Qualification provided the eligibility criteria for enabling a prospective bidder to participate in the process for the said project, while awarding of concession was to be evaluated on the financial bids of the prospective bidders. The prospective bidders were expected to evaluate the feasibility of facilities and the project before placing the bid.
2.2 Pursuant to notice inviting tenders, the appellant - M/s.IMC Limited submitted its bid for licence of Berth No.15. Page 3 of 66 C/LPA/1059/2018 CAV JUDGMENT The bid of the appellant-Company was accepted and a Letter of Intent for Award of Concession was issued to M/s.IMC Limited on 07.12.2010. Vide communication dated 27.01.2011, the appellant-Company was conveyed by the 1st respondent - DPT that it was required to form a Special Purpose Vehicle ("SPV").
2.3 The appellant - IMC constituted Special Purpose Vehicle (SPV) i.e. JRE Infra Private Limited - the 2nd respondent herein (hereinafter referred to as "JRE" or "SPV") which has executed the Concession Agreement with the Concessioning Authority. The Concession Agreement has an arbitration clause, as a part of the dispute resolution mechanism. Disputes having arisen, the 1st respondent alleging breach of agreement, invoked arbitration clause and initiated arbitration proceedings. Learned Arbitral Tribunal, comprising of Justice (Retd.) R.C.Lahoti, Former Chief Justice of India (Presiding Arbitrator), Justice (Retd.) J.M.Panchal and Justice (Retd.) A.R.Dave (Presiding Arbitrators), is constituted. 2.4 Broadly, the claims made by the first respondent - DPT / claimant can be categorised for non-payment of licence fees, non-payment of liquidated damages, non-payment of remuneration of independent engineer, non-payment of Page 4 of 66 C/LPA/1059/2018 CAV JUDGMENT royalty as agreed, non-payment/ non-reimbursement of taxes and duties, losses and damages caused to the 1st respondent and non-payment of cost towards assessing the replacement cost. The 2nd respondent- JRE filed Statement of Defence in the arbitration proceedings and also preferred Counter Claim. On completion of pleadings, before recording evidence, the 1 st respondent - DPT moved an application for impleadment of appellant - IMC as a party to the arbitration proceedings. The 2nd respondent, opposed the prayer for impleadment on many grounds. The learned Arbitral Tribunal, by considering the respective pleas of the 1st respondent and 2nd respondent and by considering the clauses in the agreement, by prima-facie accepting the case of the 1st respondent, allowed the application for impleadment, and, at the first instance, the learned Arbitral Tribunal on 14.03.2018, has passed the following order:
"1. The claimant's Application dated 7.3.2018 for impleading IMC Limited as party to the proceeding has been heard at length. After hearing the learned Senior Counsel for the parties, the Tribunal has formed an opinion that the Application deserves to be allowed. Accordingly, the application allowed. Reasons would follow.
2. As a consequence of the impleadment having Page 5 of 66 C/LPA/1059/2018 CAV JUDGMENT been allowed as above, the claimant seeks leave of the Tribunal for moving an Application to amend the statement of claim. Let the Application be filed within one week from today. The present respondent may file reply/ objections within a week thereafter.
3. The Tribunal would meet on 12.04.2018, at 11:30 AM for hearing and deciding the applicatino for amendment."
Thereafter, reasons are placed on record by order dated 26.03.2018. Paragraphs 22 to 25 of the order read as under:
"(22) For the present, while directing impleadment of IMC as party to the proceedings, we are proceeding on the prima facie opinion formed by the tribunal on the available facts and circumstances of the case as discernible from the averments made by the parties and the documents filed. We have found inter alia that IMC had incurred certain obligations while participating in the bidding process and it is the IMC which had brought into existence the present Respondent as a SPV for the purpose of entering into the CA while retaining with itself 100% shareholding and consequently the control of the present Respondent. If on trial it is found that IMC cannot be held bound by the agreement entered into between the Claimant and the present Respondent or is otherwise entitled to Page 6 of 66 C/LPA/1059/2018 CAV JUDGMENT be exonerated, the IMC would certainly be held not liable in the present proceedings. Needless to say, that in spite of the IMC having been directed to be impleaded it shall have full liberty of raising all its pleas and defending itself.
(23) We are satisfied that the application for impleadment deserves to be allowed. The Claimant/ Applicant has made out a strong prima facie case for permitting the impleadment. If on recording of evidence the Tribunal finds that the conditions requisite for holding the present Respondent an alter ego of the IMC have not been shown to exist, or, a case for piercing the corporate veil is not made out, the Tribunal may exonerate IMC from the liability if any incurred by the present Respondent. (24) On 14-03-2018, after hearing the Learned Senior Advocates for the parties, we had passed the Order - "the application is allowed. Reasons would follow."
(25) The reasons are hereby placed on record." 2.5 Within the time fixed by the learned Arbitral Tribunal, an application was filed for amendment in the Statement of Claim, same was also allowed by order dated 12.04.2018 by the Tribunal.
2.6 The appellant-Company, which has responded to Page 7 of 66 C/LPA/1059/2018 CAV JUDGMENT Request for Qualification ("RFQ") and Request for Proposal ("RFP"), has filed the Special Civil Application under Articles 226 and 227 of the Constitution of India with the prayer, inter alia, that an appropriate Writ, order or direction may be issued for quashing and setting aside the order dated 14.03.2018 (with the reasons as recorded on 26.03.2018) passed by the learned Arbitral Tribunal on various grounds. 2.7 In the Special Civil Application, mainly it was the case of the appellant herein that the impugned order was passed by the learned Arbitral Tribunal without issuing any prior notice and opportunity and as such, same was passed in violation of the principles of natural justice. It was also the case of the appellant that there was no arbitration agreement between the appellant - Company and the 1st respondent - DPT and no notice was issued under Section 21 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Arbitration Act" for short). Further, it was also the case of the appellant that the plea of the 1st respondent - DPT that the appellant is an alter ego of respondent No.2 was considered and accepted and order of impleadment was ordered without any basis. It was also the case of the appellant that no case was made out for lifting the corporate veil and all the documents relating to bid, namely RFQ and RFP constituted Page 8 of 66 C/LPA/1059/2018 CAV JUDGMENT prelude to a contract and the learned Arbitral Tribunal has committed an error by looking into such documents and ordering impleadment of the appellant as party-respondent in the arbitral proceedings. As such, it was the case of the appellant that the order impugned in the petition is erroneous and suffers from grave infirmities, resulting in irreparable harm and prejudice caused to the appellant, as such, there is no alternative remedy except to question the same by way of a writ petition.
2.8 The aforesaid petition was taken up for hearing at the stage of admission by the learned Single Judge and the 1 st respondent - DPT has contested the matter. In the defence to contest the relief sought for in the petition, it was the case of the 1st respondent that the appellant - Company was qualified applicant for participation in the bid, as per the terms of the RFQ, as such, it was issued RFP and a Letter of Award for developing 15th Multi Purpose Cargo Berth was issued by the 1st respondent to the appellant - IMC which was accepted by the IMC. It was also the case of the 1st respondent that the 2nd respondent - JRE is a Special Purpose Vehicle which is incorporated as per the terms and conditions of the bid and if all the terms and conditions of the Concession Agreement were considered, coupled with the terms and conditions of RFQ Page 9 of 66 C/LPA/1059/2018 CAV JUDGMENT and RFP, it is clear that the appellant is an alter ego of the 2nd respondent Company. The petition was also defended on the ground that a Special Civil Application itself is not maintainable under Article 226 of the Constitution of India as the learned Arbitral Tribunal is constituted pursuant to the terms of the Agreement, as such, in absence of any public functions which are being discharged by the learned Arbitral Tribunal, no petition can be maintained under Articles 226 or 227 of the Constitution of India against an order passed by the learned Arbitral Tribunal.
2.9 Considering the rival submissions made on behalf of the parties and material placed on record, the learned Single Judge has held that the appellant is a primary bidder who has taken up the project and who has been awarded the contract and thereafter the 2nd respondent - JRE is created as a Special Purpose Vehicle and the appellant is, in fact, an alter ego of the 2nd respondent. It is further held that corporate veil could be lifted or not has to be considered by the Tribunal keeping in mind the underlying object and purpose of the Arbitration Act. The learned Single Judge has also held that even though Concession Agreement may not have been signed by the appellant, it would not make any change so far as the impleadment of the petitioner is concerned and it cannot pose Page 10 of 66 C/LPA/1059/2018 CAV JUDGMENT itself as a third party merely because it is not a signatory to the agreement. Placing reliance on the judgments of Hon'ble Supreme court in the case of Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. And Others reported in (2013)1 SCC 641 and also in the case of A. Ayyasamy v. A. Paramasivam And Others reported in (2016)10 SCC 386, the learned Single Judge has held that the word `party' in the agreement is to be considered in broader concept or by understanding the lifting of corporate veil. Further, the learned Single Judge, while holding that the Arbitration Act has been enacted to provide a mechanism of framework to settle the disputes and any narrow or restricted interpretation which frustrates the object cannot be accepted, has rejected the plea of the appellant. At the same time, the learned Single Judge has held that petition under Articles 226 and 227 of the Constitution of India is maintainable against the orders passed by the learned Arbitral Tribunal. By not accepting the plea of the appellant that the order passed by the learned Arbitral Tribunal is in violation of principles of natural justice and without issuing notice as contemplated under Section 21 of the Arbitration Act, the learned Single Judge has dismissed the petition. However, the learned Single Judge has observed that the observations made are only for Page 11 of 66 C/LPA/1059/2018 CAV JUDGMENT the purpose of deciding the petition prima-facie and all the contentions are left open to be considered by the learned Arbitral Tribunal.
3. We have heard Shri S.N.Soparkar, learned Senior Counsel with Shri Dhaval Shah, learned advocate for the appellant, Shri Mihir Thakore, learned Senior Counsel with Shri Dhaval D. Vyas, learned advocate for the 1st respondent and Ms.Gargy Vyas, learned advocate for the 2nd respondent.
4. Shri S.N.Soparkar, learned Senior Counsel appearing for the appellant has made detailed submissions before us. Mainly, it is submitted that the appellant is not at all a party to the Concession Agreement which governs the terms of the contract. It is contended that once the Concession Agreement is entered into, it is not open to look into any of the documents relating to RFQ, RFP or any other document relating to invitation of the bids. Only the terms and conditions of the Concession Agreement are to be looked into. It is categorically submitted by learned Senior Counsel that such Concession Agreement constitutes for the entire understanding between the parties to the agreement regarding the project and supersedes all previous written and/or oral representations and arrangements regarding the Page 12 of 66 C/LPA/1059/2018 CAV JUDGMENT project. It is further submitted that in case of any contradiction between the terms of agreement and any such other bid document as referred above, the terms of the agreement would prevail. By referring to various clauses in the agreement, it is the case of learned Senior Counsel that as much as the appellant is not a signatory to the Concession Agreement, it cannot be dragged to arbitration proceedings. It is submitted that unless there is a notice, as required under Section 21 of the Arbitration Act, there cannot be any arbitration against the appellant. In any case, it is submitted that the learned Arbitral Tribunal ought not to have allowed the application for impleadment without notice to the appellant and the order which is impugned in the petition is passed in violation of the principles of natural justice. In absence of any agreement containing arbitration between the appellant and the 1st respondent - DPT, the learned Arbitral Tribunal has committed an error in allowing the application for impleadment. It is submitted that even in cases where there is a dispute for appointment of Arbitrator even after entering into agreement, an application is required to be filed under Section 11 of the Arbitration Act. In the instant case, without resorting to provisions of Sections 11 and 21 of the Arbitration Act, straightaway, the appellant is impleaded in the arbitration Page 13 of 66 C/LPA/1059/2018 CAV JUDGMENT proceedings. It is further submitted that though the appellant Company has responded to the RFQ and RFP by submitting the bid, once a separate Special Purpose Vehicle is incorporated as per the terms of the RFP and an agreement is entered into, it is not open for the learned Arbitral Tribunal to look at the issue by lifting the corporate veil. It is submitted that in any case, no case is made out for lifting the corporate veil. It is submitted that prelude to a contract cannot be confused with the contract itself. It is submitted that in view of the specific conditions in the Concession Agreement barring to look at the documents prior to the Concession Agreement, the 1st respondent cannot rely on such documents to seek impleadment of the appellant as a party - respondent. It is submitted that in spite of such grounds raised before the learned Single Judge, the learned Single Judge has not considered such contentions in proper perspective and has committed error in rejecting the petition filed by the appellant. In support of his arguments, learned Senior Counsel has relied on several judgments. However, we shall refer to such authorities at the appropriate stage.
5. Per contra, Shri Mihir Thakore, learned Senior Counsel appearing for the 1st respondent - DPT, by taking us to various clauses in the documents of RFQ, RFP and the Page 14 of 66 C/LPA/1059/2018 CAV JUDGMENT Concession Agreement, has submitted that in response to RFQ, only the appellant - Company has responded and further, looking at the qualifying criteria as notified in the RFQ and the information furnished by the appellant herein, the 1st respondent has found that the appellant is qualified for issuance of RFP and for inviting bids. Thereafter, on paying the requisite fee by the appellant, the RFP document was furnished and the appellant alone has offered its bid in response to the tender notice. It is submitted that the 2nd respondent Company was not in existence at the stage of RFQ or RFP and was only incorporated as per the terms of the RFP to implement the project. It is submitted that the appellant is nothing but an alter ego of respondent No.2 Company and if various clauses in the agreement are considered coupled with reference to the terms and conditions of the RFQ and RFP, it is clear that appellant is the main Company which is implementing the project through the 2nd respondent. Further, it is submitted that the appellant holds 100% shares of the 2nd respondent Company and fully controls and manages the 2nd respondent Company as per the terms of the contract as mentioned in the Concession Agreement. In that view of the matter, it is not open for the appellant - Company to plead that it is a third party and has not agreed for any arbitration. It Page 15 of 66 C/LPA/1059/2018 CAV JUDGMENT is submitted that if the terms of the Concession Agreement are considered, it is clear that the appellant is the real entity behind the 2nd respondent, as such, it is a necessary and proper party to be proceeded with against the claim made before the learned Arbitral Tribunal. It is submitted that in any event, the learned Arbitral Tribunal itself, while allowing the application for impledment has observed that such impleadment is ordered, on prima-facie opinion formed by it and it is open for the appellant - IMC to raise all its pleas available under law before the Tribunal.
6. Having heard learned Senior Counsels on both sides, we have perused the material placed on record.
7. Though the question of maintainability of the petition itself is raised before the learned Single Judge by submitting that the petition is not maintainable under Articles 226 and 227 of the Constitution of India against the orders of the learned Arbitral Tribunal, such an objection is not accepted and the learned Single Judge has proceeded to decide the matter on merits and has not interfered with the order of the learned Arbitral Tribunal. Even before us, the issue regarding maintainability of the petition has been seriously argued by learned counsels on both sides, but after considering the Page 16 of 66 C/LPA/1059/2018 CAV JUDGMENT matter at length, as we have heard them on merits and we are not persuaded to accept the case of the appellant on merits, as such, we are of the view that there is no need to consider the issue of maintainability and record findings on, objection of maintainbility, raised, on behalf of the 1st respondent.
8. At the outset, Shri S.N.Soparkar, learned Senior Counsel appearing for the appellant has submitted that the order passed by the learned Arbitral Tribunal is in violation of principles of natural justice, on this ground alone, it is fit to be set aside. It is submitted that though the appellant is not a party to the Concession Agreement and no claim is made at the first instance before the learned Arbitral Tribunal against the appellant herein, the appellant is sought to be impleaded on the ground that it is an alter ego of the 2nd respondent. It is contended that before deciding such issue and before ordering impleadment of the appellant as party-respondent, the learned Arbitral Tribunal ought to have issued notice.
9. It is brought to our notice by Shri S.N.Soparkar, learned Senior Counsel appearing for the appellant that when the appellant relied on judgment of the learned Single Judge of this Court dated 13.08.2008 passed in Special Civil Application Page 17 of 66 C/LPA/1059/2018 CAV JUDGMENT No.3370/2008 at the stage of amendment of the Claim Petition, the said plea was rejected on the ground that the said judgment was not brought to the notice of the learned Arbitral Tribunal before deciding the application for impleadment.
10. On the other hand, Shri Mihir Thakore, learned Senior Counsel appearing for the 1st respondent has contended that by allowing the application for impleadment, no prejudice is caused to the appellant so as to seek quashing of such order only on the ground that no notice was issued to it before passing the order. It is further submitted that the appellant - Company holds 100% shares in the 2nd respondent
- Special Purpose Vehicle and said Company has contested the application before the learned Arbitral Tribunal. It is further brought to our notice that in absence of showing that by passing order of impleadment, the appellant has suffered prejudice, it is not open to question such order only on the ground that, the learned Arbitral Tribunal has passed the order without issuing notice.
11. The Arbitral Tribunal itself, while passing the order of impleadment has observed that the opinion expressed is prima-facie. It is to be noted that arbitration proceedings are covered by Section 29A of the Arbitration Act and award is to Page 18 of 66 C/LPA/1059/2018 CAV JUDGMENT be passed within the time-frame fixed. In the judgment dated 13.08.2008, passed in Special Civil Application No.3370/2008 upon which reliance is placed by learned Senior Counsel for the appellant, the learned Single Judge of this Court has held that before ordering impleadment, notice is required to be issued to the proposed defendant. There cannot be any definite proposition that at all times and in all cases, notice is required to be issued before ordering impleadment. If ordering impleadment itself will not result in any prejudice, in such event, it cannot be said that merely because an order for impleadment is passed without notice, that by itself is a ground to set aside such order. The real test which is required to be seen is whether any prejudice is caused to the party which has complained that it was ordered to be impleaded without notice?
12. In the judgment in M.C.Mehta v. Union of India And Others, reported in (1999)6 SCC 237, the Honourable Supreme Court has held that, it is not always necessary for the Court to strike down an order merely because an order is passed against a party which has complained that it is passed in violation of principles of natural justice. Similar view is also taken by the Honourable Supreme Court in the case of Aligarh Muslim University And Others v. Mansoor Ali Page 19 of 66 C/LPA/1059/2018 CAV JUDGMENT Khan reported in (2000)7 SCC 529. Further, in the judgment in the case of Escorts Farms Ltd. v. Commissioner, Kumaon Division, Nainital, U.P. And Others reported in (2000)4 SCC 284, the Honourable Supreme Court has held that rules of natural justice are to be followed for doing substantial justice and not for completing a mere ritual of hearing.
13. Reverting to the facts of the case on hand, it is to be noticed that the order passed by the learned Arbitral Tribunal clearly records that opinion expressed is prima-facie and subject to objections and remedies available under the Arbitration Act to the impleaded respondent, i.e. the appellant herein. If the appellant claims that it is not a party to the agreement, as such it cannot be impleaded as party respondent in the arbitration proceedings, it is always open for it to move an application under Section 16 of the Arbitration Act to rule on its jurisdiction. In view of such remedy and further remedies available under the law, by ordering impleadment, we are of the opinion that no prejudice is caused to the appellant. Whether notice is required to be issued to a party before ordering impleadment, or not, is a matter which depends on facts and circumstances of each case. If a strong case is made out for impleadment, it is always open for the Page 20 of 66 C/LPA/1059/2018 CAV JUDGMENT Courts and Tribunals to order impleadment and to give an opportunity before deciding the main claim. In that view of the matter and having gone through the case law on the subject as referred above, we are of the view that the order of the learned Arbitral Tribunal cannot be said to be not in conformity with law merely on the ground that appellant was not issued notice before passing the order of its impleadment. Even the learned Single Judge has also rightly rejected the plea of the appellant for quashing the order of the learned Arbitral Tribunal on the aforesaid ground.
14. Further contention of Shri S.N.Soparkar, learned Senior Counsel for the appellant is that the appellant is not a signatory to the Concession Agreement, in spite of the same, without issuing any notice to the appellant as contemplated under Section 21 of the Arbitration Act and without resorting to the remedies available under Section 11 of the Act, straightaway, the learned Arbitral Tribunal has impleaded the appellant as a party-respondent in the arbitration proceedings. It is submitted that various clauses contained in the Concession Agreement if looked into, it is clear that the said agreement is a conclusive agreement between the parties who are signatories to it and the bid documents prior to entering of Concession Agreement cannot be looked into. It is further Page 21 of 66 C/LPA/1059/2018 CAV JUDGMENT submitted that in spite of specific and express provisions contained in the Concession Agreement in this regard, though the appellant has not signed such agreement, the learned Arbitral Tribunal has impleaded the appellant as party- respondent. To substantiate his case that a non-party to the agreement cannot be impleaded in the arbitral proceedings, learned Senior Counsel has placed reliance on judgments of the Hon'ble Supreme Court in the case of Deutsche Post Bank Home Finance Limited v. Taduri Sridhar And Another reported in (2011)11 SCC 375, Indowind Energy Limited v. Wescare (India) Limited And Another reported in (2010)5 SCC 306 and also in the case of S.N.Prasad, Hitek Industries (Bihar) Limited v. Monnet Finance Limited And Others reported in (2011)1 SCC 320. It is further submitted that in a latest judgment in the case of ESSAR Oil Limited v. Hindustan Shipyard Limited And Others reported in (2015)10 SCC 642 also, the Hon'ble Supreme Court has held that a non-party to the agreement cannot be impleaded in arbitral proceedings. It is submitted that therefore, as the judgments in the case of Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. And Others reported in (2013)1 SCC 641 and in the case of Purple Medical Solutions Private Page 22 of 66 C/LPA/1059/2018 CAV JUDGMENT Limited v. MIV Therapeutics Inc. And Another reported in (2015)15 SCC 622 have no application to the facts of the case, the learned Arbitral Tribunal and the learned Single Judge have wrongly relied on the aforesaid judgments to accept the plea of the 1st respondent - DPT.
15. On the other hand, Shri Mihir Thakore, learned Senior Counsel appearing for the 1st respondent has taken us to various clauses in the Concession Agreement itself and it is submitted that the appellant, as an applicant, has admitted the terms and conditions of the Concession Agreement, specifically by addressing a letter dated 28.04.2011. It is submitted that in view of various clauses in the agreement itself, coupled with the letter dated 28.04.2011, it cannot be said that the appellant is a third party to the agreement, as such, cannot be impleaded in the arbitral proceedings. Learned Senior Counsel further submitted that the judgment of the Hon'ble Supreme Court in the case of Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. And Others reported in (2013)1 SCC 641, is an authoritative pronouncement made by the Hon'ble Supreme Court wherein it is categorically held that a non-signatory to the agreement also can be proceeded with in arbitration proceedings. It is submitted that the same principle is also Page 23 of 66 C/LPA/1059/2018 CAV JUDGMENT reiterated in the judgment in Purple Medical Solutions Private Limited v. MIV Therapeutics Inc. And Another reported in (2015)15 SCC 622 and also in the case of Cheran Properties Limited v. Kasturi And Sons Limited And Others reported in 2018 SCC OnLine SC 431. Further, it is submitted that, as much as the appellant, who was an applicant as defined under the terms and conditions of the RFP and also in the Concession Agreement, it is not open for it to plead that its impleadment is in violation of the provisions under Sections 21 and 11 of the Arbitration Act.
16. To consider the said submissions of the learned counsels, relevant conditions of the RFQ and RFP and certain clauses of the Concession Agreement are required to be looked into. For ready reference, we refer to such provisions as referred in the documents which are as follows:
16.1 The Request for Qualification (RFP) document is placed at Page 630 of the paper-book filed by the appellant. In the definition clauses, `applicant' is defined as "applicant means a Company that intends to submit or has submitted the Application in line with the terms and conditions set forth in the RFQ". "Qualified applicant" is defined as "an Applicant/ Consortium who has been shortlisted for the issue of RFP Page 24 of 66 C/LPA/1059/2018 CAV JUDGMENT based on selection criteria and other terms and conditions as set forth in the RFQ". The criteria for evaluation is mentioned in Pages 656 to 658 of the paper-book of the appellant.
16.2 The relevant clauses contained in the Request For Proposal are as under:
"1.1.2. The Selected Bidder shall incorporate a special purpose company (the "Concessionaire") prior to execution of the Concession Agreement. The Concessionaire shall be responsible for designing, engineering, installation, financing, procurement, construction, commissioning operation, maintenance and management of the Project under and in accordance with the provisions of the concession agreement (the "Concession Agreement") to be entered into between the concessionaire and the KPT in the form provided by the KPT as part of the Bidding Documents pursuant thereto.
... ... ...
1.1.3 The scope of work will broadly include
designing, engineering, installation, financing,
procurement, construction, commissioning
operation, maintenance and management of the Project and thereof marketing and providing of the facilities and services.Page 25 of 66 C/LPA/1059/2018 CAV JUDGMENT
... ... ...
1.1.5 The Concession Agreement sets forth
the detailed terms and conditions for grant of the concession to the Concessionaire, including the scope of the Concessionaire's services and obligations (the "Concession").
... ... ...
6.1 The Bidding Process shall be governed
by, and construed in accordance with, the laws of India and the Courts at Gandhidham shall have exclusive jurisdiction over all disputes arising under, pursuant to and/or in connection with the Bidding Process."
16.3 The relevant clauses in the Bid Document dated 25.09.2010 submitted by the appellant to the 1st respondent are Clauses 19, 21 and 22 and the same read as under:
"19. In the event of our being declared as the Selected Bidder, we through the concessionaire agree to enter into a Concession Agreement in accordance with the draft that has been provided to us prior to the Bid Due Date. We agree not to seek any changes in the aforesaid draft and agree to abide by the same.
... ... ...
21. The Royalty has been quoted by us after Page 26 of 66 C/LPA/1059/2018 CAV JUDGMENT taking into consideration all the terms and conditions stated in the RFP, draft Concession Agreement, our own estimates of costs and vessel traffic and after a careful assessment of the site and all the conditions that may affect the Bid.
22. We offer a Bid Security of Rs.1.82 Crores (Rupees One Crore Eighty Two Lakhs only) to the KPT in accordance with the RFP Document."
16.4 The relevant portions of the Concession Agreement dated 18.02.2011 are as under:
"(G) The Applicant has incorporated the Concessionaire as a special purpose company in India, under the Companies Act, 1956 to implement the Project;
... ... ...
"`Applicant' means M/s.IMC Ltd. having its registered office at 232/A, Acharya Jagdish Chandra Bose Road, Kolkata - 700020, India"
... ... ...
"Management Control" means the possession,
directly or indirectly of the power to direct or cause the direction of the management and policies of the Concessionaire, whether through the ownership of voting securities, by contract or otherwise or the power to elect or appoint more than 50% (fifty Page 27 of 66 C/LPA/1059/2018 CAV JUDGMENT percent) of the directors, managers, partners or other individuals exercising similar authority with respect to Concessionaire."
... ... ...
"`Party' means either the Concessioning Authority or the Concessionaire as the context may require or admit and "Parties" means both Concessioning Authority and Concessionaire."
... ... ...
"1.3 Interpretations
This Agreement constitutes the entire
understanding between the Parties regarding the Project and supersedes all previous written and/or oral representations and/or arrangements regarding the Project. If there is any aspect of the Project not covered by any of the provisions of this Agreement, then and only in that event, reference may be made by the Parties to the bid documents, inter alia including the RFP and RFQ documents, issued by the Concessioning Authority and also including addendums, clarifications given in writing in the pre-bid meetings to the submissions of the Concessionaire and the bid submitted by the Concessionaire but not otherwise. In case of any contradictions in the terms of this Agreement and any such other bid documents as referred to above, the terms of this Agreement shall prevail." Page 28 of 66 C/LPA/1059/2018 CAV JUDGMENT
... ... ...
"3.1 Conditions Precedent:
The award of the Concession shall be subject to the satisfaction or waiver of the following conditions precedent (the "Conditions Precedent"):
a) The following Conditions Precedent shall be satisfied by the Concessionaire:
... ... ...
viii. Procuring and furnishing the
following confirmations, in original, from the Applicant:
(a) it shall at all times comply with the provisions of Article 11.2 in respect of their shareholding in the Concessionaire;
(b) it has the financial standing and resources to fund/ raise finances for undertaking and implementing the Project in accordance with this Agreement;
(c) the Applicant is duly organized and
validly existing under the laws of the
jurisdiction of its incorporation, and has
requested the Concessioning Authority to
enter into this Agreement with the
Concessionaire and has agreed to and
unconditionally accepted the terms and
Page 29 of 66
C/LPA/1059/2018 CAV JUDGMENT
conditions set forth in this Agreement;"
... ... ...
Shareholding:
"11.1 Ownership Structure:
The Applicant has caused the Concessionaire to be incorporated as a special purpose company to implement, operate and maintain the Project/ Project Facilities and Services in accordance with this Agreement. The shareholding pattern of Concessionaire is:
S. No. Share Holder's Name Number of Shares Percentage
1. IMC Limited 10,000.00 100% Total Share Holding of the Concessionaire 100.00% * Share holding pattern as on 27th December, 2010 11.2 Shareholding The Concessionaire shall ensure that the Applicant maintain Management Control at least until expiry of the Exclusivity Period and also maintain their equity holding in the Concessionaire such that the Applicant legally and beneficially hold not less than 51% (fifty one percent) of its paid up equity capital until 3 (three) years after Date of Commercial Operations and not less than 26% (twenty six percent) of its paid up equity capital during the balance Concession Period."Page 30 of 66 C/LPA/1059/2018 CAV JUDGMENT
Dispute Resolution "19.1 Amicable Settlement If any dispute or difference or claims of any kind arises between the Concessioning Authority and the Concessionaire in connection with construction, interpretation or application of any terms and conditions or any matter or thing in any way connected with or in connection with or arising out of this Agreement, or the rights, duties or liabilities of any Party under this Agreement, whether before or after the termination of this Agreement, then the Parties shall meet together promptly, at the request of any Party, in an effort to resolve such dispute, difference or claim by discussion between them."
... ... ...
"19.3Arbitration
a) Arbitrators
Failing amicable settlement and/or settlement with the assistance of Expert appointed by the Parties by mutual consent, the dispute or differences or claims as the case may be, shall be finally settled by binding arbitration under the Arbitration and Conciliation Act, 1996. Unless the Parties mutually agree otherwise, within 30 (thirty) Days of invocation of the arbitration as mentioned below, the rules of arbitration prescribed by the Page 31 of 66 C/LPA/1059/2018 CAV JUDGMENT International Centre for Alternative Dispute Resolution, New Delhi shall apply to the arbitration. The arbitration shall be by a panel of three Arbitrators, one to be appointed by each Party and the third, who shall act as presiding arbitrator, to be appointed by the two arbitrators appointed by the Parties. The arbitration shall be invoked by one party issuing to the other a notice in writing invoking the arbitration and appointing an Arbitrator. Upon receipt of the notice, the other Party shall appoint the second Arbitrator. The two Arbitrators so appointed shall appoint the third Arbitrator who shall act as the "Presiding Arbitrator. If the other Party fails to appoint a second Arbitrator within 30 (thirty) Days from the receipt of the request to do so, then the Arbitrator so appointed by the first party shall adjudicate the disputes as "Sole Arbitrator".
... ... ...
"21.11 Entire Agreement:
This Agreement and the Appendices together
constitute a complete and exclusive statement of the terms of the agreement between the Parties. All prior written or oral understanding, offers or other communications of every kind pertaining to this Agreement unless specifically retained in this Agreement and the Appendices, by reference or otherwise, are abrogated and withdrawn."
(emphasis supplied) Page 32 of 66 C/LPA/1059/2018 CAV JUDGMENT
17. By reading the relevant clauses in the agreements referred above, it is to be noticed that the appellant, as an applicant, responded to the RFQ and as it was found to be qualified, RFP was furnished to it and in response to the same, bid documents were submitted by the appellant. Various clauses in the RFP make it clear that the appellant, as an applicant, has incorporated the Concessionaire, i.e. 2nd respondent as a Special Purpose Vehicle to implement the project and `applicant' is defined even in the Concession Agreement, namely, "M/s.IMC Limited", i.e. the appellant herein. It is true that under Clause 1.3 of the Concession Agreement, it is stated that agreement constitutes the entire understanding between the parties regarding the project and supersedes all previous written or oral representations and arrangements regarding the project, but at the same time, Clause 3.1 clearly stipulates that it is the obligation of the applicant/ appellant herein to comply the provisions under Clause 11.2 in respect of shareholding of the concessionaire and to fund/ raise finances for implementation of the project and the applicant has unconditionally accepted the terms and conditions set forth in the Concession Agreement. As per the shareholding pattern under Clause 11.2, the applicant has to Page 33 of 66 C/LPA/1059/2018 CAV JUDGMENT maintain management control of the 2nd respondent concessionaire until the expiry of the exclusivity period and also to maintain the equity holding in concessionaire by holding not less then 51% of the paid-up equity capital until three years after the date of commercial operations and not less than 26% of its paid-up equity capital during the balance concession period. Further, under Clause 11.1 of the Concession Agreement, which deals with ownership structure of the 2nd respondent concessionaire, the appellant- IMC is the holder of 100% shares of the 2nd respondent Company, as such, it is a holding Company of the 2nd respondent Special Purpose Vehicle. Thus, it is clear from the very terms of the Concession Agreement itself, obligations are created on the appellant - applicant by the 2nd respondent Concessionaire of which management and control is fully that of the appellant. In addition to the same, the appellant - Company has also addressed a letter dated 28.04.2011 accepting the terms and conditions of the Concession Agreement entered into between the first respondent - DPT and the 2nd respondent - Special Purpose Vehicle. The letter dated 28.04.2011 reads as under: Page 34 of 66 C/LPA/1059/2018 CAV JUDGMENT
[On Letter Head of IMC Limited] "28th April, 2011 The Chairman, Kandla Port Trust, PB No.50, Administrative Office, Gandhidham, Kutch-370201, Fax: 02836-235782 Sub: Confirmation required under the terms of the Concession Agreement between Kandla Port Trust (Concessioning Authority) and JRE Infra Private Limited (Concessionaire) for the Development of Multi-Purpose Cargo Berth No.15 at Kandla Port ============================= Pursuant to the requirements of Article 3.1(a)(viii) of the Concession Agreement between Kandla Port Trust and JRE Infra Private Limited, IMC Limited confirms as below:
(a) IMC Limited shall at all times comply with the provisions of Article 11.2 in respect of their shareholding in the concessionaire;
(b) IMC Limited has the financial standing and resources to fund / raise finances for undertaking and implementing the Project in accordance with the Concession Agreement.
(c) IMC Limited is duly organized and validly existing under the laws of the jurisdiction of its incorporation, and has requested the concessioning Authority to enter into the concession Agreement with the Concessionaire and has agreed to and unconditionally accepted the terms and conditions set forth in the Concession Agreement.
Yours faithfully, For IMC Limited sd/-
K. Kannan GM (Finance & Accounts) & Company Secretary"
Page 35 of 66 C/LPA/1059/2018 CAV JUDGMENT
18. During the course of hearing, when the said letter is produced, same is objected to by learned Senior Counsel for the appellant stating that the said document was not placed either before the learned Arbitral Tribunal at the time of passing of the order nor before the learned Single Judge when the matter was heard, but at the same time, it is not disputed that such a document is executed by the appellant - Company. In that view of the matter, such document can be looked into which is nothing but a letter addressed by the appellant to respondent No.1 - DPT, wherein the appellant, as an applicant, has unconditionally accepted the terms and conditions set forth in the Concession Agreement. In view of the same, we are of the view that, prima-facie case is made out for impleadment of the appellant as a party-respondent. Further, it is also to be noted that all the contentions are left open by the learned Arbitral Tribunal itself while passing the orders which are impugned in the petition.
19. Coming to case law on the subject, in Deutsche Post Bank Home Finance Limited v. Taduri Sridhar And Another reported in (2011)11 SCC 375, the Hon'ble Supreme Court, in a case arising out of a petition filed under Section 11 of the Arbitration Act, interpreting the Housing Page 36 of 66 C/LPA/1059/2018 CAV JUDGMENT Development agreement based on a loan with developer as guarantor, when disputes arose inter-se between the borrower and guarantor-developer arising out of construction agreement, held that the appellant - lender who was not a party to the construction agreement, as such cannot be allowed to be joined in an application under Section 11 of the Act, and has set aside the order appointing arbitrator so far as appellant-lender therein is concerned.
20. In the case of Indowind Energy Limited v. Wescare (India) Limited And Another reported in (2010)5 SCC 306, again arising out of an application under Section 11 of the Act, it is held that arbitration agreement is not binding on a person not party to the agreement based on the subsequent conduct of the party.
21. In the case of S.N.Prasad, Hitek Industries (Bihar) Limited v. Monnet Finance Limited And Others reported in (2011)1 SCC 320, the Hon'ble Supreme Court has held that guarantor cannot be made party to a reference to arbitration in a dispute for repayment of loan.
22. It is to be noticed that all the aforesaid three judgments are earlier to judgment in the case of Chloro Page 37 of 66 C/LPA/1059/2018 CAV JUDGMENT Controls India Private Limited v. Severn Trent Water Purification Inc. And Others reported in (2013)1 SCC
641. In Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. And Others (supra), the Hon'ble Supreme Court has, by reviewing the entire case law on the subject, in principle held that, a non-signatory party could be subjected to arbitration provided the transactions are with group Companies and there was a clear intention of the parties to bind both, i.e. the signatory as well as non-signatory party. Paragraphs 72 to 76 of the said judgment read as under:
"72. This evolves the principle that a non-signatory party could be subjected to arbitration provided these transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non-signatory parties. In other words, 'intention of the parties' is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties.
73. A non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The Court will examine these Page 38 of 66 C/LPA/1059/2018 CAV JUDGMENT exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the Court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the Court answers the same in the affirmative, the reference of even non-signatory parties would fall within the exception afore-discussed.
74. In a case like the present one, where origin and end of all is with the Mother or the Principal Agreement, the fact that a party was non- signatory to one or other agreement may not be of much significance. The performance of any one of such agreements may be quite irrelevant without the performance and fulfillment of the Principal or the Mother Agreement. Besides designing the corporate management to successfully complete the joint ventures, where the parties execute different agreements but all with one primary Page 39 of 66 C/LPA/1059/2018 CAV JUDGMENT object in mind, the Court would normally hold the parties to the bargain of arbitration and not encourage its avoidance. In cases involving execution of such multiple agreements, two essential features exist; firstly, all ancillary agreements are relatable to the mother agreement and secondly, performance of one is so intrinsically inter- linked with the other agreements that they are incapable of being beneficially performed without performance of the others or severed from the rest. The intention of the parties to refer all the disputes between all the parties to the arbitral tribunal is one of the determinative factor.
75. We may notice that this doctrine does not have universal acceptance. Some jurisdictions, for example, Switzerland, have refused to recognize the doctrine, while others have been equivocal. The doctrine has found favourable consideration in the United States and French jurisdictions. The US Supreme Court in Ruhrgos AG v Marathon Oil Co. [526 US 574 (1999)] discussed this doctrine at some length and relied on more traditional principles, such as, the non- signatory being an alter ego, estoppel, agency and third party beneficiaries to find jurisdiction over the non- signatories.
76. The Court will have to examine such pleas with greater caution and by definite reference to the language of the contract and intention of the Page 40 of 66 C/LPA/1059/2018 CAV JUDGMENT parties. In the case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of non- signatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically inter- mingled or inter-dependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties to refer signatory as well as non-signatory parties to arbitration. The principle of 'composite performance' would have to be gathered from the conjoint reading of the principal and supplementary agreements on the one hand and the explicit intention of the parties and the attendant circumstances on the other."
(emphasis supplied)
23. Though learned Senior Counsel Shri S.N. Soparkar has submitted that the ratio laid down by the Hon'ble Supreme Court in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. And Others, reported in (2013)1 SCC 641 cannot be applied to the facts of the case on hand stating that such judgment is rendered in relation to interpretation of provisions of Section 45 of the Arbitration Page 41 of 66 C/LPA/1059/2018 CAV JUDGMENT Act, but from a reading of the judgment itself, it is clear that in principle, it is decided by the Hon'ble Supreme Court that where the intention of the parties is clear, even a non- signatory can be party to arbitration proceedings. As such, the argument of learned Senior Counsel for the appellant that the judgment in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. And Others (supra) cannot be applied to the facts of the case on hand, cannot be accepted.
24. Further, in the case of Purple Medical Solutions Private Limited v. MIV Therapeutics Inc. And Another reported in (2015)15 SCC 622, the Hon'ble Supreme Court has, considered in Paragraphs-12 to 14 of the judgment, permissible area for appointment of arbitrator by a Court on behalf of non-signatory to arbitration agreement. Paragraph 14 of the judgment reads as under:
"14. A perusal of the relevant clauses of the agreements providing for arbitration and the facts set out herein adequately satisfies the Court that disputes and differences between the petitioner and the respondents have arisen which require resolution by a process of arbitration as contemplated in the agreements between the parties. The petitioner had appointed its arbitrator Page 42 of 66 C/LPA/1059/2018 CAV JUDGMENT (Mr.Justice S.H.Kapadia, a former Chief Justice of India) and despite notice, the respondents have failed to make the requisite appointment. The said lapse/ failure would confer jurisdiction under Section 11(6) of the Arbitration Act to appoint an arbitrator on behalf of the respondents. The facts stated in the present applications showing the involvement of the second respondent and the decision of this Court in Chloro Controls India (P) Ltd., in my considered view, would justify appointment of an arbitrator on behalf of both the respondents and permit the process of arbitration to be conducted by lifting the corporate veil to ascertain the role of the second respondent in the transactions in question as claimed by the petitioner."
25. Both the aforesaid judgments support the case of the 1st respondent - DPT. Even in the case of Cheran Properties Limited v. Kasturi And Sons Limited And Others reported in 2018 SCC OnLine SC 431, the view expressed by the Hon'ble Supreme Court also supports the case of the 1st respondent.
26. Another judgment which is relied on by learned Senior Counsel for the appellant is in the case of ESSAR Oil Limited v. Hindustan Shipyard Limited And Others reported in (2015)10 SCC 642. The said judgment is post Page 43 of 66 C/LPA/1059/2018 CAV JUDGMENT Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. And Others reported in (2013)1 SCC 641, but in the said case, it is to be noticed, Hindustan Shipyard was the contractor of ONGC and had sub-contracted part of such contract to ESSAR Oil Limited. ESSAR Oil Limited wanted to implead ONGC in the arbitral proceedings between itself and Hindustan Shipyard Limited. In the said case, there was neither a concept of alter ego nor of a group Company applicable, as applicable in the facts of the present case. In that view of the matter, the judgment in ESSAR Oil Limited v. Hindustan Shipyard Limited And Others reported in (2015)10 SCC 642, though post Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. And Others reported in (2013)1 SCC 641, would not render any assistance in support of the case of the appellant herein.
27. Learned Senior Counsel Shri S.N.Soparkar also brought to our notice, latest judgment dated 11.09.2018 rendered by the Hon'ble Supreme Court in the case of M/s.PSA Mumbai Investments PTE. Limited v. The Board of Trustees of the Jawaharlal Nehru Port Trust And Anr. in Civil Appeal No.9352 of 2018. The said judgment is brought to our notice along with Civil Application No.2 of 2018, Page 44 of 66 C/LPA/1059/2018 CAV JUDGMENT stating that the ratio laid down in the said judgment supports the case of the appellant and it is further submitted that the terms and conditions in the RFQ, RFP and Concession Agreement are almost similar. Having carefully perused the aforesaid judgment, we are of the view that the said judgment also would not render any assistance in support of the case of the appellant. It is to be noticed that the said judgment is rendered by the Hon'ble Supreme Court in Civil Appeal arising out of a judgment of the High Court rendered in exercise of power under Section 37 of the Act and further, there is no Concession Agreement entered into in the aforesaid case. The distinguishable feature of the case on hand to the aforesaid case is that in the Concession Agreement entered into, `applicant' is defined as "M/s.IMC Limited", who is none other than the appellant - Company herein and there are specific clauses under Clause 3.1 (a) (viii), a, b, and c, under which the appellant, as the applicant, has agreed and accepted unconditionally, the terms and conditions set forth in the said agreement. Considering the said clauses in the Concession Agreement along with letter dated 28.04.2011, which is addressed by the appellant to the 1st respondent, prima-facie, it appears that the appellant also agreed for the terms and conditions of the Concession Agreement. Even by ignoring the Page 45 of 66 C/LPA/1059/2018 CAV JUDGMENT documents of RFQ and RFP and by looking at the terms of the Concession Agreement alone, it is clear that the appellant, as an applicant, accepted several obligations arising out of the Concession Agreement. Relying on the interpretation Clause under Clause 1.3 of the Concession Agreement, though it is pleaded on behalf of the appellant that the Concession Agreement supersedes all previous written or oral representations and arrangements regarding the project, but by reading the terms of the Concession Agreement itself conjointly, we are satisfied that the rights and obligations are created even by the appellant herein about the project, for implementation of which, 2nd respondent - Special Purpose Vehicle is incorporated. It is fairly well-settled that while interpreting a document, the document as a whole is to be considered, but by not referring to one single clause in such document and, further intention of the parties has to be culled out by looking at all the terms and conditions of the document. Hence, from a composite reading of all the terms and conditions of the Concession Agreement, we are of the view that the appellant cannot be termed as a third party and as such, cannot be impleaded in arbitral proceedings.
28. It is a further submission of Shri S.N.Soparkar, learned Senior Counsel for the appellant that, the case of the Page 46 of 66 C/LPA/1059/2018 CAV JUDGMENT 1st respondent that the appellant is an alter ego of the 2nd respondent and the issue is required to be examined by lifting the corporate veil, is not within the purview and jurisdiction of the learned Arbitral Tribunal. It is submitted that the learned Arbitral Tribunal, which is a body created pursuant to an agreement, has no authority to examine the doctrine of lifting of corporate veil so as to accept the plea of the 1st respondent. To buttress the said submission, learned Senior Counsel has placed reliance on a judgment of the learned Single Judge of Delhi High Court in the case of Sudhir Gopi v. Indira Gandhi National Open University reported in 2017 SCC OnLine Delhi 8345 and also on a judgment of the learned Single Judge of Bombay High Court in the case of Oil and Natural Gas Corporation Ltd. v. M/s.Jindal Drilling and Industries Limited reported in 2015 SCC OnLine Bombay 1707.
29. On the other hand, Shri Mihir Thakore, learned Senior Counsel appearing for the 1st respondent, responding to this submission, has submitted that there is nothing in law which prohibits the learned Arbitral Tribunal from lifting the corporate veil on the basis of doctrine of alter ego. It is submitted that the learned Arbitral Tribunal has a right to take up all disputes which a Court can undertake, except the Page 47 of 66 C/LPA/1059/2018 CAV JUDGMENT enumerated disputes like, criminal matters, etc. It is submitted that the disputes which the Arbitral Tribunal cannot decide are considered in a judgment of the Hon'ble Supreme Court in the case of A. Ayyasamy v. A. Paramasivam And Others reported in (2016)10 SCC 386. Learned Senior Counsel has taken us to the relevant paragraph of the aforesaid judgment.
30. In this case, it is not in dispute that the appellant - IMC submitted its bid in the tender process for developing 15th Multi Purpose Cargo Berth at DPT on Build, Operate and Transfer basis and was declared as highest bidder for Birth No.15 and was therefore, awarded the project. As per the terms of the RFP, the appellant has incorporated a separate and independent corporate entity, i.e. respondent No.2 - JRE as a Special Purpose Vehicle for implementation of the project. It is also not in dispute that 100% shareholding of the 2nd respondent - SPV is held by the appellant - IMC. In view of such contractual obligations in the documents which are earlier in point of time of execution of the Concession Agreement and further depending on the covenants of the Concession Agreement, it is the case of the 1st respondent - DPT that appellant is an alter ego of the 2nd respondent. Thus, it is the plea of the 1st respondent that issue between the parties is required to be examined by lifting the corporate veil. Page 48 of 66 C/LPA/1059/2018 CAV JUDGMENT However, it is the case of the appellant that the Tribunals constituted under the provisions of the Arbitration Act are not empowered to examine the issue of lifting of corporate veil. In this regard, reference is made by learned Senior Counsel for the appellant to a judgment in the case of Sudhir Gopi v. Indira Gandhi National Open University reported in 2017 SCC OnLine Delhi 8345. In the aforesaid judgment, the learned Single Judge of Delhi High Court has held that the Arbitral Tribunal, being a creature of limited jurisdiction, has no power to extend the scope of arbitral proceedings to include a person who has not consented to arbitrate. It is further held that an Arbitral Tribunal would not have the power to pierce the corporate veil so as to bind other parties who have not agreed to arbitrate. In the said judgment, it is held that the Courts would, undoubtedly, have the power to determine whether in a given case, corporate veil should be pierced and the persons behind the corporate facade be held accountable for the obligations of the corporate entity, however, an Arbitral Tribunal has no jurisdiction to lift the corporate veil. Further reliance is also placed on a judgment rendered by the learned Single Judge of Bombay High Court in the case of Oil and Natural Gas Corporation Ltd. v. M/s.Jindal Drilling and Industries Limited reported in 2015 SCC OnLine Bombay Page 49 of 66 C/LPA/1059/2018 CAV JUDGMENT 1707. Even in the said judgment, the learned Single Judge of Bombay High Court also held that the Arbitral Tribunal has no power to lift the corporate veil and only a Court can lift the corporate veil of the Company, if a strongest case is made out.
31. On hearing the response on the said issues by the learned Senior Counsel Shri Mihir Thakore and keeping in view of the provisions of the Arbitration Act, 1996, as also the judgment of the Hon'ble Supreme Court in the case of A. Ayyasamy v. A. Paramasivam And Others reported in (2016)10 SCC 386, we are not in agreement with the view taken by the learned Single Judges in the aforesaid judgments in Sudhir Gopi v. Indira Gandhi National Open University reported in 2017 SCC OnLine Delhi 8345 and Oil and Natural Gas Corporation Ltd. v. M/s.Jindal Drilling and Industries Limited reported in 2015 SCC OnLine Bombay 1707. There is nothing in law which prohibits an Arbitral Tribunal from lifting the corporate veil on the basis of doctrine of alter ego. The Arbitral Tribunal has a right to take up all disputes which a Court can undertake, except certain disputes generally treated as non-arbitrable, viz. (i) patent, trade marks and copyright, (ii) anti-trust/ competition laws, (iii) insolvency/ winding up, (iv) bribery/ corruption, (v) fraud, (vi) criminal matters. The Arbitration and Page 50 of 66 C/LPA/1059/2018 CAV JUDGMENT Conciliation Act, 1996, does not make any provision excluding any category of disputes treating them as non-arbitratble but the Courts have held that certain kinds of disputes may not be capable of adjudication through means of arbitration. This issue is elaborately considered by the Hon'ble Supreme Court in the case of A. Ayyasamy v. A. Paramasivam And Others reported in (2016)10 SCC 386. Paragraphs 13, 14, 20, 21 and 35 of the aforesaid judgment read as under:
"13. What would be the position in case a suit is filed by the plaintiff and in the said suit the defendant files an application under Section 8 of the Act questioning the maintainability of the suit on the ground that parties had agreed to settle the disputes through the means of arbitration having regard to the existence of an arbitration agreement between them? Obviously, in such a case, the Court is to pronounce upon arbitrability or non- arbitrability of the disputes.
14. In the instant case, there is no dispute about the arbitration agreement inasmuch as there is a specific arbitration clause in the partnership deed. However, the question is as to whether the dispute raised by the respondent in the suit is incapable of settlement through arbitration. As pointed out above, the Act does not make any provision excluding any category of disputes Page 51 of 66 C/LPA/1059/2018 CAV JUDGMENT treating them as non-arbitrable. Notwithstanding the above, the Courts have held that certain kinds of disputes may not be capable of adjudication through the means of arbitration. The Courts have held that certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, cannot be referred to arbitration. Following categories of disputes are generally treated as non- arbitrable:
(i) patent, trademarks and copyright;
(ii) anti-trust/competition laws;
(iii) insolvency/winding up;
(iv) bribery/corruption;
(v) fraud;
(vi) criminal matters.
Fraud is one such category spelled out by the decisions of this Court where disputes would be considered as non-arbitrable.
... ... ...
20. We shall revert to the question of per incuriam at a later stage. At this juncture, we may point out that the issue has been revisited by another Division Bench of this Court in Booz Allen & Hamilton Inc. v. SBI Home Finance Limited and others. In this case, one of the questions that had arisen for determination was, in the context of Page 52 of 66 C/LPA/1059/2018 CAV JUDGMENT Section 8 of the Act, as to whether the subject matter of the suit was 'arbitrable' i.e. capable of being adjudicated by a private forum (Arbitral Tribunal). In this context, the Court carried out detailed discussion on the term 'arbitrability' by pointing out three facets thereof, viz.:
1) whether the disputes are capable of adjudication and settlement by arbitration?
2) whether the disputes are covered by the arbitration agreement?
3) whether the parties have referred the disputes to arbitration?
21. As we are concerned with the first facet of the arbitrability of dispute, on this aspect the Court pointed out that in those cases where the subject matter falls exclusively within the domain of public fora, viz. the Courts, such disputes would be non-arbitrable and cannot be decided by the Arbitral Tribunal but by the Courts alone. The justification and rationale given for adjudicating such disputes through the process of Courts, i.e. public fora, and not by Arbitral Tribunals, which is a private forum, is given by the court in the following manner:
"35. The Arbitral Tribunals are private for a chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of Page 53 of 66 C/LPA/1059/2018 CAV JUDGMENT being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the Court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.
36. The well-recognised examples of non- arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.
37. It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not Page 54 of 66 C/LPA/1059/2018 CAV JUDGMENT merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself. (Vide Black's Law Dictionary.)
38. Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable."
... ... ...
35. Ordinarily every civil or commercial dispute whether based on contract or otherwise which is capable of being decided by a civil court is in principle capable of being adjudicated upon and resolved by arbitration "subject to the dispute being governed by the arbitration agreement"
unless the jurisdiction of the Arbitral Tribunal is excluded either expressly or by necessary implication. In Booz-Allen and Hamilton Inc. v. SBI Home Finance Ltd., this Court held that adjudication of certain categories of proceedings is reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not exclusively reserved for adjudication by courts and tribunals may by Page 55 of 66 C/LPA/1059/2018 CAV JUDGMENT necessary implication stand excluded from the purview of private fora. This Court set down certain examples of non-arbitrable disputes such as:
(i) Disputes relating to rights and liabilities which give rise to or arise out of criminal offences;
(ii) Matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights and child custody;
(iii) Matters of guardianship;
(iv) Insolvency and winding up;
(v) Testamentary matters, such as the grant of probate, letters of administration and succession certificates; and
(vi) Eviction or tenancy matters governed by special statutes where a tenant enjoys special protection against eviction and specific courts are conferred with the exclusive jurisdiction to deal with the dispute.
This Court held that this class of actions operates in rem, which is a right exercisable against the world at large as contrasted with a right in personam which is an interest protected against specified individuals. All disputes relating to rights in personam are considered to be amenable to arbitration while rights in rem are required to be adjudicated by courts and public tribunals. The enforcement of a mortgage has been held to be a right in rem for which proceedings in arbitration would not be maintainable. In Vimal Kishore Shah v. Jayesh Dinesh Shah, this Court added a seventh category of cases to the six non-arbitrable Page 56 of 66 C/LPA/1059/2018 CAV JUDGMENT categories set out in Booz Allen, namely, disputes relating to trusts, trustees and beneficiaries arising out of a trust deed and the Trust Act."
32. Even in the case of Purple Medical Solutions Private Limited v. MIV Therapeutics Inc. And Another reported in (2015)15 SCC 622, in the matter arising out of the proceedings under Section 11 of the Arbitration Act, having noticed serious allegations of fraud which were made against respondent No.2 therein who was not a party to the agreement, the Hon'ble Supreme Court having found that relevant facts justify lifting of corporate veil, referred respondent No.2 therein to arbitration.
33. Further, in the case of IVRCL Limited. v. Gujarat State Petroleum Corporation Limited And Anr. - First Appeal No.1714 of 2015 and other allied appeals, decided on 08-13/10/2015, a Division Bench of this Court held that it is no longer res-integra that in a given set of circumstances, even a non-signatory to an arbitral agreement can be subjected to arbitration proceedings. It is further observed that instances have been recognized by Courts where on the ground of piercing corporate veil, as one entity being found to be an alter ego of the other or on similar grounds, even a non-signatory entity to an arbitration Page 57 of 66 C/LPA/1059/2018 CAV JUDGMENT agreement is allowed to be joined in the arbitration proceedings. The Division Bench has disapproved the argument that, in no case, a non-signatory to the arbitration agreement can be compelled to submit to the jurisdiction of the Arbitral Tribunal validly constituted.
34. In view of the aforesaid judgments of the Hon'ble Supreme Court and Division Bench of this Court, we are not in agreement with the submission made by Shri S.N.Soparkar, learned Senior Counsel for the appellant, that the learned Arbitral Tribunal has no jurisdiction to examine the issue by lifting the corporate veil and further, on facts, no case is also made out to examine the claim of alter ego by lifting the corporate veil. Whether a case is made out for impleading a third party by applying the doctrine of lifting of corporate veil, is a matter which is to be examined having regard to facts of each case and keeping in mind the concept of group Companies. In the case on hand, it is not in dispute that initially, response to the RFQ is made by the appellant- Company, RFP is issued to the appellant-Company, bid documents are submitted by the appellant-Company and only thereafter, pursuant to the terms in the RFP, 2nd respondent - SPV is registered by the appellant so as to execute the project. We have already held above that various clauses in the Page 58 of 66 C/LPA/1059/2018 CAV JUDGMENT Concession Agreement also create rights and obligations not only against parties to the agreement but also against the appellant-Company, which is a holding Company of the 2nd respondent - SPV. Even on facts, it cannot be said that the appellant-Company is a third party, has nothing to do with the disputes which have arisen between the 1st and 2nd respondents and has no obligations to the contract. In any event, the learned Arbitral Tribunal itself has opined that the findings recorded are prima-facie and it is always open to contest the proceedings by participating before it. Even after impleadment, if the appellant disputes jurisdiction of the learned Arbitral Tribunal, all its objections are left open to be raised and considered at the appropriate stage.
35. The other submission of Shri S.N.Soparkar, learned Senior Counsel for the appellant is that, appellant is not a signatory to the Concession Agreement entered between the 1st respondent - DPT and 2nd respondent - SPV and only in the Concession Agreement, there is a clause of arbitration, as such, the earlier documents, namely, RFP and RFQ cannot be looked into. It is submitted that a prelude to a contract cannot be confused with the contract itself. Precisely, it is the submision of learned Senior Counsel that the documents relating to RFQ, RFP and the bid documents cannot be looked Page 59 of 66 C/LPA/1059/2018 CAV JUDGMENT into after execution of the Concession Agreement. In support of his argument, learned Senior Counsel has relied on the judgments in the case of Dresser Rand S.A. v. Bindal Agro Chem Ltd. And Anr. reported in (2006)1 SCC 751 and in the case of Bharat Sanchar Nigam Limited v. Telephone Cables Limited reported in (2010)5 SCC 213.
36. In response to the said contention of the appellant, Shri Mihir Thakore, learned Senior Counsel appearing for the 1st respondent has contended that the appellant - IMC, by a letter of confirmation dated 28.04.2011, issued after execution of the Concession Agreement, has agreed to unconditionally accepting the terms and conditions set forth in the Concession Agreement. Therefore, the above judgments relied upon by the appellant would not render any assistance to the case of the appellant. It is submitted that documents, i.e. RFP, RFQ, etc. which are prior to execution of the Concession Agreement are in juxtaposition with the terms of the Concession Agreement. Further, it is submitted that it is the IMC, i.e. the appellant herein who, had placed bid for the project and IMC's bid was accepted by the 1st respondent - DPT and IMC was awarded project for development of Berth No.15 taking in consideration IMC's financial strengths and other qualifications, at the stage at which the 2nd respondent - Company was not even Page 60 of 66 C/LPA/1059/2018 CAV JUDGMENT incorporated. As such, IMC, through 2nd respondent - JRE, which is a wholly owned Special Purpose Vehicle of the appellant, has entered into Concession Agreement.
37. It is true that in the case of Dresser Rand S.A. v. Bindal Agro Chem Ltd. And Anr. reported in (2006)1 SCC 751, the Hon'ble Supreme Court has held that tender document by itslef is neither an agreement nor contract and a prelude to contract should not be confused with the contract itself. Further, in the case of Bharat Sanchar Nigam Limited v. Telephone Cables Limited reported in (2010)5 SCC 213 also, it was found that there was clear suppression of terms governing tender process and concluded contract and as a matter of fact, it was found that arbitration clause contained in the contract would come into picture only on placement of the purchase order. In such facts, it was held by the Hon'ble Supreme Court that arbitration clause cannot be invoked in absence of placing of purchse order. While considering the terms governing process of contract which were distinguishable from the terms of the concluded contract, it was found that no petition can be maintained for appointment of an arbitrator in absence of any such concluded contract governing the clause for appointment of an arbitrator. Page 61 of 66 C/LPA/1059/2018 CAV JUDGMENT
38. The plea of the appellant, by taking assistance of the judgments referred to above, is on the premise that appellant is not a party to the Concession Agreement, as such, no further document can be looked into, but as we have already noticed, apart from the obligations under the documents relating to RFP, RFQ and bid, even in the Concession Agreement, the `applicant' is defined so as to mean "M/s.IMC Ltd. having its registered office at 232/A, Acharya Jagdish Chandra Bose Road, Kolkata - 700020, India". At the same time, appellent has agreed to, and unconditionally accepted, the terms and conditions of such agreement as contemplated under Clause 3.1(viii)(a), (b) and (c). In addition to the same, the execution of the confirmation letter dated 28.04.2011, is also not disputed, except stating that such document is not produced before the learned Arbitral Tribunal and learned Single Judge. A perusal of such document, which is produced during the course of hearing, makes it clear that it is the appellant who has requested the Concessioning Authority to enter into Concession Agreement with the Concessionaire, i.e. JRE (SPV) - the 2nd respondent herein, and appellant has agreed to, and unconditionally accepted, the terms and conditions set forth in the Concession Agreement. In view of the clauses in the Concession Agreement and furhter, having Page 62 of 66 C/LPA/1059/2018 CAV JUDGMENT regard to plea of the 1st respondent - DPT that appellant is an alter ego of the 2nd respondent, the plea of the appellant that prelude to a contract cannot be confused with the contract itself, also would not render any support to accept the case of the appellant.
39. Further, it is also required to be noted that the scope of interference with the interim orders passed by the Arbitral Tribunal is considerd by the Hon'ble Supreme Court in a judgment in the case of M/s.SBP and Co. v. M/s.Patel Engineering Ltd. And Anr. reported in 2006(1) GLH 105. In the aforesaid judgment, by a majority view, the Hon'ble Supreme Court has disapproved the stand adopted by some of the High Courts that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court. Paragraphs 44 and 45, of the aforesaid judgment, which are relevant for the purpose, read as under:
"44. It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution of India. We see no warrant for such an approach. Section 37 makes certain orders of the arbitral tribunal appealable. Under Section 34, the aggrieved party has an avenue for Page 63 of 66 C/LPA/1059/2018 CAV JUDGMENT ventilating his grievances against the award including any in-between orders that might have been passed by the arbitral tribunal acting under Section 16 of the Act. The party aggrieved by any order of the arbitral tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The arbitral tribunal is after all, the creature of a contract between the parties, the arbitration agreement, even though if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the arbitral tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the arbitral tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India. Such an intervention by the High Courts is not permissible.
45. The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every order made by the arbitral tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of Page 64 of 66 C/LPA/1059/2018 CAV JUDGMENT course, a right of appeal is available to them under Section 37 of the Act even at an earlier stage."
40. Similar view also is taken by the Hon'ble Supreme Court in the case of Lalitkumar V. Sanghavi And Another v. Dharamdas V. Sanghavi And Others reported in (2014)7 SCC 255.
41. In light of the view expressed by the Hon'ble Supreme Court in the judgments referred to above and considering that the learned Arbitral Tribunal itself has observed that only by considering the prima-facie case, such impleadment of the appellant is ordered, keeping open the contentions which are to be raised by the appellant and furhter, in view of the reasons recorded by us, as referred above, in our opinion, the learned Single Judge has not committed any error in dismissing the petition filed by the appellant herein.
42. For the aforesaid reasons, we do not find any merit in this Letters Patent Appeal. Same is accordingly dismissed, with no order as to cost.
43. However, it is reiterated that the observations made and findings recorded either by the learned Single Judge or by Page 65 of 66 C/LPA/1059/2018 CAV JUDGMENT us in this judgment are only for the purpose of deciding the issue prima-facie and all the contentions that may be raised by the appellant are left open for consideration by the learned Arbitral Tribunal.
44. In view of dismissal of appeal, Civil Application No.1/2018 for stay also stands dismissed and Civil Application No.2/2018 stands disposed of.
sd/-
(R.SUBHASH REDDY, CJ) sd/ (VIPUL M. PANCHOLI, J) sunil Page 66 of 66