Arbitration Agreements need not be a formal contract. Section 7(4)(b) states, an Arbitration Agreement can be derived from exchange of letters, telex, telegram or other means of communication, including through electronic means. What is required to be ascertained is, intention of parties to refer their disputes or differences to Arbitration. A common-sense approach must be adopted. Arbitration Clauses cannot be construed with a purely legalistic mindset.
Doctrine of Group of Companies had its origins in 1970’s from French Arbitration Practice [Dow Chemical v. Isover-Saint-Gobain, 1984 Rev Arb 137] and has been applied in Chloro Controls India (P) Ltd., (2013) 1 SCC 641; Ameet Lal Chand Shah, (2018) 15 SCC 678. Doctrine of Group of Companies indicates, implied consent to an Arbitration Agreement.
Based on Doctrine of Group of Companies, a Non-Signatory can be bound by an Arbitration Agreement when conduct of parties [engagement in negotiation/making statements] evidences a clear intention to bind both Signatories as well as Non-Signatories; or, transaction between parties has a composite nature. Doctrine of Group of Companies has also been invoked in cases where there is a tight group structure with strong organizational and financial links, constituting a single economic unit/single economic reality.
– Hon’ble Justice Indu Malhotra, Mahanagar Telephone Nigam Ltd. v. Canara Bank, [Civil Appeal Nos. 6202-6205 of 2019].
“I have had the advantage of going through an elaborate, well considered and scholarly drafted Judgment proposed by my esteemed Sister Justice Indu Malhotra.
I entirely agree with the reasoning and the conclusion, which my erudite Sister has drawn, which are based on remarkably articulate process of reasoning.”
– Hon’ble Justice Abhay Manohar Sapre, Mahanagar Telephone Nigam Ltd. v. Canara Bank, [Civil Appeal Nos. 6202-6205 of 2019].