COX & KINGS LTD.versusSAP INDIA PVT. LTD. & ANR.

                  [2024] 9 S.C.R. 199 : 2024 INSC 670

                            Cox & Kings Ltd.
                                    v.
                         Sap India Pvt. Ltd. & Anr.
                     (Arbitration Petition No. 38 of 2020)
                              09 September 2024
     [Dr. Dhananjaya Y. Chandrachud, CJI, J.B. Pardiwala*
                    and Manoj Misra, JJ.]

                            Issue for Consideration
       Whether the application of the petitioner for the appointment of
       an arbitrator deserves to be allowed. Whether the requirement of
       prima facie existence of an arbitration agreement, as stipulated
       u/s. 11 of the Act, 1996, is satisfied. Whether the respondent no.
       2 is a party to the arbitration agreement or not.

                                   Headnotes†
       Arbitration and Conciliation Act, 1996 – s.11(6) r/w. s.11(12)
       (a) – Petitioner has filed the present petition in terms of s.11(6)
       r/w.s.11(12)(a) of the Act, seeking appointment of an arbitrator
       for the adjudication of disputes and claims in terms of clause
       15.7 of the Services General Terms and Conditions Agreement
       dated 30.10.2015 entered into between the Petitioner and
       respondent no. 1 – The petitioner had also arrayed respondent
       no. 2 in the arbitration notice – Respondents have contended
       that respondent no. 2 has neither impliedly nor explicitly
       consented to the arbitration agreement between the petitioner
       and respondent no. 1:
       Held: It is settled that the arbitral tribunal is the preferred first
       authority to look into the questions of arbitrability and jurisdiction,
       and the courts at the referral stage should not venture into contested
       questions involving complex facts – The respondents have raised
       a number of objections against the present petition, however, none
       of the objections raised question or deny the existence of the
       arbitration agreement under which the arbitration has been invoked
       by the petitioner in the present case – Thus, the requirement of
       prima facie existence of an arbitration agreement, as stipulated
       u/s. 11 of the Act, 1996, is satisfied – Once the arbitral tribunal
       is constituted, it shall be open for the respondents to raise all the

* Author
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       available objections in law, and it is only after (and if) the preliminary
       objections are considered and rejected by the tribunal that it shall
       proceed to adjudicate the claims of the petitioner – Further, on the
       issue of impleadment of respondent no. 2, which is not a signatory
       to the arbitration agreement, elaborate submissions have been made
       on both the sides, placing reliance on terms of the agreements,
       email exchanges, etc – In view of the complexity involved in the
       determination of the question as to whether the respondent no. 2 is
       a party to the arbitration agreement or not, this Court is of the view
       that it would be appropriate for the arbitral tribunal to take a call on
       the question after taking into consideration the evidence adduced
       before it by the parties and the application of the legal doctrine
       as elaborated in the decision in Cox and Kings – Thus, petition is
       allowed and an arbitrator is appointed. [Paras 30, 32, 33, 34, 35]

                                  Case Law Cited
       Cox and Kings Ltd. v. SAP India Pvt. Ltd. [2023] 15 SCR 621 :
       2023 INSC 1051; In Re: Interplay Between Arbitration Agreements
       under the Arbitration and Conciliation Act, 1996 and the Stamp Act
       [2023] 15 SCR 1081 : 1899 2023 INSC 1066 – followed.
       Lombardi Engg. Ltd. v. Uttarakhand Jal Vidyut Nigam Ltd. [2023]
       13 SCR 943 : 2023 INSC 976; SBI General Insurance Co. Ltd.
       v. Krish Spinning 2024 INSC 532 – relied on.
       Chloro Controls India (P) Ltd v. Severn Trent Water Purification Inc
       [2012] 13 SCR 402 : (2013) 1 SCC 641 – referred to.

                                    List of Acts
       Arbitration and Conciliation Act, 1996.

                                 List of Keywords
       Arbitrator; Appointment of an arbitrator; Arbitration agreement;
       Existence of arbitration agreement; Arbitral Tribunal; Available
       objections in law; Impleadment of party; Party not signatory to
       arbitration agreement; Referral stage; Complex questions involving
       complex facts.

                                Case Arising From
       CIVIL ORIGINAL JURISDICTION: Arbitration Petition No. 38 of 2020
       Under Section 11(6) read with Section 11(12)(a) of the Arbitration and
       Conciliation Act 1996
[2024] 9 S.C.R.                                                           201

              Cox & Kings Ltd. v. Sap India Pvt. Ltd. & Anr.


                         Appearances for Parties
     Nagarkatti Kartik Uday, Hiroo Advani, Divyakant Lahoti, Ms. Vindhya
     Mehra, Ms. Madhur Jhavar, Ms. Praveena Bisht, Kartik Lahoti,
     Navdeep Dahiya, Kumar Vinayakam Gupta, Ms. Mallika Luthra,
     Saksham Barsaiyan, Karandeep Dahiya, Ms. Surbhi Saran, Ms. Ria
     Garg, Rahul Maheshwari, Advs. for the Petitioner.
     Ritin Rai, Sr. Adv., Farhad Sorabjee, Dheeraj Nair, Kumar Kislay, Pratik
     Pawar, Siddhesh Pradhan, Ms. Shanaya Cyrus Irani, Anirudh Krishnan,
     Shiva Krishnamurti, Balaji Srinivasan, George Pothan Poothicote, Ms.
     Manisha Singh, Ms. Jyoti Singh, Ashu Pathak, Arunava Mukherjee,
     Debesh Panda, Pallav Mongia, Ajay Bhargava, Aseem Chaturvedi,
     Mrs. Trishala Trivedi, M/s. Khaitan & Co., Ujjwal A. Rana, Himanshu
     Mehta, M/s. Gagrat and Co., Advs. for the Respondents.
                Judgment / Order of the Supreme Court
                                 Judgment
     J.B. Pardiwala, J.
1.   Cox & Kings Ltd. (hereinafter referred to as the “petitioner”) has
     filed the present petition in terms of Section 11(6) read with Section
     11(12)(a) of the Arbitration & Conciliation Act, 1996 (for short “the Act,
     1996”), seeking appointment of an arbitrator for the adjudication of
     disputes and claims in terms of clause 15.7 of the Services General
     Terms and Conditions Agreement dated 30.10.2015 entered into
     between the Petitioner and SAP India Pvt. Ltd. (hereinafter referred
     to as the “respondent no. 1”)
     A.    FACTUAL MATRIX
2.   The petitioner is a company registered under the Companies Act,
     1956 and is engaged in the business of providing tourism packages
     and hospitality services to its customers.
3.   Respondent no. 1 is also a company registered under the Companies
     Act, 1956 and is engaged in the business of providing business
     software solution services. It is a wholly-owned subsidiary of SAP
     SE GMBH (Germany) (hereinafter referred to as the “respondent
     no. 2”), a company incorporated under the laws of Germany.
4.   The petitioner and respondent no. 1 entered into a SAP Software
     End User License Agreement & SAP Enterprise Support Schedule
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       (for short “License Agreement”) on 14.12.2010 under which the
       petitioner was made a licensee of certain Enterprise Resource
       Planning (“ERP”) software developed and owned by the respondents.
       The License Agreement is a mandatory pre-requisite for all customers
       of the respondents who intend to enter into any software agreement
       with the respondents.
5.     It is the case of the petitioner that while it was developing its own
       software for e-commerce operations in 2015, it was approached
       by respondent no. 1 who recommended their ‘Hybris Solution’
       (hereinafter referred to as the “SAP Hybris Software”) for use by
       the petitioner. It is the case of the petitioner that respondent no. 1
       had, at the relevant point in time, represented that the SAP Hybris
       Software would be suitable and 90% compatible to the requirements
       of the petitioner. It was further represented that the customisation
       of the balance 10% would take about 10 months from the date of
       execution of an agreement and that the customisation of the SAP
       Hybris Software would take lesser time than the time the petitioner
       may take in developing its own technological solution.
6.     The transaction for the purchase, customisation and use of the SAP
       Hybris Software was divided into three separate agreements entered
       into between the petitioner and respondent no. 1:
       i.     First, Software License and Support Agreement Software Order
              Form no. 3 (for short “Order Form no. 3”) dated 30.10.2015 for
              the purchase of SAP Hybris Software License by the petitioner.
       ii.    Second, the Services General Terms and Conditions Agreement
              (for short “GTC agreement”) dated 30.10.2015 containing the
              terms and conditions governing the implementation of the SAP
              Hybris Software.
       iii.   Third, SAP Global Service and Support Agreement, Order Form
              no. 1 dated 16.11.2015 (for short “Order Form no. 1”) which
              was executed pursuant to the signing of the GTC agreement
              and contained the terms of payment between the parties for
              the services being rendered.
7.     It is the case of the petitioner that as it had already entered into
       the License Agreement with respondent no. 1 in 2010, it was not
       required to do so again for the purpose of purchasing the SAP Hybris
       Software. The GTC agreement, Order Form no. 3 and Order Form
[2024] 9 S.C.R.                                                          203

              Cox & Kings Ltd. v. Sap India Pvt. Ltd. & Anr.


     no. 1 were all executed pursuant to the License Agreement. The
     said three agreements are ancillary to the License Agreement and
     have a similar underlying commercial purpose.
8.   It is pertinent to note that in terms of Clause 15.7 of the GTC
     agreement, in the event of any dispute, the parties agreed to resolve
     their disputes through arbitration. Clause 15.7 of GTC agreement
     reads as under:
           “15.7 Dispute Resolution: In the event of any dispute
           or difference arising out of the subject matter of this
           Agreement, the Parties shall undertake to resolve such
           disputes amicably. If disputes and differences cannot be
           settled amicably then such disputes shall be referred to
           bench of three arbitrators, where each party will nominate
           one arbitrator and the two arbitrators shall appoint a
           third arbitrator. Arbitration award shall be binding on both
           parties. The arbitration shall be held in Mumbai and each
           party will bear the expenses of their appointed arbitrator.
           The expense of the third arbitrator shall be shared by the
           parties. The arbitration process will be governed by the
           Arbitration & Conciliation Act, 1996.”
9.   Certain issues arose between the parties regarding the timely
     completion and implementation of the SAP Hybris Software. After
     several queries from the petitioner, respondent no. 1 vide e-mail dated
     24.04.2016, informed about certain challenges in the execution of
     the SAP Hybris Software project. Thereafter, a series of emails were
     exchanged between respondent no. 1 and the petitioner regarding
     the completion of the project.
10. Subsequently, as there was no response from respondent no. 1 to the
    e-mails sent by the petitioner, the latter, vide e-mail dated 31.08.2016
    contacted respondent no. 2, i.e., the German parent company of
    respondent no. 1 and apprised them of the issues being faced by the
    petitioner in the execution and delivery of the SAP Hybris Software.
    Respondent no. 2 was informed of the various shortcomings in the
    execution of the project and the negative ramifications being caused
    to the petitioner’s business as a result thereof. In response to the
    concerns raised by the petitioner, respondent no. 2, vide e-mail
    dated 01.09.2016, assured to provide a framework for resolution of
    the challenges and completion of the project.
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11. Respondent no. 2 vide email dated 07.10.2016 assured the petitioner
    that it would monitor the execution of the project and requested
    the petitioner for an opportunity to agree on the revised plan and
    delivery. As per the minutes of the meeting dated 14.11.2016, one
    of the suggestions given by respondent no. 2 as part of the revised
    proposal for the execution of the project was that a substantial part
    of the project work would be outsourced to the more experienced
    global team, and one representative of respondent no. 2 would
    overlook the progress of the project at the execution level.
12. Unable to resolve the issues, the contract for the SAP Hybris Software
    project ultimately came to be rescinded on 15.11.2016. In response
    to this, respondent no. 2, vide e-mail dated 23.11.2016, requested
    the petitioner for one last opportunity to complete the project, which
    the petitioner declined vide email dated 24.11.2016.
13. Respondent no. 2, vide email dated 09.12.2016 sent to the petitioner,
    communicated that there were shortcomings at the petitioner’s end as
    well and the respondents could not be said to be solely responsible
    for the collapse of the SAP Hybris Software project.
14. Despite several correspondences and meetings, the matter could not
    be settled amicably between the parties. On 29.10.2017, respondent
    no. 1 issued a notice invoking arbitration under Clause 15.7 of the
    GTC agreement for the alleged wrongful termination of the contract
    between the parties and non-payment of Rs. 17 Crore. Upon failure
    of the petitioner to nominate an arbitrator in response to the aforesaid
    notice, a Section 11(6) petition was instituted by respondent no. 1
    before the Bombay High Court. The said petition came to be allowed
    vide order dated 30.11.2018 and an arbitral tribunal was constituted
    to adjudicate the disputes between the parties. The petitioner filed
    its Statement of Defence and counterclaims on 31.07.2019 for an
    amount of Rs. 45,99,71,098/-.
15. It may not be out of place to state at this stage that respondent no. 2
    was not made a party to the aforesaid arbitration proceedings. In the
    course of the said proceedings, the petitioner filed an application under
    Section 16 of the Act, 1996 before the arbitral tribunal, contending
    that the four agreements entered into between the parties were
    part of a composite transaction and for this reason the agreements
    should be made a part of a singular proceeding.
[2024] 9 S.C.R.                                                        205

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16. During the pendency of the aforesaid application, on 22.10.2019, the
    NCLT, Mumbai admitted an application filed under Section 7 of the
    Insolvency and Bankruptcy Code, 2016 (for short “the Insolvency
    Code”) against the petitioner and appointed an Interim Resolution
    Professional. Vide Public Announcement dated 25.10.2019, the
    Interim Resolution Professional ordered for the commencement of the
    Corporate Insolvency Resolution Process (‘CIRP’). On 05.11.2019,
    the NCLT passed an order adjourning the arbitration proceedings
    sine die due to initiation of the CIRP.
17. Meanwhile, upon seeking permission of the Interim Resolution
    Professional, the petitioner sent a fresh notice to the respondents
    on 07.11.2019 invoking arbitration under Clause 15.7 of the GTC
    agreement. Pertinently, the petitioner arrayed respondent no. 2 in
    the said arbitration notice. The petitioner appointed Dr. Justice Arijit
    Pasayat, former Judge of this Court, as its nominated arbitrator
    and called upon the respondents to appoint their arbitrator for the
    constitution of the tribunal. However, upon failure of the respondents
    to appoint an arbitrator in terms of the said notice, the petitioner has
    preferred the present petition.
     B.    REFERENCE ORDER
18. This petition was heard by a three-Judge Bench of this Court. By
    an order dated 06.05.2022, Chief Justice N.V Ramana (as he then
    was) speaking for himself and Justice A.S. Bopanna doubted the
    correctness of the application of the Group of Companies doctrine
    by the Indian courts. Chief Justice Ramana criticised the approach
    of a three-Judge Bench of this Court in Chloro Controls India (P)
    Ltd v. Severn Trent Water Purification Inc reported in (2013) 1
    SCC 641 which relied upon the phrase “claiming through or under”
    appearing in Section 45 of the Act, 1996 to adopt the Group of
    Companies doctrine. He noted that the subsequent decisions of
    this Court read the doctrine into Sections 8 and 35 of the Act,
    1996 without adequately examining the interpretation of the phrase
    “claiming through or under” appearing in those provisions. He also
    observed that economic concepts such as tight group structure and
    single economic unit alone cannot be utilized to bind a non-signatory
    to an arbitration agreement in the absence of an express consent.
    Consequently, he referred the matter to the larger bench to seek
    clarity on the interpretation of the phrase “claiming through or under”
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       appearing under Sections 8, 35 and 45 respectively of the Act, 1996.
       The following two questions were formulated by him for reference:
       i.     Whether the phrase “claiming through or under” in Sections
              8 and 11 respectively of the Act, 1996 could be interpreted to
              include the Group of Companies doctrine; and
       ii.    Whether the Group of Companies doctrine as expounded by
              Chloro Controls (supra) and subsequent judgments is valid
              in law?
19.     Justice Surya Kant, in a separate opinion, observed that the decisions
       of this Court before Chloro Controls (supra) adopted a restrictive
       approach by placing undue emphasis on formal consent. Justice
       Surya Kant traced the evolution of the Group of Companies doctrine
       to observe that it had gained a firm footing in Indian jurisprudence.
       However, he opined that this Court has adopted inconsistent
       approaches while applying the doctrine in India, which needed to be
       clarified by a larger bench. Accordingly, he highlighted the following
       questions of law for determination by the larger Bench:
       i.     Whether the Group of Companies Doctrine should be read
              into Section 8 of the Act, 1996 or whether it can exist in Indian
              jurisprudence independent of any statutory provision;
       ii.    Whether the Group of Companies Doctrine should continue to be
              invoked on the basis of the principle of ‘single economic reality’;
       iii.   Whether the Group of Companies Doctrine should be construed
              as a means of interpreting implied consent or intent to arbitrate
              between the parties; and
       iv.    Whether the principles of alter ego and/or piercing the corporate
              veil can alone justify pressing the Group of Companies Doctrine
              into operation even in the absence of implied consent?
       C.     SUBMISSIONS ON BEHALF OF THE APPELLANT
20. Mr. Hiroo Advani, the learned counsel appearing on behalf of the
    petitioner, submitted at the outset that the GTC agreement, Order
    Form no. 1, Order Form no. 3 and the License Agreement are
    interlinked and form part of a composite transaction. The said
    four agreements cannot be performed in isolation and have to be
    read coherently for achieving the common object underlying the
    agreements.
[2024] 9 S.C.R.                                                          207

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21. The counsel submitted that respondent no. 1 is indisputably a fully
    owned subsidiary of respondent no. 2 and the customisation of the
    SAP Hybris Software to meet the requirements of the petitioner was
    not feasible without the aid, execution and performance of respondent
    no. 2. He submitted that for such reason, it could be said that there
    exists a direct commercial relationship between the petitioner and
    both the respondents.
22. The counsel further submitted that the various emails exchanged
    between the petitioner and respondent no. 2 are indicative of
    the intention of respondent no. 2 to monitor the execution of the
    SAP Hybris Software project and to ensure the compliance of the
    contractual obligations on behalf of respondent no. 1. The counsel
    adverted to the contents of many such emails in support of his
    contention.
23. The counsel placed reliance on certain clauses of the License
    Agreement, Order Form no. 3 and GTC agreement to submit that
    although respondent no. 2 may not have been a signatory to the
    agreements, yet it had been entrusted with certain liabilities and
    obligations under the agreements entered into between the petitioner
    and respondent no. 1, thereby making it a veritable party to the
    transaction.
24. In the last, the counsel submitted that as per the decision of the
    Constitution Bench of this Court in Cox and Kings Ltd. v. SAP India
    Pvt. Ltd. & Anr. reported in 2023 INSC 1051 the court at the stage
    of referral is only required to look prima facie into the validity and
    existence of an arbitration agreement and should leave the questions
    relating to the involvement of the non-signatory to the arbitral tribunal.
     D.    SUBMISSIONS ON BEHALF OF THE RESPONDENTS
25. Mr. Ritin Rai, the learned senior counsel appearing on behalf of the
    respondents made the following submissions which can be broadly
    divided into four categories:
     i.    Contentions and claims sought to be raised by the petitioner
           are pending adjudication before another arbitral tribunal
           constituted under the same dispute resolution clause
           •     The same contentions and claims as sought to be advanced
                 in the present petition have already been raised and are
                 pending adjudication before an arbitral tribunal constituted
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                 under the GTC Agreement. In the said proceedings, the
                 Bombay High Court appointed an arbitrator and the same
                 was affirmed by this Court.
             •   The claims of the petitioner pertaining to the GTC
                 agreement read with Order Form no. 1 (collectively referred
                 to as the “Service Agreement”) are already sub-judice
                 and cannot be permitted to be reagitated. The petitioner
                 has already filed its counterclaims for an amount of Rs.
                 45,99,71,098/- before the arbitral tribunal presided by
                 Justice Madan B. Lokur (Retd.).
             •   Allowing parallel arbitration proceedings emanating from
                 the same agreement and transaction would entail a risk
                 of conflicting judgments on the same subject matter
                 including the analogous set of facts in evidence. As such,
                 the principles of res sub-judice and res judicata would
                 be attracted to the second arbitration proceedings and
                 consequently the present petition.
       ii.   Respondent no. 2 has neither impliedly nor explicitly
             consented to the arbitration agreement between the
             petitioner and respondent no. 1
             •   The agreements in question have been executed only
                 between the petitioner and respondent no. 1. Respondent
                 no. 2 is not a signatory to any of the agreements between
                 the petitioner and respondent no. 1.
             •   Respondent no. 2 has been unnecessarily and
                 disingenuously made a party to the present proceedings.
                 Not a single limb of the transaction between the petitioner
                 and respondent no. 1 was to be performed by or has
                 been performed by respondent no. 2. Respondent no. 2
                 was never part of the negotiation process between the
                 petitioner and respondent no. 1. Respondent no. 2 did
                 not by its conduct, agree, either impliedly or explicitly, to
                 be bound by the terms and conditions of the agreements
                 between respondent no. 1 and the petitioner.
             •   It is preposterous to suggest that by trying to address the
                 concerns of a customer of the subsidiary company (who had
                 voluntarily reached out), respondent no. 2 would become
[2024] 9 S.C.R.                                                         209

                Cox & Kings Ltd. v. Sap India Pvt. Ltd. & Anr.


                  liable under the contracts executed solely between the
                  petitioner and respondent no. 1.
            •     Respondent no. 2 entered the fray only when the petitioner,
                  of its own accord, approached it and levelled certain
                  allegations and raised issues concerning the SAP Hybris
                  Software project with its management in August, 2016.
            •     There is nothing on record either in the contractual
                  framework or otherwise to indicate that the project was to
                  be performed by respondent no. 2. The only communication
                  with respondent no. 2 in respect of the SAP Hybris Software
                  project arose after the escalation emails in August, 2016
                  where the petitioner itself requested the management of
                  respondent no. 2 company to help with the alleged issues
                  plaguing the SAP Hybris Software project. It was neither
                  the intention of the petitioner nor that of respondent no.
                  1 to bind respondent no. 2 to the agreements.
            •     The references to respondent no. 2 in the License
                  Agreement only indicate that respondent no. 1 has
                  obtained a license from respondent no. 2. No part of the
                  License Agreement between the petitioner and respondent
                  no. 1 was to be performed by respondent no. 2 and it is
                  only in such circumstances that the parties chose not to
                  make respondent no. 2 a party thereto. The references to
                  respondent no. 2 in the License Agreement are standard
                  references used by global software licensing companies.
                  These references cannot bind a foreign owner of such
                  licenses. Any finding to the contrary would completely
                  upset the well-established commercial practice in this
                  sector and would set a dangerous precedent.
     iii.   Claims raised by the petitioners are beyond the ambit of
            Clause 15.7 of the GTC agreement
            •     There exists no commonality between the four agreements
                  entered into between the petitioner and respondent no. 1.
                  The contention of the petitioner that the four agreements
                  form part of a “single composite transaction” is incorrect
                  as the License Agreement and Order Form no. 3 bear no
                  significance to the implementation of the software, which
                  is covered by the Services Agreement comprising of the
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                 GTC agreement and Order Form no. 1. Implementation
                 is an exercise de hors the purchase of the license of the
                 software.
             •   The claims raised by the petitioner are beyond the ambit
                 of the Services Agreement. As the License Agreement
                 read with Order Form no. 3 is distinct and independent
                 from the Services Agreement, it naturally follows that the
                 arbitration agreement contained under the GTC agreement
                 read with Order Form no. 1 does not apply to the License
                 Agreement read with Order Form no. 3.
             •   As the arbitration clause under the License Agreement read
                 with Order Form no. 3 has not been invoked till date by
                 either of the parties, it stands to reason that any alleged
                 claims pertaining to the License Agreement read with
                 Order Form no. 3 as mentioned in the notice of arbitration
                 are time-barred and cannot be adjudicated upon. On this
                 ground alone, the present Petition is liable to be dismissed.
       iv.   The present petition is not bona fide and the petitioners
             have suppressed material facts from this Court
             •   The present proceedings are a belated and misconceived
                 attempt on the part of the petitioner to inflate amounts that
                 it claims are due from respondent no. 1 and respondent no.
                 2. This is sought to be done by the petitioner to portray and
                 provide a false view of its financial position to the creditors
                 and subvert the due process of law through colourable
                 actions. The petitioner is indulging in forum-shopping by
                 once again attempting to appoint an arbitrator under the
                 GTC agreement, a right which both the Bombay High
                 Court and this Court, in two separate lengthy proceedings,
                 under Sections 11 and 14 respectively of the Act, 1996,
                 had decisively held to be forfeited by the petitioner for all
                 times to come.
             •   The petitioner failed to disclose that respondent no. 1 had
                 challenged the notice of arbitration before the NCLT, Mumbai.
       E.    SUBMISSIONS ON BEHALF OF THE INTERVENOR,
             UNCITRAL NATIONAL COORDINATION COMMITTEE FOR
             INDIA (UNCCI)
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26. Mr George Pothan Poothicote and Ms Manisha Singh, the learned
    counsel appearing on behalf of the intervenors in I.A. no. 69863 of
    2023, made the following submissions:
     i.    UNCITRAL Model Law on International Commercial Arbitration
           (“model law”) was amended in 2006 to address the concerns
           about the formal requirements necessary for constituting an
           arbitration agreement. The amendment was adopted by the
           United Nations General Assembly vide Resolution 61/33 dated
           04.12.2006. Post the amendment, Article 7 of the model law
           provides two options to the member states – the first option
           requires the arbitration agreement to be in the form of a clause
           in a contract or a separate agreement, both of which must be
           in writing; the second option is silent on the requirement of a
           written agreement and thus the contract law applicable in a
           specific jurisdiction remains available for the determination of the
           level of consent necessary for a party to become bound by an
           arbitration agreement allegedly made by reference. Section 7 of
           the Act, 1996 is similar to (but not the same as) the first option.
     ii.   As per the Constitution Bench decision in Cox and Kings
           (supra), the court, at the referral stage, is not bound to go into
           the merits of the case to decide if the non-signatory is bound
           by the arbitration agreement. On the contrary, the referral court
           should leave it to the arbitral tribunal to decide such an issue.
     F.    ANALYSIS
27. Having heard the learned counsel appearing for the parties and
    having gone through the materials on record, the short question that
    falls for our consideration is whether the application of the petitioner
    for the appointment of an arbitrator deserves to be allowed.
28. On the scope of powers of the referral court at the stage of Section
    11(6), it was observed by us in Lombardi Engg. Ltd. v. Uttarakhand
    Jal Vidyut Nigam Ltd. reported in 2023 INSC 976 as follows:
           “26. Taking cognizance of the legislative change, this Court
           in Duro Felguera, S.A. v. Gangavaram Port Ltd. [Duro
           Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC
           729 : (2017) 4 SCC (Civ) 764], noted that post 2015
           Amendment, the jurisdiction of the Court under Section
           11(6) of the 1996 Act is limited to examining whether an
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           arbitration agreement exists between the parties — “nothing
           more, nothing less.””
                                                   (Emphasis supplied)
29. A Constitution Bench of this Court in In Re: Interplay Between
    Arbitration Agreements under the Arbitration and Conciliation
    Act, 1996 and the Stamp Act, 1899 reported in 2023 INSC 1066,
    speaking through one of us (Dr. D.Y. Chandrachud, CJI), considered
    the scope of judicial interference by the referral court in a Section 11
    application. A few relevant observations made therein are reproduced
    hereinbelow:
           “81. One of the main objectives behind the enactment of
           the Arbitration Act was to minimise the supervisory role
           of Courts in the arbitral process by confining it only to the
           circumstances stipulated by the legislature. For instance,
           Section 16 of the Arbitration Act provides that the Arbitral
           Tribunal may rule on its own jurisdiction “including ruling
           on any objection with respect to the existence or validity
           of the arbitration agreement”. The effect of Section
           16, bearing in view the principle of minimum judicial
           interference, is that judicial authorities cannot intervene in
           matters dealing with the jurisdiction of the Arbitral Tribunal.
           Although Sections 8 and 11 allow Courts to refer parties
           to arbitration or appoint arbitrators, Section 5 limits the
           Courts from dealing with substantive objections pertaining
           to the existence and validity of arbitration agreements
           at the referral or appointment stage. A Referral Court at
           Section 8 or Section 11 stage can only enter into a prima
           facie determination. The legislative mandate of prima
           facie determination ensures that the Referral Courts do
           not trammel the Arbitral Tribunal’s authority to rule on its
           own jurisdiction.”
30. In a recent decision in SBI General Insurance Co. Ltd. v. Krish
    Spinning reported in 2024 INSC 532, it was observed by us that
    the arbitral tribunal is the preferred first authority to look into the
    questions of arbitrability and jurisdiction, and the courts at the referral
    stage should not venture into contested questions involving complex
    facts. A few relevant paragraphs of the said decision are extracted
    hereinbelow:
[2024] 9 S.C.R.                                                               213

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           “98. What follows from the negative facet of arbitral
           autonomy when applied in the context of Section 16 is
           that the national courts are prohibited from interfering in
           matters pertaining to the jurisdiction of the arbitral tribunal,
           as exclusive jurisdiction on those aspects vests with the
           arbitral tribunal. The legislative mandate of prima facie
           determination at the stage of Sections 8 and 11 respectively
           ensures that the referral courts do not end up venturing
           into what is intended by the legislature to be the exclusive
           domain of the arbitral tribunal.
                                    xxx xxx xxx
           114. In view of the observations made by this Court in In
           Re: Interplay (supra), it is clear that the scope of enquiry
           at the stage of appointment of arbitrator is limited to
           the scrutiny of prima facie existence of the arbitration
           agreement, and nothing else. […]
                                    xxx xxx xxx
           125. We are also of the view that ex-facie frivolity and
           dishonesty in litigation is an aspect which the arbitral
           tribunal is equally, if not more, capable to decide upon
           the appreciation of the evidence adduced by the parties.
           We say so because the arbitral tribunal has the benefit
           of going through all the relevant evidence and pleadings
           in much more detail than the referral court. If the referral
           court is able to see the frivolity in the litigation on the basis
           of bare minimum pleadings, then it would be incorrect
           to doubt that the arbitral tribunal would not be able to
           arrive at the same inference, most likely in the first few
           hearings itself, with the benefit of extensive pleadings and
           evidentiary material.”
                                                    (Emphasis supplied)
31. Further, on the scope of enquiry at the referral stage for the
    determination of whether a non-signatory can be impleaded as a party
    in the arbitration proceedings, it was observed by the Constitution
    Bench in Cox and Kings (supra) as follows:
           “158. Section 16 of the Arbitration Act enshrines the
           principle of competence-competence in Indian arbitration
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       law. The provision empowers the Arbitral Tribunal to
       rule on its own jurisdiction, including any ruling on any
       objections with respect to the existence or validity of
       arbitration agreement. Section 16 is an inclusive provision
       which comprehends all preliminary issues touching upon
       the jurisdiction of the Arbitral Tribunal. [Uttarakhand Purv
       Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd.,
       (2020) 2 SCC 455 : (2020) 1 SCC (Civ) 570] The doctrine
       of competence-competence is intended to minimise judicial
       intervention at the threshold stage. The issue of determining
       parties to an arbitration agreement goes to the very root
       of the jurisdictional competence of the Arbitral Tribunal.
                              xxx xxx xxx
       160. In Pravin Electricals (P) Ltd. v. Galaxy Infra & Engg.
       (P) Ltd. [Pravin Electricals (P) Ltd. v. Galaxy Infra & Engg.
       (P) Ltd., (2021) 5 SCC 671 : (2021) 3 SCC (Civ) 307] ,
       a Bench of three Judges of this Court was called upon
       to decide an appeal arising out of a petition filed under
       Section 11(6) of the Arbitration Act for appointment of sole
       arbitrator. The issue before the Court was the determination
       of existence of an arbitration agreement on the basis of
       the documentary evidence produced by the parties. This
       Court prima facie opined that there was no conclusive
       evidence to infer the existence of a valid arbitration
       agreement between the parties. Therefore, the issue of
       existence of a valid arbitration agreement was referred
       to be decided by the Arbitral Tribunal after conducting a
       detailed examination of documentary evidence and cross-
       examination of witnesses.
       161. The above position of law leads us to the inevitable
       conclusion that at the referral stage, the Court only has
       to determine the prima facie existence of an arbitration
       agreement. If the referral court cannot decide the issue,
       it should leave it to be decided by the Arbitral Tribunal.
       The referral court should not unnecessarily interfere with
       arbitration proceedings, and rather allow the Arbitral
       Tribunal to exercise its primary jurisdiction. In Shin-
       Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. [Shin-Etsu
[2024] 9 S.C.R.                                                           215

              Cox & Kings Ltd. v. Sap India Pvt. Ltd. & Anr.


           Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC
           234], this Court observed that there are distinct advantages
           to leaving the final determination on matters pertaining to
           the validity of an arbitration agreement to the Tribunal :
           (Shin-Etsu Chemical Co. case [Shin-Etsu Chemical Co.
           Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234] , SCC p.
           267, para 74)
                “74. … Even if the Court takes the view that
                the arbitral agreement is not vitiated or that
                it is not valid, inoperative or unenforceable,
                based upon purely a prima facie view, nothing
                prevents the arbitrator from trying the issue fully
                and rendering a final decision thereupon. If the
                arbitrator finds the agreement valid, there is no
                problem as the arbitration will proceed and the
                award will be made. However, if the arbitrator
                finds the agreement invalid, inoperative or
                void, this means that the party who wanted to
                proceed for arbitration was given an opportunity
                of proceeding to arbitration, and the arbitrator
                after fully trying the issue has found that there
                is no scope for arbitration.”
                                  xxx xxx xxx
           164. In case of joinder of non-signatory parties to an
           arbitration agreement, the following two scenarios will
           prominently emerge: first, where a signatory party to an
           arbitration agreement seeks joinder of a non-signatory
           party to the arbitration agreement; and second, where a
           non-signatory party itself seeks invocation of an arbitration
           agreement. In both the scenarios, the referral court will
           be required to prima facie rule on the existence of the
           arbitration agreement and whether the non-signatory is
           a veritable party to the arbitration agreement. In view
           of the complexity of such a determination, the referral
           court should leave it for the Arbitral Tribunal to decide
           whether the non-signatory party is indeed a party to the
           arbitration agreement on the basis of the factual evidence
           and application of legal doctrine. The Tribunal can delve
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          into the factual, circumstantial, and legal aspects of the
          matter to decide whether its jurisdiction extends to the
          non-signatory party. In the process, the Tribunal should
          comply with the requirements of principles of natural justice
          such as giving opportunity to the non-signatory to raise
          objections with regard to the jurisdiction of the Arbitral
          Tribunal. This interpretation also gives true effect to the
          doctrine of competence-competence by leaving the issue
          of determination of true parties to an arbitration agreement
          to be decided by the Arbitral Tribunal under Section 16.
          165. In view of the discussion above, we arrive at the
          following conclusions:
          ………
          (l) At the referral stage, the referral court should leave it for
          the Arbitral Tribunal to decide whether the non-signatory
          is bound by the arbitration agreement […]”
                                                   (Emphasis supplied)
32. As discussed above, the respondents have raised a number of
    objections against the present petition, however, none of the
    objections raised question or deny the existence of the arbitration
    agreement under which the arbitration has been invoked by the
    petitioner in the present case. Thus, the requirement of prima facie
    existence of an arbitration agreement, as stipulated under Section
    11 of the Act, 1996, is satisfied.
33. Once the arbitral tribunal is constituted, it shall be open for the
    respondents to raise all the available objections in law, and it is only
    after (and if) the preliminary objections are considered and rejected
    by the tribunal that it shall proceed to adjudicate the claims of the
    petitioner.
34. Further, on the issue of impleadment of respondent no. 2, which is
    not a signatory to the arbitration agreement, elaborate submissions
    have been made on both the sides, placing reliance on terms of the
    agreements, email exchanges, etc. In view of the complexity involved
    in the determination of the question as to whether the respondent no.
    2 is a party to the arbitration agreement or not, we are of the view
    that it would be appropriate for the arbitral tribunal to take a call on
    the question after taking into consideration the evidence adduced
[2024] 9 S.C.R.                                                          217

                  Cox & Kings Ltd. v. Sap India Pvt. Ltd. & Anr.


      before it by the parties and the application of the legal doctrine as
      elaborated in the decision in Cox and Kings (supra).
35. In view of the aforesaid, the present petition is allowed. We appoint
    Shri Justice Mohit S. Shah, former Chief Justice of the High Court
    of Judicature at Bombay to act as the sole arbitrator. The fees of
    the arbitrator including other modalities shall be fixed in consultation
    with the parties.
36.    It is made clear that all the rights and contentions of the parties are
      left open for adjudication by the learned arbitrator.
37. Pending application(s), if any, shall stand disposed of.

      Result of the case: Petition allowed.



      †
          Headnotes prepared by: Ankit Gyan