| ture | 1<br>REPORTABLE<br>IN THE SUPREME COURT OF INDIA<br>CIVIL ORIGINAL JURISDICTION<br>PETITION FOR ARBITRATION (CIVIL) NO. 65 OF 2016<br>Reckitt Benckiser (India) Private Limited …..Petitioner(s)<br>:Versus:<br>Reynders Label Printing India<br>Private Limited and Anr. ....Respondent(s)<br>J U D G M E N T<br>A.M. Khanwilkar, J.<br>1. The singular question involved in this application filed<br>under Sections 11(5), 11(9) and 11(12)(a) of the Arbitration<br>and Conciliation Act, 1996 (for short “the Act”) seeking<br>appointment of a sole arbitrator, is whether respondent No.2 <br>a company established under the laws of Belgium, having its<br>principal place of business at Nijverheldsstraat 3, 2530<br>Not Verified<br>igned by Boechout, Belgium, could be impleaded in the proposed<br>ISHT<br>9.07.01<br>IST<br>arbitration proceedings despite the fact that it is a non |
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| lly s<br>N B<br>201<br>:12<br>on: | |
2
st
signatory party to the agreement dated 1 May, 2014,
executed between the applicant and respondent No.1 a
company established under the Companies Act, 2013 merely
because it (respondent No.2) is one of the group companies of
which respondent No.1 also is a constituent. The legal position
as to when a nonsignatory to an arbitration agreement can be
impleaded and subjected to arbitration proceedings is no more
res integra . In the case of Chloro Controls India Private
Limited Vs. Severn Trent Water Purification Inc. and
1
Ors. , a threeJudge Bench of this Court opined that
ordinarily, an arbitration takes place between the persons who
have been parties to both the arbitration agreement as well as
the substantive contract underlying it. Invoking the doctrine
of “group of companies”, it went on to observe that an
arbitration agreement entered into by a company, being one
within a group of corporate entities, can, in certain
circumstances, bind its nonsignatory affiliates. That
exposition has been followed and applied by another three
1
(2013) 1 SCC 641
3
Judge Bench of this Court in Cheran Properties Limited Vs.
2
In paragraph 23 of this
Kasturi and Sons Limited and Ors.
decision, the Court, after analysing the earlier decisions and
including the doctrine expounded in Chloro Controls India
(supra), concluded as follows:
Private Limited
“23. As the law has evolved, it has recognised that modern
business transactions are often effectuated through multiple
layers and agreements. There may be transactions within a
group of companies. The circumstances in which they have
entered into them may reflect an intention to bind both
signatory and nonsignatory entities within the same group.
In holding a nonsignatory bound by an arbitration
agreement, the court approaches the matter by attributing to
the transactions a meaning consistent with the business
sense which was intended to be ascribed to them. Therefore,
factors such as the relationship of a nonsignatory to a party
which is a signatory to the agreement, the commonality of
subjectmatter and the composite nature of the transaction
weigh in the balance. The group of companies doctrine is
essentially intended to facilitate the fulfilment of a mutually
held intent between the parties, where the circumstances
indicate that the intent was to bind both signatories and
nonsignatories. The effort is to find the true essence of the
business arrangement and to unravel from a layered
structure of commercial arrangements, an intent to bind
someone who is not formally a signatory but has assumed
the obligation to be bound by the actions of a signatory.”
In the present case, it is not in dispute that the
2.
respondents are constituents of a group of companies known
as “Reynders Label Printing Group”. The constituent
2
(2018) 16 SCC 413
| 4<br>companies of the said group of companies can be described in<br>the form of a chart appended to the written submission filed<br>by respondent No.1 as Annexure R1/1, which reads thus:<br>Reynders Label Printing Group<br>Reynesco Invest NV Reynesco NV | | | | | | |
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| Reynders<br>Ttiketten<br>NV (R2) | Reynders<br>Etiquetters<br>Cosmetiques SA | Reynders<br>Pharmaceutical<br>Labels NV | Reynders<br>Label Printin<br>India Pvt.<br>Ltd. (R1) | Reynders<br>gEtiquettes<br>France SA | Reynders<br>Etiketten<br>Polska Sp z. | o.o. |
| | | | | | | |
| 3. Keeping in mind the exposition in Chloro Controls<br>(supra) and Cheran Properties (supra), the crucial question is<br>whether it is manifest from the indisputable correspondence<br>exchanged between the parties, culminating in the agreement<br>dated 1st May, 2014, that the transactions between the<br>applicant and respondent No.1 were essentially with the group<br>of companies and whether there was a clear intention of the<br>parties to bind both the signatory as well as nonsignatory<br>parties (respondent No.1 and respondent No.2, respectively).<br>In other words, whether the indisputable circumstances go to<br>show that the mutual intention of the parties was to bind both | | | | | | |
| Reynesco Invest NV | | Reynesco NV | |
|---|
5
the signatory as well as the nonsignatory parties, namely,
respondent No.1 and respondent No.2, respectively, qua the
existence of an arbitration agreement between the applicant
and the said respondents.
4. In the wake of the amended Section 11(6) read with
Section 11(6A) of the Act, the enquiry by this Court must
confine itself to the examination of existence of an arbitration
agreement. No more and no less. For that, we must revert to
the assertion made by the applicant in the present application.
Be it noted that respondent No.1 has not filed any counter
affidavit to refute the assertions made by the applicant in the
application under consideration. Respondent No.1, however,
through its counsel has urged that respondent No.2 has no
st
concern with the subject agreement dated 1 May, 2014. That
agreement is only between the applicant and respondent No.1
and as a result thereof, it would give rise to a domestic
commercial arbitration and not an international commercial
arbitration. Respondent No.1 has also made it amply clear
through its counsel that it will have no objection, whatsoever,
6
if the Court were to appoint a sole arbitrator for resolving the
dispute between the applicant and respondent No.1, who
would conduct the arbitration proceedings in accordance with
the Act, in Delhi, as a domestic commercial arbitration
between the applicant and respondent No.1 alone.
Be that as it may, reverting to the averments in the
5.
application under consideration, it is mentioned that the
st
dispute arises out of the agreement dated 1 May, 2014,
executed between the applicant and respondent No.1, but
respondent No.2 has been impleaded because it is the parent/
holding company of respondent No.1. The agreement, in the
3
form of clause 13, contains an arbitration agreement between
3
“ 13. Dispute Resolution
13.1 Prior to the beginning of any arbitration process the parties hereby undertake to
attempt in good faith to resolve any dispute by way of negotiation between senior
executives of the parties who have authority to settle such dispute. A copy of any
Escalation Notice shall be given to the Regional Senior Vice President (or equivalent person
of seniority) of each party or their Affiliates (which copy shall state that it is an Escalation
Notice pursuant to this Agreement). Provided, however, that the negotiations shall be
completed within thirty (30) days of the date of the Escalation Notice or within such longer
period as the parties may agree in writing prior to the expiration of the initial thirtyday
period.
13.2 In the event the dispute is not resolved within a period of 30 days from the
commencement of such dispute, the dispute shall be referred to arbitration and the parties
shall mutually appoint a Sole arbitrator who shall conduct the proceedings in accordance
with Indian Arbitration Act, 1996 as amended from time to time or any reenactment
thereof. The arbitration shall be held in Delhi and the proceedings shall be conducted in
English.
13.3 The existence of a dispute with respect to this Agreement between the parties
shall not relieve either party from performance of its obligations under this Agreement that
are not the subject of such dispute.”
7
4
the parties. In terms of clause 9 thereof, respondent No.2 has
assumed the liability to indemnify the applicant in case of any
loss, damage etc., caused to the applicant on account of acts
and omissions of respondent No.1. Respondent No.2 is an
integral party to the stated agreement which contains an
arbitration agreement in the form of clause 13.2. The
applicant has relied upon emails exchanged which, according
to the applicant, provide the record of an arbitration
agreement within the meaning of Section 7(4)(b) of the Act.
According to the applicant, the respondents had approached
the applicant with an offer to print labels for the applicant,
including for booklets and leaflets and labels required for
Mucinex, exported to USA. The ‘Drug Facts’ and other details
4
“ 9. Indemnity
9.1 The Supplier and the Supplier group shall indemnify RB against any claims, losses,
damages and expenses howsoever incurred or suffered by RB (and whether direct or
consequential or economic loss) arising out of or in connection with
(i) defective workmanship, quality or materials;
(ii) an infringement or alleged infringement of any intellectual property rights
caused by the use, manufacture, or supply of the products; and
(iii) negligent performance or failure or delay in performance of the terms of this
Agreement by this Supplier.
9.2 Supplier shall indemnify and hold harmless RB and their respective officers,
directors, agents, and employees against any and all claims:
i. Arising out of an alleged breach of the terms and conditions of other provision of
this Agreement.
ii. based upon any allegations that the material produced by RB using Product was
defective (including, but not limited to, manufacturing or refining defects);
These provisions shall survive termination or expiry of this Agreement.”
8
which were to be printed on the backlabel were in accordance
with the laws of USA and the respondents were aware of the
fact that Mucinex supply is meant for USA market. The
th
applicant relied upon the minutes of the meeting held on 29
May, 2013, between the officials of the applicant and the
officials of respondent No.1. Pursuant thereto, the respondents
made a presentation to the applicant about their capability to
print labels for the applicant, including the booklet and leaflet
labels as desired and made several representations about the
quality of their product. The applicant asserts that the
respondents had held exhaustive negotiations in relation to
the execution of agreement whereby the respondents were to
provide packaging material to the applicant and its affiliates.
rd
Based on negotiations, the applicant, by email dated 23
April, 2014, circulated a draft of the agreement along with the
code of conduct and antibribery policy of the applicant. The
applicant asserts that the respondents replied to the same
through Mr. Frederik Reynders (promoter of respondent No.2
which is the parent company of respondent No.1) by his email
9
rd
of 23 April, 2014 at 12:00 PM. The said email sent by Mr.
rd
Frederik Reynders was responded to by the applicant on 23
April, 2014 at 12:10 PM. Further, Mr. Frederik Reynders, by
rd
his email of 23 April, 2014 at 4:09 PM, attached a copy of
the draft with some attached comments from the headquarters
of the respondents in Belgium (respondent No.2 herein).
According to the applicant, the comments related to clause 9
of the draft agreement relating to the indemnity of respondent
Nos.1 & 2. It is then stated that in the same email, Mr.
Frederik Reynders gave a counter proposal, concerning clause
9.1 of the draft agreement, of providing a document of
insurance to inform the applicant about their maximum
coverage. On this basis, it is asserted that respondent No.2
was aware of the fact that indemnity is being extended to the
applicant and that respondent No.2 was the disclosed
principal on whose behalf the respondent No.1 was executing
the agreement. It is further asserted that the arbitration
agreement was an integral part of the agreement executed
between the applicant and respondent No.1, on its behalf and
10
on behalf of its disclosed principal, namely, respondent No.2.
The applicant has then asserted that respondent No.1
th
addressed an email dated 6 June, 2014, to the applicant
enclosing a signed copy of the agreement and further stating
that hard copy would be delivered to the applicant. The
relevant averments in the application referred to above have
been articulated in paragraphs 7.7 to 7.12, which read thus:
“7.7 The Applicant states that the Respondents had
approached it with its offer to print labels for the applicant,
including booklet and leaflet labels (required for Mucinex
exported to USA). The Drug Facts and other details which
were to be printed on the back label were in accordance with
the laws of USA and the Respondents were aware of the fact
that the Mucinex supply is meant for USA market. True
typed copy of the Minutes of Meeting held on November 22,
2013 between the officials with the respondent No.1 are
annexed as ANNEXURE A2 (at pages 133 to 134).
7.8 The Respondents subsequently made a presentation
about their capability to print labels for the Applicant,
including booklet and leaflet labels (required for Mucinex
exported to USA). During personal meeting and in the
presentation, the Respondents represented that they are the
market leaders in label printing across the globe and they
provide creativity and innovation for selfadhesive labels.
Further, the Respondents represented that Reynders label
printing in India offers tailor made solutions to fit all needs
of the Respondent including perfect adhesion on vials
conforming to ISO 15010), every single label is printed as per
specifications) and numbering of each label, to ensure
quality control. The Respondents offered to print booklet &
leaflet labels “ to put extra information on a packaging where
the available space for text or images is rather limited”. The
Respondents further specifically emphasised that such
booklet labels contain a multipage booklet, glued at the
11
back, having application in pharmaceutical industry. For the
purpose of adhering and maintaining strict quality control
measures, the Respondents represented that inspection of
printed labels is conducted through a system consisting of
“500 100% camera controlled inspection system, online
numbering on back side and units for offline numbering”.
Further, in relation to quality assurance, the Respondents
represented to the Applicant that they provide standard
quality assurance and in addition, they also provide quality
check by camera control. True typed copy of the Presentation
dated NIL made by the Respondents is annexed as
ANNEXURE A3 (at pages 135 to 156).
7.9 In the interregnum, the Applicant entered into a
Supply Agreement dated April 16, 2014 with its affiliate in
India viz., RB Healthcare. True typed copy of the Supply
Agreement executed between the Applicant and RB
Healthcare dated 16.04.2014 is annexed as ANNEXURE A4
(at pages 157 to 189).
7.10 The Applicant and Respondents held detailed
negotiations in relation to execution of an agreement,
whereby the Respondents were to provide packaging material
to the Applicant and its affiliates. Based on negotiations, the
Applicant by email dated April 23, 2014, circulated a draft of
the Agreement along with the Code of Conduct and Anti
Bribery policy, of the Applicant. True typed copy of the email
23.04.2014 addressed by the Applicant to the Respondents
is annexed as ANNEXURE A5 (at pages 190 to 191). The
applicant also requested the Respondents to attach a copy of
the executed specifications of Mucinex labels and signed
copy of the pricing/costing agreement for Mucinex Labels. It
is relevant to state that Clause 9 of the draft Agreement,
specifically stated “ The Supplier and the Supplier group shall
indemnify RB against any claims, losses, damages and
expenses howsoever incurred or suffered by RB (and whether
direct or consequential or economic loss) arising out of or in
connection with……negligence performance or failure or delay
in performance of the terms of this agreement by the
Supplier”.
7.11 In response, the Respondents through Mr. Frederik
Reynders (promoter of Respondent No.2 which is a
parent of Respondent No.1) by his email responded on
12
April 23, 2014 at 12:00 pm. True typed copy of the email
dated April 23, 2014 addressed by Mr. Frederik Reynders to
the Applicant is annexed as ANNEXURE A6 (at page 192).
The said email sent by Mr. Frederik Reynders was
responded by the Applicant on April 23, 2014 at 12:10
pm. True typed copy of the email dated April 23, 2014
addressed by the Applicant to Mr. Frederik Reynders is
annexed as ANNEXUXRE A7 (at page 193). Further, Mr.
Frederik Reynders by his email of April 23, 2014 at
04.09 pm attached a copy of the draft Agreement with
“some comments of our HQ in Belgium (Respondent No.2
herein)”. True typed copy of the email dated April 23, 2014
with the commented Agreement sent by Mr. Frederik
Reynders to the Applicant is annexed as ANNEXURE A8 (at
page 194). The comments related to Clause 9 of the draft
Agreement relating to Indemnity extended by the Respondent
Nos.1 and 2. In the same email, Mr. Reynders also stated
that for Clause 9.1 of the draft Agreement, “I will
provide you with an document of our Insurance to
inform you about our maximum coverage”. From the
above, it is clear that Respondent No.2 was aware of the fact
that indemnity is being extended to the Applicant and the
fact that Respondent No.2 is the disclosed principal, on
whose behalf the Respondent No.1 is executing the
Agreement. In this regard, it is relevant to state that the
arbitration agreement is an integral part of the Agreement
executed between the Applicant and the Respondent No.1.
Hence, the arbitration agreement also has been executed by
Respondent No.1 on its behalf and on behalf of its disclosed
principal i.e. the Respondent No.2.
7.12 After further discussions, the Respondent No.1, on
its behalf of and on behalf of its parent and disclosed
principal – Reynders Belgium) of Respondent No.2,
executed the Agreement on May 1, 2014 and sent the
In this context it is stated that the
same to the Applicant.
Respondent No.1 had addressed an email dated June 6,
2014 to the Applicant enclosing the signed copy of the
Agreement and further stating that hard copy shall be
delivered to the Applicant. True typed copy of the email
dated June 6, 2014 sent by the Respondent No.1 to the
Applicant is annexed as ANNEXURE A9 (at page 195). The
13
Agreement was subsequently executed by the Applicant and
a hard copy, was sent to the Respondents.”
(emphasis supplied)
We deem it apposite to reproduce the correspondence,
6.
referred to in the aforesaid paragraphs of the application
under consideration, for examining the case made out by the
applicant as to whether respondent No.2 can be said to have
assented or had an intention to become party to the
arbitration agreement by its conduct, without being a
st
signatory to the agreement dated 1 May, 2014. Annexures5
to 9 referred to by the applicant read thus:
“ ANNEXURE A5
From: Joshi, Sonu [mail to:Sonu.Joshi@rb.com]
Sent: woensdag 23 april 2014 10:38
To: Frederic Reynders
Subject: Commercial Agreement sighoffRB & Reynders
Dear Frederik,
As per our Global procurement policies and procedures, it is
mandatory for RB to signoff a commercial agreement,
document on code of conduct and AntiBribery policies with
all of our suppliers. Accordingly, please find the following
documents for immediate signoff.
1. Code of Conduct
2. AntiBribery and
3. Commercial agreement (Packing material Supply
Agreement) Along with the above, please attach a copy of the
signedoff specs of Mucinex labels and the signed copy of our
pricing/costing agreement on the Mucinex labels.
14
Please go through the commercial agreement, provide all
relevant details i.e. Company Name, Address, Supply/Mfg.
location, Details of Products manufactured/supplied, Agreed
payment terms etc. and send us the duly signed (by the
authorized signatory) & company stamped copy along with
the signed & stamped copies of the Code of Conduct and
Anti Bribery policies.
For any information or clarifications, please contact me.
Request you to email/send us all the documents latest by
th
30 April 2014 and if earlier it would be really appreciated.
Regards,
Sonu Dev Joshi
Manager Procurement –Packing Material
RB
Plot – 48, Institutional Area, Sector32, Gurgaon – 122001
Direct911244028197; Mobile +91 8527399487
www.reckittbenckiser.com
ANNEXURE A6
On 23Apr2014, at 12:00 pm., “Frederik Reynders”
< fre@reynders.com > wrote:
Dear Sonu,
th
We will provide you with all complete documents before 30 .
A lead time of 14 days is highly requested and recommended
a leaflet label after receival of PO till delivery at RB factory in
Baddi.
Please confirm.
Best regards,
Frederik Reynders
Reynders_Label Printing India Pvt. Ltd.
www.reynders.com
ANNEXURE A7
15
From: Joshi, Sonu [mail to: Sonu.Joshi@rb.com]
Sent: woensdag 23 april 2014 12:10
To: Frederic Reynders
Cc: Kari Vandenbussche
Subject: Re: Commercial Agreement signoff – RB &
Reynders
Hi Frederik
Thanks.
We (me and you) will discuss on the leadtimes, align on
some buffer days and publish the official lead times to
BADDI planning team.
The unofficial or real/crash/squeeze lead time must remain
between the three of us.
Regards
Sonu Dev Joshi
ManagerPM Procuremen
RB
ANNEXURE A8
From:
Frederic Reynders [mail to: fre@reynders.com ]
Sent: Wednesday, April 23, 2014 4:09 PM
To: Joshi, Sonu
Cc: Kari Vandenbussche
Subject: RE: Commercial Agreement signoff – RB &
Reynders
Dear Sonu,
Please find attached the contract with some comments of
our HQ in Belgium. We will discuss & agree on a realistic
and necessary lead time between the 3 of us.
For 9.1. I will provide you with an document of our
insurance to inform you about our maximum coverage.
16
Waiting for your feedback. Feel free to call in case of any
questions.
Frederik Reynders
Reynders_Label Printing India Pvt. Ltd.
www.reynders.com
ANNEXURE A9
From: Kari Vandenbussche [mail to: fre@reynders.com ]
Sent: Friday, June 06, 2014 4:38 PM
To: Joshi, Sonu
Cc:
Frederic Reynders
Subject: FW: Commercial Agreement signoff – RB &
Reynders
Dear Mr. Sonu Joshi,
Attached you find the signed agreement with Company
stamp, hard copies will be delivered today at your R&B office
in Gurgaon.
Best regards,
Kari Vandenbussche
Site Manager
Plot no. F 686 – Chopanki Ind. Area
Chopanki 301019 – Bhiwadi – Rajasthan
T + 91 987 1024 467
M + 91 987 102 4467
F + 91 149 330 5403
”
www.reynders.com
(emphasis supplied)
7. Respondent No.2 has filed its counter affidavit and
emphatically refuted the assertions made by the applicant that
17
respondent No.2 is the parent or holding company of
respondent No.1. It is stated that respondent No.1 and
respondent No.2 both are part of Reynders Label Printing
Group. This group is an internationally operating group of
seven printing companies and each of these companies has its
own separate legal entities and operates in different offices
independently. Further, these companies only share a
common parent entity, namely, Reynesco NV which is also the
holding company of both respondent companies. First,
respondent No.2 had no presence or operation whatsoever in
India and was not involved in the negotiation, execution
and/or performance of the agreement. There is no privity of
contract between the applicant and respondent No.2. Second,
respondent No.2 in its counter affidavit has clearly stated that
Mr. Frederik Reynders was not the promoter of respondent
No.2. However, Mr. Frederik Reynders was an employee of
respondent No.1. The signatory to the stated agreement, Mr.
Kari Vandenbussche, had neither exercised any managerial
functions for respondent No.2, nor was he an authorized
18
representative or a director of respondent No.2 with any
authority to appoint the said respondent. The relevant extract
of the counter affidavit reads thus:
“ THE ANSWERING RESPONDENT DID NOT PARTICIPATE
IN THE NEGOTIATIONS PERTAINING THE AGREEMENT
15. It is incorrect to state that the answering
Respondent was at any point in time involved in the
negotiations with respect to the Agreement. The
answering Respondent did not make any presentation or
representations to the Applicant. From the documents
annexed by the Applicant, there is nothing to show that
the answering Respondent ever made any presentation
to the Applicant or was present at any meeting prior to
the date of the alleged Agreement.
16. Contrary to what has been alleged by the
Applicant, the answering Respondent did not provide
any comments on the draft of the Agreement. The
answering Respondent submits that it is not aware of the
email dated 23.04.2014, as alleged by the Applicant.
Respondent No.1 did not forward email dated
23.04.2014 or any such email to the answering
Respondent seeking comments of the answering
Respondent on the draft of the Agreement. The reference
to HQ in Belgium is not a reference to the answering
Respondent. As explained above, the answering
Respondent is but one of seven subsidiaries of the
holding company Reynesco NV.
17. The answering Respondent submits that it was not
party to any negotiations pertaining to the Agreement. The
signatory to the Agreement, Mr. Karl Vandenbussche,
and Mr. Frederik Reynders, who is alleged to have
carried out the negotiations with respect to the
Agreement, were not representing (or purporting to
19
represent) or acting in any way for the answering
Respondent, and they had no authority to bind the
answering Respondent.
18. The answering Respondent has no connection to the
present dispute not having been a party in any capacity to
the negotiation, execution, or enforcement of the Agreement.
RESPONDENT NO.1 HAD NO AUTHORITY TO BIND THE
ANSWERING RESPONDENT AND DID NOT EXECUTE THE
AGREEMENT ON BEHALF OF THE ANSWERING
RESPONDENT.
19.
The signatory to the Agreement is Mr. Karl
Vandenbussche, who at no point time exercised any
managerial functions for the answering Respondent. Mr.
Vandenbussche has never been an authorized
representative or a director of the answering
Respondent, having any authority to bind the answering
Respondent.
20. Further, Mr. Frederik Reynders, who is alleged to
have carried out the negotiations with respect to the
Agreement, has incorrectly been described as the
promoter of the answering Respondent. Mr. Frederik
Reynders was not and has never been an employee,
officer or representative of the answering Respondent.
21. The Applicant contends that the fact that Mr. Frederik
Reynders was acting on behalf of the answering Respondent
and the answering Respondent is the parent company of
Respondent No.1 binds the answering Respondent to the
Agreement and consequently the arbitration Agreement. It is
submitted that the answering Respondent is not the
parent company of Reynders India and at no point in
time was Mr. Frederik Reynders ever employed by the
answering Respondent or for that matter Reynesco NV.
Clearly, Mr. Frederik Reynders was not acting for the
answering Respondent, and had no authority to bind the
answering Respondent. From the communication and
documents annexed by the Applicant, there is nothing to
show that Mr. Vandenbussche or Mr. Frederik Reynders
represented themselves to be the agents of the answering
20
Respondent or authorized persons acting for the answering
Respondent.
22. It is submitted that the answering Respondent has no
connection to the present dispute not having been a party in
any capacity to the negotiation, execution, or enforcement of
the Agreement. Therefore, the Applicant’s submission that
the Agreement was executed by Respondent No.1 on behalf
of Respondent No.2, is incorrect. As demonstrated above, the
answering Respondent was never a participant in the
negotiations between the Applicant and Respondent No.1.”
(emphasis supplied)
The applicant has filed a rejoinder affidavit in which it is
8.
vaguely stated that Mr. Frederik Reynders, during the stage of
negotiation of the agreement, was taking directions from the
representatives of respondent No.2. In paragraphs 10 to 12 of
the said affidavit, in response to the stand taken by
respondent No.2, the applicant has stated thus:
“10. The contents of Para 15 are wrong and denied. It is a
matter of record (Annexure – A3 at Page 135 of the
Application) that the Respondents had approached the
Applicant at the time of negotiation of Agreement under the
common banner of ‘Reynders Label Printing’ and in that
capacity had made a presentation to the Applicant. In fact,
the Respondents market themselves as a label printing
company, the printing being executed through various sites
around the world.
11. The contents of Para 1618 are incorrect and denied. It is
a matter of record that Respondent No.2 had actively
participated in the negotiation of the Agreement. It is a
matter of record (Annexure A8 at Page 194 of Application)
that Respondent No.1 was taking directions from
Respondent No.2 during the stage of negotiations of the
21
Agreement. In fact, Respondent No.2 through Mr. Kristof
Vandenbroucke had shared comments on the Agreement.
The same Mr. Kristof Vandenbroucke subsequently
participated in the escalation meeting held in
Amsterdam for amicable resolution of the disputes that
have arisen between the parties. Without prejudice to the
same, it is submitted that it is inconsequential whether or
not Respondent No.2 participated in negotiations of the
Agreement. As elaborated in the Preliminary Submissions,
there is irrefutable evidence that Respondent No.2 has
assented to the Agreement.
12. The contents of Para 1922 are wrong and denied. It is a
matter of record (Annexure A8 at Page 194 of the
Application) that Mr. Frederik Reynders, during the
stage of negotiations of the Agreement, was taking
In
directions from representatives of Respondent No.2.
any case, as demonstrated hereinabove, Respondent No.2
has admitted to its liability under the Indemnity Clause, its
limited objection being the extent of its liability thereunder.
Additionally, Respondent No.2 had participated in the
escalation meetings held in Amsterdam under the
Arbitration Clause. Clearly the paragraphs under reply are
an afterthought.”
(emphasis supplied)
In the backdrop of the averments in the application and
9.
the correspondence exchanged between the parties adverted to
by the applicant, it is obvious that the thrust of the claim of
the applicant is that Mr. Frederik Reynders was acting for and
on behalf of respondent No.2, as a result of which the
respondent No.2 has assented to the arbitration agreement.
This basis has been completely demolished by respondent
22
No.2 by stating, on affidavit, that Mr. Frederik Reynders was
in no way associated with respondent No.2 and was only an
employee of respondent No.1, who acted in that capacity
during the negotiations preceding the execution of agreement.
Thus, respondent No.2 was neither the signatory to the
arbitration agreement nor did have any causal connection with
the process of negotiations preceding the agreement or the
execution thereof, whatsoever. If the main plank of the
applicant, that Mr. Frederik Reynders was acting for and on
behalf of respondent No.2 and had the authority of respondent
No.2, collapses, then it must necessarily follow that
respondent No.2 was not a party to the stated agreement nor
had it given assent to the arbitration agreement and, in
absence thereof, even if respondent No.2 happens to be a
constituent of the group of companies of which respondent
No.1 is also a constituent, that will be of no avail. For, the
burden is on the applicant to establish that respondent No.2
had an intention to consent to the arbitration agreement and
be party thereto, maybe for the limited purpose of enforcing
23
the indemnity clause 9 in the agreement, which refers to
respondent No.1 and the supplier group against any claim of
loss, damages and expenses, howsoever incurred or suffered
by the applicant and arising out of or in connection with
matters specified therein. That burden has not been
discharged by the applicant at all. On this finding, it must
necessarily follow that respondent No.2 cannot be subjected to
the proposed arbitration proceedings. Considering the
averments in the application under consideration, it is not
necessary for us to enquire into the fact as to which other
constituent of the group of companies, of which the
respondents form a part, had participated in the negotiation
process.
10. Suffice it to observe that respondent No.2 was never
involved in the negotiation process concerning the stated
st
agreement dated 1 May, 2014. On this finding, the
application must fail as against respondent No.2 and as a
consequence whereof, the provisions for making reference to
the sole arbitrator, on the assumption that it is an
24
international commercial arbitration, cannot be taken forward.
As respondent No.1 is a company having been established
under the provisions of the Indian Companies Act and having
its registered office in India, the applicant can pursue its
remedy against respondent No.1 for appointment of a sole
arbitrator to conduct arbitration proceedings, as a domestic
commercial arbitration.
11. Indeed, the applicant had vehemently relied upon the
circumstances and correspondence postcontract but that
cannot be the basis to answer the matter in issue. The
respondent No.2 has justly relied upon the exposition in
Godhra Electricity Co. Ltd. and Anr. Vs. State of Gujarat
5
, to buttress the argument that postnegotiations in
and Anr.
law would not bind the respondent No.2 qua the arbitration
agreement limited between applicant and respondent No.1. In
any case, even this plea is based on the assumption that Mr.
Frederik Reynders was associated with and had authority to
transact on behalf of respondent No.2, which assertion has
5
(1975) 1 SCC 199
25
been refuted and rebutted by respondent No.2. It is clearly
stated that Mr. Frederik Reynders was neither connected to
nor had any authority of respondent No.2, but was only an
employee of respondent No.1 and acted only in that capacity.
For the view that we have taken, it is unnecessary to
12.
dilate on other contentions. Suffice it to observe that the
application must fail against respondent No.2 and on that
conclusion, no relief can be granted to the applicant who has
invoked the jurisdiction of this Court on the assumption that
it is a case of international commercial arbitration. Despite
that, respondent No.1 through counsel has urged that as the
subject agreement between the applicant and respondent No.1
contains an arbitration clause (clause 13) and since disputes
have arisen between them, the respondent No.1 would agree to
the appointment of a sole arbitrator by this Court for
conducting arbitration proceedings between the applicant and
respondent No.1, as domestic commercial arbitration. This
stand has been reiterated in the written submissions filed on
behalf of respondent No.1, filed after the conclusion of the oral
26
arguments. Resultantly, even though no relief can be granted
to the applicant as against respondent No.2, we proceed to
pass the following order in the interest of justice.
The arbitration application is dismissed as against
13.
respondent No.2. However, we appoint Mr. Justice Badar
Durrez Ahmed (Former Chief Justice, Jammu & Kashmir High
Court) as the sole arbitrator to conduct domestic commercial
arbitration at New Delhi, between the applicant and
respondent No.1 on the terms and conditions as specified in
the Act of 1996.
14. Application stands disposed of in the above terms. No
costs. All pending interim applications are also disposed of.
…………………………..….J.
(A.M. Khanwilkar)
…………………………..….J.
(Ajay Rastogi)
New Delhi;
July 01, 2019.
