Case: Purple Medical Solutions Pvt. Ltd Vs. MIV Therapeutics INC &amp; Another

of clause 6.1 (c and d) of the SPA and clause 4.1(c and g) of the LRA. Accordingly, a dispute notice was issued on 4th October, 2013, calling upon the respondents to expeditiously clear their dues as per the judgment and resolve the dispute as well as allot the pending shares. Having received no response to the dispute notice, the petitioner issued a Notice of Arbitration on 16th October, 2013, appointing Mr. Justice S.H. Kapadia, a former Chief Justice of India, as their nominee arbitrator. Subsequent to the said appointment, the petitioner has been noticed by one Mr. Alan Lindsay claiming to be an assignee of the rights of RHO against the respondents and MIV India of an entitlement to receive a sum of Rs. 850,000. Legal action for recovery of the aforesaid sum of money was threatened in the event of the claim remaining unpaid.9. It is in the aforesaid circumstances that the two applications have been filed under Section 11(6) of the Arbitration Act for appointment of Arbitrator(s) on behalf of both the respondents. 10. According to the petitioner, the second respondent is an alter-ego of the first respondent. The first respondent is merely a corporate veil of the said respondent. All acts/deeds/transactions on behalf of the first respondent was performed by the second respondent including signing of the two agreements; the representations made; and the commitments and undertakings furnished. It is, therefore, submitted that the appointment of an Arbitrator to be made by the Court should not only be on behalf of the first respondent but also on behalf of the second respondent. To support the above reliance has been placed on the decision of this Court in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. and others [(2013) 1 SCC 641] . The relevant paragraphs placed before the Court may be extracted herein below: "102. Joinder of non-signatory parties to arbitration is not unknown to the arbitration jurisprudence. Even the ICCAs Guide to the Interpretation of the 1958 New York Convention also provides for such situation, stating that when the question arises as to whether binding a non-signatory to an arbitration agreement could be read as being in conflict with the requirement of written agreement under Article I of the Convention, the most compelling answer is "no" and the same is supported by a number of reasons.103. Various legal basis may be applied to bind a non-signatory to an arbitration agreement:103.1 The first theory is that of implied consent, third party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities.103.2 The second theory includes the legal doctrines of agent-principal relations, apparent authority, piercing of veil (also called "the alter ego"), joint venture relations, succession and estoppel. They do not rely on the parties intention but rather on the force of the applicable law.104. We may also notice the Canadian case of The City of Prince George v. A.L. Sims & Sons Ltd. [(1998) 23 YCA 223]wherein the Court took the view that an arbitration agreement is neither inoperative nor incapable of being performed if a multi-party dispute arises and not all parties are bound by the arbitration agreement: the parties bound by the arbitration agreement are to be referred to arbitration and court proceedings may continue with respect to the other parties, even if this creates a risk of conflicting decisions.107. If one analyses the above cases and the authors views, it becomes abundantly clear that reference of even non-signatory parties to an arbitration agreement can be made. It may be the result of implied or specific consent or judicial determination. Normally, the parties to the arbitration agreement calling for arbitral reference should be the same as those to the action. But this general concept is subject to exceptions which are that when a third party, i.e. non-signatory party, is claiming or is sued as being directly affected through a party to the arbitration agreement and there are principal and subsidiary agreements, and such third party is signatory to a subsidiary agreement and not to the mother or principal agreement which contains the arbitration clause, then depending upon the facts and circumstances of the given case, it may be possible to say that even such third party can be referred to arbitration. " 11. The respondents have not appeared before this Court in spite of service being effected by courier and e-mail under orders of the Court. The process was repeated before the hearing began. Even after the hearing commenced the matters were kept partially heard and the fact that the hearing had commenced was directed to be intimated to the respondents by courier and e-mail which direction has been duly complied with. In spite of the above the respondents have chosen not to contest the proceedings. 12. 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 (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 Private Limited (supra), 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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]12. 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 (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 Private Limited (supra), 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.