Case: Oil and Natural Gas Corporation Ltd Vs. M/s Discovery Enterprises Pvt. Ltd. &amp; Anr

oil and gas sector and DEPL has indicated on the website that it works under the fraternal hood of the said group; (vii) DEPL is promoted and managed by the son and daughter in law of the Managing Director of JDIL; (viii) The bid submitted by DEPL was signed by G D Sharma as an authorized signatory who is an employee of JDIL; (ix) The Managing Director of JDIL, Mr Naresh Kumar, had negotiated with the owners of the vessel for hiring on behalf DEPL; (x) DEPL was incorporated in 2003; (xi) Mohan Ramanathan who attended the office of ONGC in connection with the subject contract was the General Manager of JDIL; and (xii) Almost all senior officers of JDIL including its Managing Director actively took part in matters relating to the hiring of the vessel, its deployment, performance and related issues. Therefore, a corporate, financial and functional unity exists between DEPL and JDIL. 49. At the hearing before the first Arbitral Tribunal on 7 July 2009, the documents which were produced by ONGCs witness were taken on the record. Counsel for JDIL objected to these documents on the ground of relevance and admissibility but stated that he would cross-examine the witness without prejudice to those contentions. The first Arbitral Tribunal observed that the rival contentions would be decided while disposing of the application under Section 16. ONGC also filed an application for discovery and inspection before the first Arbitral Tribunal and the annexure to the application contained a schedule indicating the disclosures which were sought. The order of the first Arbitral Tribunal notes the submission of ONGC that the applications for discovery and inspection must be decided first and it is only on the completion of the process that JDILs challenge to jurisdiction under Section 16 could be addressed. The first Arbitral Tribunal deferred a decision on the two applications until the issue of jurisdiction was decided. The net result is that the applications for discovery and inspection which were crucial to ONGCs claim that there existed functional, financial and economic unity between DEPL and JDIL remained to be decided before the application under Section 16 was taken up. There is merit in the submission which was been urged on behalf of the ONGC that the application for discovery and inspection had to be decided before the plea of jurisdiction was adjudicated upon. The application for discovery and inspection was intended to facilitate ONGC in its plea that there existed functional, financial and economic unity between the two companies. The failure of the first Arbitral Tribunal to hear the application for discovery and inspection goes to the root of its interim award dated 27 October 2010 holding an absence of jurisdiction qua JDIL. The interim award of the Arbitral Tribunal in the first proceeding, dated 27 July 2010 refers to the documents which were produced by ONGC and to the submission that neither DEPL nor JDIL had led any evidence to controvert the documentary and oral evidence adduced by ONGC. The first Arbitral Tribunal upheld the plea of jurisdiction that JDIL is neither a party to the contract nor had it submitted a bid to ONGC which resulted in the formation of the contract. The Tribunal held that the agreement was only between ONGC and DEPL and that in terms of Section 7, an agreement to arbitrate is between the parties to the agreement. While observing that the arbitration agreement was only between DEPL and ONGC, the Tribunal held that neither was there an arbitration agreement between ONGC and JDIL nor was JDIL a signatory to the agreement between ONGC and DEPL. After noting the documents which were relied upon by ONGC, the Tribunal held that there was no tickle of evidence to indicate that JDIL, a distinct incorporated legal entity, ever played any role to find itself in the contract between JDIL and ONGC. The executives of JDIL who participated in the contractual dealing were held to be representatives of DEPL. Reading the interim award dated 27 October 2010 of the first Arbitral Tribunal, the unmistakable impression which emerges from the record is that the primary basis for the determination of an absence of jurisdiction is that the arbitration agreement was between ONGC and DEPL. The legal foundation of the group of companies doctrine has not been evaluated, on facts or law. True enough, the judgment of this Court in Cholo Controls (supra) is of 2013, Cheran Properties (supra) is of 2018 and MTNL (supra) came in 2020. However, ONGC had clearly laid out the factual and legal foundation for setting up a case in opposition to the plea of JDIL. The first Arbitral Tribunal has made a fundamental error of law in not deciding the application by ONGC on discovery and inspection of documents before it ruled on jurisdiction. In doing so, the first Arbitral Tribunals interim award dated 27 October 2010 goes against the principles of natural justice. The failure to consider the application for discovery and inspection of documents results in a situation where vital evidence that could have assisted the Tribunal in its determination of the challenge under Section 16 was shut out. As a matter of fact, it emerged from the record that no evidence was adduced by JDIL in support of its plea of the absence of jurisdiction under Section 16. JDIL having taken the plea of absence of jurisdiction was required to establish the grounds on which it set about to establish its plea. 50. Based on the above discussion, the interim award of the first Arbitral Tribunal stands vitiated because of: (i) The failure of the arbitral tribunal to decide upon the application for discovery and inspection filed by ONGC; (ii) The failure of the arbitral tribunal to determine the legal foundation for the application of the group of companies doctrine; and (iii) The decision of the arbitral tribunal that it would decide upon the applications filed by ONGC only after the plea of jurisdiction was disposed of. D. Conclusion

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

Explanation:
0[ds]The interpretation of the term parties vis-à-vis an arbitration agreement under Section 7 has been dealt with by this Court in Indowind (supra) in the context of an application for the appointment of an arbitrator under Section 11(6). In that case, the second respondent company was the promoter of Indowind. The first and second respondent had entered into an agreement of sale. In the agreement, the seller was described to include the first respondent and its subsidiaries. The second respondent was described as the buyer and as the promoter of Indowind. Under the agreement, the seller agreed to transfer business assets for a consideration which was partly payable in money and partly by the issuance of shares. The sale agreement also incorporated a clause to arbitrate any dispute. The Board of Directors of the first and second respondent approved of the agreement, but there was no approval by the Board of Indowind. After a dispute arose, the first respondent instituted a petition under Section 11(6) against both the second respondent and Indowind for the appointment of an arbitrator. Indowind resisted the petition on the ground that it was not a party to the agreement between the first and second respondent. The application was allowed by the Chief Justice of the Madras High Court by observing that prima facie Indowind was a party after lifting the corporate veil and noticing Indowinds intention to be bound by the sale agreement. Two issues were framed by this Court for consideration:(i) Whether an arbitration clause found in a document (agreement) between two parties, could be considered as a binding arbitration agreement on a person who is not a signatory to the agreement;(ii) Whether a company could be said to be a party to a contract containing an arbitration agreement, even though it did not sign the agreement containing an arbitration clause, with reference to its subsequent conduct.Justice R V Raveendran, speaking for the two-judge Bench in Indowind (supra) held that if Indowind had acknowledged or confirmed in any correspondence, agreement or document that it was a party to the arbitration agreement between the first and second respondent or that it was bound by the arbitration agreement contained in that contract, it could have been possible to say that Indowind is a party to the arbitration agreement. That however was not the position. The decision in Indowind (supra) was in the context of an application under Section 11(6). A party which was not a signatory to the arbitration agreement had raised an objection on the ground that the agreement to arbitration did not operate in relation to it. The Court refused to pierce the corporate veil and relied on a strict interpretation of Section 7 to hold thus :17. It is not in dispute that Subuthi and Indowind are two independent companies incorporated under the Companies Act, 1956. Each company is a separate and distinct legal entity and the mere fact that the two Companies have common shareholders or common Board of Directors, will not make the two Companies a single entity. Nor will the existence of common shareholders or Directors lead to an inference that one company will be bound by the acts of the other. If the Director who signed on behalf of Subuthi was also a Director of Indowind and if the intention of the parties was that Indowind should be bound by the agreement, nothing prevented Wescare insisting that Indowind should be made a party to the agreement and requesting the Director who signed for Subuthi also to sign on behalf of Indowind.18. The very fact that the parties carefully avoided making Indowind a party and the fact that the Director of Subuthi though a Director of Indowind, was careful not to sign the agreement as on behalf of Indowind, shows that the parties did not intend that Indowind should be a party to the agreement. Therefore the mere fact that Subuthi described Indowind as its nominee or as a company promoted by it or that the agreement was purportedly entered by Subuthi on behalf of Indowind, will not make Indowind a party in the absence of a ratification, approval, adoption or confirmation of the agreement dated 24-2-2006 by Indowind.20. Wescare referred to several acts and transactions as also the conduct of Indowind to contend that an inference should be drawn that Indowind was a party to the agreement or that it had affirmed and approved the agreement or acted in terms of the agreement. An examination of the transactions between the parties to decide whether there is a valid contract or whether a particular party owed any obligation towards another party or whether any person had committed a breach of contract, will be possible in a suit or arbitration proceeding claiming damages or performance. But the issue in a proceeding under Section 11 is not whether there was any contract between the parties or any breach thereof. A contract can be entered into even orally. A contract can be spelt out from correspondence or conduct. But an arbitration agreement is different from a contract. An arbitration agreement can come into existence only in the manner contemplated under Section 7. If Section 7 says that an arbitration agreement should be in writing, it will not be sufficient for the petitioner in an application under Section 11 to show that there existed an oral contract between the parties, or that Indowind had transacted with Wescare, or Wescare had performed certain acts with reference to Indowind, as proof of arbitration agreement.24. It is no doubt true that if Indowind had acknowledged or confirmed in any correspondence or other agreement or document, that it is a party to the arbitration agreement dated 24-2-2006 or that it is bound by the arbitration agreement contained therein, it could have been possible to say that Indowind is a party to the arbitration agreement. But that would not be under Section 7(4)(a) but under Section 7(4)(b) or Section 7(5). Be that as it may. That is not the case of Wescare. In fact, the delivery notes/invoices issued by Wescare do not refer to the agreement dated 24-2-2006. Nor does any letter or correspondence sent by Indowind refer to the agreement dated 24-2-2006, either as an agreement executed by it or as an agreement binding on it…..18. Subsequently, in Chloro Controls (supra), a three-judge Bench of this Court dealt with the provisions of Section 45, which falls in Part II of the Act of 1996 dealing with the enforcement of foreign arbitral awards. Section 45 postulates that notwithstanding anything contained in Part I, a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement in writing for arbitration shall at the request of one of the parties or any person claiming through or under him refer the parties to arbitration unless it finds that the agreement is void, inoperative or incapable of being performed. Interpreting the expressions through or under in Section 45, this Court held that though an arbitration normally would take place between parties to the arbitration agreement, it could take place between a signatory to an arbitration agreement and a third party as well. This Court held that though the scope of the arbitration agreement is limited to parties who have entered into it and those who claim under or through them, courts under the English law have developed the group of companies doctrine. In substance, the doctrine postulates that an arbitration agreement which has been entered into by a company within a group of companies, can bind its non-signatory affiliates or sister concerns if the circumstances demonstrate a mutual intention of the parties to bind both the signatory and affiliated, non-signatory parties. Elaborating on the concept, the Court held:71. Though the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the courts under the English law have, in certain cases, also applied the group of companies doctrine. This doctrine has developed in the international context, whereby an arbitration agreement entered into by a company, being one within a group of companies, can bind its non- signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates. This theory has been applied in a number of arbitrations so as to justify a tribunal taking jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement. [Russell on Arbitration (23rd Edn.)]72. This evolves the principle that a non-signatory party could be subjected to arbitration provided these transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non- signatory parties. In other words, intention of the parties is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties.Noting that this would only be in exceptional cases, the Court in Chloro Controls (supra) held that these exceptions would be examined on the touchstone of:(i) A direct relationship to the party signatory to the arbitration agreement;(ii) Direct commonality of the subject matter; and(iii) Whether the agreement is of a composite transaction where the performance of a mother agreement may not be feasible without the execution or performance of a subsidiary or ancillary agreement.20. In Cheran Properties (supra), a three-judge Bench of this Court interpreted and applied the group of companies doctrine in the context of the enforcement of a domestic arbitration award against a non-signatory to the arbitration agreement. The Court observed that the decision by a two-judge Bench in Indowind (supra) was rendered before the evolution and application of the group of companies doctrine by a three-judge Bench in Chloro Controls (supra):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 non-signatory entities within the same group. In holding a non-signatory 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 non-signatory to a party which is a signatory to the agreement, the commonality of subject- matter 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 non-signatories. 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.This Court in Cheran Properties (supra) also analysed academic literature that scrutinised adjudicatory trends across the world. It noted that the written intention to arbitrate between parties can extend to bind non-signatories with the aim to target the creditworthy member of the group of companies. However, the principle of separate legal personalities of companies also has to be balanced. The corporate veil can be pierced to bind non-signatories upon a construction of the arbitration agreement, the intention at the time of entering the contract and the performance of the underlying contract:25. Does the requirement, as in Section 7, that an arbitration agreement be in writing exclude the possibility of binding third parties who may not be signatories to an agreement between two contracting entities? The evolving body of academic literature as well as adjudicatory trends indicate that in certain situations, an arbitration agreement between two or more parties may operate to bind other parties as well. Redfern and Hunter explain the theoretical foundation of this principle:… The requirement of a signed agreement in writing, however, does not altogether exclude the possibility of an arbitration agreement concluded in proper form between two or more parties also binding other parties. Third parties to an arbitration agreement have been held to be bound by (or entitled to rely on) such an agreement in a variety of ways : first, by operation of the group of companies doctrine pursuant to which the benefits and duties arising from an arbitration agreement may in certain circumstances be extended to other members of the same group of companies; and, secondly, by operation of general rules of private law, principally on assignment, agency, and succession…. [Id at p. 99.]The group of companies doctrine has been applied to pierce the corporate veil to locate the true party in interest, and more significantly, to target the creditworthy member of a group of companies [ Op cit fn. 16, 2.40, p. 100.] . Though the extension of this doctrine is met with resistance on the basis of the legal imputation of corporate personality, the application of the doctrine turns on a construction of the arbitration agreement and the circumstances relating to the entry into and performance of the underlying contract. [Id, 2.41 at p. 100.]This Court in Cheran Properties (supra) also distinguished the principle laid down in Chloro Controls (supra) from its application in the context of Section 11(6) in Duro Felguera v. Gangavaram Port Limited (2017) 9 SCC 729  [Duro Felguera]. In Duro Felguera (supra), a two- judge Bench of this Court refused to direct a joint arbitration in five different contracts between sister concerns of one of the parties of the original arbitration agreement, by respecting the conscious intention of the parties to subject themselves to separate arbitration agreements under their individual contracts. This Court in Cheran Properties (supra) distinguished the factual situation in Duro Felguera (supra) by discerning the mutual intention of the parties and performance of the contract:34. […..] The principle which underlies Chloro Controls [Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641  : (2013) 1 SCC (Civ) 689] is that an arbitration agreement which is entered into by a company within a group of companies may bind non- signatory affiliates, if the circumstances are such as to demonstrate the mutual intention of the parties to bind both signatories and non-signatories. In applying the doctrine, the law seeks to enforce the common intention of the parties, where circumstances indicate that both signatories and non- signatories were intended to be bound. In Duro [Duro Felguera v. Gangavaram Port Ltd., (2017) 9 SCC 729  : (2017) 4 SCC (Civ) 764] , the case was held to stand on a different footing since all the five different packages as well as the corporate guarantee did not depend on the terms and conditions of the original package nor on the memorandum of understanding executed between the parties. The judgment in Duro[Duro Felguera v. Gangavaram Port Ltd., (2017) 9 SCC 729  : (2017) 4 SCC (Civ) 764] does not detract from the principle which was enunciated in Chloro Controls[Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641  : (2013) 1 SCC (Civ) 689].22. In MTNL (supra), a two-judge Bench of this Court was considering a situation in which MTNL had floated certain bonds to Can Bank Financial Services Ltd (Canfina) through a memorandum of understanding. The bond amount was placed in an FD by MTNL with Canfina. Canfina paid back a part of the amount of the FD while the rest was not paid to MTNL. As a consequence, MTNL did not service the interest of the bonds. Canfina was a wholly-owned subsidiary of Canara Bank. Canfina had transferred the bonds to Canara Bank. Subsequently, all three parties had participated in a meeting where the minutes indicated their view to take recourse to arbitration. A sole arbitrator was appointed to resolve the dispute and notice was issued in the arbitration to MTNL, Canara Bank and Canfina. A dispute was raised on whether Canfina could be joined as a party to the arbitral proceedings. In this backdrop, this Court while dealing with the joinder of Canfina in the arbitration proceedings held:10.3. A non-signatory can be bound by an arbitration agreement on the basis of the group of companies doctrine, where the conduct of the parties evidences a clear intention of the parties to bind both the signatory as well as the non- signatory parties. Courts and tribunals have invoked this doctrine to join a non-signatory member of the group, if they are satisfied that the non-signatory company was by reference to the common intention of the parties, a necessary party to the contract.While elucidating the circumstances in which the group of companies doctrine could be invoked to bind the non-signatory, the Court held:10.5. The group of companies doctrine has been invoked by courts and tribunals in arbitrations, where an arbitration agreement is entered into by one of the companies in the group; and the non-signatory affiliate, or sister, or parent concern, is held to be bound by the arbitration agreement, if the facts and circumstances of the case demonstrate that it was the mutual intention of all parties to bind both the signatories and the non-signatory affiliates in the group. The doctrine provides that a non-signatory may be bound by an arbitration agreement where the parent or holding company, or a member of the group of companies is a signatory to the arbitration agreement and the non- signatory entity on the group has been engaged in the negotiation or performance of the commercial contract, or made statements indicating its intention to be bound by the contract, the non-signatory will also be bound and benefitted by the relevant contracts. [ Interim award in ICC Case No. 4131 of 1982, IX YB Comm Arb 131 (1984); Award in ICC Case No. 5103 of 1988, 115 JDI (Clunet) 1206 (1988). See also Gary B. Born : International Commercial Arbitration, Vol. I, 2009, pp. 1170-1171.]10.6. The circumstances in which the group of companies doctrine could be invoked to bind the non-signatory affiliate of a parent company, or inclusion of a third party to an arbitration, if there is a direct relationship between the party which is a signatory to the arbitration agreement; direct commonality of the subject-matter; the composite nature of the transaction between the parties. A composite transaction refers to a transaction which is interlinked in nature; or, where the performance of the agreement may not be feasible without the aid, execution, and performance of the supplementary or the ancillary agreement, for achieving the common object, and collectively having a bearing on the dispute.10.7. The group of companies doctrine has also been invoked in cases where there is a tight group structure with strong organisational and financial links, so as to constitute a single economic unit, or a single economic reality. In such a situation, signatory and non-signatories have been bound together under the arbitration agreement. This will apply in particular when the funds of one company are used to financially support or restructure other members of the group. [ ICC Case No. 4131 of 1982, ICC Case No. 5103 of 1988.].On the facts, the Court held that Canfina was set up as a wholly-owned subsidiary of Canara Bank. The dispute arose out of the subscription by Canfina of the bonds floated by MTNL which were subsequently transferred by Canfina to its holding company, Canara Bank. MTNL had contended that it was constrained to cancel the allotment due to the non-payment of the sale consideration by Canfina. Hence, this Court held that it would be futile to decide the dispute only between MTNL and Canara Bank in the absence of Canfina since indisputably, the original transaction emanated from the agreement between MTNL and Canfina and there was a clear and direct nexus between the issuance of the bonds, their subsequent transfer by Canfina to Canara Bank and the cancellation of allotment by MTNL. Canfina was held to be a proper party to the proceedings.36. In Ssangyong Engineering (supra), this Court held that the expression public policy of India in Section 34 would mean the fundamental policy of Indian law as explained in Associate Builders v. DDA (2015) 3 SCC 49 . Sub-section (2A) to Section 34, which was introduced by the Amending Act of 2016, provides for an additional ground of challenge in the case of a domestic award, namely the existence of a patent illegality apparent on the face of the award. Justice R F Nariman, speaking for the two-judge Bench, observed that:34. What is clear, therefore, is that the expression public policy of India, whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49  : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to Renusagar understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263  : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263  : (2014) 5 SCC (Civ) 12] , as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49  : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Courts intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49  : (2015) 2 SCC (Civ) 204] .41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49  : (2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under public policy of India, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.37. In this backdrop, it has been held that:(i) A mere contravention of substantive law is not a ground to set aside an award;(ii) The court while exercising the power of judicial review should not reappreciate evidence;(iii) The construction of a contract is essentially a matter for the arbitral tribunal to decide;(iv) An award can be construed to be perverse only if it is based on no evidence or has ignored vital evidence;(v) The illegality of an award must be of such a nature or character so as to go to the root of the award; and(vi) Judicial intervention under Section 34 would not be warranted only because an alternative view on facts or the construction of the award is available.40. Now it is in this backdrop that the Court must approach the task at hand. In the present batch of cases, there are two parallel proceedings arising out of the constitution of two sets of arbitral tribunals. In the first proceeding, the Arbitral Tribunal consisted of Mr Justice S P Kurdukar, Mr Justice M S Rane and Mr S Venkateswaran. Both DEPL and JDIL were made parties by ONGC, which is the claimant. The application filed by JDIL under Section 16 was allowed by the Arbitral Tribunal by its interim award dated 27 October 2010. The appeal filed by ONGC was dismissed by the Bombay High Court on 27 June 2012. In pursuance of the arbitration proceedings, the Arbitral Tribunal made a final award on 6 June 2013 in favour of ONGC against DEPL.46. It is important to note that in the Arbitral Award in the second proceeding, no issue of jurisdiction arose since only JDIL and ONGC were parties and the claim of JDIL arose under four distinct contracts of JDIL with ONGC. DEPL was not a party to that proceeding. The examination-in-chief of ONGCs witness in the first arbitration proceeding was treated as an affidavit in the subsequent arbitration involving the claim by JDIL against ONGC. This Court has been informed that the cross-examination of the witness in the first arbitral proceeding leading up to the interim award dated 27 October 2010 was also treated as a cross-examination in the subsequent arbitration. JDIL also led evidence, inter alia, of its manager in support of its assertion that there were neither any common directors between JDIL and DEPL nor did JDIL hold any shares in DEPL.47. The above narration indicates that the batch of cases which has been transferred to this Court arises from a claim in arbitration by JDIL against ONGC under four contracts. The Arbitral Tribunal by its award dated 9 October 2013 (the Arbitral Award in the second proceeding) allowed the claim. ONGC did not plead any defence to the claim on merits. However, ONGC asserted a right to adjust the amounts which were due to JDIL against the claims which ONGC had against DEPL under a distinct contract. ONGC asserted that JDIL and DEPL form one common economic entity and that the group of companies doctrine would apply. Thus essentially, the grounds on which ONGC opposed JDILs application under Section 16 in the first arbitral proceeding overlap with the basis on which ONGC sought adjustment of the claims due to JDIL in the second arbitral proceeding. There is thus a significant degree of overlap between the issues which arose before the first Arbitral Tribunal in its interim award dated 27 October 2010 and those on which the Arbitral Tribunal rendered its Arbitral Award dated 9 October 2013 in the second proceeding. As we have seen above, Arbitral Award in the second proceeding relied on the findings contained in the interim award of the first Arbitral Tribunal dated 27 October 2010. In opposing JDILs application under Section 16 before the Arbitral Tribunal consisting of Mr Justice S P Kurdukar, Mr Justice M S Rane and Mr S Venkateswaran, ONGC invoked the group of companies doctrine. In the course of its statement of claim, ONGC pleaded that DEPL was awarded the contract by relying on the fact that it is a group company of the DP Jindal Group of Companies and that JDIL has a vital business interest in DEPL, which can be said to be an alter ego of JDIL.48. ONGC pleaded that it had a continuing business relationship with JDIL for the past several years and this was a major factor which weighed with ONGC while deciding to award the contract in favour of the DEPL. On the date of the submission of the claim, ONGC had three subsisting contracts with JDIL. ONGC claimed that DEPL has a close corporate unity with the Jindal Group of Companies and that it has consistently represented that they are a group company within the DP Jindal Group of Companies. According to ONGC, besides the letterheads of DEPL which indicate that it belongs to the DP Jindal Group of Companies, JDIL has also acknowledged this position on its website. ONGC also indicated that since DEPL is liable to compensate ONGC for the loss suffered by it, ONGC has adjusted the monies payable to JDIL as security to satisfy the award. ONGC led the evidence of its Chief Manager (MM), Anindya Bhattacharya. The witness for ONGC deposed that:(i) At the pre-bid conference which was held on 7 October 2005, DEPL was represented by Mohan Ramanathan together with two other persons and he is an employee of JDIL;(ii) In response to the second expression of interest dated 17 October 2005, DEPL submitted its offer which was signed by G D Sharma on behalf of DEPL;(iii) G D Sharma holds the position of Manager (Commercial and Development) with JDIL;(iv) In response to ONGCs invitation for sealed bids from shortlisted parties on 31 October 2005, DEPL submitted its bid under a cover letter dated 4 November 2005. The annexure to the letter contained a resume of DEPL declaring that it is a part of the DP Jindal Group of Companies which has a strong presence in the oil and gas sector and is engaged in off shore drilling for oil and gas;(v) Both DEPL and JDIL shared a common addresses and telephone numbers;(vi) DEPL was created by the Jindal Group with the definite purpose of rendering a particular service to the oil and gas sector and DEPL has indicated on the website that it works under the fraternal hood of the said group;(vii) DEPL is promoted and managed by the son and daughter in law of the Managing Director of JDIL;(viii) The bid submitted by DEPL was signed by G D Sharma as an authorized signatory who is an employee of JDIL;(ix) The Managing Director of JDIL, Mr Naresh Kumar, had negotiated with the owners of the vessel for hiring on behalf DEPL;(x) DEPL was incorporated in 2003;(xi) Mohan Ramanathan who attended the office of ONGC in connection with the subject contract was the General Manager of JDIL; and(xii) Almost all senior officers of JDIL including its Managing Director actively took part in matters relating to the hiring of the vessel, its deployment, performance and related issues. Therefore, a corporate, financial and functional unity exists between DEPL and JDIL.49. At the hearing before the first Arbitral Tribunal on 7 July 2009, the documents which were produced by ONGCs witness were taken on the record. Counsel for JDIL objected to these documents on the ground of relevance and admissibility but stated that he would cross-examine the witness without prejudice to those contentions. The first Arbitral Tribunal observed that the rival contentions would be decided while disposing of the application under Section 16. ONGC also filed an application for discovery and inspection before the first Arbitral Tribunal and the annexure to the application contained a schedule indicating the disclosures which were sought. The order of the first Arbitral Tribunal notes the submission of ONGC that the applications for discovery and inspection must be decided first and it is only on the completion of the process that JDILs challenge to jurisdiction under Section 16 could be addressed. The first Arbitral Tribunal deferred a decision on the two applications until the issue of jurisdiction was decided. The net result is that the applications for discovery and inspection which were crucial to ONGCs claim that there existed functional, financial and economic unity between DEPL and JDIL remained to be decided before the application under Section 16 was taken up. There is merit in the submission which was been urged on behalf of the ONGC that the application for discovery and inspection had to be decided before the plea of jurisdiction was adjudicated upon. The application for discovery and inspection was intended to facilitate ONGC in its plea that there existed functional, financial and economic unity between the two companies. The failure of the first Arbitral Tribunal to hear the application for discovery and inspection goes to the root of its interim award dated 27 October 2010 holding an absence of jurisdiction qua JDIL. The interim award of the Arbitral Tribunal in the first proceeding, dated 27 July 2010 refers to the documents which were produced by ONGC and to the submission that neither DEPL nor JDIL had led any evidence to controvert the documentary and oral evidence adduced by ONGC. The first Arbitral Tribunal upheld the plea of jurisdiction that JDIL is neither a party to the contract nor had it submitted a bid to ONGC which resulted in the formation of the contract. The Tribunal held that the agreement was only between ONGC and DEPL and that in terms of Section 7, an agreement to arbitrate is between the parties to the agreement. While observing that the arbitration agreement was only between DEPL and ONGC, the Tribunal held that neither was there an arbitration agreement between ONGC and JDIL nor was JDIL a signatory to the agreement between ONGC and DEPL. After noting the documents which were relied upon by ONGC, the Tribunal held that there was no tickle of evidence to indicate that JDIL, a distinct incorporated legal entity, ever played any role to find itself in the contract between JDIL and ONGC. The executives of JDIL who participated in the contractual dealing were held to be representatives of DEPL. Reading the interim award dated 27 October 2010 of the first Arbitral Tribunal, the unmistakable impression which emerges from the record is that the primary basis for the determination of an absence of jurisdiction is that the arbitration agreement was between ONGC and DEPL. The legal foundation of the group of companies doctrine has not been evaluated, on facts or law. True enough, the judgment of this Court in Cholo Controls (supra) is of 2013, Cheran Properties (supra) is of 2018 and MTNL (supra) came in 2020. However, ONGC had clearly laid out the factual and legal foundation for setting up a case in opposition to the plea of JDIL. The first Arbitral Tribunal has made a fundamental error of law in not deciding the application by ONGC on discovery and inspection of documents before it ruled on jurisdiction. In doing so, the first Arbitral Tribunals interim award dated 27 October 2010 goes against the principles of natural justice. The failure to consider the application for discovery and inspection of documents results in a situation where vital evidence that could have assisted the Tribunal in its determination of the challenge under Section 16 was shut out. As a matter of fact, it emerged from the record that no evidence was adduced by JDIL in support of its plea of the absence of jurisdiction under Section 16. JDIL having taken the plea of absence of jurisdiction was required to establish the grounds on which it set about to establish its plea.50. Based on the above discussion, the interim award of the first Arbitral Tribunal stands vitiated because of:(i) The failure of the arbitral tribunal to decide upon the application for discovery and inspection filed by ONGC;(ii) The failure of the arbitral tribunal to determine the legal foundation for the application of the group of companies doctrine; and(iii) The decision of the arbitral tribunal that it would decide upon the applications filed by ONGC only after the plea of jurisdiction was disposed of.