Mahanagar Telephone Nigam Ltd Vs Canara Bank

1. The present Special Leave Petitions have been filed to of 1995 Order dated 21.10.2011 passed in C.M. No. 122311 Order dated 05.07.2013 passed in C.M. No. 8100 of 2012 and Order dated 10.01.2014 passed in C.M. No. 324 2.1. In 1992 MTNL floated 17% Non­Cumulative Secured Redeemable Bonds described as the VI Series worth Rs. 425 crores. On 10.02.1992 MTNL Services Ltd. under interest was not paid by CANFINA to MTNL. As a through. Against payment of Rs. 50 crores received from CANFINA MTNL serviced the bonds of approximately Rs. 31 2.2. As per Canara Bank soon after the bonds were subscribed collapse of the secondary market in shares security and Even such buyers were offering very low prices for these 2.3. In these circumstances Respondent No. 1 Canara Bank 2.5. MTNL vide letter dated 14.10.1992 addressed to Canara Bank refused to transfer the Bonds on the various grounds 2.6. MTNL by a subsequent letter dated 16.02.1993 informed of Rs. 40 crores in favour of CANFINA. The bond instruments were however retained on the ground that CANFINA had failed to pay the deposit money of Rs. 150 2.7. MTNL vide letter dated 20.10.1993 cancelled all the Bonds inter alia on the ground that letters of consideration 2.8. Canara Bank vide its reply dated 13.01.1994 contended 2.9. MTNL sent a statement of accounts by adjusting the thereon cannot be refunded. MTNL with its letter dated 13.01.1994 attached a cheque for Rs. 5 41 17 463 as the Canara Bank however returned the cheque vide letter dated 10.02.1994 demanding the restoration and the Delhi High Court to challenge the cancellation of the It is relevant to note that CANFINA was joined as a The Delhi High Court vide Order dated 09.09.1996 parties in light of this Court’s judgment in O.N.G.C. v The Writ Petition was dismissed on the ground of the Company Law Board under Section 111 of the Law Board came to be dismissed vide Order dated 26.02.1998 since the remedy was no longer available as Restoration of the Writ Petition which was restored vide On 27.03.2001 a meeting was convened by the Cabinet Secretariat Litigation Cell which was presided by of MTNL Canara Bank and CANFINA The Committee directed Canara Bank CANFINA and an appropriate reference to the Permanent Machinery of Arbitration functioning in the Department of Public Enterprises. The Committee did not permit Canara Bank The Delhi High Court vide Order to the Committee on Disputes. The Writ Petition was adjourned sine die. Canara Bank was granted liberty to revive the Petition in the event that the Committee on Disputes was unable to resolve the disputes between the The Committee of Disputes held a meeting on 16.12.2008 which was attended by the Committee after hearing the parties expressed the view in view of the different inter­linked transactions between The representatives of Canara Bank expressed the of Arbitration would take much longer than judicial the parties should expeditiously enter into an arbitration Pursuant to the meeting held on 16.12.2008 Canara Bank vide its letter dated 05.03.2009 sent a draft arbitration agreement to the Chairman and sent by Canara Bank was between Canara Bank and By letter dated 17.03.2010 Canara Bank requested the Deputy Secretary Cabinet Secretariat to advise MTNL to execute the arbitration agreement in accordance with the direction of the Ministry of Law and The Delhi High Court vide Order agreement between the parties is signed as soon as The decision in O.N.G.C. v u S. 151 CPC for restoration of the disposed of Writ The Delhi High Court restored the Writ Petition and vide Order dated 16.09.2011 noted that Whether Canara Bank is liable for the acts or During the course of the proceedings the parties referred to arbitration. The parties were requested to On 21.10.2011 the name of Mr Canara Bank which was accepted by the Counsel for On 05.01.2012 the Sole Arbitrator issued notice to all the three parties i.e. MTNL Canara Canara Bank raised an objection to joining CANFINA as a party to the arbitration. The Arbitrator heard the parties on 27.03.2012 on the issue whether CANFINA should be joined as a party to the The learned Arbitrator passed an interim award holding that CANFINA had not appeared on 16.09.2011 arbitration. CANFINA was not a party to the arbitration MTNL filed C.M. No. 8100 of 2012 before the Delhi High Court seeking clarification of Order dated 16.09.2011 as to whether CANFINA ought to be impleaded as a necessary party to the arbitration The Delhi Court vide order dated 05.07.2013 Canara Bank filed its Statement of MTNL filed I.A. Nos. 324 325 of 2014 before the Delhi High Court for recall of the Orders dated 16.09.2011 21.10.2011 and 05.07.2013 passed in The Delhi High Court vide Order dated 10.01.2014 dismissed the Application for Recall on the ground that the application was identical to the the Statement of Claim filed by Canara Bank and also 3. Aggrieved by the Orders dated 16.09.2011 21.10.2011 in W.P.No. 5695 C.M. No. 122311 C.M. No This Court vide Order dated 08.05.2014 issued Notice to all 4. Ms. Madhavi Divan learned ASG appeared on behalf of MTNL No. 1 Canara Bank and Ms. Saumya Sinha along with Mr 5.1. In the absence of a written agreement for arbitration and 7(3) of the Arbitration and Conciliation Act 1996 the transactions between the Appellant MTNL on the one hand and Respondent No. 1 and 2 Canara Bank and subscribed by Respondent No 2 CANFINA and were subsequently transferred to its parent Company i.e In the absence of Respondent No. 2 CANFINA being made a party to the arbitration the arbitral proceedings 5.4. The only existing arbitration agreement between the parties is a draft tripartite agreement forwarded by Canara Bank as the disputed Bonds were bought from the Appellant The Appellant MTNL had consented to the disputes 6. The Counsel for Respondent No. 1 Canara Bank inter alia MTNL filed the present Appeal after filing its reply to the Statement of Claim and Counter­Claim before the learned Sole Arbitrator and has therefore submitted itself to the an application under Section 16 of the Arbitration and 6.3. Respondent No. 2 CANFINA was merely joined as a proforma party in the Writ Petition before the Delhi High Court and therefore cannot be made a party before the 6.4. At the time of giving consent to arbitration and appointment 6.5. The Appellant MTNL has not filed any claim against Respondent No. 2 CANFINA and therefore cannot seek 7. We have heard the learned Counsel for the parties and There are two issues which have arisen for our consideration : the first issue raised by the Appellant MTNL with respect to the existence of a valid arbitration been raised by Respondent No. 1 Canara Bank that the Order dated 16.09.2011 and 21.10.2011 is between Canara to the arbitration agreement and hence cannot be impleaded A valid arbitration agreement constitutes the heart of an between the parties to submit their existing or future disputes or differences to arbitration. A valid arbitration 9.1. Section 7 defines “arbitration agreement” and reads as 1) In this Part “arbitration agreement” means an arise between them in respect of a defined legal An arbitration agreement is in writing if it is b) An exchange of letters telex telegrams or other means of telecommunication which provide a 5) There reference in a contract to a document containing an arbitration clause constitutes an the reference is such as to make that arbitration 9.2. The arbitration agreement need not be in any particular is the agreement to refer their disputes or differences to clause in an agreement separate agreement or 9.3. Section 7(4)(b) of the 1996 Act states that an arbitration agreement can be derived from exchange of letters telex telegram or other means of communication including through electronic means. The 2015 Amendment Act inserted the words “including communication through may not have signed a formal contract it cannot absolve general principles of construction of statutes statutory instruments and other contractual documents. The the contract conduct of the parties and correspondence the parties were ad idem and had actually reached an agreement upon all material terms then it would be The meaning of a contract must be gathered by adopting a common sense approach and must not be 9.5. A commercial document has to be interpreted in such a invalidate it. An ‘arbitration agreement’ is a commercial effect to the intention of the parties rather than to 9.6. In Khardah Company Ltd. v. Raymon and Co. Pvt Ltd.5 this Court while ascertaining the terms of an fairly be deduced from the words actually used term there is nothing in law which prevents them from setting up that term. The terms of a contract can be expressed or implied from what has been 9.7. In interpreting or construing an arbitration agreement or This Court in Enercon Ltd. and Ors. v. Enercon GMBH6 held that a common sense approach has to be adopted to give effect to the intention of the parties to arbitrate the disputes between them. Being a commercial 9.8. In this case MTNL raised a preliminary objection that there We will first deal with this issue. The agreement between MTNL and Canara Bank to refer the disputes to arbitration is evidenced from the following documents The Minutes of the Meeting dated 27.03.2001 parties were present and participated in the proceedings. The Committee on Disputes in the view of the different inter­liked transactions between them. Canara Bank suggested that to expedite the arbitration it should be conducted under the Arbitration & Conciliation Act 1996. This was Secretariat Canara Bank addressed letters dated 05.03.2009 and 17.03.2010 to MTNL wherein it enclosed a draft Arbitration Agreements wherein all three parties i.e. Canara Bank CANFINA and MTNL In the Writ Petition filed by Canara Bank the Delhi High Court vide Order dated 16.09.2011 recorded the consent of MTNL and Canara Bank to be referred to The relevant extract of the Order dated “Unfortunately although the parties had displayed their willingness for arbitration the Committee on Disputes could not resolve the have the parties been able to arrive at a consensus with regard to the specific clauses of the arbitration agreement. As noted in the order dated 01.10.2010 according to the petitioner it is is liable for the acts or omissions of CANFINA the arbitration namely whether the petitioner is liable for the acts or omissions of CANFINA and whether the petitioner is liable to take over the liabilities of CANFINA prior to the arbitration of the points to be decided in the course of arbitration. Even though the learned counsel for scope and ambit of powers of the Committee on Disputes we are making the present order in for arbitration as a mode for resolving their disputes. This is welcome because both the Pursuant thereto MTNL participated in the agreement in writing between the parties. The only 9.10. An additional ground for rejecting the preliminary objection Section 7(4)(c) provides that there can be an of claims and defense in which the existence of the agreement is asserted by one party and not denied by the In the present case Canara Bank had filed its The statement of Claim and Defence filed before the arbitration agreement which was not denied by the other 10.1. Canara Bank raised an objection to the joinder of 10.2. As per the principles of contract law an agreement entered on the other members of the same group as each company The parent or the subsidiary company entering into agency or representation will be the only entity in a group the same principles and normally the company entering parties to bind both the signatory as well as the non­ that the non­signatory company was by reference to the common intention of the parties a necessary party to the 1970’s from French arbitration practice. The ‘Group of Companies’ doctrine indicates the implied consent to an the companies of the group should bind the other companies which by virtue of their role in the conclusion performance or termination of the contracts containing of all parties to the proceedings appear to have been veritable parties to these contracts or to have been The ‘Group of Companies’ doctrine has been invoked by group and the non­signatory affiliate or sister or parent 9 1984 Rev Arb 137 110 JDI 899See also Gary B. Born: International Commercial Arbitration Vol. I party which is a signatory to the arbitration agreement direct commonality of the subject matter the composite 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 cases where there is a tight group structure with strong organizational and financial links so as to constitute a particular when the funds of one company are used to financially support or re­structure other members of the 10.6. The ‘Group of Companies’ doctrine has been invoked and applied by this Court in Chloro Controls India Ltd. v Severn Trent Water Purification Inc. 12 with respect to an international commercial agreement. Recently this Court 10.7. Coming to the facts of the present case CANFINA was set 6.14 CANFINA was set up as a wholly owned subsidiary of Canara Bank and it commenced its operation with its Head Office at Bangalore on 1 June 1987. Its authorized and paid up capital are 14 Report Presented to the Lok Sabha on 21st December 1993 has branches at Ahmedabad Bombay Calcutta Hyderabad Madras and New Delhi besides company functioned under the umbrella of the its functioning to the Board of Canara Bank for 6.15 The activities authorized to be conducted by the Company are equipment leasing merchant­ banking venture capital and consultancy services business and obtained the classification of an ‘Equipment leasing company’ from the Department of Finance Companies of RBI this classification entitles the company to mobilize public deposits to Bank to its subsidiaries are such as could be 10.8. The disputes between the parties emanated out of the transaction dated 10.02.1992 whereby CANFINA has subscribed to the bonds floated by MTNL. CANFINA Canara Bank. It is the contention of MTNL that since Bonds MTNL eventually was constrained to cancel the MTNL and Canara Bank in the absence of CANFINA since undisputedly the original transaction emanated from a transaction between MTNL and CANFINA the original purchaser of the Bonds. The disputes arose on the of the Bonds its subsequent transfer by CANFINA to Canara Bank and the cancellation by MTNL which has led Therefore CANFINA is undoubtedly a necessary and Given the tri­patite nature of the transaction there can be a final resolution of the disputes only if all three It is of relevance to note that CANFINA has Court had joined CANFINA as Respondent No. 2 even though it was joined as a proforma party. CANFINA was not present on two dates i.e. on 16.09.2011 and MTNL had submitted before the Delhi High Court that Canara Bank should agree to take over the liabilities of Court recorded that there was no necessity of requiring Canara Bank to agree to take over the liabilities of CANFINA prior to the arbitration proceedings. This issue On the commencement of arbitration proceedings before the Sole Arbitrator notice was issued by the Sole as a party to the arbitration proceedings was raised by We do not find any merit in the objection raised by MTNL wherein it has clearly stated that the arbitration would be between three parties i.e. Canara Bank and It is incomprehensible why Canara Bank is now Counsel for Canara Bank to oppose the impleadment of Respondent No. 2 CANFINA to being impleaded in the throughout participated in the proceedings before the Committee on Disputes before the Delhi High Court before the Sole Arbitrator and was represented by its separate and its subsidiary CANFINA to the proceedings. In this case there can be no final resolution of the disputes unless 11. In view of the aforesaid discussion the present appeals are join Respondent No. 2 CANFINA i.e. the wholly owned subsidiary of Respondent No. 1 Canara Bank in the The matter is remitted to the Sole Arbitrator to as expeditiously as possible. We have however expressed no Pending applications if any are disposed of Abhay Manohar Sapre J. elaborate well considered and scholarly drafted judgment proposed by my esteemed Sister Justice I entirely agree with the reasoning and the conclusion which my erudite Sister has drawn As rightly observed by my learned Sister in para 8 following two questions arise for One whether the arbitration agreement in question is a bi­party agreement between the MTNL(appellant herein and Canara Bank respondent No. 1) or it is a tri­partite agreement between the MTNL Canara Bank and CANFINA respondent No. 2) and if so whether the agreement satisfies the conditions laid down in Section 7(4)(b) and of the Arbitration and Conciliation Act 1996 so as to enable the arbitral tribunal to 5. Second if the answer to the first question is that the agreement in question is a tri­partite agreement whether CANFINA is also a necessary party to the arbitral proceedings for deciding the rights of the parties inter se in relation to the in question is essentially a tri­partite agreement between the parties namely MTNL Canara Bank and CANFINA. Indeed this is clear from the documents exchanged between the parties the three parties that it can be effectively decided we have no hesitation in coming to a conclusion that the agreement in question is in fact a tri­ partite agreement between the three parties mentioned above. In my view it satisfies the This issue is extensively dealt with by my Court in several decisions and I agree with her Somewhat similar question also arose in should be dealt with in the arbitral proceedings­ whether it should be dealt with in one arbitral be dealt with in separate or parallel arbitration 11. This question was succinctly dealt with by the their book on “International Arbitration". to 2.212 to 12. The learned authors examined party arbitration. They opined that subject to the resolved as far as possible in one arbitral 13. Since the main object of the arbitral only when the disputes are resolved as far as possible in one arbitral proceedings. In this case decide the dispute on merits in accordance with 14. As rightly observed by my learned Sister the undisputed facts brought on record in clear terms the facts of this case so as to enable the arbitral tribunal to determine the rights of three parties named above. In my considered view one cannot Companies” has its application to arbitral proceedings and in appropriate cases it can be so

Summary: The Group of Companies doctrine indicates the implied consent to an agreement to arbitrate, in the context of modern multi-party business transactions. In 1992, Mahanagar Telephone Nigam Limited (“MTNL”) floated 17% non-cumulative secured redeemable bonds worth Rs. 425 crores. On February 10, 1992, after executing a Memorandum of Understanding with Can Bank Financial Services Limited (“CANFINA”), MTNL placed bonds worth Rs.200 crores with CANFINA through the form of a fixed deposit (“Bonds”).CANFINA paid around Rs. 50 crores of the fixed deposit, however, since the balance amount was yet to paid, MTNL serviced the Bonds to a partial extent.Soon after the Bonds were subscribed, there was an outbreak of a security scam which led to a collapse of the secondary market in shares, security, and bonds. One of the consequences of the security scam was that CANFINA was facing a liquidity crunch and as a result, Canara Bank, being the parent concern of CANFINA, purchased a face value of Rs. 80 crores worth of Bonds issued by MTNL from CANFINA.Canara Bank upon purchasing the Bonds from CANFINA requested MTNL to register the Bonds in their name, however MTNL refused to do the same. It was only on February 16, 2019, that MTNL informed Canara Bank that it had registered a part of the Bonds having a face value of Rs. 40 crores in favour of CANFINA, however, MTNL had retained the bond instruments due to a failure on part of CANFINA to deposit the balance money. Subsequently, MTNL cancelled the Bonds on October 20, 1993 on the ground that that the letters of consideration were with CANFINA.  Being aggrieved by the actions of MTNL, Canara Bank filed a Writ Petition to challenge the cancellation of the Bonds, wherein CANFINA was arrayed as a proforma party.The High Court initially dismissed the Writ Petition on the ground that the parties had a recourse to alternate remedies and asked the Union of India to resolve the dispute as per the decision of O.N.G.C. v. Commissioner of Central Excise. Due to the other alternate remedies available to the parties to resolve their dispute, the Writ Petition was never adjudicated upon initially, and the parties were given the liberty to revive the Writ Petition in the event that the parties were not able to resolve their dispute through the use of the alternate remedies. One of the alternate remedies that the parties had resorted to was the Committee of Disputes, which the parties were referred to by the High Court on May 30, 2008.The Committee of Disputes was of the opinion that all three parties must take the recourse of arbitration due to the different interlinked transactions between them and execute an arbitration agreement under the Arbitration and Conciliation Act, 1996 (“Act”) to resolve the dispute expeditiously. Canara Bank even prepared a draft arbitration agreement, which had CANFINA, MTNL and Canara Bank as the parties to the agreement and waited for MTNL to execute the agreement.In the meantime, the Supreme Court through the decision of Electronics Corporation of India Ltd. v. Union of India &amp; Ors.7 overruled the decision of O.N.G.C. v. Commissioner of Central Excise  and as a result the Writ Petition was finally revived after Canara Bank moved an application to revive the same. During the proceedings before the High Court, the parties agreed to refer the matter to arbitration on September 16, 2011 and a sole arbitrator was appointed on October 21, 2011. The sole arbitrator issued a notice to all three parties, however, Canara Bank raised an objection before the arbitrator with regards to the joinder of CANFINA as a party to the arbitration. The arbitrator passed an interim award wherein it was held that since CANFINA was not present before the High Court on September 16, 2011, when the parties were referred to arbitration, and as a result CANFINA had not agreed to be a party to the arbitration. In 1992, Mahanagar Telephone Nigam Limited (“MTNL”) floated 17% non-cumulative secured redeemable bonds worth Rs. 425 crores. On February 10, 1992, after executing a Memorandum of Understanding with Can Bank Financial Services Limited (“CANFINA”), MTNL placed bonds worth Rs.200 crores with CANFINA through the form of a fixed deposit (“Bonds”).CANFINA paid around Rs. 50 crores of the fixed deposit, however, since the balance amount was yet to paid, MTNL serviced the Bonds to a partial extent. Soon after the Bonds were subscribed, there was an outbreak of a security scam which led to a collapse of the secondary market in shares, security, and bonds. One of the consequences of the security scam was that CANFINA was facing a liquidity crunch and as a result, Canara Bank, being the parent concern of CANFINA, purchased a face value of Rs. 80 crores worth of Bonds issued by MTNL from CANFINA. Canara Bank upon purchasing the Bonds from CANFINA requested MTNL to register the Bonds in their name, however MTNL refused to do the same. It was only on February 16, 2019, that MTNL informed Canara Bank that it had registered a part of the Bonds having a face value of Rs. 40 crores in favour of CANFINA, however, MTNL had retained the bond instruments due to a failure on part of CANFINA to deposit the balance money. Subsequently, MTNL cancelled the Bonds on October 20, 1993 on the ground that that the letters of consideration were with CANFINA.  Being aggrieved by the actions of MTNL, Canara Bank filed a Writ Petition to challenge the cancellation of the Bonds, wherein CANFINA was arrayed as a proforma party. The High Court initially dismissed the Writ Petition on the ground that the parties had a recourse to alternate remedies and asked the Union of India to resolve the dispute as per the decision of O.N.G.C. v. Commissioner of Central Excise. Due to the other alternate remedies available to the parties to resolve their dispute, the Writ Petition was never adjudicated upon initially, and the parties were given the liberty to revive the Writ Petition in the event that the parties were not able to resolve their dispute through the use of the alternate remedies. One of the alternate remedies that the parties had resorted to was the Committee of Disputes, which the parties were referred to by the High Court on May 30, 2008. The Committee of Disputes was of the opinion that all three parties must take the recourse of arbitration due to the different interlinked transactions between them and execute an arbitration agreement under the Arbitration and Conciliation Act, 1996 (“Act”) to resolve the dispute expeditiously. Canara Bank even prepared a draft arbitration agreement, which had CANFINA, MTNL and Canara Bank as the parties to the agreement and waited for MTNL to execute the agreement. In the meantime, the Supreme Court through the decision of Electronics Corporation of India Ltd. v. Union of India &amp; Ors.7 overruled the decision of O.N.G.C. v. Commissioner of Central Excise  and as a result the Writ Petition was finally revived after Canara Bank moved an application to revive the same. During the proceedings before the High Court, the parties agreed to refer the matter to arbitration on September 16, 2011 and a sole arbitrator was appointed on October 21, 2011. The sole arbitrator issued a notice to all three parties, however, Canara Bank raised an objection before the arbitrator with regards to the joinder of CANFINA as a party to the arbitration. The arbitrator passed an interim award wherein it was held that since CANFINA was not present before the High Court on September 16, 2011, when the parties were referred to arbitration, and as a result CANFINA had not agreed to be a party to the arbitration. ISSUE BEFORE THE COURT: The issue has been raised by Respondent No. 1 Canara Bank that the Order dated 16.09.2011 and 21.10.2011 is between Canara Bank and MTNL. Respondent No. 2 CANFINA, is not a party to the arbitration agreement, and hence cannot be impleaded in the proceedings. RATIO OF THE COURTAs per the principles of contract law, an agreement entered into by one of the companies in a group, cannot be binding on the other members of the same group, as each company is a separate legal entity which has separate legal rights and liabilities. The parent, or the subsidiary company, entering into an agreement, unless acting in accord with the principles of agency or representation, will be the only entity in a group, to be bound by that agreement. Similarly, an arbitration agreement is also governed by the same principles, and normally, the company entering into the agreement, would alone be bound by it.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.The Group of Companies doctrine indicates the implied consent to an agreement to arbitrate, in the context of modern multi-party business transactions. 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 inter-linked 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.The Group of Companies Doctrine has also been invoked in cases where there is a tight group structure with strong organizational 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 re-structure other members of the group.Coming to the facts of the present case, CANFINA was set up as a wholly owned subsidiary of Canara Bank. There is a clear and direct nexus between the issuance of the Bonds, its subsequent transfer by CANFINA to Canara Bank, and the cancellation by MTNL, which has led to disputes between the three parties. Therefore, CANFINA is undoubtedly a necessary and proper party to the arbitration proceedings.The present case is one of implied or tacit consent by Respondent No. 2 CANFINA to being impleaded in the arbitral proceedings, which is evident from the conduct of the parties. Court found that Respondent No. 2 CANFINA has throughout participated in the proceedings before the Committee on Disputes, before the Delhi High Court, before the Sole Arbitrator, and was represented by its separate Counsel before this Court in the present appeal. There was a clear intention of the parties to bind both Canara Bank, and its subsidiary CANFINA to the proceedings. In this case, there can be no final resolution of the disputes, unless all three parties are joined in the arbitration. As per the principles of contract law, an agreement entered into by one of the companies in a group, cannot be binding on the other members of the same group, as each company is a separate legal entity which has separate legal rights and liabilities. The parent, or the subsidiary company, entering into an agreement, unless acting in accord with the principles of agency or representation, will be the only entity in a group, to be bound by that agreement. Similarly, an arbitration agreement is also governed by the same principles, and normally, the company entering into the agreement, would alone be bound by it. 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. The Group of Companies doctrine indicates the implied consent to an agreement to arbitrate, in the context of modern multi-party business transactions. 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 inter-linked 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. The Group of Companies Doctrine has also been invoked in cases where there is a tight group structure with strong organizational 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 re-structure other members of the group. Coming to the facts of the present case, CANFINA was set up as a wholly owned subsidiary of Canara Bank. There is a clear and direct nexus between the issuance of the Bonds, its subsequent transfer by CANFINA to Canara Bank, and the cancellation by MTNL, which has led to disputes between the three parties. Therefore, CANFINA is undoubtedly a necessary and proper party to the arbitration proceedings. The present case is one of implied or tacit consent by Respondent No. 2 CANFINA to being impleaded in the arbitral proceedings, which is evident from the conduct of the parties. Court found that Respondent No. 2 CANFINA has throughout participated in the proceedings before the Committee on Disputes, before the Delhi High Court, before the Sole Arbitrator, and was represented by its separate Counsel before this Court in the present appeal. There was a clear intention of the parties to bind both Canara Bank, and its subsidiary CANFINA to the proceedings. In this case, there can be no final resolution of the disputes, unless all three parties are joined in the arbitration. DECISION HELD BY COURT: The appeals were partly allowed. Court invoked the Group of Companies doctrine, to join Respondent No. 2 CANFINA i.e. the wholly owned subsidiary of Respondent No. 1 Canara Bank, in the arbitration proceedings pending before the Sole Arbitrator. The matter was remitted to the Sole Arbitrator to continue with the arbitral proceedings, and conclude the same as expeditiously as possible.