Reckitt Benckiser (India) Private Limited (“Reckitt India”) vs Reynders Label Printing India Private Limited (“Reynders India”) & Anr.
CITATION – Petition for Arbitration (Civil) No. 65 of 2016.
JUDGE – Justice A.M. Khanwilkar.
- In this case, Reckitt Benckiser (India) Private Limited wanted to implead a Belgian associate company (Respondent No. 2) of Reynders Label Printing India Private Limited in an Application filed under Section 11 of the Arbitration and Conciliation Act, 1996, based on the doctrine of ‘groups of companies’.
- The agreement was executed on May 1st 2014, between Reckitt Benckiser(India) Pvt Ltd and Reynders Label Printing (India) Pvt Ltd, the agreement was for providing packaging material to the Petitioner and its affiliates, during the pre-negotiations stage, the Petitioner shared a draft of agreement along with its code of conduct and anti-bribery policy with Respondent No. 1.
- This email was reverted by one Mr Fredrick Reynders who as per the Petitioner was the promotor of Reynders Etiketten NV (Respondent No. 2) which is one of the group companies of Reynders Label Printing Group and is established and bound by the laws of Belgium.
- The Respondents are constituents of a group of companies known as “Reynders Label Printing Group.
- Whether the indisputable circumstances go to show that the mutual intention of the parties was to bind both the signatory as well as non-signatory parties, namely Respondent No. 1, and Respondent No. 2 respectively, qua the existence of an arbitration agreement between the Applicant and the said Respondents
- Having considered the submissions of both sides, the Court held that the burden was on Reckitt India to establish that Reynders Belgium had an intention to consent to the arbitration agreement and be a party thereto, even if it was for the limited purpose of its obligations to indemnify Reckitt India for damages and loss caused due to acts and omissions of Reynders India. This burden, the Court found, had not been successfully discharged by Reckitt India.
- The Court found that Reynders Belgium was neither the signatory to the arbitration agreement nor did it have any causal connection with the process of negotiations preceding the Agreement or the execution thereof. From the facts placed before it, it found that Mr Frederik Reynders was only an employee of Reynders India, who acted in that capacity during the negotiations preceding the Agreement, and was in no way associated with Reynders Belgium.
- Having considered the facts on record, it therefore held that Reynders Belgium was neither a party to the Agreement nor had it given its assent to the arbitration agreement and that the fact of Reynders Belgium and Reynders India belonging to the same group of companies made no difference.
- Having held that Reynders Belgium could not be made a party to the arbitration, technically, the Court could therefore no longer grant reliefs under the application filed on the premise of an international commercial arbitration. However, in the interest of justice and possibly by virtue of the consent of Reynders India, it went ahead and appointed an arbitrator to conduct domestic commercial arbitration between Reckitt India and Reynders India.
IMPLICATION – While the Supreme Court needed to add further clarity to the principles about non-signatories that were expounded in Chloro Controls India Private Limited vs Severn Trent Water Purification Inc. and Ors (2013) 1 SCC 641, going ahead and appointing the arbitrator to pursue domestic arbitration saves parties the cost and time in having to file a fresh Section 11 petition, in a court of appropriate jurisdiction. This is very much in keeping with the recent trend of Courts not allowing technicalities to get in the way of the larger picture of expediting arbitration. However, with this judgment in place, parties should take care while seeking to implead such non-signatory affiliates and must only do so if facts show a clear intention on their part to consent to arbitration.