RECKITT BENCKISER (INDIA) PRIVATE LIMITED v. REYNDERS LABEL PRINTING INDIA PRIVATE LIMITED

Judgment

966 SUPREME COURT REPORTS [2019] 8 S.C.R. 966 [2019] 8 S.C.R. A RECKITT BENCKISER (INDIA) PRIVATE LIMITED v. REYNDERS LABEL PRINTING INDIA PRIVATE LIMITED AND ANR. (Petition for Arbitration (Civil) No. 65 of 2016) JULY 01, 2019 [A. M. KHANWILKAR AND AJAY RASTOGI, JJ.] Arbitration and Conciliation Act, 1996 – ss. 11(5), 11(9) and 11(12)(a) – Signatory and non-signatory parties to the arbitration agreement – According to the applicant, the respondents had approached them with an offer to print labels – Pursuant thereto, respondent no.1 and applicant entered into an agreement dated 01.05.2014 – It was averted that arbitration agreement was an integral part of the agreement dated 01.05.2014 – Respondent no.2 was a non-signatory party to the agreement dated 01.05.2014 – Dispute arose between the parties – Respondent no.2 was impleaded in the arbitration proceedings on the ground that respondent no.2 was the parent/holding Company of respondent no.1 – Respondent no.2 refuted the assertions made by the applicant – Held: In the instant case, burden is on the applicant to establish that respondent no.2 had an intention to consent to the arbitration agreement and be party, may be for the limited purpose of enforcing the indemnity clause 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 matter specified – That burden was not discharged by the applicant – Further, respondent no.2 was never involved in the negotiation process concerning the agreement dated 01.05.2014 – Thus, respondent cannot be subjected to proposed arbitrative proceedings. Disposing of the application, the Court HELD : 1. In the backdrop of the averments in the application and 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 one ‘FR’ was acting for and on behalf of respondent No.2, as a result of which the respondent 966 B C D E F G H RECKITT BENCKISER (I) PVT. LTD. v. REYNDERS LABEL PRINTING (I) PVT. LTD. 967 No.2 has assented to the arbitration agreement. This basis has been completely demolished by respondent No.2 by stating, on affidavit, that ‘FR’ 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 ‘FR’ 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 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 this Court 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. [Para 9] [983-C-H; 984-A-B]

#2. Suffice it to observe that respondent No.2 was never involved in the negotiation process concerning the stated agreement dated 1st 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 international commercial arbitration, cannot be taken forward. As respondent No.1 is a A B C D E F G H 968 SUPREME COURT REPORTS [2019] 8 S.C.R. A B C 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. [Para 10] [984-B-D]