A party can be compelled to arbitrate even though it is not a signatory to the contract: Delhi High Court.

The Delhi High Court has passed a judgment on 07-04-2021 in the case of Shapoorji Pallonji And Co. Pvt. Ltd. Vs Rattan India Power Ltd & Anrs. ARB. P. 716/2019. Justice Vibhu Bakhru allowed the petition.


The petitioner (hereafter referred to as ‘Shapoorji’), a company incorporated under the Companies Act, 1956, has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996.

Respondent no.1, previously known as Indiabulls Power Limited, (hereafter referred to as ‘Indiabulls’) was desirous of developing a 5×270 MW thermal power plant at Amravati, Maharashtra (hereafter referred to as the ‘Project’). Respondent no. 2 (hereafter ‘Elena’) is a wholly owned subsidiary of Indiabulls.

On 19.05.2008, Indiabulls invited bids for execution of Civil and Structural Works, Boiler Turbine Generator Package (hereafter ‘BTG Works’), which was a part of the Project. Shapoorji submitted its bid in response to the said invitation, which was subsequently revised. The revised bid was accepted and a Letter of Award (hereafter ‘the LoA’) dated 06.02.2010 for the contract of execution of the BTG Works at an estimated price of ₹180 Crores, was awarded to Shapoorji. The LoA was signed on behalf of Elena but the letterhead carried the name “Indiabulls”.

Thereafter, on 26.03.2010 Shapoorji and Elena entered into the ‘Contract for BTG Civil and Structural Works’ (hereafter ‘BTG Contract’) for execution of BTG Works. The BTG Contract expressly included the LoA as one of the contract documents. The initial scope of work for the BTG Works was subsequently increased through twenty-one different amendments issued by Elena and the contract price for BTG Contract was changed to ₹189,18,87,147.07/- (Rupees One Hundred and Eighty-Nine Crores Eighteen Lakh Eighty-Seven Thousand One Hundred Forty-Seven and Seven Paisa only). The Work Order bearing Amendment No. 21 is dated 31.05.2017. The said Work Order also included an arbitration clause.

On 03.01.2012, Work Order for Civil and Structural work for Balance of Plant (BoP Contract) was issued to Shapoorji. Prior to that, on 29.10.2010, the contract for Civil and Structural work for the Balance of Plant (BoP Works) was entered into with Gannon Dunkerley & Co. Ltd. The respondents claim that Gannon Dunkerley & Co. could not complete the BoP Works. Shapoorji agreed to complete it; therefore, the same was offloaded to Shapoorji. Shapoorji claims that the BoP Contract was supplemental to BTG Works and therefore, is covered within the Dispute Resolution Clause under the BTG Contract.

Disputes have arisen in respect of execution of the works and rendering of services under the aforementioned Contract(s). In view of the said disputes, Shapoorji issued a notice invoking arbitration in respect of (i) Letter of Award dated 06.02.2010 (BTG Contract); (ii) Work Order no. 3451000221 dated 03.01.2012 (BoP Contract), awarded to Shapoorji for Balance of Plant Works (BoP Works); (iii) Work Order bearing No. 3382003859 dated 18.10.2012, awarded to Shapoorji for arrangement of DG Sets (DG Contract); and (iv) Letter of Intent dated 14.01.2014 issued by Indiabulls to Shapoorji for civil construction of 4 RCC Bridges (RCC Contract).


Court took reliance from the case of Cheran Properties Ltd. v. Kasturi & Sons Ltd (2018) The Court in this case noted that “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.” The Courts in different jurisdictions have evolved various principles on the basis of which, in certain exceptional circumstances non-signatories may be compelled to arbitrate.

Given the facts and circumstances of the case, this Court is of the view that it would be apposite to compel Indiabulls to arbitrate as there is sufficient material to show that Elena is its alter ego. This is evident from the fact that Elena’s name has been mentioned in parenthesis against the name of Indiabulls in the LoA. The shareholding pattern confirms that Indiabulls does exercise complete control as a shareholder over Elena. The fact that the officials of Indiabulls acted on behalf of Elena also indicate that Indiabulls exercises substantial and dominant direct control over the affairs of Elena.

The petition is allowed.

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