Judgement Briefs

Alternative Dispute Resolution

GMR Energy Ltd. v. Doosan Power Systems India Pvt. Ltd.

2017 SCC OnLine Del 11625

Citation
2017 SCC OnLine Del 11625
Court
Delhi High Court
Date
14 November 2017
Bench
Prathiba M. Singh, J.

Facts

  • GMR Chhattisgarh Energy Ltd. entered into three engineering, procurement and construction agreements with Doosan Power Systems India.
  • The agreements concerned construction and supply for a power project.
  • They contained arbitration clauses providing for arbitration under SIAC Rules with Singapore as the seat.
  • GMR Infrastructure Ltd. later executed a corporate guarantee supporting the project obligations.
  • GMR Energy Ltd. did not sign the original EPC agreements or the corporate guarantee.
  • However, after payment difficulties arose:
  • GMR Energy entered into memoranda of understanding with Doosan;
  • it undertook responsibility for specified overdue amounts;
  • it made payments on behalf of the project company; and
  • it participated in efforts to restructure the liability.
  • Doosan commenced SIAC arbitration in Singapore against:
  • the project company;
  • GMR Infrastructure; and
  • GMR Energy.
  • GMR Energy filed a suit before the Delhi High Court seeking an anti-arbitration injunction.
  • It argued that it was a non-signatory and could not be compelled to arbitrate.

Issue

  • Whether GMR Energy could prima facie be subjected to arbitration as a non-signatory.
  • Whether two Indian parties could select Singapore as the seat.
  • Whether the Delhi High Court should restrain the SIAC proceedings.
  • Whether the arbitral tribunal could decide the alter-ego and non-signatory objections.

Rule

  • Anti-arbitration injunctions are granted only in exceptional situations.
  • Courts ordinarily respect:
  • competence-competence;
  • the tribunal’s authority to decide jurisdiction; and
  • the parties’ choice of a foreign seat.
  • A non-signatory may prima facie be referred where its conduct shows:
  • assumption of obligations;
  • direct participation in performance;
  • common intention;
  • integrated commercial arrangements; or
  • operation as an alter ego or controlling participant.
  • Two Indian parties may choose a foreign seat.
  • That principle was later conclusively affirmed by the Supreme Court in PASL Wind Solutions.
  • The modern controlling basis for binding a group company is consent, as clarified in Cox and Kings.

Application

  • GMR Energy was not sought to be joined merely because it belonged to the same corporate group.
  • Doosan relied upon specific conduct:
  • GMR Energy negotiated repayment arrangements;
  • it entered into two MOUs connected with EPC liabilities;
  • it undertook payment responsibility up to a stated amount;
  • it made payments directly; and
  • it represented that it would support performance.
  • These facts created a serious prima facie case that GMR Energy had assumed obligations connected with the contracts containing arbitration clauses.
  • The High Court did not finally hold that GMR Energy was liable.
  • It asked only whether the arbitration was so plainly without jurisdiction that it should be stopped before the tribunal examined the issue.
  • The answer was no.
  • The SIAC tribunal was competent to determine:
  • whether GMR Energy had consented;
  • whether the MOUs incorporated the original dispute-resolution framework;
  • whether alter-ego principles applied; and
  • whether liability could ultimately be imposed.
  • The Court also rejected the argument that Indian parties could not agree to Singapore arbitration.
  • The juridical seat determines whether the award is domestic or foreign.
  • Indian nationality of all parties does not by itself prevent selection of a foreign seat.
  • Singapore was expressly selected and SIAC Rules were incorporated.
  • The arbitration therefore fell within the foreign-seated framework under Part II.
  • Granting an injunction would improperly allow an Indian court to assume supervisory control over a Singapore-seated arbitration.
  • The Court dissolved the earlier interim restraint and permitted the SIAC proceedings to continue.
  • After Cox and Kings, the broad language in GMR Energy about corporate unity and alter ego should be used cautiously.
  • Group structure supports the inquiry but cannot replace proof of consent.
  • The strongest basis for the result remains GMR Energy’s own MOUs, payment undertakings and active role.

Conclusion

  • The Delhi High Court refused to restrain the Singapore arbitration.
  • It held that Doosan had established a sufficient prima facie case for the tribunal to determine whether GMR Energy was bound.
  • It also accepted that Indian parties could choose a foreign seat.
  • The final jurisdictional and liability questions were left to the SIAC tribunal.
  • Use this case for: courts should not stop a foreign arbitration where a non-signatory’s direct assumption and performance of contractual obligations create a prima facie case of consent.