Nakul Dewan, Clasis Law win for Doosan; GMR Energy to submit to Singapore arbitration

The Delhi High Court yesterday passed a comprehensive judgment in the case of GMR Energy Limited v. Doosan Power Systems India Pvt. Ltd, which could contribute immensely to the arbitration jurisprudence in the country..The matter was regarding the ongoing arbitration between GMR Chhattisgarh Energy Limited (GCEL), GMR Infrastructure Limited (GIL), GMR Energy and Doosan India for development of a 1350 MW Coal Fired Thermal Power Plant at Raikheda in Chhattisgarh..In the suit, GMR Energy sought a decree of permanent injunction restraining Doosan India from continuing with the arbitration proceedings before the Singapore International Arbitral Centre (SIAC), claiming that it was not a signatory to the arbitration agreement entered into by GCEL and GIL with Doosan..The Delhi High Court had initially granted an ex-parte injunction in favour of GMR Energy. However, in a judgment passed yesterday, it referred GMR Energy, a non-signatory to an arbitration agreement, to submit to ongoing arbitration proceedings in Singapore governed by the SIAC rules..The Court applied the doctrine of alter ego while subjecting the non-signatory to the ongoing arbitration..Appearing for Doosan India was Advocate Nakul Dewan, instructed by Clasis Law Partner Sumeet Lall along with Sidhant Kapoor. GMR Energy was represented by Senior Advocates Rajiv Nayar and Darpan Wadhwa, instructed by Agarwal Law Associates‘ Partner Rishi Agrawala..Senior Advocate AS Chandiok, along with Agarwal Law Associates‘ Shally Bhasin appeared for GCEL and GIL..The single judge bench of Justice Mukta Gupta, relying upon various precedents of the Supreme Court and other High Courts, determined the following main issues that arose between the parties:-.In the backdrop that parties were Indian, whether arbitration in Singapore falls under Part I of Part II of the Act?Whether the Arbitral Tribunal constituted in Singapore under the SIAC Rules has the jurisdiction to pierce the corporate veil?Whether the Court must form a prima-facie opinion on the issue of alter ego or return a finding?.The Court extensively elucidated upon the laws applicable to arbitration and discussed the scope of designating a ‘seat’ of arbitration while affirming that the arbitration proceedings in the present case will fall under Part II of the Act..Further, the contention raised by GMR Energy that, in the absence of the word ‘place’ or ‘seat’ in the arbitration clause, Singapore was only the venue between the parties, was rejected. Placing reliance on various judgments passed by the Supreme Court clarifying the said position, the High Court observed that the arbitration is to be governed by SIAC Rules and consequently, Singapore will be the seat of arbitration..The plea that two Indian parties cannot choose a foreign-seated arbitration was rejected by placing reliance on the previous judgments passed by the Supreme Court of India and the Madhya Pradesh High Court wherein two Indian parties were allowed to proceed with foreign seated arbitrations..The Court further examined the scope of lifting the corporate veil on grounds other than fraud i.e. on the principle of alter ego and observed that modern jurisprudence recognizes certain circumstances besides fraud wherein lifting of the corporate veil is permissible..Further, the issue of alter ego does not fall within the category of non-arbitrable disputes and therefore, a tribunal in a foreign seated arbitration can go into issues which are arbitrable..In the present case, the Court rendered a prima-facie view, observing that the arbitration was not a court-referred arbitration and, therefore, it was in the domain of the Arbitral Tribunal to decide the issue of alter ego..Read the Judgment: