Reckitt Benckiser (India) Private Limited vs Reynders Label Printing India Private Limited and Anr.

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

PETITION FOR ARBITRATION (CIVIL) NO. 65 OF 2016

Reckitt Benckiser (India) Private Limited …..Petitioner(s)

:Versus:

Reynders Label Printing India Private Limited and Anr. ....Respondent(s)

JUDGMENT

A.M. Khanwilkar, J.

1. The singular question involved in this application filed

under Sections 11(5), 11(9) and 11(12)(a) of the Arbitration

and Conciliation Act, 1996 (for short “the Act”) seeking

appointment of a sole arbitrator, is whether respondent No.2 ­

a company established under the laws of Belgium, having its

principal place of business at Nijverheldsstraat 3, 2530 Signature Not Verified Digitally signed by ARJUN BISHT Date: 2019.07.01 Boechout, Belgium, could be impleaded in the proposed 16:26:12 IST Reason:

arbitration proceedings despite the fact that it is a non­ 2

signatory party to the agreement dated 1 st May, 2014,

executed between the applicant and respondent No.1 ­ a

company established under the Companies Act, 2013 ­ merely

because it (respondent No.2) is one of the group companies of

which respondent No.1 also is a constituent. The legal position

as to when a non­signatory to an arbitration agreement can be

impleaded and subjected to arbitration proceedings is no more

res integra. In the case of Chloro Controls India Private

Limited Vs. Severn Trent Water Purification Inc. and

Ors.,1 a three­Judge Bench of this Court opined that

ordinarily, an arbitration takes place between the persons who

have been parties to both the arbitration agreement as well as

the substantive contract underlying it. Invoking the doctrine

of “group of companies”, it went on to observe that an

arbitration agreement entered into by a company, being one

within a group of corporate entities, can, in certain

circumstances, bind its non­signatory affiliates. That

exposition has been followed and applied by another three­

1 (2013) 1 SCC 641 3

Judge Bench of this Court in Cheran Properties Limited Vs.

Kasturi and Sons Limited and Ors.2 In paragraph 23 of this

decision, the Court, after analysing the earlier decisions and

including the doctrine expounded in Chloro Controls India

Private Limited (supra), concluded as follows:

“23. As the law has evolved, it has recognised that modern business transactions are often effectuated through multiple layers and agreements. There may be transactions within a group of companies. The circumstances in which they have entered into them may reflect an intention to bind both signatory and non­signatory entities within the same group. In holding a non­signatory bound by an arbitration agreement, the court approaches the matter by attributing to the transactions a meaning consistent with the business sense which was intended to be ascribed to them. Therefore, factors such as the relationship of a non­signatory to a party which is a signatory to the agreement, the commonality of subject­matter and the composite nature of the transaction weigh in the balance. The group of companies doctrine is essentially intended to facilitate the fulfilment of a mutually held intent between the parties, where the circumstances indicate that the intent was to bind both signatories and non­signatories. The effort is to find the true essence of the business arrangement and to unravel from a layered structure of commercial arrangements, an intent to bind someone who is not formally a signatory but has assumed the obligation to be bound by the actions of a signatory.”

2. In the present case, it is not in dispute that the

respondents are constituents of a group of companies known

as “Reynders Label Printing Group”. The constituent

2 (2018) 16 SCC 413 4

companies of the said group of companies can be described in

the form of a chart appended to the written submission filed

by respondent No.1 as Annexure R­1/1, which reads thus:

Reynders Label Printing Group

Reynesco Invest NV Reynesco NV

Reynders Reynders Reynders Reynders Reynders Reynders Ttiketten Etiquetters Pharmaceutical Label Printing Etiquettes Etiketten NV (R­2) Cosmetiques SA Labels NV India Pvt. France SA Polska Sp z.o.o.

Ltd. (R­1)

3. Keeping in mind the exposition in Chloro Controls

(supra) and Cheran Properties (supra), the crucial question is

whether it is manifest from the indisputable correspondence

exchanged between the parties, culminating in the agreement

dated 1st May, 2014, that the transactions between the

applicant and respondent No.1 were essentially with the group

of companies and whether there was a clear intention of the

parties to bind both the signatory as well as non­signatory

parties (respondent No.1 and respondent No.2, respectively).

In other words, whether the indisputable circumstances go to

show that the mutual intention of the parties was to bind both 5

the signatory as well as the non­signatory parties, namely,

respondent No.1 and respondent No.2, respectively, qua the

existence of an arbitration agreement between the applicant

and the said respondents.

4. In the wake of the amended Section 11(6) read with

Section 11(6A) of the Act, the enquiry by this Court must

confine itself to the examination of existence of an arbitration

agreement. No more and no less. For that, we must revert to

the assertion made by the applicant in the present application.

Be it noted that respondent No.1 has not filed any counter

affidavit to refute the assertions made by the applicant in the

application under consideration. Respondent No.1, however,

through its counsel has urged that respondent No.2 has no

concern with the subject agreement dated 1st May, 2014. That

agreement is only between the applicant and respondent No.1

and as a result thereof, it would give rise to a domestic

commercial arbitration and not an international commercial

arbitration. Respondent No.1 has also made it amply clear

through its counsel that it will have no objection, whatsoever, 6

if the Court were to appoint a sole arbitrator for resolving the

dispute between the applicant and respondent No.1, who

would conduct the arbitration proceedings in accordance with

the Act, in Delhi, as a domestic commercial arbitration

between the applicant and respondent No.1 alone.

5. Be that as it may, reverting to the averments in the

application under consideration, it is mentioned that the

dispute arises out of the agreement dated 1 st May, 2014,

executed between the applicant and respondent No.1, but

respondent No.2 has been impleaded because it is the parent/

holding company of respondent No.1. The agreement, in the

form of clause 13,3 contains an arbitration agreement between 3 “13. Dispute Resolution 13.1 Prior to the beginning of any arbitration process the parties hereby undertake to attempt in good faith to resolve any dispute by way of negotiation between senior executives of the parties who have authority to settle such dispute. A copy of any Escalation Notice shall be given to the Regional Senior Vice President (or equivalent person of seniority) of each party or their Affiliates (which copy shall state that it is an Escalation Notice pursuant to this Agreement). Provided, however, that the negotiations shall be completed within thirty (30) days of the date of the Escalation Notice or within such longer period as the parties may agree in writing prior to the expiration of the initial thirty­day period.

13.2 In the event the dispute is not resolved within a period of 30 days from the commencement of such dispute, the dispute shall be referred to arbitration and the parties shall mutually appoint a Sole arbitrator who shall conduct the proceedings in accordance with Indian Arbitration Act, 1996 as amended from time to time or any re­enactment thereof. The arbitration shall be held in Delhi and the proceedings shall be conducted in English.

13.3 The existence of a dispute with respect to this Agreement between the parties shall not relieve either party from performance of its obligations under this Agreement that are not the subject of such dispute.” 7

the parties. In terms of clause 9 4 thereof, respondent No.2 has

assumed the liability to indemnify the applicant in case of any

loss, damage etc., caused to the applicant on account of acts

and omissions of respondent No.1. Respondent No.2 is an

integral party to the stated agreement which contains an

arbitration agreement in the form of clause 13.2. The

applicant has relied upon e­mails exchanged which, according

to the applicant, provide the record of an arbitration

agreement within the meaning of Section 7(4)(b) of the Act.

According to the applicant, the respondents had approached

the applicant with an offer to print labels for the applicant,

including for booklets and leaflets and labels required for

Mucinex, exported to USA. The ‘Drug Facts’ and other details

4 “9. Indemnity 9.1 The Supplier and the Supplier group shall indemnify RB against any claims, losses, damages and expenses howsoever incurred or suffered by RB (and whether direct or consequential or economic loss) arising out of or in connection with

(i) defective workmanship, quality or materials;

(ii) an infringement or alleged infringement of any intellectual property rights caused by the use, manufacture, or supply of the products; and

(iii) negligent performance or failure or delay in performance of the terms of this Agreement by this Supplier.

9.2 Supplier shall indemnify and hold harmless RB and their respective officers, directors, agents, and employees against any and all claims:

i. Arising out of an alleged breach of the terms and conditions of other provision of this Agreement.

ii. based upon any allegations that the material produced by RB using Product was defective (including, but not limited to, manufacturing or refining defects); These provisions shall survive termination or expiry of this Agreement.” 8

which were to be printed on the back­label were in accordance

with the laws of USA and the respondents were aware of the

fact that Mucinex supply is meant for USA market. The

applicant relied upon the minutes of the meeting held on 29 th

May, 2013, between the officials of the applicant and the

officials of respondent No.1. Pursuant thereto, the respondents

made a presentation to the applicant about their capability to

print labels for the applicant, including the booklet and leaflet

labels as desired and made several representations about the

quality of their product. The applicant asserts that the

respondents had held exhaustive negotiations in relation to

the execution of agreement whereby the respondents were to

provide packaging material to the applicant and its affiliates.

Based on negotiations, the applicant, by e­mail dated 23rd

April, 2014, circulated a draft of the agreement along with the

code of conduct and anti­bribery policy of the applicant. The

applicant asserts that the respondents replied to the same

through Mr. Frederik Reynders (promoter of respondent No.2

which is the parent company of respondent No.1) by his e­mail 9

of 23rd April, 2014 at 12:00 PM. The said e­mail sent by Mr.

Frederik Reynders was responded to by the applicant on 23 rd

April, 2014 at 12:10 PM. Further, Mr. Frederik Reynders, by

his e­mail of 23rd April, 2014 at 4:09 PM, attached a copy of

the draft with some attached comments from the headquarters

of the respondents in Belgium (respondent No.2 herein).

According to the applicant, the comments related to clause 9

of the draft agreement relating to the indemnity of respondent

Nos.1 & 2. It is then stated that in the same e­mail, Mr.

Frederik Reynders gave a counter proposal, concerning clause

9.1 of the draft agreement, of providing a document of

insurance to inform the applicant about their maximum

coverage. On this basis, it is asserted that respondent No.2

was aware of the fact that indemnity is being extended to the

applicant and that respondent No.2 was the disclosed

principal on whose behalf the respondent No.1 was executing

the agreement. It is further asserted that the arbitration

agreement was an integral part of the agreement executed

between the applicant and respondent No.1, on its behalf and 10

on behalf of its disclosed principal, namely, respondent No.2.

The applicant has then asserted that respondent No.1

addressed an e­mail dated 6 th June, 2014, to the applicant

enclosing a signed copy of the agreement and further stating

that hard copy would be delivered to the applicant. The

relevant averments in the application referred to above have

been articulated in paragraphs 7.7 to 7.12, which read thus:

“7.7 The Applicant states that the Respondents had approached it with its offer to print labels for the applicant, including booklet and leaflet labels (required for Mucinex exported to USA). The Drug Facts and other details which were to be printed on the back label were in accordance with the laws of USA and the Respondents were aware of the fact that the Mucinex supply is meant for USA market. True typed copy of the Minutes of Meeting held on November 22, 2013 between the officials with the respondent No.1 are annexed as ANNEXURE A­2 (at pages 133 to 134).

7.8 The Respondents subsequently made a presentation about their capability to print labels for the Applicant, including booklet and leaflet labels (required for Mucinex exported to USA). During personal meeting and in the presentation, the Respondents represented that they are the market leaders in label printing across the globe and they provide creativity and innovation for self­adhesive labels.

Further, the Respondents represented that Reynders label printing in India offers tailor made solutions to fit all needs of the Respondent including perfect adhesion on vials conforming to ISO 15010), every single label is printed as per specifications) and numbering of each label, to ensure quality control. The Respondents offered to print booklet & leaflet labels “to put extra information on a packaging where the available space for text or images is rather limited”. The Respondents further specifically emphasised that such booklet labels contain a multi­page booklet, glued at the 11

back, having application in pharmaceutical industry. For the purpose of adhering and maintaining strict quality control measures, the Respondents represented that inspection of printed labels is conducted through a system consisting of “500 100% camera controlled inspection system, online numbering on back side and units for offline numbering”. Further, in relation to quality assurance, the Respondents represented to the Applicant that they provide standard quality assurance and in addition, they also provide quality check by camera control. True typed copy of the Presentation dated NIL made by the Respondents is annexed as ANNEXURE A­3 (at pages 135 to 156).

7.9 In the interregnum, the Applicant entered into a Supply Agreement dated April 16, 2014 with its affiliate in India viz., RB Healthcare. True typed copy of the Supply Agreement executed between the Applicant and RB Healthcare dated 16.04.2014 is annexed as ANNEXURE A­4 (at pages 157 to 189).

7.10 The Applicant and Respondents held detailed negotiations in relation to execution of an agreement, whereby the Respondents were to provide packaging material to the Applicant and its affiliates. Based on negotiations, the Applicant by email dated April 23, 2014, circulated a draft of the Agreement along with the Code of Conduct and Anti­ Bribery policy, of the Applicant. True typed copy of the email 23.04.2014 addressed by the Applicant to the Respondents is annexed as ANNEXURE A­5 (at pages 190 to 191). The applicant also requested the Respondents to attach a copy of the executed specifications of Mucinex labels and signed copy of the pricing/costing agreement for Mucinex Labels. It is relevant to state that Clause 9 of the draft Agreement, specifically stated “The Supplier and the Supplier group shall indemnify RB against any claims, losses, damages and expenses howsoever incurred or suffered by RB (and whether direct or consequential or economic loss) arising out of or in connection with……negligence performance or failure or delay in performance of the terms of this agreement by the Supplier”.

7.11 In response, the Respondents through Mr. Frederik Reynders (promoter of Respondent No.2 which is a parent of Respondent No.1) by his email responded on 12

April 23, 2014 at 12:00 pm. True typed copy of the email dated April 23, 2014 addressed by Mr. Frederik Reynders to the Applicant is annexed as ANNEXURE A­6 (at page 192). The said email sent by Mr. Frederik Reynders was responded by the Applicant on April 23, 2014 at 12:10 pm. True typed copy of the email dated April 23, 2014 addressed by the Applicant to Mr. Frederik Reynders is annexed as ANNEXUXRE A­7 (at page 193). Further, Mr. Frederik Reynders by his email of April 23, 2014 at 04.09 pm attached a copy of the draft Agreement with “some comments of our HQ in Belgium (Respondent No.2 herein)”. True typed copy of the email dated April 23, 2014 with the commented Agreement sent by Mr. Frederik Reynders to the Applicant is annexed as ANNEXURE A­8 (at page 194). The comments related to Clause 9 of the draft Agreement relating to Indemnity extended by the Respondent Nos.1 and 2. In the same email, Mr. Reynders also stated that for Clause 9.1 of the draft Agreement, “I will provide you with an document of our Insurance to inform you about our maximum coverage”. From the above, it is clear that Respondent No.2 was aware of the fact that indemnity is being extended to the Applicant and the fact that Respondent No.2 is the disclosed principal, on whose behalf the Respondent No.1 is executing the Agreement. In this regard, it is relevant to state that the arbitration agreement is an integral part of the Agreement executed between the Applicant and the Respondent No.1. Hence, the arbitration agreement also has been executed by Respondent No.1 on its behalf and on behalf of its disclosed principal i.e. the Respondent No.2.

7.12 After further discussions, the Respondent No.1, on its behalf of and on behalf of its parent and disclosed principal – Reynders Belgium) of Respondent No.2, executed the Agreement on May 1, 2014 and sent the same to the Applicant. In this context it is stated that the Respondent No.1 had addressed an email dated June 6, 2014 to the Applicant enclosing the signed copy of the Agreement and further stating that hard copy shall be delivered to the Applicant. True typed copy of the email dated June 6, 2014 sent by the Respondent No.1 to the Applicant is annexed as ANNEXURE A­9 (at page 195). The 13

Agreement was subsequently executed by the Applicant and a hard copy, was sent to the Respondents.”

(emphasis supplied)

6. We deem it apposite to reproduce the correspondence,

referred to in the aforesaid paragraphs of the application

under consideration, for examining the case made out by the

applicant as to whether respondent No.2 can be said to have

assented or had an intention to become party to the

arbitration agreement by its conduct, without being a

signatory to the agreement dated 1st May, 2014. Annexures­5

to 9 referred to by the applicant read thus:

“ANNEXURE A­5

From: Joshi, Sonu [mail to:Sonu.Joshi@rb.com] Sent: woensdag 23 april 2014 10:38 To: Frederic Reynders Subject: Commercial Agreement sigh­off­RB & Reynders

Dear Frederik, As per our Global procurement policies and procedures, it is mandatory for RB to sign­off a commercial agreement, document on code of conduct and Anti­Bribery policies with all of our suppliers. Accordingly, please find the following documents for immediate sign­off.

1. Code of Conduct

2. Anti­Bribery and

3. Commercial agreement (Packing material Supply Agreement) Along with the above, please attach a copy of the signed­off specs of Mucinex labels and the signed copy of our pricing/costing agreement on the Mucinex labels.

14 Please go through the commercial agreement, provide all relevant details i.e. Company Name, Address, Supply/Mfg. location, Details of Products manufactured/supplied, Agreed payment terms etc. and send us the duly signed (by the authorized signatory) & company stamped copy along with the signed & stamped copies of the Code of Conduct and Anti Bribery policies.

For any information or clarifications, please contact me. Request you to email/send us all the documents latest by 30th April 2014 and if earlier it would be really appreciated.

Regards,

Sonu Dev Joshi Manager Procurement –Packing Material RB Plot – 48, Institutional Area, Sector­32, Gurgaon – 122001 Direct­91­124­4028197; Mobile +91 85273­99487 www.reckittbenckiser.com

ANNEXURE A­6

On 23­Apr­2014, at 12:00 pm., “Frederik Reynders” <fre@reynders.com> wrote:

Dear Sonu, We will provide you with all complete documents before 30th. A lead time of 14 days is highly requested and recommended a leaflet label after receival of PO till delivery at RB factory in Baddi.

Please confirm.

Best regards,

Frederik Reynders Reynders_Label Printing India Pvt. Ltd. www.reynders.com

ANNEXURE A­7 15

From: Joshi, Sonu [mail to: Sonu.Joshi@rb.com] Sent: woensdag 23 april 2014 12:10 To: Frederic Reynders Cc: Kari Vandenbussche

Subject: Re: Commercial Agreement sign­off – RB & Reynders

Hi Frederik

Thanks.

We (me and you) will discuss on the lead­times, align on some buffer days and publish the official lead times to BADDI planning team.

The unofficial or real/crash/squeeze lead time must remain between the three of us.

Regards

Sonu Dev Joshi Manager­PM Procuremen RB

ANNEXURE A­8

From: Frederic Reynders [mail to:fre@reynders.com] Sent: Wednesday, April 23, 2014 4:09 PM To: Joshi, Sonu Cc: Kari Vandenbussche

Subject: RE: Commercial Agreement sign­off – RB & Reynders

Dear Sonu,

Please find attached the contract with some comments of our HQ in Belgium. We will discuss & agree on a realistic and necessary lead time between the 3 of us. For 9.1. I will provide you with an document of our insurance to inform you about our maximum coverage.

16 Waiting for your feedback. Feel free to call in case of any questions.

Frederik Reynders Reynders_Label Printing India Pvt. Ltd.

www.reynders.com

ANNEXURE A­9

From: Kari Vandenbussche [mail to:fre@reynders.com] Sent: Friday, June 06, 2014 4:38 PM To: Joshi, Sonu Cc: Frederic Reynders

Subject: FW: Commercial Agreement sign­off – RB & Reynders

Dear Mr. Sonu Joshi, Attached you find the signed agreement with Company stamp, hard copies will be delivered today at your R&B office in Gurgaon.

Best regards,

Kari Vandenbussche Site Manager Plot no. F 686 – Chopanki Ind. Area Chopanki 301019 – Bhiwadi – Rajasthan T + 91 987 1024 467 M + 91 987 102 4467 F + 91 149 330 5403 www.reynders.com” (emphasis supplied)

7. Respondent No.2 has filed its counter affidavit and

emphatically refuted the assertions made by the applicant that 17

respondent No.2 is the parent or holding company of

respondent No.1. It is stated that respondent No.1 and

respondent No.2 both are part of Reynders Label Printing

Group. This group is an internationally operating group of

seven printing companies and each of these companies has its

own separate legal entities and operates in different offices

independently. Further, these companies only share a

common parent entity, namely, Reynesco NV which is also the

holding company of both respondent companies. First,

respondent No.2 had no presence or operation whatsoever in

India and was not involved in the negotiation, execution

and/or performance of the agreement. There is no privity of

contract between the applicant and respondent No.2. Second,

respondent No.2 in its counter affidavit has clearly stated that

Mr. Frederik Reynders was not the promoter of respondent

No.2. However, Mr. Frederik Reynders was an employee of

respondent No.1. The signatory to the stated agreement, Mr.

Kari Vandenbussche, had neither exercised any managerial

functions for respondent No.2, nor was he an authorized 18

representative or a director of respondent No.2 with any

authority to appoint the said respondent. The relevant extract

of the counter affidavit reads thus:

“THE ANSWERING RESPONDENT DID NOT PARTICIPATE IN THE NEGOTIATIONS PERTAINING THE AGREEMENT

15. It is incorrect to state that the answering Respondent was at any point in time involved in the negotiations with respect to the Agreement. The answering Respondent did not make any presentation or representations to the Applicant. From the documents annexed by the Applicant, there is nothing to show that the answering Respondent ever made any presentation to the Applicant or was present at any meeting prior to the date of the alleged Agreement.

16. Contrary to what has been alleged by the Applicant, the answering Respondent did not provide any comments on the draft of the Agreement. The answering Respondent submits that it is not aware of the e­mail dated 23.04.2014, as alleged by the Applicant. Respondent No.1 did not forward e­mail dated 23.04.2014 or any such e­mail to the answering Respondent seeking comments of the answering Respondent on the draft of the Agreement. The reference to HQ in Belgium is not a reference to the answering Respondent. As explained above, the answering Respondent is but one of seven subsidiaries of the holding company Reynesco NV.

17. The answering Respondent submits that it was not party to any negotiations pertaining to the Agreement. The signatory to the Agreement, Mr. Karl Vandenbussche, and Mr. Frederik Reynders, who is alleged to have carried out the negotiations with respect to the Agreement, were not representing (or purporting to 19

represent) or acting in any way for the answering Respondent, and they had no authority to bind the answering Respondent.

18. The answering Respondent has no connection to the present dispute not having been a party in any capacity to the negotiation, execution, or enforcement of the Agreement.

RESPONDENT NO.1 HAD NO AUTHORITY TO BIND THE ANSWERING RESPONDENT AND DID NOT EXECUTE THE AGREEMENT ON BEHALF OF THE ANSWERING RESPONDENT.

19. The signatory to the Agreement is Mr. Karl Vandenbussche, who at no point time exercised any managerial functions for the answering Respondent. Mr. Vandenbussche has never been an authorized representative or a director of the answering Respondent, having any authority to bind the answering Respondent.

20. Further, Mr. Frederik Reynders, who is alleged to have carried out the negotiations with respect to the Agreement, has incorrectly been described as the promoter of the answering Respondent. Mr. Frederik Reynders was not and has never been an employee, officer or representative of the answering Respondent.

21. The Applicant contends that the fact that Mr. Frederik Reynders was acting on behalf of the answering Respondent and the answering Respondent is the parent company of Respondent No.1 binds the answering Respondent to the Agreement and consequently the arbitration Agreement. It is submitted that the answering Respondent is not the parent company of Reynders India and at no point in time was Mr. Frederik Reynders ever employed by the answering Respondent or for that matter Reynesco NV. Clearly, Mr. Frederik Reynders was not acting for the answering Respondent, and had no authority to bind the answering Respondent. From the communication and documents annexed by the Applicant, there is nothing to show that Mr. Vandenbussche or Mr. Frederik Reynders represented themselves to be the agents of the answering 20

Respondent or authorized persons acting for the answering Respondent.

22. It is submitted that the answering Respondent has no connection to the present dispute not having been a party in any capacity to the negotiation, execution, or enforcement of the Agreement. Therefore, the Applicant’s submission that the Agreement was executed by Respondent No.1 on behalf of Respondent No.2, is incorrect. As demonstrated above, the answering Respondent was never a participant in the negotiations between the Applicant and Respondent No.1.”

(emphasis supplied)

8. The applicant has filed a rejoinder affidavit in which it is

vaguely stated that Mr. Frederik Reynders, during the stage of

negotiation of the agreement, was taking directions from the

representatives of respondent No.2. In paragraphs 10 to 12 of

the said affidavit, in response to the stand taken by

respondent No.2, the applicant has stated thus:

“10. The contents of Para 15 are wrong and denied. It is a matter of record (Annexure – A3 at Page 135 of the Application) that the Respondents had approached the Applicant at the time of negotiation of Agreement under the common banner of ‘Reynders Label Printing’ and in that capacity had made a presentation to the Applicant. In fact, the Respondents market themselves as a label printing company, the printing being executed through various sites around the world.

11. The contents of Para 16­18 are incorrect and denied. It is a matter of record that Respondent No.2 had actively participated in the negotiation of the Agreement. It is a matter of record (Annexure A­8 at Page 194 of Application) that Respondent No.1 was taking directions from Respondent No.2 during the stage of negotiations of the 21

Agreement. In fact, Respondent No.2 through Mr. Kristof Vandenbroucke had shared comments on the Agreement.

The same Mr. Kristof Vandenbroucke subsequently participated in the escalation meeting held in Amsterdam for amicable resolution of the disputes that have arisen between the parties. Without prejudice to the same, it is submitted that it is inconsequential whether or not Respondent No.2 participated in negotiations of the Agreement. As elaborated in the Preliminary Submissions, there is irrefutable evidence that Respondent No.2 has assented to the Agreement.

12. The contents of Para 19­22 are wrong and denied. It is a matter of record (Annexure A­8 at Page 194 of the Application) that Mr. Frederik Reynders, during the stage of negotiations of the Agreement, was taking directions from representatives of Respondent No.2. In any case, as demonstrated hereinabove, Respondent No.2 has admitted to its liability under the Indemnity Clause, its limited objection being the extent of its liability thereunder. Additionally, Respondent No.2 had participated in the escalation meetings held in Amsterdam under the Arbitration Clause. Clearly the paragraphs under reply are an afterthought.” (emphasis supplied)

9. 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 Mr. Frederik Reynders was acting for and

on behalf of respondent No.2, as a result of which the

respondent No.2 has assented to the arbitration agreement.

This basis has been completely demolished by respondent 22

No.2 by stating, on affidavit, that Mr. Frederik Reynders 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 Mr. Frederik Reynders 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 23

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 us 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.

10. 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 24

international commercial arbitration, cannot be taken forward.

As respondent No.1 is a 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.

11. Indeed, the applicant had vehemently relied upon the

circumstances and correspondence post­contract but that

cannot be the basis to answer the matter in issue. The

respondent No.2 has justly relied upon the exposition in

Godhra Electricity Co. Ltd. and Anr. Vs. State of Gujarat

and Anr.,5 to buttress the argument that post­negotiations in

law would not bind the respondent No.2 qua the arbitration

agreement limited between applicant and respondent No.1. In

any case, even this plea is based on the assumption that Mr.

Frederik Reynders was associated with and had authority to

transact on behalf of respondent No.2, which assertion has

5 (1975) 1 SCC 199 25

been refuted and rebutted by respondent No.2. It is clearly

stated that Mr. Frederik Reynders was neither connected to

nor had any authority of respondent No.2, but was only an

employee of respondent No.1 and acted only in that capacity.

12. For the view that we have taken, it is unnecessary to

dilate on other contentions. Suffice it to observe that the

application must fail against respondent No.2 and on that

conclusion, no relief can be granted to the applicant who has

invoked the jurisdiction of this Court on the assumption that

it is a case of international commercial arbitration. Despite

that, respondent No.1 through counsel has urged that as the

subject agreement between the applicant and respondent No.1

contains an arbitration clause (clause 13) and since disputes

have arisen between them, the respondent No.1 would agree to

the appointment of a sole arbitrator by this Court for

conducting arbitration proceedings between the applicant and

respondent No.1, as domestic commercial arbitration. This

stand has been reiterated in the written submissions filed on

behalf of respondent No.1, filed after the conclusion of the oral 26

arguments. Resultantly, even though no relief can be granted

to the applicant as against respondent No.2, we proceed to

pass the following order in the interest of justice.

13. The arbitration application is dismissed as against

respondent No.2. However, we appoint Mr. Justice Badar

Durrez Ahmed (Former Chief Justice, Jammu & Kashmir High

Court) as the sole arbitrator to conduct domestic commercial

arbitration at New Delhi, between the applicant and

respondent No.1 on the terms and conditions as specified in

the Act of 1996.

14. Application stands disposed of in the above terms. No

costs. All pending interim applications are also disposed of.

…………………………..….J. (A.M. Khanwilkar)

…………………………..….J. (Ajay Rastogi) New Delhi;

July 01, 2019.