OIL AND NATURAL GAS CORPORATION LTD. v. M/S DISCOVERY ENTERPRISES PVT. LTD. & ANR.

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A (viii) The bid submitted by DEPL was signed by GD Sharma as an authorized signatory who is an employee of JDIL; (ix) The Managing Director of JDIL, Mr Naresh Kumar, had negotiated with the owners of the vessel for hiring on behalf DEPL; B (x) DEPL was incorporated in 2003; (xi) Mohan Ramanathan who attended the office of ONGC in connection with the subject contract was the General Manager of JDIL; and

C (xii) Almost all senior officers of JDIL including its Managing Director actively took part in matters relating to the hiring of the vessel, its deployment, performance and related issues. Therefore, a corporate, financial and functional unity exists between DEPL and JDIL.

49Copy pinpoint49. At the hearing before the first Arbitral Tribunal on 7 July 2009, the documents which were produced by ONGC’s witness were taken on the record. Counsel for JDIL objected to these documents on the ground of relevance and admissibility but stated that he would cross- examine the witness without prejudice to those contentions. The first Arbitral Tribunal observed that the rival contentions would be decided while disposing of the application under Section 16. ONGC also filed an application for discovery and inspection before the first Arbitral Tribunal and the annexure to the application contained a schedule indicating the disclosures which were sought. The order of the first Arbitral Tribunal notes the submission of ONGC that the applications for discovery and inspection must be decided first and it is only on the completion of the process that JDIL’s challenge to jurisdiction under Section 16 could be addressed. The first Arbitral Tribunal deferred a decision on the two applications until the issue of jurisdiction was decided. The net result is that the applications for discovery and inspection which were crucial to ONGC’s claim that there existed functional, financial and economic unity between DEPL and JDIL remained to be decided before the application under Section 16 was taken up. There is merit in the submission which was been urged on behalf of the ONGC that the application for discovery and inspection had to be decided before the plea of jurisdiction was adjudicated upon. The application for discovery and inspection was intended to facilitate ONGC in its plea that there existed functional, H

OILAND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES 973 PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]

financial and economic unity between the two companies. The failure of the first Arbitral Tribunal to hear the application for discovery and inspection goes to the root of its interim award dated 27 October 2010 holding an absence of jurisdiction qua JDIL. The interim award of the Arbitral Tribunal in the first proceeding, dated 27 July 2010 refers to the documents which were produced by ONGC and to the submission that neither DEPL nor JDIL had led any evidence to controvert the documentary and oral evidence adduced by ONGC. The first Arbitral Tribunal upheld the plea of jurisdiction that JDIL is neither a party to the contract nor had it submitted a bid to ONGC which resulted in the formation of the contract. The Tribunal held that the agreement was only between ONGC and DEPL and that in terms of Section 7, an agreement to arbitrate is between the parties to the agreement. While observing that the arbitration agreement was only between DEPL and ONGC, the Tribunal held that neither was there an arbitration agreement between ONGC and JDIL nor was JDIL a signatory to the agreement between ONGC and DEPL. After noting the documents which were relied upon by ONGC, the Tribunal held that there was “no tickle of evidence to indicate that JDIL”, a distinct incorporated legal entity, ever played any role to find itself in the contract between JDIL and ONGC. The executives of JDIL who participated in the contractual dealing were held to be representatives of DEPL. Reading the interim award dated 27 October 2010 of the first Arbitral Tribunal, the unmistakable impression which emerges from the record is that the primary basis for the determination of an absence of jurisdiction is that the arbitration agreement was between ONGC and DEPL. The legal foundation of the group of companies doctrine has not been evaluated, on facts or law. True enough, the judgment of this Court in Cholo Controls (supra) is of 2013, Cheran F Properties (supra) is of 2018 and MTNL (supra) came in 2020. However, ONGC had clearly laid out the factual and legal foundation for setting up a case in opposition to the plea of JDIL. The first Arbitral Tribunal has made a fundamental error of law in not deciding the application by ONGC on discovery and inspection of documents before it ruled on jurisdiction. In doing so, the first Arbitral Tribunal’s interim G award dated 27 October 2010 goes against the principles of natural justice. The failure to consider the application for discovery and inspection of documents results in a situation where vital evidence that could have assisted the Tribunal in its determination of the challenge under Section 16 was shut out. As a matter of fact, it emerged from the record that no H

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A evidence was adduced by JDIL in support of its plea of the absence of jurisdiction under Section 16. JDIL having taken the plea of absence of jurisdiction was required to establish the grounds on which it set about to establish its plea.

50Copy pinpoint50. Based on the above discussion, the interim award of the first B Arbitral Tribunal stands vitiated because of: (i) The failure of the arbitral tribunal to decide upon the application for discovery and inspection filed by ONGC; (ii) The failure of the arbitral tribunal to determine the legal C foundation for the application of the group of companies doctrine; and (iii) The decision of the arbitral tribunal that it would decide upon the applications filed by ONGC only after the plea of jurisdiction was disposed of. D D Conclusion

51Copy pinpoint51. For all the above reasons we have come to the conclusion that there was a fundamental failure of the first Arbitral Tribunal to address the plea raised by ONGC for attracting the group of companies doctrine. Moreover, by leaving the application filed by ONGC for E discovery and inspection unresolved, the first Arbitral Tribunal failed to allow evidence which may have had a bearing on the issue of whether JDIL could be considered to have an economic unity with DEPL and could hence be made a party to the arbitral proceedings.

52Copy pinpoint52. For the above reasons, we are of the view that: F (i) The interim award of the Arbitral Tribunal dated 27 July 2010 on the plea raised by JDIL under Section 16 has to be set aside; (ii) The judgment of the Single Judge of the Bombay High Court G dated 27 June 2012 dismissing ONGC’s appeal under Section 37 would have to be set aside; (iii) The plea by JDIL that the Arbitral Tribunal lacks jurisdiction would have to be decided afresh. In this regard, this Court was informed that one of the three arbitrators has died and that the Arbitral Tribunal cannot be reconstituted. We

OILAND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES 975 PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]

accordingly direct that ONGC and JDIL shall each nominate their arbitrators within a period of two weeks from the date of this judgment while the two arbitrators shall nominate and appoint the third arbitrator. The Arbitral Tribunal so reconstituted shall decide afresh upon the plea of JDIL in regard to the absence of jurisdiction after furnishing to the parties the opportunity of leading any further evidence or seeking the production of further documentary material on the record. The evidence and documentary evidence which has been already adduced before the earlier Arbitral Tribunal shall however form part of the record of the newly constituted Tribunal; C (iv) As regards the cases which have been transferred to this Court, we would order and direct that these cases be remitted back to the Bombay High Court. The decision on those appeals which arose from the dismissal by the Single Judge of the petition under Section 34 challenging the Arbitral D Award dated 9 October 2013 in the second proceeding, in favour of JDIL, shall be held in abeyance and remain adjourned sine die until the Arbitral Tribunal which is reconstituted in terms of the above directions rules on its jurisdiction and in the event that it rejects the plea challenging its jurisdiction, until the arbitral award is delivered in relation to ONGC’s claim against JDIL; and (v) During the pendency of these proceedings, ONGC was directed to deposit the amount due under the Arbitral Award in the second proceeding dated 9 October 2013, which was permitted to be withdrawn by JDIL subject to furnishing a bank guarantee which shall be kept alive during the pendency of the proceedings before the Bombay High Court. The bank guarantee furnished by JDIL shall be kept alive to the satisfaction of the Prothonotary and Senior master of the Bombay High Court. G

53Copy pinpoint53. For the above reasons, we issue the following directions: (i) The judgment of the Single Judge of the Bombay High Court dated 27 June 2012 in Arbitration Petition No 814 of 2011 is set aside; H

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A (ii) The appeal filed by ONGC under Section 37 of the Act of 1996 against the interim award of the Arbitral Tribunal dated 27 October 2010 is allowed and the interim award of the Tribunal dated 27 October 2010 shall stand set aside; (iii) A fresh Arbitral Tribunal shall be constituted by ONGC and B JDIL each nominating their arbitrators within a period of two weeks from the date of this judgment and the two arbitrators thereafter will jointly appoint the third arbitrator; (iv) The present judgment will not have any bearing on the arbitral award dated 6 June 2013 passed in favour of ONGC against C DEPL; (v) The transferred cases shall stand remitted back to the Bomaby High Court. The hearing of the transferred cases is adjourned sine die so as to await the outcome of the arbitral proceedings between ONGC and JDIL in terms of D (iii) above; (vi) In pursuance of the interim orders of this Court, ONGC was directed to deposit the amount due to JDIL under the Arbitral Award in the second proceeding dated 9 October 2013 which was permitted to be withdrawn by JDIL subject to furnishing a bank guarantee. The bank guarantee furnished by JDIL shall be kept alive to the satisfaction of the Prothonotary and Senior master of the Bombay High Court pending the disposal of the arbitration appeals against the judgment of the Single Judge dated 28 April 2015 dismissing the petition under Section 34 challenging the arbitral award dated 9 October 2013; and (vii) Upon the reconstitution of the Arbitral Tribunal, the plea of JDIL under Section 16 shall be decided afresh. All the rights and contentions in that regard are kept open to be decided by the arbitral tribunal. The oral and documentary evidence which was produced before the earlier arbitral tribunal shall form part of the proceedings before the fresh Arbitral Tribunal to be constituted in pursuance of the above directions. ONGC would be at liberty to pursue its application for discovery and inspection and to seek further directions before the Arbitral Tribunal. Parties would be at H

OILAND NATURAL GAS CORP. LTD. v. M/S DISCOVERY ENTERPRISES 977 PVT. LTD. & ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]

liberty to apply for leading further evidence before the A Arbitral Tribunal if they are so advised.

54Copy pinpoint54. The appeal is allowed in the above terms. The transferred cases are remitted back to the Bombay High Court for disposal in the light of the above directions.

55Copy pinpoint55. Pending application(s), if any, stand disposed of. B

Bibhuti Bhushan Bose Appeal allowed. (Assisted by : Neha Sharma, LCRA)