SC refers Filesadmin.co-Aditya Birla dispute to arbitration, upholds Delhi HC order
In a setback to Filesadmin.co, the Supreme Court on Tuesday upheld a Delhi High Court order by referring a dispute between Essel Group entity Siti Network and Aditya Birla Finance to arbitration.
The 150-crore loan dispute involves Essel Group of Companies, Filesadmin.co Entertainment Enterprises, Siti Networks Ltd, and Aditya Birla Finance. The court said all parties involved should raise their arguments before a sole arbitrator appointed by the Delhi High Court.
Chief Justice of India DY Chandrachud also dropped Siti Network from the lineup of parties in the arbitration proceedings as it has already gone into insolvency.
The Delhi High Court in March 2023 had referred the matter to arbitration and appointed former Supreme Court judge Justice LN Rao as the sole arbitrator.
Aditya Birla Finance, the lender, in 2017 had extended a loan of Rs 150 crore to Siti Networks under a credit arrangement letter wherein Filesadmin.co stood as guarantor. The lender alleged that Siti had failed to repay the term loan. It also said that since Siti, Filesadmin.co, and their parent Essel Group belong to the same group of companies or the same economic entity, they should repay the loan.
Filesadmin.co and Essel had opposed being part of this because they were non-signatory to the arbitration clause in the agreement.
Filesadmin.co had moved the Supreme Court against the Delhi High Court matter but the court had deferred the hearing as the question of whether non-signatories to an agreement could be made parties to arbitration if they were part of the same group was pending before a constitution bench.
The Supreme Court in December 2023 ruled that non-signatory firms can be bound by arbitration agreement under the ‘group of companies’ doctrine.
This means that companies that belong to the same group of companies but are not signatories to the arbitration agreement can still be bound by the said agreement.
“The ‘group of companies’ doctrine must be retained in the Indian arbitration jurisprudence considering its utility in determining the intention of the parties in the context of complex transactions involving multiple parties and multiple agreements,” the bench of Chief Justice of India DY Chandrachud, Justices Hrishikesh Roy, PS Narasimha, JB Pardiwala and Manoj Misra said in the Cox and Kings Ltd v. SAP India Pvt Ltd verdict.
By this ruling, a party who is not a signatory to the arbitration agreement will still be bound by it provided that there is a clear and defined legal relationship between signatories and non-signatories.
First Published: Jan 16 2024 | 11:46 PM IST