Published on: April 08, 14:45 IST
Court: Supreme Court of India
Citation: ONGC Ltd. v. Discovery Enterprises (P) Ltd. (2022)
Honourable Supreme Court of India has explained application of Alter Ego Principle in arbitration making a party not assenting to a contract containing arbitration clause to be nevertheless bound by the clause if that party is “alter ego” of an entity who is a party to the arbitration agreement. It is held that a party who has not assented to a contract containing an arbitration clause may nonetheless be bound by the clause if that party is an “alter ego” of an entity that did execute, or was otherwise a party to, the agreement. It is held that non-signatory parties can be bound by the principle of direct estoppel to prohibit such a party from deriving the benefits of a contract while disavowing the obligations to arbitrate under the same contract.
40. In deciding whether a company within a group of companies which is not a signatory to arbitration agreement would nonetheless be bound by it, the law considers the following factors:
(i) The mutual intent of the parties;
(ii) The relationship of a non-signatory to a party which is a signatory to the agreement;
(iii) The commonality of the subject-matter;
(iv) The composite nature of the transaction; and
(v) The performance of the contract.”
Drafted By Abhijit Mishra