Published on: 25 September 2023 at 12:59 IST
Court: Supreme Court of India
Citation: Chloro Controls India v. Severn Trent Water Purification (2013)
Honourable Supreme Court of India has explained the Doctrine of Alter Ego as a Corporate Veil of a person which is used for all acts/deeds/transactions on behalf of the said person. The said doctrine is based on Two Theories namely as following.
- First Theory: Implied consent by the virtue of third-party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of the parties and, to a large extent, on good faith principle. They apply to private as well as public legal entities.
- Second Theory: Act of Agent-principal relations, apparent authority, piercing of veil (also called ‘the alter ego’), joint venture relations, succession and estoppel.
107. If one analyses the above cases and the authors’ views, it becomes abundantly clear that reference of even non-signatory parties to an arbitration agreement can be made. It may be the result of implied or specific consent or judicial determination. Normally, the parties to the arbitration agreement calling for arbitral reference should be the same as those to the action. But this general concept is subject to exceptions which are that when a third party i.e. non-signatory party, is claiming or is sued as being directly affected through a party to the arbitration agreement and there are principal and subsidiary agreements, and such third party is signatory to a subsidiary agreement and not to the mother or principal agreement which contains the arbitration clause, then depending upon the facts and circumstances of the given case, it may be possible to say that even such third party can be referred to arbitration.”
Drafted by Abhijit Mishra
