# GEMINI BAY TRANSCRIPTION PVT. LTD v. INTEGRATED SALES SERVICE LTD. & ANR

- **Citation:** [2021] 7 S.C.R. 957
- **Court:** Supreme Court of India
- **Decided:** 2021-08-10
- **Case number:** Civil Appeal Nos. 8343-8344 of 2018
- **Bench:** Rohinton Fali Nariman, B. R. Gavai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gemini-bay-transcription-pvt-ltd-v-integrated-sales-service-ltd-anr-35153
- **Pages:** 67

## Headnote

Arbitration and Conciliation Act, 1996:
ss. 44, 47, 48 - Foreign awards - Recognition and enforcement
of, against non-signatories to the arbitration agreement - On facts,
Hong Kong based company-respondent no. 1-ISS and Indian
company-DMC entered into a Representation Agreement - In terms
thereof, ISS had to assist DMC to sell its goods and services to the
prospective customers and in consideration was to receive
Commission - By amendment, the agreement was subject to laws of
the State of Delaware, USA - Dispute between the parties - Initiation
of arbitration by ISS, claiming that DMC allegedly terminated its
contract with the customers introduced by ISS and executed new
contracts with the appellant company-GBT, a company owned and
controlled by the Chairman of DMC, thereby depriving ISS of its
Commission - ISS claimed damages on the basis of accounting for
lost Commissions - Chairman of DMC, DMC, DMCG, GBC and
appellant company filed claim as respondents - Issuance of award
by the arbitrator directing the DMC, DMCG, Chairman of DMC,
GBC and the appellant company to jointly and severally pay the
amount awarded to ISS - As regards, the enforcement of award, the
Single Judge of the High Court held that the award would be
enforceable against DMC as it was a party to the agreement, and
not against non-signatories to the arbitration agreement - However,
the Division Bench set aside the order of the Single Judge - Appeal
by non-signatories - Held: Foreign award could be enforced against
non-signatories to the arbitration agreement - s. 47(1)(c) being
procedural in nature does not go to the extent of requiring
substantive evidence to "prove" that a non-signatory to an
arbitration agreement can be bound by a foreign award - s. 47(1)(c)
speaks of only evidence as may be necessary to prove that the award
is a foreign award - A non-party to the agreement, alleging that it
[2021] 7 S.C.R. 957
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cannot be bound by an award made under such agreement, is outside
the literal construction of s. 48(1)(a) - Non-signatory's objection
cannot possibly fit into s. 48(1)(a) - Application of the alter ego
doctrine under Delaware law would depend primarily upon the
Arbitrator applying the oral and documentary evidence led before
him to arrive at this conclusion on facts - Furthermore, perversity
not a ground to set aside an award in an international commercial
arbitration held in India -Expression 'submission to arbitration' u/
s. 48(1)(c) only deals with disputes outside the scope of the
arbitration agreement between the parties-and not to whether a
person who is not a party to the agreement can be bound by the
same - As regards, the plea that the Award should be set aside since
no proper reasons given by the Arbitrator, being breach of natural
justice, s. 48(1)(b) does not speak of absence of reasons in an
arbitral award at all - Plea that since damages were given in tort,
they would be outside the scope of the arbitration agreement cannot
be accepted since u/s. 44, the tort claims may be decided by an
arbitrator provided they are disputes that arise in connection with
the agreement - Furthermore, s.46 does not speak of "parties" at
all, but of "persons" who may, thus, be non-signatories to the
arbitration agreement - Thus, on facts, actual loss can be said to
have been occasioned to ISS, and the damages awarded cannot be
said to shock the conscience of this Court - Damages - Doctrine of
alter ego.
s. 44 - Foreign awards - Ingredients to an award being
foreign award - Stated.
s. 47 - Pre-requisites for the enforcement of a foreign award
- Stated.
s. 48(1)(a), (b) and (c) - Conditions for enforcement of foreign
awards - Interpretation and scope of - Explained.
Dismissing the appeals, the Court
HELD: 1.1 A reading of Section 44 of the Arbitration and
Conciliation Act, 1996 would show that there are six ingredients
to an award being a foreign award under the said Section. First, it
must be an

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GEMINI BAY TRANSCRIPTION PVT. LTD.
v.
INTEGRATED SALES SERVICE LTD. & ANR.
(Civil Appeal Nos. 8343-8344 of 2018)
AUGUST 10, 2021
[ROHINTON FALI NARIMAN AND B. R. GAVAI, JJ.]
Arbitration and Conciliation Act, 1996:
ss. 44, 47, 48 - Foreign awards - Recognition and enforcement
of, against non-signatories to the arbitration agreement - On facts,
Hong Kong based company-respondent no. 1-ISS and Indian
company-DMC entered into a Representation Agreement - In terms
thereof, ISS had to assist DMC to sell its goods and services to the
prospective customers and in consideration was to receive
Commission - By amendment, the agreement was subject to laws of
the State of Delaware, USA - Dispute between the parties - Initiation
of arbitration by ISS, claiming that DMC allegedly terminated its
contract with the customers introduced by ISS and executed new
contracts with the appellant company-GBT, a company owned and
controlled by the Chairman of DMC, thereby depriving ISS of its
Commission - ISS claimed damages on the basis of accounting for
lost Commissions - Chairman of DMC, DMC, DMCG, GBC and
appellant company filed claim as respondents - Issuance of award
by the arbitrator directing the DMC, DMCG, Chairman of DMC,
GBC and the appellant company to jointly and severally pay the
amount awarded to ISS - As regards, the enforcement of award, the
Single Judge of the High Court held that the award would be
enforceable against DMC as it was a party to the agreement, and
not against non-signatories to the arbitration agreement - However,
the Division Bench set aside the order of the Single Judge - Appeal
by non-signatories - Held: Foreign award could be enforced against
non-signatories to the arbitration agreement - s. 47(1)(c) being
procedural in nature does not go to the extent of requiring
substantive evidence to "prove" that a non-signatory to an
arbitration agreement can be bound by a foreign award - s. 47(1)(c)
speaks of only evidence as may be necessary to prove that the award
is a foreign award - A non-party to the agreement, alleging that it
[2021] 7 S.C.R. 957
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cannot be bound by an award made under such agreement, is outside
the literal construction of s. 48(1)(a) - Non-signatory's objection
cannot possibly fit into s. 48(1)(a) - Application of the alter ego
doctrine under Delaware law would depend primarily upon the
Arbitrator applying the oral and documentary evidence led before
him to arrive at this conclusion on facts - Furthermore, perversity
not a ground to set aside an award in an international commercial
arbitration held in India -Expression 'submission to arbitration' u/
s. 48(1)(c) only deals with disputes outside the scope of the
arbitration agreement between the parties-and not to whether a
person who is not a party to the agreement can be bound by the
same - As regards, the plea that the Award should be set aside since
no proper reasons given by the Arbitrator, being breach of natural
justice, s. 48(1)(b) does not speak of absence of reasons in an
arbitral award at all - Plea that since damages were given in tort,
they would be outside the scope of the arbitration agreement cannot
be accepted since u/s. 44, the tort claims may be decided by an
arbitrator provided they are disputes that arise in connection with
the agreement - Furthermore, s.46 does not speak of "parties" at
all, but of "persons" who may, thus, be non-signatories to the
arbitration agreement - Thus, on facts, actual loss can be said to
have been occasioned to ISS, and the damages awarded cannot be
said to shock the conscience of this Court - Damages - Doctrine of
alter ego.
s. 44 - Foreign awards - Ingredients to an award being
foreign award - Stated.
s. 47 - Pre-requisites for the enforcement of a foreign award
- Stated.
s. 48(1)(a), (b) and (c) - Conditions for enforcement of foreign
awards - Interpretation and scope of - Explained.
Dismissing the appeals, the Court
HELD: 1.1 A reading of Section 44 of the Arbitration and
Conciliation Act, 1996 would show that there are six ingredients
to an award being a foreign award under the said Section. First, it
must be an arbitral award on differences between persons arising
out of legal relationships. Second, these differences may be in
contract or outside of contract, for example, in tort. Third, the
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legal relationship so spoken of ought to be considered
"commercial" under the law in India. Fourth, the award must be
made on or after the 11th day of October, 1960. Fifth, the award
must be a New York Convention award, it must be in pursuance
of an agreement in writing to which the New York Convention
applies and be in one of such territories. And Sixth, it must be
made in one of such territories which the Central Government
by notification declares to be territories to which the New York
Convention applies. [Para 29][986-G-H; 987-A-B]
Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC
1; R.M. Investment and Trading Co. (P) Ltd. v. Boeing
Co. (1994) 4 SCC 541 : [1994] 1 SCR 837 - referred
to.
1.2 As the marginal note indicates, Section 47 provides that
the pre-requisites for the enforcement of a foreign award are: (1)
the original award or a copy thereof duly authenticated in the
manner required by the law of the country in which it is made; (2)
the original agreement for arbitration or a duly certified copy
thereof, and; (3) such evidence as may be necessary to prove
that the award is a foreign award. Section 47 is based on Article
IV of the New York Convention which is contained in Schedule I
to the Arbitration Act, 1996. [Para 34, 35][988-C-E]
International Commercial Arbitration by Gary B.Born
(Wolters Kluwer, 2nd Edn., 2014) - referred to.
1.3 All the requirements of sub-section (1) of Section 47
are procedural in nature, the object being that the enforcing court
must first be satisfied that it is indeed a foreign award, as defined,
and that it is enforceable against persons who are bound by the
award. The submission that to prove that a non- signatory to an
arbitral agreement can only be roped in to the said agreement on
evidence being adduced before the enforcing court as to whether
the non-signatory is a person who claims under a party or is
otherwise affected by the alter ego doctrine, is disingenuous to
say the least. Section 47(1)(c) being procedural in nature does
not go to the extent of requiring substantive evidence to "prove"
that a non-signatory to an arbitration agreement can be bound by
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a foreign award. As a matter of fact, Section 47(1)(c) speaks of
only evidence as may be necessary to prove that the award is a
foreign award. This Section only has reference to the six
ingredients of a foreign award that have been outlined, which are
contained in the definition section, namely, Section 44.
Ingredients 1 to 4 can easily be made out from the foreign award
itself as the award would narrate facts which would show the legal
relationship between the 'persons' bound by the award (who need
not necessarily be parties to the arbitration agreement), and as
to whether the award deals with matters that can be considered
commercial under the law in force in India. Equally, the date of
the foreign award would appear on the face of the foreign award
itself. Thus, Section 47(1)(c) would apply to adduce evidence as
to whether the arbitration agreement is a New York Convention
agreement. Also, the requisite Central Government notification
can be produced under Section 47(1)(c), so that Section 44(b)
gets satisfied. The submission that the burden of proof is on the
person enforcing the award and that this burden can only be
discharged by such person leading evidence to affirmatively show
that a non-signatory to an arbitration agreement can be bound by
a foreign award is outside Section 47(1)(c), cannot be accepted.
[Para 37][989-F-H; 990-A-D]
1.4 Section 48 deals with enforcement of a foreign award
being refused. It is important to notice that when enforcement of
a foreign award is resisted, the party who resists it must prove to
the court that its case falls within any of the sub-clauses of subsection (1) or sub-section (2) of Section 48. Given that foreign
awards in convention countries need to be enforced as speedily
as possible, the same logic would apply to Section 48, as a result
of which the expression "proof" in Section 48 would only mean
"established on the basis of the record of the arbitral tribunal"
and such other matters as are relevant to the grounds contained
in Section 48. The New York Convention, which our Act has
adopted, has a pro-enforcement bias, and unless a party is able
to show that it's case comes clearly within Sections 48(1) or 48(2),
the foreign award must be enforced. Also, the grounds contained
in Sections 48(1)(a) to (e) are not to be construed expansively
but narrowly. [Para 38-40][990-E-F; 992-A-C]
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Ssangyong Engg. & Construction Co. Ltd. v. NHAI
(2019) 15 SCC 131 : [2019] 7 SCR 522 - relied on.
Emkay Global Financial Services Ltd. v. Girdhar Sondhi
(2018) 9 SCC 49 : [2018] 10 SCR 937; Vijay Karia v.
Prysmian Cavi E Sistemi SRL (2020) 11 SCC 1 : [2020]
4 SCR 336 - referred to.
1.5 If read literally, Section 48(1)(a) speaks only of parties
to the agreement being under some incapacity, or the agreement
being invalid under the law to which parties have subjected it.
There can be no doubt that a non-party to the agreement, alleging
that it cannot be bound by an award made under such agreement,
is outside the literal construction of Section 48(1)(a). Also, it must
not be forgotten that whereas Section 44 speaks of an arbitral
award on differences between "persons", Section 48(1)(a) refers
only to the "parties" to the agreement referred to in Section
44(a). Thus, to include non-parties to the agreement by
introducing the word "person" would run contrary to the express
language of Section 48(1)(a), when read with Section 44. Also, it
must not be forgotten that these grounds cannot be expansively
interpreted. The grounds are in themselves specific, and only
speak of incapacity of parties and the agreement being invalid
under the law to which the parties have subjected it. To attempt
to bring non-parties within this ground is to try and fit a square
peg in a round hole. Quite apart from the fact that Section 48(1)(a)
was not put forward either before the Single Judge or the Division
Bench of the High Court. [Para 42, 43][996-G-H; 997-A-C]
1.6 Given the conclusion on Section 48(1)(a) when read with
Section 44 of the Arbitration Act 1996, it cannot be followed what
is stated to be "international practice" in trying to fit a nonsignatory's objection to a foreign award being binding upon it
under Section 48(1)(a). A non-signatory's objection cannot possibly
fit into Section 48(1)(a). Without delving deep into this problem,
it may perhaps be open in an appropriate case for a non-signatory
to bring its case within Section 48(2) read with Explanation 1(iii).
[Para 49][999-E-F]
Ssangyong Engg. & Construction Co. Ltd. v. NHAI
(2019) 15 SCC 131 : [2019] 7 SCR 522 - relied on.
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Dallah Real Estate and Tourism Co. v. Ministry of
Religious Affairs of the Government of Pakistan [2010]
3 WLR 1472; IMC Aviation Solutions Pty Ltd. v. Altain
Khuder LLC [2011] VSCA 248; Aloe Vera of America,
Inc v. Asianic Food (S) Pte Ltd & Anr. [2006] SGHC 78
- referred to.
1.7 In the facts of the instant case, what this Court is being
asked to do, in the guise of applying Section 48(1)(a), is really to
undertake a review on the merits. The application of the alter
ego doctrine under Delaware law would depend primarily upon
the Arbitrator applying the oral and documentary evidence led
before him to arrive at this conclusion on facts. This he has done
by not only adverting to the documentary evidence, but also
adverting to the oral evidence of ISS, MD of DMC and Chairman
of DMC. Given the fact that the foreign award gives reasons on
facts in this case to apply the alter ego doctrine, it would not be
possible to re-appreciate these facts especially when the burden
lies on the appellants to establish the grounds made out in Section
48(1), none of which go to the merits of the case. [Para 57][1005C-E]
1.8 Perversity as a ground to set aside an award in an
international commercial arbitration held in India no longer obtains
after the 2015 amendment to the Arbitration Act, 1996. Section
48 of the Act has also been amended in the same manner as
Section 34 of the Act. The ground of "patent illegality appearing
on the face of the award" is an independent ground of challenge
which applies only to awards made under Part I which do not
involve international commercial arbitrations. Thus, the "public
policy of India" ground after the 2015 amendment does not take
within its scope, "perversity of an award" as a ground to set aside
an award in an international commercial arbitration under Section
34, and concomitantly as a ground to refuse enforcement of a
foreign award under Section 48, being a pari materia provision
which appears in Part II of the Act. [Para 58, 59][1005-E-F; 1006C-E]
Ssangyong Engg. & Construction Co. Ltd. v. NHAI
(2019) 15 SCC 131 : [2019] 7 SCR 522 - relied on.
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1.9 Section 48(1)(c) relates to an award which deals with a
difference not contemplated by or not falling within the terms of
the submission to arbitration, or it contains decisions on matters
beyond the scope of the submissions to arbitration. Given the
fact that the expression 'submission to arbitration' would refer
primarily to the arbitration agreement, sub-clause (c) only deals
with disputes that could be said to be outside the scope of the
arbitration agreement between the parties - and not to whether
a person who is not a party to the agreement can be bound by the
same. In fact, the proviso to Section 48(1)(c) makes this even
clearer, in that it states that an award may be partially enforced,
provided that matters which are outside the submission to
arbitration can be segregated, thereby again showing that the
thrust of the provision is whether the dispute between parties
are qua excepted matters for example, or are otherwise outside
the scope of the arbitration agreement. [Para 60][1006-E-H]
Ssangyong Engg. & Construction Co. Ltd. v. NHAI
(2019) 15 SCC 131 : [2019] 7 SCR 522; Olympus
Superstructures (P) Ltd. v. Meena Vijay Khetan (1999)
5 SCC 651 : [1999] 3 SCR 490 - referred to.
Aloe Vera of America, Inc v. Asianic Food (S) Pte Ltd &
Anr. [2006] SGHC 78 - referred to.
1.10 It was submitted that since the Award contained
reasoning which was perfunctory in nature, it would not pass
muster and it would be a breach of natural justice, 'reasons' being
a part of natural justice as understood in this country, referring
to Section 48(1)(b). Section 48(1)(b) does not speak of absence
of reasons in an arbitral award at all. The only grounds on which
a foreign award cannot be enforced u/s. 48(1)(b) are natural justice
grounds relatable to notice of appointment of the arbitrator or of
the arbitral proceedings, or that a party was otherwise unable to
present its case before the arbitral tribunal, all of which are events
anterior to the making of the award. [Para 63][1011-E-G]
Vijay Karia v. Prysmian Cavi E Sistemi SRL (2020) 11
SCC 1 : [2020] 4 SCR 336 - referred to.
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1.11 Section 44 recognises the fact that tort claims may be
decided by an arbitrator provided they are disputes that arise in
connection with the agreement. The submission that since
damages were given in tort in the instant case, they would be
outside the scope of the arbitration, agreement cannot be
accepted. [Para 66, 67, 70][1013-B-E; 1018-C]
Renusagar Power Co. Ltd. v. General Electric Co.
(1984) 4 SCC 679 : [1985] 1 SCR 432; Tarapore &
Co. v. Cochin Shipyard Ltd. (1984) 2 SCC 680 : [1984]
3 SCR 118 - referred to.
Astro Vencedor Compania Naviera S.A. of Panama v.
Mabanaft GmbH [(1971) 2 QB 588 - referred to.
1.12 It was submitted that a comparison between Sections
35 and 46 of the Arbitration Act, 1996 would show that the
legislature circumscribed the power of the enforcing court under
Section 46 to persons who are bound by a foreign award as
opposed to persons which would include 'persons claiming under
them' and that, therefore, a foreign award would be binding on
parties alone and not on others. First and foremost, Section 46
does not speak of "parties" at all, but of "persons" who may,
therefore, be non-signatories to the arbitration agreement. Also,
Section 35 of the Act speaks of "persons" in the context of an
arbitral award being final and binding on the "parties" and
"persons claiming under them", respectively. Section 35 would,
therefore, refer to only persons claiming under parties and is,
therefore, more restrictive in its application than Section 46 which
speaks of "persons" without any restriction. Quite apart from
this, another important conundrum arises from the Division Bench
judgment in the instant case. The Division Bench judgment
applied Delaware law to satisfy itself that such law had indeed
been followed to apply the alter ego doctrine correctly, as a result
of which the foreign award would have to be upheld. This approach
is completely erroneous. First and foremost, Section 48 does not
contain any ground for resisting enforcement of a foreign award
based upon the foreign award being contrary to the substantive
law agreed to by the parties and which it is to apply in reaching
its conclusion. As a matter of fact, whether the award is correct
in law (applying Delaware law), would be relevant if at all such
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award were to be set aside in the State in which it was made and
that too if such law permitted interference on the ground that the
arbitral award had infracted the substantive law of the agreement.
The arbitral award in this case was not challenged in the State of
Missouri. Hence, the Division Bench's foray into this line of
reasoning is wholly incorrect. [Para 71] [1018-D-H; 1019-A-B]
Indowind Energy Ltd. v. Wescare (India) Ltd. (2010) 5
SCC 306 : [2010] 5 SCR 284; Chloro Controls India
(P) Ltd. v. Severn Trent Water Purification Inc. (2013)
1 SCC 641 : [2012] 13 SCR 402; Cheran Properties
Ltd. v. Kasturi & Sons Ltd. (2018) 16 SCC 413 : [2018]
4 SCR 1063 - referred to.
1.13 As a matter of fact, if an international commercial
arbitration were to be held in India, Section 28(1)(b) recognises
that an arbitral tribunal can decide the dispute in accordance with
the rules of law designated by the parties as applicable to the
substance of the dispute which, in turn, has a direct nexus to the
substantive law of the country whose laws are said to apply. There
is no ground in the pari materia provisions of Section 34 to set
aside such award on the ground that the substantive law of that
country has been infracted. Indeed, the only ground on which
such award could possibly be interfered with is if such award,
valid under the law which it applied, could be held to be contrary
to the public policy of India. [Para 72][1019-B-D]
International Commercial Arbitration by Gary B.Born
(Wolters Kluwer, 2nd Edn., 2014) - referred to.
1.14 The final argument that the damages that have been
awarded on no basis whatsoever would again not fall within any of
the exceptions contained in Section 48(1). In order to attract
Section 48(2) read with Explanation 1(iii), it is only in exceptional
cases which involve some basic infraction of justice which shocks
the conscience of the court that such a plea can be entertained.
The Arbitrator correctly held that as nothing was forthcoming
from any of the appellants, he would have to make a best judgment
assessment for damages. In making that assessment, he took
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into account the commission that was being earned by GBT from
the two clients of DMC and arrived at a figure of 100,000 USD
per month and then found, on a reasonable estimate, that they
would continue to be clients for a period of four years, as a result
of which the figure of 6,948,100 USD was reached. That such
'guesstimates' are not a stranger to the law of damages in the
U.S. and other common law tradition nations. [Para 74-76][1021B-C; 1021-F-H]
Ssangyong Engg. & Construction Co. Ltd. v. NHAI
(2019) 15 SCC 131 : [2019] 7 SCR 522 - relied on.
Frederick Thomas Kingsley v. The Secretary of State
for India AIR 1923 Cal 49 - referred to.
1.15 There can be no doubt whatsoever that as a result of
the machinations of the Chairman and MD of DMC, as found by
the arbitral tribunal, ISS was deprived of commission legitimately
due to it under the representation agreement. This being so,
there can be no doubt that actual loss can be said to have been
occasioned to ISS. In any case, the damages so awarded in the
facts of this case cannot even remotely be said to shock the
conscience of this Court so as to clutch at "the basic notion of
justice" ground contained in Section 48(2) Explanation (1)(iii).
[Para 79, 80][1023-C-D]
Agritrade International (P) Ltd. v. National Agricultural
Coop. Mktg. Federation of India Ltd., (2012) SCC
OnLine Del 896 - referred to.
Case Law Reference
(2021) 2 SCC 1
referred to
Para 30
[1994] 1 SCR 837
referred to
Para 33
[2018] 10 SCR 937
referred to
Para 38
[2019] 7 SCR 522
relied on
Para 40, 49,
59, 60, 74
(2020) 11 SCC 1
referred to
Para 41
[1999] 3 SCR 490
referred to
Para 60
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[1985] 1 SCR 432
referred to
Para 67
[1984] 3 SCR 118
referred to
Para 68
[2010] 5 SCR 284
referred to
Para 71
[2012] 13 SCR 402
referred to
Para 71
[2018] 4 SCR 1063
referred to
Para 71
AIR 1923 Cal 49
referred to
Para 76
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 83438344 of 2018.
From the Judgment and Order dated 04.01.2017 of the High Court
of Judicature at Bombay, Nagpur Bench, Nagpur in Arbitration Appeal
No. 3 of 2016.
With
Civil Appeal Nos.8345-8346 of 2018.
K.V. Vishwanathan, Harish N. Salve, Sr. Advs., Kuber Dewan,
Sharath Sampath, Manikya Khanna, Apoorv Singhal, Pratyaksh Sharma,
Aditya Krishna, Ms. Anuradha Dutt, Ms. B. Vijayalakshmi Menon, Wilson
Mathew, Ms. Suman Yadav, Ms. Trisha Raychaudhri, Advs. for the
Appellant.
Arif Bookwala, Sr. Adv., Gagan Sanghi, Devendra V. Chauhan,
M. Bharath, Rameshwar Prasad Goyal, Advs. for the Respondents.
The Judgment of the Court was delivered by
R. F. NARIMAN, J
1. These appeals raise interesting questions relatable to Part II of
the Arbitration and Conciliation Act, 1996 [the "Arbitration Act, 1996"]
which provisions deal inter alia with recognition and enforcement of
foreign awards. The facts necessary to appreciate the points raised in
these appeals are as follows.
2. On 18th September, 2000, a representation agreement was
entered into between Integrated Sales Services Ltd. ["ISS" / Respondent
No. 1], a company based in Hong Kong and DMC Management
Consultants Ltd. ["DMC"], a company registered in India, whose
principal business address is at Nagpur. By this agreement, ISS was to
assist DMC to sell its goods and services to prospective customers, and
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in consideration thereof was to receive commission. The relevant clauses
of the agreement are clauses 2 and 3 which read as follows: -
"2. Duties of Representative
Representative shall assist Company with its efforts to sell its
Goods and Services to prospective customers. Secondly, where
acceptable to the Company, identify potential sources of investment
and Investors, and assist Company in negotiating the terms of
purchase, sale and/or investment.
3. Validity
The right of representation under this Agreement is not limited by
time. Compensation is due Representative as defined under
"Payment" hereinafter. However, if Company finds
Representative's efforts to be unsatisfactory, it will state so in
writing with specific and, reasonable guidelines which, if
accomplished within six months, shall constitute satisfactory
performance, If Representative is unable to substantially- satisfy
these guidelines, then Company may cancel this Agreement
forthwith. However, compensation for existing or potential
customers identified by the Representative, shall continue according
to the Payment clause below."
3. The commission payable is then referred to in clause 4. The
agreement under clause 8(d) which is "General" then states as follows:-
(d) Interpretation, Amendment, Law, Arbitration, and Assignments
(i) This Agreement is subject to the laws of the State of Missouri,
U.S.A.
(ii) In the event a dispute arises in connection with this Agreement,
such dispute shall be referred to a single arbitrator in Kansas City,
Missouri, U.S.A. to be appointed by agreement between the
parties hereto, or failing agreement to be appointed according to
the rules of the American Arbitration, Association the same rules
under which any dispute which any dispute shall be decided.
(iii) In the event a dispute is committed to arbitration, the party
deemed at fault shall reimburse the full cost of the arbitration and
legal process to the aggrieved party.
(iv) The Agreement shall not be amended in any way other than
by agreement in writing, signed by both parties.
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4. It is important to note that this agreement was signed by one
Shri Rattan Pathak as Managing Director of DMC, and by one Shri
Terry Peteete, Director of ISS. Though this agreement was entered into
on 18th September, 2000, it came into force on 3rd October, 2000. A first
amendment to this representation agreement was made between the
aforesaid parties, which was signed by one Shri Arun Dev Upadhyaya
[Appellant in CA No. 8345-8346/2018] on behalf of DMC, and Terry
Peteete on behalf of ISS. We are not directly concerned with the changes
made by this first amendment except to indicate that Arun Dev
Upadhyaya, one of the appellants before us, was a signatory on behalf
of DMC. Likewise, a second amendment agreement was entered into
on 1st January, 2008, again with effect from 3rd October, 2000, in which
various amendments were made to the original representation agreement.
We are concerned, with sub-clause (4) of this amendment, which reads
as follows: -
4. In modification of clause 8(d)(1) of the Agreement, this
Agreement is subject to the laws of the State of Delaware, U.S.A.,
and shall survive the expiration of any other clauses in this
Amendment.
5. Disputes arose between the parties, as a result of which a
notice for arbitration dated 22nd June, 2009 was sent by ISS to Arun Dev
Upadhyaya. Ultimately, a statement of claim dated 22nd June, 2009, was
filed before the learned Arbitrator naming Arun Dev Upadhyaya, DMC
(India), DMC Global (company registered in Mauritius), Gemini Bay
Consulting Limited (company registered in the British Virgin Islands)
and Gemini Bay Transcription Private Limited ["GBT" / Appellant in
CA No. 8343-8344/2018] as respondents. The statement of claim alleged
as follows: -
6. DMC Management Consultants, through the Chairman
(Upadhyaya) and/or with his family, in turn owns or controls all
the stock of DMC Global, which has assumed the obligations of
DMC Management Consultants under the agreement referred to
below, including the agreement for arbitration; and the Chairman
controls and dominates the activities of DMC Global. Both DMC
Management Consultants and the Chairman have disregarded the
corporate form of DMC Global to effect the wrongs complained
of herein, in such a manner and to such an extent that DMC
Global should be bound as a party to this arbitration.
GEMINI BAY TRANSCRIPTION PVT. LTD. v. INTEGRATED SALES
SERVICE LTD. & ANR. [R. F. NARIMAN, J]
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7. Gemini Bay Consulting Limited ("GBC") is a company formed
in the British Virgin Islands, which is owned and/or controlled and
dominated by the Chairman, who has disregarded its corporate
form to effect the wrongs complained of herein, and GBC has
been used by the Chairman among others as a continuation
corporation of DMC Management Consultants and DMC Global
to divert funds away from ISS as complained of herein, in such a
manner and to such an extent that GBC should be bound as a
party to this arbitration.
8. Gemini Bay Transcription Private Limited ("GBT") is a company
formed in India, with a registered office at the same address as
that of the Chairman, which is owned and/or controlled and
dominated by the Chairman, who has disregarded its corporate
form to effect the wrongs complained of herein, and GBT has
been used by the Chairman among others as a continuation
corporation of DMC Management Consultants and DMC Global
to divert funds away from ISS as complained of herein, in such a
manner and to such an extent that GBT should be bound as a
puny to this arbitration.
xxx xxx xxx
13. As the relationship developed, Claimant ISS as Representative
brought to the Company two substantial "PC" customers, identified
as MedQuist Transcriptions Ltd, of Mt. Laurel, New Jersey
("MedQuist"), and AssistMed, Inc. of Los Angeles, California
("AssistMed") (sometimes hereinafter collectively referred to as
the "Customer"). ISS acted as representative of the company
with the Customers.
14. Under the original terms of the Representation Agreement,
ISS was to receive commission of 20% of the gross revenues to
Company from these Customers for so long as they continue to
be customers.
15. Throughout the relationship between ISS and Respondents,
the principal representative of ISS has been Terry Peteete, a
resident of Kansas City, Missouri.
16. Throughout the same period, the principal representative of
DMC Management Consultants and DMC Global has been the
Chairman, Respondent Arun Dev Upadhyaya. In that regard, the
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Chairman has made regular trips from India to the United States,
approximately 4 trips per year, for business and personal reasons.
17. Those trips have included at least four trips to Kansas City,
Missouri, to conduct business with ISS representative Terry
Peteete, regarding the subject matter of this arbitration. Therefore,
he has purposely availed himself of this jurisdiction, and requiring
his participation in this arbitration in Kansas City, Missouri does
not offend traditional or constitutional notions of justice arid fair
play.
xxx xxx xxx
30. From September 18, 2000, until approximately June 30, 2008,
the relationship among the parties proceeded agreeably. ISS
performed its obligations, and upon information and belief, both
DMC Management Consultants and DMC Global performed their
obligations.
xxx xxx xxx
38. On July 22, 2008, DMC Management Consultants gave notice
by email entitled "Contract Termination Notice," to the two "PC"
Customers, MedQuist and Assistmed, of its intention to terminate
the Customer contracts 90 days later. (Note that the Customer
Contract with MedQuist had been signed by DMC Global, but
was terminated by DMC Management Consultants). DMC
Management Consultants requested the Customers "begin the
ramping down process 15 days from now," and further that the
"ramping down be completed within a period of 90 days.
39. This purported "ramping down" of the Customer Contracts
by DMC Management Consultants and DMC Global in fact never
took place. Upon information and belief, as part of the scheme to
divert funds from DMC Management and evade payment to ISS
of commissions Respondents caused new contracts to be executed
by the Customers with Respondent Gemini Bay Consultants
(GBC). During the same time, the Chairman caused a new
company Respondent Gemini Bay Transcriptions (GBT) to be set
up as the company that actually performed the work for both PC
Customers, and continues to do so today. The employees of both
DMC Management employees Consultants and DMC Global
became GBT, and work in the same facilities, using the same
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equipment, and managed by the same management team. These
two July 22, 2008, email termination notices were part of a scheme
by Respondents to divert the business from the Customer
Contracts away from DMC Management Consultants and DMC
Global to GBC and GBT.
41. The primary purpose of doing so was to evade the contractual
obligations of the Respondents under the Representation
Agreement to pay ISS its commissions for revenues earned from
these Customers.
42. At all times, DMC Management Consultants and DMC Global
acted under the direct instruction of the Chairman in furthering
this scheme to deprive ISS of its commissions.
43. The Chairman dominated and manipulated the activities of
DMC Management Consultants and DMC Global for his personal
and business advantage, for the sole improper purpose of harming
ISS and breaching his personal obligations and the obligations of
his two companies to ISS under the Representation Agreement.
44. The Chairman used the companies as alter egos of himself,
and he ignored the corporate forms of both DMC Management
Consultants and DMC Global to achieve his improper purpose of
breaching the Representation Agreement.
6. Based on these averments, damages were claimed on the basis
of "Accounting for Lost Commissions" as follows:
64. Upon information and belief, the revenues being paid to
Respondents by the "PC" Customers since October 22, 2008,
continue at a rate such that the commissions payable under the
Representation Agreement for the period since October 22, 2008,
is approximately $100,000 per month.
65. Upon information and belief, the amount of lost commissions,
past, present and reasonably certain to occur in the future, are
determined at a rate of $100,000 per month for the period of 48
months following the termination date of October 22, 2008,
aggregates $4.8 million due and to become due to ISS from
Respondents due to their breach of contract.
7. It was then averred:
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74. By making its claims pursuant to the Representation Agreement
and the corporate law of Delaware in this arbitration, Claimant
ISS is not making, and hereby specifically reserves: (i) all claims
which may arise in the future, under the Representation
Agreement, for commissions which may become payable in a
manner other than as described above, and (ii) all claims for any
additional right, title, interest and other matters ISS may make at
another time or in another forum against any of these Respondents
based in tort, fraud, abusive conduct, or any other wrongful conduct
under the law of any of the United States. India. Mauritius, or any
other jurisdiction, whether for equitable relief, compensatory
damages, punitive or exemplary damages, moral damages, or
otherwise.
8. To this statement of claim, objections were filed by GBT and
Arun Dev Upadhyaya, in which all the aforesaid averments were denied.
Meanwhile, a suit was filed by GBT against ISS before the Civil Judge,
Senior Division, Nagpur, with the following prayers: -
(i) Pass a decree of declaration in favour of the plaintiff and against
the defendants, their agent, servants and all other persons claiming
through or under them, declaring therein that the Arbitration
Agreement entered into between the Defendant No. 1 and
Defendant No. 3, is not binding or enforceable against the Plaintiff
and therefore the defendant Nos. 1 & 2 cannot prosecute/ proceed
with any proceeding against the plaintiff or any one claiming
through or under the plaintiff, in any manner whatsoever, in the
peculiar facts and circumstances of the present case;
(ii) Pass a decree of permanent injunction in favour of the plaintiff
and against the defendants, their agent, servants and all other
persons claiming through or under them, restraining them from
prosecuting or proceeding or continuing with any arbitration
proceedings against the Plaintiff, based on the so-called Arbitration
Agreement entered into between the Defendant No. 1 and
Defendant No. 3, the same being not binding or enforceable against
the Plaintiff, in the peculiar facts and circumstances of the case
and in the interest of justice;
(iii) Pass a decree of Rs. 10,00,000/ (Rupees Ten Lacs only)
towards compensation in favour of the plaintiff and against
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Defendant Nos. 1 and 2, in the peculiar facts and circumstances
of the case;
(iv) Award costs of the suit against the defendant Nos. 1 & 2;
(v) And be further pleased to pass such order/orders and grant
such other reliefs, as this Hon'ble Court may deem fit in the given
facts and circumstances of the case.
9. Though a temporary injunction was prayed for, it was rejected
on 25th January, 2010.
10. On 23rd December, 2009, the learned Arbitrator raised four
issues in a preliminary award as follows: -
1)The determination of applicable law; and
2) The jurisdiction of this tribunal over non-signatory parties; and
3) Whether facts warrant piercing the corporate veil of certain
corporations; and
4) Whether certain non-signatory parties to the original agreement
should be excluded from this arbitration.
Only ISS and DMC filed briefs. DMC's brief addressed only the
issue of applicable law and in spite of the arbitrator's numerous
warnings, other Respondents and non-signatory parties failed to
file relevant briefs on the matters and submitted affidavits.
11. Issues 1 and 2 were answered stating that Delaware law is
the substantive law which controls the agreement and its interpretation
and that, since neither the claimant nor the respondent challenged the
validity of the agreement or the validity of the arbitration clause, the
Arbitrator has jurisdiction to decide whether a non-signatory to the
representation agreement can be bound by the award. The other two
issues were stated to require an in-depth review and analysis of factual,
testimonial and documentary evidence as a result of which the decision
on these two issues was "postponed".
12. The learned Arbitrator in his final award dated 28th March,
2010, set out the issues that were to be adjudicated as follows: -
I THE UNDERSIGNED ARBITRATOR, Alain Frecon, (the
"tribunal") having been designated in accordance with the
arbitration agreement entered into by ISS and DMC Management
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Consultants Limited, dated September 18 2000, having been duly
sworn, having given the parties full and complete opportunity to
present their respective case, and having heard all the proofs and
allegations of the parties, including all the witnesses and reviewed
all the documents, demonstrative evidence and submissions
presented in this case, do hereby Award as follows:
TO BE DECIDED
1) Does the "alter ego" doctrine warrant piercing the corporate
veil?
2) Was there a breach of the Representation Agreement and by
whom?
3) Should damages be awarded, and if the answer is yes, how
much?
13. After describing the parties and the claim made, Issue 1 which
was styled "Alter ego doctrine and piercing of the corporate veil" was
answered as follows: -
Before piercing a corporate veil, this tribunal must carefully review
a complex set of factual, documentary and testimonial evidence.
As Professor William W.