In the case of Shapoorji Pallonji and Co Pvt Ltd v Rattan India Power Ltd [in Arb P 716/2019 and IA 7836/2020], the Delhi High Court passed an order under section 11 of the Arbitration and Conciliation Act 1996 wherein the petitioner, Shapoorji Pallonji and Co Pvt Ltd, sought to appoint the same arbitrator nominated by the second respondent, Elena Power & Infrastructure Ltd, as the nominee arbitrator on behalf of the first respondent, Rattan India Power Ltd (previously Indiabulls Power Ltd), for the adjudication of disputes which had arisen between the parties.


Rattan India invited bids from subcontractors to undertake a civil and structural works, boilers turbine generator package (BTG) job (BTG works) for a project in Amravati. Elena Power was a wholly owned subsidiary of Rattan India and was its engineering, procurement and construction contractor for this project. Shapoorji submitted a bid, which was revised and accepted through issuing a letter of award. The letter of award was signed by Elena Power but the letterhead was that of Rattan India.

Shapoorji and Elena Power entered into the BTG contract on 26 March 2010 for the execution of the BTG works. The initial workload for the BTG works was increased through 21 amendments issued by Elena Power. The BTG contract and the work order dated 31 May 2017 containing amendment 21 included an arbitration clause.

Shapoorji was also given a work order dated 3 January 2012 for civil and structural work for the balance of the plant (BOP) (BOP contract). This BOP contract was initially entered into by Rattan India and Elena Power (the respondents) and Gannon Dunkerley & Co Ltd, which did not complete the work.

When disputes arose in respect of the execution of the works and the rendering of services, Shapoorji issued a notice invoking arbitration under different contracts and work orders, including the BTG contract and the BOP contract. In this notice, Shapoorji nominated an arbitrator and called upon the respondents to jointly name an arbitrator.

Rattan India responded to said notice by stating that none of the contracts or work orders were entered into by them and therefore there was no existing arbitration clause between them and Shapoorji. Simultaneously, Elena Power nominated an arbitrator.

The main question that fell before the Delhi High Court was whether prima facie an arbitration agreement had existed between Rattan India and Shapoorji in respect of the BTG and BOP contracts.


Shapoorji submitted to the Delhi High Court that:

  • the letter of award issued by Rattan India had stated that Shapoorji would enter into a formal contract with "Indiabulls Power Ltd (Elena Power and Infrastructure Ltd), for the subject work". According to Shapoorji, this implied that Elena Power had been acting on behalf of Rattan India;
  • the bids and offers had been accepted by Rattan India;
  • the bank guarantees had been issued by Shapoorji in favour of Rattan India;
  • the contract payments had been made directly by Rattan India to Shapoorji; and
  • the BTG contract included a clause which obligated Shapoorji to perform extra work. The work order for the BOP contract was an integral part of the project and thus was required to be construed as extra work under the BTG contract.

Rattan India submitted that:

  • it was not a signatory to the BTG contract and therefore could not be compelled to arbitrate; and
  • the notice invoking arbitration was a composite notice regarding separate contracts and was thus invalid.


The Delhi High Court observed that arbitration is an alternate dispute resolution mechanism that rests on consent between the parties. The rule is that a non-signatory cannot be compelled to arbitrate because said party has not acceded to arbitration. However, this rule is not without exceptions. The courts in different jurisdictions have evolved various principles based on which, in certain exceptional circumstances, a non-signatory may be compelled to arbitrate.

The Court discussed the following principles in the matter at hand.

Doctrine of alter egos
The courts have compelled non-signatories to arbitrate by disregarding their corporate facade or when the courts have found the signatory to be an alter ego of the non-signatory or vice versa.

Gary B Born, in his book International Commercial Arbitration,(1) explained the concept of "alter ego" in the context of arbitration agreements as when it requires convincing evidence that one entity dominated the day-to-day actions of another or that it exercised this power to invoke fraud or any other injustice or inequality on a third party, or to evade statutory or other legal obligations.

In Passalacqua Builders Inc v Resnick Developers South Inc,(2) the court listed some of the grounds on which piercing the corporate veil would be justified, such as where the parent and subsidiary:

  • are run by common officers;
  • have close proximity;
  • are not treated as separate profit centres; and
  • share common office space.

On applying the aforementioned principles, the Delhi High Court held that the arbitration clause of the letter of award clearly indicated that the formal contract would be with Rattan India. The Court observed that mentioning Elena Power between brackets in the letter of award had indicated that the respondents were one and the same.

The Court was inclined to accept that Elena Power was a special purpose vehicle and it would be apt to treat Elena Power as an extended division of Rattan India, as it had not been involved in any other business than executing Rattan India's projects.

Doctrine of group companies and intention of parties to arbitrate
Various courts have applied the doctrine of group companies to compel a non-signatory to an agreement to arbitrate. This doctrine was first applied in Dow Chemical v Isover-Saint-Gobain.(3) The Supreme Court applied this doctrine in Chloro Controls (India) (P) Ltd v Severn Trent Water Purification Inc(4) to compel certain companies to arbitrate disputes that arose in connection with agreements to which they were not signatories.

On applying the group of companies doctrine in Mahanagar Telephone Nigam Ltd v Canara Bank,(5) the Supreme Court observed that the conduct of the parties evidenced the parties' (both signatory and non-signatory) clear intention to be bound by an arbitration agreement. The doctrine provides that a non-signatory may be bound by an arbitration agreement where the parent company, holding company or a member of the group of companies is a signatory to the arbitration agreement and the non-signatory entity in the group has been engaged in the negotiation or performance of the commercial contract or made statements indicating its intention to be bound by the contract.

The Supreme Court also observed that this doctrine has been invoked in cases where the funds of one company are used to financially support or restructure other group members.(6)

In Ameet Lalchand Shah v Rishabh Enterprises(7) the Supreme Court took a liberal view on the issue of compelling a non-signatory to arbitrate. In this case, Rishabh Enterprises had entered into various agreements for different works of a project. These agreements contained identical arbitration clauses. Ameet Lalchand was an individual who was stated to be the promoter of the two companies as one in said agreements and had exercised control over both companies. The Supreme Court found that all agreement were interconnected and referred to its earlier decision in Chloro Controls (Supra), holding that the dispute could be resolved only by referring all four agreements and the parties thereto to arbitration.

On applying the doctrine of group companies to the present case, the Delhi High Court observed that the BOP contract had been awarded to another company and that it had been terminated. This contract did not include an arbitration clause. Even though it had been submitted by Shapoorji that the work under the BOP contract was incidental to the work under the BTG contract, the final bill issued by Shapoorji for the BTG contract had not included the amount due for the BOP contract.

Further, the Court observed that the bids had been invited and accepted by Rattan India. Rattan India had also secured itself against performance of the BTG contract as Shapoorji had furnished bank guarantees against the advances received. It also had furnished performance bank guarantees in favour of Rattan India.

Active role in negotiations and direct involvement in the contract
The courts and arbitral tribunals have imputed implied consent of a non-signatory to arbitration agreements in cases where they have found that the non-signatories had played an active role in negotiations and had been directly involved in the contract.

In Gvozdenovic v United Air Lines Inc,(8) the court held that where a party conducts itself as if it was a party to a commercial contract – by playing a substantial role in negotiations or performance of the contract – it may be held to have impliedly consented to be bound by the contract.

On applying this principle, the Delhi High Court held that Rattan India exercised complete control over Elena Power as the shareholder. Even the officials of Elena Power acted on behalf of Rattan India, which indicated that Rattan India exercised substantial and dominant direct control over Elena Power's affairs.

Courts in several jurisdictions have drawn heavily on the principle of estoppel and have compelled non-signatories to arbitrate.

In Life Techs Corp v AB Sciex Prop Ltd,(9) it was held that a non-signatory may be estopped from avoiding arbitration where it has knowingly accepted the benefits of an agreement with an arbitration clause. Even in Deloitte Noraudit v Deloitte Haskins Sells,(10) the court held that a non-signatory was compelled to arbitrate under equitable estoppel principles because it had received a copy of the contract and did not object to it, then offered no persuasive reason for its inaction and knowingly accepted the contract's benefits.

On applying this principle, the Delhi High Court held that the final bill for the BTG contract was submitted to and received by Rattan India. Rattan India did not object to amendment at any time during the execution of the BTG works or thereafter. Thus, Rattan India was estopped from contending to the contrary.


In light of the facts and circumstances of the present case, the Court observed that there was sufficient material to show that Elena Power was an alter ego of Rattan India and that Rattan India had had a direct involvement in the BTG contract. Considering this, the Court held that Rattan India should also be referred to arbitration for disputes relating to or arising from the BTG contract.

Further, the Court denied that there had been any existing agreement between the parties which referred disputes relating to the BOP contract to arbitration.

Consequently, the Court passed an order appointing Elena Power's nominee arbitrator as the arbitrator for Rattan India. The court also directed the nominee arbitrator of both parties to appoint the third arbitrator for the adjudication of disputes under the BTG contract.

For further information on this topic please contact Aniketh Nair or Dev Motta at Clasis Law by telephone (+91 22 4910 0000) or email ([email protected] or [email protected]). The Clasis Law website can be accessed at


(1) Volume I (third edition), p 1546.

(2) 933 F 2d 131, 32.

(3) 1984 Rev Arb 137.

(4) (2013) 1 SCC 641.

(5) (2020) 12 SCC 767.

(6) International Chamber of Commerce, Case 4131 of 1982; International Chamber of Commerce, Case 5103 of 1988.

(7) (2018) 15 SCC 678.

(8) 933 F 2d 1100, 1105 (2d Cir 1991).

(9) 803 F Supp 2d 270, 273-74 (SDNY 2011).

(10) 9 F 3d 1060 (2d Cir 1993).