Madras High Court directs non-signatories to arbitrate under the ‘Group of Companies’ doctrine

A division bench of the Madras High Court (‘Madras HC’) in its judgment dated July 23, 2018 in SEI Adhavan Power Private Limited & Anr. v. Jinneng Clean Energy Technology Limited & Other,[1] held that non-signatories to an arbitration agreement may be referred to arbitration, on the basis of the ‘group of companies’ doctrine. AZB & Partners successfully represented Jinneng Clean Energy Technology Limited (‘Jinneng’) in this matter.

Jinneng, along with SunEdison Energy Holding (Singapore) Pte Ltd. (‘SunEdison Singapore’) were parties to a Non-Disposal Undertaking (‘NDU’). Upon a breach of the NDU, Jinneng initiated arbitration against SunEdison Singapore as well as SEI Adhavan Power Private Limited (‘SEI’) and SunEdison Solar Power India Private Limited (‘SunEdison India’), neither of which were signatories to the NDU. SEI and SunEdison India therefore filed a suit before the Madras HC, seeking an injunction against the arbitration, on the ground that they were non-signatories to the NDU and thus were not bound by the arbitration agreement thereunder.

The Madras HC (single and division benches) referred SunEdison India and SEI to arbitration under the NDU, on the ground that SEI, SunEdison India and SunEdison Singapore constituted a single economic entity, i.e., the SunEdison group of companies, were “intrinsically connected to each other”, and the transactions between the parties were all in respect of the same project. The Madras HC referred to and relied upon the Supreme Court judgment in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. and Others,[2] in which it was held, inter alia, that an arbitration agreement entered into by a company within its group of companies can bind its non-signatory affiliates.

[1] Judgment dated July 23, 2018 in Original Side Appeal Nos.170 to 175 and 206 to 210 of 2018 (Madras High Court)
[2] Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. and Others, (2013) 1 SCC 641

Published In:Inter Alia - Quarterly Edition - September 2018 [ English Chinese japanese ]
Date: September 1, 2018