Overview
In this case, the Bombay High Court considered whether an application under Section 11 of the Arbitration and Conciliation Act 1996 could be treated as an international commercial arbitration only because the applicant was under the control of a foreign parent company.
SO Tunnelling India Pvt. Ltd. invoked arbitration in the 2022 settlement agreement with Hindustan Construction Co. Ltd. concerning the Tapovan Vishnugad Hydroelectric Power Project. It was argued by the respondent that the applicant was an alter ego of SELI Overseas S.p.A., its Italian parent, and the dispute was under the jurisdiction of the Supreme Court.
The Court had to examine the limited scope of scrutiny under Section 11, the group of companies doctrine, and whether questions as to the control should be decided by the Arbitral Tribunal.
Facts of the Case
The parties entered into the Tapovan Settlement Agreement on 20 October 2022. Under this agreement, Hindustan Construction Co., the respondent herein, had to pay a Final Settlement Amount, with 12% interest for payment which was delayed.
After continuously demanding for the same, the respondent disagreed with the GST component but acknowledged the liability to pay the settlement amount.
Thereafter, SO Tunnelling India Pvt. Ltd., the applicant herein, issued a Dispute Notice on 14 July 2025 and a Notice of Arbitration on 11 August 2025, proposing Justice Shiavax Jal Vazifdar to be the sole arbitrator. He recused himself. Even after further discussions, there was no agreement between the parties. This resulted in the applicant approaching the Bombay High Court under Section 11.
It was contended by the respondent that the applicant was an alter ego of SELI Overseas S.p.A., which held 98 of its 100 shares, and both the companies were represented by the same management. It also relied on a separate settlement agreement, which involved SELI and argued that both the agreements were part of one composite arrangement.
It was maintained by the applicant that it was an Indian company with a separate legal entity, and that the Tapovan agreement was self-contained.
Legal Issues
- Whether the arbitration between the parties should be considered as an international commercial arbitration under Section 2(1)(f) only because it was controlled by its foreign parent.
- Whether it is upon the referral court to decide upon the alter ego and group of companies questions at the initial stage of Section 11 proceedings.
- Whether the separate settlement agreements and their connection created a legally composite arbitration arrangement.
- Whether such disputed jurisdictional questions should be decided upon by the Arbitral Tribunal under Section 16.
Decision
The Bombay High Court allowed the application and Mr Amrut Joshi was appointed as the sole arbitrator under Clause 9.2.
It was held that the applicant was incorporated in India and was a signatory to the arbitration agreement between itself and the respondent. Therefore, the alleged control did not change the arbitration into an international commercial arbitration.
Relying on Section 11(6A), Duro Felguera, Cox and Kings and Ajay Madhusudhan Patel, it was held by the Court that the enquiry of the referral court was limited to the existence of an arbitration agreement.
Questions concerning alter ego, group of companies, and composite transactions may require evidence and are better considered by the Arbitral Tribunal under Section 16.
Objections as to the jurisdiction remained open, and arbitral costs were shared equally by the parties initially.
