Facts of the Case

The Petitioner is Chairman and Managing Director of Universal Empire Institute of Technology(UEIT). UEIT was incorporated in UAE as a Limited Liability Company. The Respondent IGNOU is a statutory university established under the Indira Gandhi National Open University Act, 1985.

UEIT entered into an Agreement to collaborate for offering and implementing various distance educational courses in Dubai, U.A.E. UEIT was to advertise the programmes at its own cost and admit students conforming to the eligibility criteria as prescribed by IGNOU.As per the terms of the Agreement the Parties agreed to fees collected from the students enrolled. The Agreement also provided for submission to Arbitration in case a dispute arises between the parties. The initial term of the Agreement was 3 years, on expiry of the which the parties entered into another agreement on similar terms effecting the renewal of earlier Agreement.

Dispute arose with IGNOU claimed that the initially the share on receipt of fees from the students enrolled were remitted, but later UEIT defaulted on these payments to IGNOU.

UEIT’s claims were that IGNOU also enrolled students from institutes operating illegally outside the Trade Free Zones, the expenditure of running such institutes were much lower than that of institutes operating in Trade Free Zone like UEIT. This adversely affected the enrollment of students to UEIT resulting into loss of revenue.

IGNOU invoked the arbitration clause Before the arbitral tribunal, IGNOU filed its statement of claims inter alia claiming an aggregate sum of USD 14,48,046, which included a sum of USD 6,63,653 on account of unpaid invoices; a sum of USD 417 on account of demand drafts which were not encashed; an amount of USD 1,60,000 on account of loss of earning; and USD 5,00,001 on account of loss of goodwill. IGNOU claimed Mr.Gopi and UEIT jointly and severally liable for the aggregate sum of claims.

Mr Gopi and UEIT filed a reply to the statement of claims before the arbitral tribunal. Simultaneously, they also filed counter claims claiming a sum of USD 66,15,498 which included compensation for business loss quantified at USD 44,91,671 and compensation for loss of reputation quantified at USD 20,00,000.

The Arbitral Tribunal Directed UEIT to file a statement inter alia to clarify clarifying the nature and character of UEIT and whether Mr Gopi was authorised to represent UEIT.

In compliance with the directions of the Arbitral Tribunal filed the relevant statements and proofs and It was confirmed by UEIT that Mr Gopi was representing the said company as its Managing Director and in terms of resolution passed by UEIT authorising him to do so. It was also clarified that the reply to the statement of claims and the counter claims was filed by Mr Sudhir Gopi on behalf of UEIT in his capacity as a Managing Director and not in his personal capacity.

UEIT claimed that the statement of claims filed by IGNOU was bad for mis-joinder of parties as Mr Sudhir Gopi was not a party to the Agreement/or the arbitration agreement (clause). UEIT also prayed that the issue of mis-joinder of parties be considered as a preliminary issue.

Mr Gopi also filed a separate application confirming the same.

But The arbitral tribunal awarded a sum of USD 664,070 in favour of IGNOU against Mr Gopi and UEIT, jointly and severally. In addition, the arbitral tribunal also awarded interest at the rate of 12% per annum on the awarded amount from 03.01.2012 to the date of the award and from the date of the award till full realisation of the amount. The arbitral tribunal also awarded the cost of proceedings quantified at ₹100,000/-.

The aggrieved respondents approached the Delhi High Court. The Counsel appearing on behalf of Mr Gopi contended that arbitral tribunal does not have the power to proceed against any person who was not a signatory/party to the arbitration agreement (non-signatories). He relied upon the decisions of this Court in Prakash Industries Ltd. v. Space Capital Services Ltd. and Balmer Lawrie & Company Ltd. v. Saraswathi Chemicals Proprietors Saraswathi Leather Chemicals (P) Ltd., well as on the decision of the Bombay High Court in Oil and Natural Gas Corporation Ltd. v. Jindal Drilling and Industries Ltd. and Great Pacific Navigation (Holdings) Corporation Limited v. M V Tongli Yantai: in support of his contention.

Question

Whether a non-signatory can be made privy to an agreement by an Arbitrator/Arbitration Panel?

Contention of IGNOU

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