Aathma and Sayan

T-16
INTERNATIONAL ARBITRAL AWARD WRITING

COMPETITION 2020
CALLBURRY PRIVATE FINANCIAL SERVICES LTD. ……………………..CLAIMANT

AND
NESTELL PRIVATE LIMITED AND OTHERS ……………………………RESPONDENT

INTERNATIONAL ARBITRAL AWARD WRITING COMPETITION 2020
TABLE OF CONTENTS
LIST OF ABBREVIATIONS…………………………………………………..2
TABLE OF AUTHORITIES…………………………………………………..3
STATEMENT OF FACTS…………………………………………………….4
ISSUES IN DISPUTE………………………………………………………...6
ARGUMENTS FROM THE CLAIMANT AND THE RESPONDENT………………7
DECISION AND AWARD…………………………………………………..22
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LIST OF ABBREVIATIONS
% Percentage
& And
(P) Private
/- Only
§ Section
AIR All India Review
B.C.LR British Columbia Law Reports
Bom. Bombay
Cal/ Cal. Calcutta
CCPS Compulsorily convertible preference shares
cl. Clause
Co. Company
CS(Comm) Civil Suit Commercial Arbitration
Edn. Edition
F. Supp. Federal Supplement
HC High Court
ICA International Court of Arbitration
ICC International Chamber of Commerce
Id Idem
Inc. Incorporated
INR Indian Rupee
Int’l Ltd International Limited
IT Information Technology
LIC Life Insurance Corporation
Ltd. Limited
NBFC Non-Banking Financial Company
No. Number
Ors. Others
Pvt. Private
QB Catherine D Goulandris
Res. Resolution
Retd. Retired
Rev Arb Review Arbitration
Rs. Rupees
s. Section
S.D.N.Y. Southern District of New York
SCC Supreme Court Cases
UK United Kindom
UNCITRAL United Nations Commission On International Trade Law
UOI Union of India
v./ v Versus
Vol Volume
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TABLE OF AUTHORITIES
ACTS
1. Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996(India).
2. Indian Contract Act, 1872, No.9, Acts of Parliament, 1996(India).
BOOKS
1. DAVID ST.JOHN SUTTON, JUDITH GILL AND MATTHEW GEARING, RUSSELL ON ARBITRATION
(Sweet and Maxwell 23rd ed. 2007).
2. SIR MICHAEL J. MUSTILL, LAW AND PRACTICE OF COMMERCIAL ARBITRATION IN ENGLAND
(2nd ed. 1985).
CASES
1. A Ayyasamy v. A Paramasivam, (2016) 10 SCC 386,
2. Ben Hashem v. Ali Shayif , 2016 (4) Bom C.R. 251.
3. Bhatia International v. Bulk Trading SA & Anr. , (2002) 4 SCC 105.
4. Builders Federal v Turner Construction, 655 F. Supp.1400 (S.D.N.Y 1987).
5. Cheran Properties Limited v. Kasturi and Sons Limited, Civil Appeal Nos. 10025-10026 of
2017.
6. Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. and Others (2013) 1
SCC 641.
7. Dow Chemical v. Isover-Saint-Gobain, 1984 Rev Arb 137.
8. Earnest Business Services Pvt Ltd v. The Government of the State of Israel, 2019 SCC
OnLine Bom 1793.
9. Eastern Coalfields Ltd. v. Rungta Projects Ltd., 2018 SCC OnLine Cal 6555.
10. GMR Energy Limited v Doosan Power Systems India Private Limited and Ors., CS(COMM)
447/2017.
11. Manindra Chandra Nandy v. Aswini Kumar Acharjya, [AIR 1921 Cal. 185].
12. Mcdermott International Inc. v. Burn Standard Co. Ltd. (1991) 2 SCC 669.
13. Mitsui OSK Lines v. Orient Ship Agency Pvt. Ltd. 2020 SCC OnLine Bom 217.
14. MTNL v. Canara Bank, AIR 2019 SC 4449.
15. ICC Case No. 4131 of 1982.
16. ICC Case No. 5103 of 1988.
17. National Insurance Company Limited v Boghara Polyfab (P) Limited, (2009) 1 SCC 267.
18. Oil and Natural Gas Corporation Ltd. v. Jindal Drilling and Industries Limited, 2015 SCC
OnLine Bom 1707.
19. Pan Liberty Navigation v. World Link (H.K) Res. Ltd, (2005) BCCA 206.
20. Gulf Canada Res Ltd v. Arrocham Int’l Ltd., (1992) 66 B.C.LR 2d 113.
21. Sasan Power Ltd. v. North American Coal Corp. Ltd., (2016) 10 SCC 813.
22. Steel Authority of India Ltd. v. HTC Engineering Private Ltd., 2016 SCC OnLine Cal 642.
23. Sudhir Gopi v. Indira Gandhi National Open University, 2017 SCC OnLine Del 8345.
24. Universal Cargo Carriers Corporation v. Citati, [1957] 2 QB 402.
25. Vodafone International Holdings B.V. v. UOI, (2012) 6 SCC 613.
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STATEMENT OF FACTS
THE PARTIES
The Claimant, Callburry Private Financial Services Limited is Non-Banking Financial Company
registered under the Companies Act, 2013. The Respondent No.1, Nestell Private Limited is a
company engaged in the manufacturing of IT hardware registered under the Companies Act 2013.
Mr Gaurav Krishnan and Mr Rahul Prasad are Respondent No. 2 and Respondent No. 3
respectively and are the Directors of Nestell Private Limited. Mr Gaurav Krishnan is a citizen of
the United Kingdom since 2015. Respondent No. 2 and Respondent No. 3 were also Directors and
on the boards of the three other companies - FiveStar Limited, Toblerr Limited and MarsKing
Limited.
NON SIGNATORIES TO THE ARBITRATION AGREEMENT
FiveStar Limited is a company engaged in the manufacturing and supply of pipes, Pipe Fittings
and Pipe Fittings Extensions.
Toblerr Limited is an company engaged in the provision of information technology services such
as consulting and research and development
MarsKing Limited is a company engaged in the provision of information technology, consulting

and business process services.
RELEVANT DATES TO THE DISPUTE
06 JANUARY 2018 - A “Loan Agreement” was executed between the Claimant and Respondent
No. 1 where under Respondent No. 1 would receive a sum of INR 60,00,00,000 (Indian Rupees
Sixty Crore only) from the Claimant. Respondent No. 2 and Respondent No. 3, the Directors in
Respondent No. 1 acted as personal guarantors for the repayment of the loan extended to
Respondent No. 1,
10 JANUARY 2018- All the parties executed a Share Pledge Agreement in terms of Clause 12.4 of
the Loan Agreement whereby 10,00,000 compulsorily convertible preference shares (“CCPS”) of
MarsKing Limited, which were held by the Guarantors were pledged in favour of the Claimant.
On the same date the principal amount of INR 60,00,00,000 was released.
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06 JUNE 2019- The Claimant issued a notice to Respondents No. 1, 2 and 3 requiring them 4 to
create security in terms of Clause 7.2.1 of the Loan Agreement by 06 July 2019.
10 JULY 2019- The Respondents failed to create requisite security to ensure that security cover for
the outstanding loan amount stood at 1.2X thereof.
09 JULY 2019- The Claimant issued a notice addressed to Respondents No. 1, 2 and 3 recording
the fact of failure on its part to create security in terms of the Loan Agreement.
31 JULY 2019 AND 31 AUGUST 2019- Respondent No. 1 defaulted in making payments towards
interest in terms of the Loan Agreement.
06 September 2019- The Claimant, Respondent No. 1, Respondent No. 2 and Respondent No. 3
entered into an agreement pursuant to Share Pledge Agreement whereby the 10,00,000 CCPS of
MarsKing Limited pledged in favour of the Claimant were converted into equity shares
10 JANUARY 2020- Respondent No. 1 failed to ensure that the security cover of the outstanding
loan amount stood at 1.9X thereof as required under Clause 7.2.2 the Loan Agreement.
15 JANUARY 2020- Claimant issued notices recording such default of the terms of the Loan
Agreement for breach thereof to Respondent No. 1, Respondent No. 2 and Respondent No. 3
demanding payment of the interest that had become due.
THE DISPUTE
There were verified news reports that Respondent No. 1 had been facing financial crises and had
been operating in huge losses. The Claimant apprehended that the Respondent No. 1 will not have
any assets to honor the terms of the Loan Agreement. A notice invoking arbitration was sent to the
parties and the non signatories on 13 February 2020.
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ISSUES IN DISPUTE
In light of the statement of facts and the statement of defense and claims filed, the Arbitral Tribunal
has framed the following issues:
1. What is the applicable law of the present arbitration?

2. Can the Arbitral Tribunal lift the corporate veil of respondents 4, 5 and 6 to determine
their connection with the present arbitration?
3. Even if the corporate veil is lifted, can the tribunal add these third parties to the
arbitration?
4. Whether there has been breach of the contract of loan agreement?
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ARGUMENTS FROM THE CLAIMANT AND THE RESPONDENT
I. What is the applicable law of the present arbitration?

The Claimants and Respondents having complied with all the procedural requirements as specified
under the Arbitration and Conciliation Act of 1996 (Act of 1996) have proceeded to the submission
of arguments. Whereby the first contention raised by the parties is with respect to the applicable
law for this present arbitration.
Claimants
It has been clearly specified by the Claimants that it is necessary to mention that the present
arbitration is in the nature of an international commercial arbitration, as it deals with a contractual
dispute and one of the parties, Respondent 2 is a UK citizen since 2015, thereby qualifying under
the definition of ICA in s. 2(1)(f) of the Act of 1996, which lays down that even in the event that
one of the parties is a national of a foreign country, then it shall be called an international
commercial arbitration.
The claimants have thereafter specified that designating the present arbitration as International
Commercial Arbitration has ramifications in the sense of the applicable rules for the substance of
the matter. A perusal to s. 28 of the Act of 19961, clarifies that in cases of an ICA, the mentioned
law in the arbitration agreement is applicable and in case there has been no such specifications
made, then the arbitral tribunal has the authority to determine the applicable rule. However, a
simple perusal to clause 13 of the Agreement would suggest that the Indian Law is applicable to
the present arbitration.
Another principle approach towards determining the procedural or curial law and to an extent the
substantive law, is the forum of arbitration or the place where the agreement to arbitrate was
entered into it.
In other words it is called the proper law of contract, which have been defined by Dicey, as follows:
1
Arbitration and Conciliation Act, 1996, § 28, No. 26 , Acts of Parliament, 1996(India).
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“The term means the system of law by which the parties to the contract intended the contract to be
governed, or where their intention is neither expressed nor to be inferred from the circumstances,
the system of law with which the transaction has its closest and most real connection.”
The Supreme Court in India has not only acknowledged this principle but also clarified as to where
and when it can be applied. In general circumstances, it is the expressed intention of the parties
that is generally the deciding factor in determining the proper law of the contract. However,
“where the intention of the parties is not expressly stated or no inference about it can be drawn,
their intention as such has no relevance. In that event, the courts endeavour to impute an intention
by identifying the legal system with which the transaction has its closest and most real connection.”
Therefore, the Claimants contend that the applicable law should be the Indian Law.
Respondents:
But the respondents have contended on this point sighting the complexity of the agreement. They
have contended that complications have arisen due to the including of non-signatory companies in
the arbitration, thereby forcing this tribunal to consider as to whether this present dispute strictly
falls within the domain of the agreement, as the parties in the agreement have been clearly defined
to not include the four companies.
In light of the observation in the aforementioned para, a reference to landmark cases under s. 28(3)
of the Act of 19962, would suggest that the arbitrator has the discretion to interpret the contract
beyond the stringent limits of the contract. It has been clearly stated in the case of Mcdermott
International Inc. v. Burn Standard Co. Ltd. that:
“The conduct of the parties would also be a relevant factor in the matter of construction of a
contract. The construction of the contract agreement is within the jurisdiction of the arbitrators
having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be
said to have misdirected themselves in passing the award by taking into consideration the conduct
of the parties. It is also trite that correspondences exchanged by the parties are required to be taken
2
Arbitration and Conciliation Act, 1996, § 28(3), No. 26, Acts of Parliament, 1996(India).
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into consideration for the purpose of construction of a contract. Interpretation of a contract is a

matter for the arbitrator to determine, even if it gives rise to determination of a question of law.”3
This case has been cited again and again in landmark cases, one being in the case of Steel Authority
of India Ltd. v. HTC Engineering Private Ltd.4, to signify the essence of this rule which is codified
in s. 28(3) of the Act of 19965. This has been further ratified by a judgment of the Calcutta High
Court in a recent case of Eastern Coalfields Ltd. v. Rungta Projects Ltd.that:
“the Ld Arbitrator gave a correct construction to section 28 (3) of the Act; he took into account
the trade usages and commercial practices prevalent in situations of this nature.”6
Therefore, it is the contention of the respondent that the contract be construed according to the
practices and usages, and especially while dealing with the alleged breach of the contract, the
tribunal should not do a strict interpretation of the contract but rather look at the mischief or
intention of the parties.
II. Can the Arbitral Tribunal lift the corporate veil of respondents 4, 5 and 6 to determine
The respondents 4, 5 and 6 (contentious respondents) are corporate entities which have a separate
juristic personality and they being non-signatory to the agreement to arbitrate, they have
vehemently opposed their presence in this arbitral dispute and have consequently prayed to be
removed from the proceedings of this tribunal without any liability of the arbitration costs as they
have been wrongly added.
The Claimants on the other hand have contended that these respondents 4, 5 and 6 should also be
made a part of this proceeding and to determine the same their corporate veil should be lifted to
show that the respondents 1, 2 and 3 are shareholders of the rest of the respondents. Additionally,
the respondents have revealed in the loan agreement itself that they are shareholders of the
contentious respondents and that they will transfer their equity shares in these companies to the
claimant as collateral under Clause 12.2.i of the loan agreement. Additionally, it should also be
considered that Respondents 2 and 3 were directors and were on the board of directors in the
3
Mcdermott International Inc. v. Burn Standard Co. Ltd. (1991) 2 SCC 669, ¶ 112.
4
Steel Authority of India Ltd. v. HTC Engineering Private Ltd.,2016 SCC OnLine Cal 642, ¶ 33
5
Arbitration and Conciliation Act, 1996, § 28(3), No. 26, Acts of Parliament, 1996 (India).
6
Eastern Coalfields Ltd. v. Rungta Projects Ltd., 2018 SCC OnLine Cal 6555, ¶ 24.
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respondents 4, 5 and 6. Even the claimant has contended that even though the contentious
respondents are non-signatories, their equity shares being involved as collateral, they should be a
part of this arbitration by virtue of application of the group of companies’ doctrine.
The Claimants and Respondents have argued this issue, under two broad sub-headings:
a. Can an arbitral tribunal lift the corporate veil of companies?
b. Can the corporate veil be lifted in the present case?
The discussions presented before the tribunal are presented as follows:
a. Can an arbitral tribunal lift the corporate veil of companies?
Respondents:
In the very beginning, the respondents have vehemently contended that it is indeed needless to
reiterate that third parties which are non-signatories to an arbitration agreement cannot be bound
by it as it breaches the fundamental principle of privity of contract which has been observed by
multitude of courts of law all over the world. This argument has been further extended to contend
that since the act of adding non-contracting parties to a contractual matter is a violation of the
contractual privity and hence the contract itself, an arbitration tribunal cannot be allowed to do
such an act thereby violating the contract.
This position of the law has been held in clear terms in the case of Sudhir Gopi v. Indira Gandhi
National Open University. It had been stated that:
“The arbitral tribunal, being a creature of limited jurisdiction, has no power to extend the scope
of the arbitral proceedings to include persons who have not consented to arbitrate. Thus, an
arbitrator would not have the power to pierce the corporate veil so as to bind other parties who
have not agreed to arbitrate.”7
Therefore, a distinction has been struck between civil courts and arbitration tribunals whereby the
jurisdiction of the latter is limited in nature that it is defined by the close boundaries of the
arbitration agreement. The act of lifting the corporate veil is seen as a step to go beyond the
7
Sudhir Gopi v. Indira Gandhi National Open University 2017 SCC OnLine Del 8345.
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arbitration agreement and try and bound non-signatory parties too, which was devised earlier as
an extra-jurisdictional act, as observed in the aforementioned case:
“The courts would, undoubtedly, have the power to determine whether in a given case the
corporate veil should be pierced and the persons behind the corporate façade be held accountable
for the obligations of the corporate entity. However as stated earlier, an arbitral tribunal, has no
jurisdiction to lift the corporate veil; its jurisdiction is confined by the arbitration agreement -
which includes the parties to arbitration - and it would not be permissible for the arbitral tribunal
to expand or extend the same to other persons.”
A similar view was also expressed by the Bombay High Court in Oil and Natural Gas Corporation
Ltd. v. Jindal Drilling and Industries Limited8in the following words:
"47. The petitioners had canvassed before the arbitral tribunal that the arbitral tribunal shall lift
the corporate veil to find out that the said DEPL and the respondents herein were forming part of
the said Jindal Group and were one and the same entity and thus the respondents were liable for
the liabilities of the said DEPL. In my view, the arbitral tribunal has no power to lift the corporate
veil. Only a Court can lift the corporate veil of a company if the strongest case is made out. In my
view, the prayer of the petitioners for lifting the corporate veil of the said DEPL was itself not
maintainable in the arbitration proceedings."
Therefore, according to the Respondent, lifting of the veil cannot be done in an arbitration as that
would be beyond the scope of the arbitration, which is limited by the terms of the contract.
Claimant:
This proposition has been disputed by the Claimants. As contended by the Claimants, the position
of law on this point has evolved and in the new legal regime, an arbitral tribunal is allowed to
pierce the corporate veil, as held by the Delhi High Court in its decision in GMR Energy Limited
v Doosan Power SystemsIndia Private Limited and Ors9. This case dispels the cloud of uncertainty
created by the judgment of the Delhi High Court in Sudhir Gopi v Indira Gandhi International
8
Oil and Natural Gas Corporation Ltd. v. Jindal Drilling and Industries Limited, 2015 SCC OnLine Bom 1707.
9
GMR Energy Limited v Doosan Power SystemsIndia Private Limited and Ors , CS(Comm) 447/2017.
11 | P a g e
Open University,wherein the Court had held that the issue of lifting of corporate veil is beyond the
jurisdiction of an arbitral tribunal.
The Delhi HC in this case while discussing the principle of alter ego held that the decision of Delhi
HC in Sudhir Gopi is per incuriam, in so far as it failed to consider the issue of arbitrability of alter
ego and the decision was passed without taking into consideration the decision of Supreme Court
in A Ayyasamy v. A Paramasivam,10wherein the Supreme Court carved out instances which cannot
be referred to arbitration.
In the case of the Court while dealing with the aspect of arbitrability of the issue of alter ego,
relied on the Supreme Court decisions in A. Ayyaswami and National Insurance Company Limited
v Boghara Polyfab (P) Limited,11 and held that the issue of alter ego will fall under the category
of disputes which can be decided by the Courts as well as by the arbitral tribunal.
Thus, the court reached the conclusion that the arbitral tribunal can pierce the corporate veil of the
company.
b. Can the corporate veil be lifted in this case?
Claimant:
The Claimants have highlighted upon the fact that the judicial approach towards the piercing of
the corporate veil has evolved to be lenient in nature, so as to avoid the misuse of corporate
personality to commit commercial crimes and to harm innocent parties. This point of view is
supported by the expression of the Delhi High Court in the case of GMR Energy Limited v Doosan
Power Systems India Private Limited and Ors :
“It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of
corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the
realities of the situation. The aim of the legislation is to do justice to all the parties. The horizon
of the doctrine of lifting of corporate veil is expanding.”
10
A. Ayyasamy v. A Paramasivam, (2016) 10 SCC 386,
11
National Insurance Company Limited v Boghara Polyfab (P) Limited, (2009) 1 SCC 267.
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But in that case, the court issued a warning saying that “(lifting of the corporate veil) It must,
however, depend primarily on the realities of the situation. The aim of the legislation is to do
justice to all the parties.”12
These principles have been observed in the case of Alpha S.A. V. Beta & Co., State Company of
Ruritanian Law, wherein the tribunal pierced the corporate veil of the signatory state-owned entity
to bind its non-signatory corporate parent to the arbitration agreement entered into by its
subsidiary. The tribunal discussed case law and doctrine developed in connection with Swiss
company law, in particular for so-called “one-man companies”, and summarized that piercing the
corporate veil was only warranted where
(i) a shareholder had total control over an entity, evinced by insufficient capitalization, confusion
in the administration and management, and confusion of assets, and
(ii) the totality of circumstances constituted an abuse of rights.
In this case as well, the instances of having shareholding in the contentious companies as well as
having common directorship may signify the existence of both economic and management based
control of the contentious respondents. Even these factors can be used to show that the contentious
respondents are alter egos of the rest of the respondents.
Additionally, the Claimants have sought refuge of the group of companies’ doctrine to further their
case that the corporate veil be lifted and all the respondents should be held to be essentially a group
of company with a common corporate personality.
It has been already observed that third party non-signatories can be added to an arbitration, if they
can be proved through the group of companies’ doctrine, that they are interlinked in such a manner
that they can be bound by the loan agreement in this case.13 This doctrine can be best defined as
follows:
“This doctrine has developed in the international context, whereby an arbitration agreement
entered into by a company, being one within a group of companies, can bind its non- signatory
12
GMR Energy Limited v Doosan Power Systems India Private Limited and Ors., CS(COMM) 447/2017.
13
Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. and Others (2013) 1 SCC 641.
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affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention
of all the parties was to bind both the signatories and the non-signatory affiliates.”14
The Courts have evolved this doctrine further to include that the most essential part is the intention
of the parties to bind non-signatories and the agreement containing the arbitral clause showcasing
this intention. In other words, “The Court will (have to) examine these exceptions from the
touchstone of direct relationship to the party signatory to the arbitration agreement, direct
commonality of the subject matter and the agreement between the parties being a composite
transaction.”15
Additionally the court have adopted another important consideration in the MTNL v. Canara Bank
Case, which is as follows:
“The Group of Companies Doctrine has also been invoked in cases where there is a tight group
structure with strong organizational and financial links, so as to constitute a single economic
unit, or a single economic reality. In such a situation, signatory and non-signatories have been
bound together under the arbitration agreement. This will apply in particular when the funds of
one company are used to financially support or re-structure other members of the group.”16
The Claimants have tried to establish that the contentious respondents are the beneficiaries of the
loan agreement because:
 The loan amount will be used in the reduction of debt and repayment of loans of
Respondent 5.
 10 lakh Compulsorily Convertible Preference Shares of Respondent 6 are pledged to the
Claimant by virtue of the share pledge agreement as mentioned in cl. 12.4 of the loan
agreement.
 Equity Shares of Respondent 4 and 5 are pledged to the Claimant under cl. 7.2 of the loan
agreement.
Therefore, they have tried to show that all the companies are related through a complex network
of shareholding and common directorship and the fact that the loan agreement has been entered
14
DAVID ST.JOHN SUTTON, JUDITH GILL AND MATTHEW GEARING, RUSSELL ON ARBITRATION 208 (Sweet and
Maxwell 23rd ed. 2007).
15
Supra note 10, at 68.
16
MTNL v. Canara Bank AIR 2019 SC 4449, ¶52; (cited ICC Case No. 4131 of 1982, ICC Case No. 5103 of 1988).
14 | P a g e
only for the benefit of respondent 5, it shows that they should be held as a necessary party and not
just a proper party. Even the respondents 4 and 6 are affected in the sense that their shares are
being transferred into equity and the CCFS of the respondent 6 are being transferred to the
claimant. Additionally, even the shares of the R4 and R6 which were held by R2 and R3 have been
locked by the Claimant, as long as they function as guarantors. Therefore, the Claimants have tried
to show the extent to which the companies are interlinked in nature.
Respondents:
This veil should not be lifted in each and every case at the request of the appellants to loop in
companies unnecessarily just to make the respondents suffer more than required.
But still there has to be certain requirements as enumerated by the Munby J in Ben Hashem v. Ali
Shayif case17, which later has been ratified by Lord Sumption in the Prest case. Both the holdings
of this case has been recognized by the apex court in the case of Balwant Rai Saluja v. Air India.
The court highlighted in the case that the test for corporate veil has moved far beyond the control
or economic control test, to include the following factors:
"a. Ownership and control of a company were not enough to justify piercing the Corporate Veil;
b. The Court cannot pierce the Corporate Veil even in the absence of third party interests merely
because it is thought to be in the interests of justice;
c. Corporate Veil can be pierced only if there is some impropriety;
d. The impropriety in question must be linked to the use of the company structure to avoid or
conceal liability; (evasion principle)
e. To justify piercing the Corporate Veil, there must be both control of the company by the wrong
doer and impropriety that is use or misuse of the company by them as a device or facade to conceal
their wrong doings; and (avoiding liability rule)
f. The company may be a "facade" even though it was not originally incorporated with any
deceptive intent provided that it is being used for the purpose of deception at the time of the
17
Ben Hashem v. Ali Shayif , 2016 (4) Bom C.R. 251.
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relevant transactions. The court would however pierce the Corporate Veil only so far as is
necessary to provide a remedy for the particular wrong done by the company."18
The respondents contend that none of these grounds have been satisfied, as there has been no fraud
or wrong being committed by the Respondents, that they will try to evade or because of which
they should have formed a façade before the tribunal.
Even with respect to the test of economic control, the respondents contended that it cannot be a
conclusive test, as the respondent 1 being a non–banking financial association, it is expected that
there will be economic control involved but additionally the test of evasion or avoiding liability
principle, has to be satisfied too. Even for the argument for the alter ego test to be satisfied, it has
to be shown that the directors of the “subsidiary” act in the primary and independent interest of
the “parent”, the alleged dominator deals with the dominated corporation at arm’s length, and the
latter pay debts or guarantees the former. But with only the last requirement being fulfilled and the
other being not proved as there does no existence of any indication to show that the claimants are
being harmed in the contractual relationship due to the complex corporate personality exist. That
in turn could have been a ground for lifting the veil, which is non-existent in this case.
Even, with respect to the argumentation for the “group of companies” doctrine, the Respondents
have agreed that the MTNL v. Canara Bank Ltd. is the latest position on the principle. But they
have contended that all the factors raised by the Claimant show why the Respondents 4, 5 and 6
request to be added to the arbitration and not why the Claimant should request the same. As, even
if the judgment is given in favour of the Claimant, the contentious respondents would be financially
harmed and they are unrelated to the loan agreement in the sense that they do not have a say against
the claimant being third party to the agreement. They can in turn bring actions against the
Respondents 1, 2 and 3 for the default and their financial loss, but this is not the correct forum for
that purpose.
Also here the respondents have brought in an important fact, that is, the language of the loan
agreement. Clause 7.2.i of the loan agreement, dealing with the amount of collateral, only requires
that the collateral cover for the Loan Outstanding Amounts should be at least 1.2x, which can be
done even by mortgage of properties acceptable by the Claimant. Hence, on the part of the
18
Mitsui OSK Lines v. Orient Ship Agency Pvt. Ltd. 2020 SCC OnLine Bom 217.
16 | P a g e
Claimant, there is an intention to own shares of the contentious companies only by means of
collateral. This shows a one sided intention to involve the contentious respondents, and not a
mutual intention which is a requirement under the concept of direct commonality of subject
matter.19 This is in line with the first theory as laid in the Chloro Controls case, to bind third parties:
“The first theory is that of implied consent, third-party beneficiaries, guarantors, assignment and
other transfer mechanisms of contractual rights. This theory relies on the discernible intentions of
the parties and, to a large extent, on good faith principle. They apply to private as well as public
legal entities.”20
Therefore, the Respondents claim that if the facts as stated by the Claimant were to be construed
accordingly, that would entail that the Respondents should have requested for the addition of
parties and not the Claimants, this in turn shows the absence of god faith on part of the claimant
and hence the reason why this theory cannot be applied.
III. Even if the corporate veil is lifted, can the tribunal add these third parties to the
arbitration?
Respondents:
The Respondents have lastly contended that the tribunal being an arbitration tribunal does not have
the power to add third parties. Though they have accepted that the aforementioned ground of group
of companies doctrine is indeed an exception to the normal rule of arbitration that only parties to
the arbitration agreement are allowed to be the parties in an arbitration under that agreement, a
principle which is recognized in s. 8 of the Act of 199621, and from which the rationae personae
jurisdiction of an arbitral tribunal flows.
But there is an exception to this principle under s. 822, which is existent under s. 45 of the Act of
1996, whereby entities claiming through or under the parties to arbitration can become a party to
19
Cheran Properties Limited v. Kasturi and Sons Limited, Civil Appeal Nos. 10025-10026 of 2017, ¶34.
20
Supra note 10, at 103.
21
Arbitration and Conciliation Act, 1996, § 8, No. 26, Acts of Parliament, 1996(India).
22
Id.
17 | P a g e
the arbitration even though they are non-signatories. The conditions for the operation of s.
45 of the Act23 has been recognized by the apex court to be as follows:
“1. The claimant was in reality always a party to the contract, although not named in it.
2. The claimant has succeeded by operation of law to the rights of the named party.
3. The claimant has become a part to the contract in substitution for the named party by virtue of
a statutory or consensual novation.
4. The original party has assigned to the claimant either the underlying contract, together with the
agreement to arbitrate which it incorporates, or the benefit of a claim which has already come into
existence.”24 (here claimant can be read as the third party who wishes to be added to an arbitration).
But none of these conditions have been existing in the given set of facts whereby the contentious
respondents have not taken the position of the rest of the respondents through substitution or
assignment or by law or by consensus. The only part where they have been named is the scenario
where their shares are to be pledged as a collateral to the loan agreement, and hence since their
shares being turned into equity shares, it would affect their business and hence they can be an
interested party.
However, there is a great difference between the case of Chloro Controls Case and that of the
present case. In the former, the third parties approached the court of law to be added in the
arbitration and in the latter, the third parties are being forced to be added by the claimant.
In strict sensu the s. 45 is to be used by a court of law or a judicial authority and at the request of
such third party only, and therefore the arbitral tribunals ideally should not be allowed to exercise
the power under s. 45. It is required to be clarified that since the applicable law is the act of 1996,
therefore the tribunal should be bound by s. 45 of the act25 as well, which has been observed by
the apex court as well, even when the seat of arbitration is in India. 26 Therefore, as there is no
authority in the act of 1996, the tribunal cannot add third parties.
23
24
SIR MICHAEL J. MUSTILL, LAW AND PRACTICE OF COMMERCIAL ARBITRATION IN ENGLAND (2nd ed. 1985).
25
26
Bhatia International v. Bulk Trading SA & Anr. , (2002) 4 SCC 105.
18 | P a g e
Claimants:
The Claimants have heavily relied on the principle of competence-competence of arbitral tribunals
which has been time and again observed by multiple model arbitration rules, an example being
articles 8 and 16 of the UNCITRAL Model Law of Arbitration. Article 16(3) of this model law
gives the power to determine any preliminary disputes to the jurisdiction of the tribunal or with
respect to the giving of award. These Model Laws have been given recognition by national courts
too in other jurisdictions.27Though, a bare reading of s. 45 of the Act of 1996, would suggest a
clear departure from this principle, since adding third parties is arguably seen to be beyond the
precincts of the arbitration agreement, which defines the jurisdiction of an arbitral tribunal.
But, in the field of international commercial arbitration, the approach has been changing, whereby
foreign courts have started giving recognition to this principle thereby giving autonomy to the
tribunal to determine its own jurisdiction. It has been so held in the case of Builders Federal v
Turner Construction28, however this power of the tribunal has been subject to judicial review as
has been observed in this case too.
The Claimants have gone forward to contend that since this is an ICA, it is the duty of this tribunal
to consider this contradicting principle, which is largely accepted across all ICAs. They have
further stated that nothing in the bare provision of s. 45 of the act suggest that the section applies
to an ICA, and hence the tribunal should be lenient to grant an exception in this case with this
being an ICA.
IV. Whether there has been breach of the contract of loan agreement?
Claimants:
The Claimants have claimed that the Respondent 1 has completely violated the following terms of
the agreement:
 Failure to abide by cl. 7.2.i of the loan agreement and raise the collateral cover to the Loan
Outstanding Amount by 1.2x by 6th July, 2019.
27
Pan Liberty Navigation v. World Link (H.K) Res. Ltd, (2005) BCCA 206.;Gulf Canada Res Ltd v. Arrocham Int’l
Ltd.,(1992) 66 B.C.LR 2d 113.
28
Builders Federal v Turner Construction, 655 F. Supp.1400 (S.D.N.Y 1987).
19 | P a g e
 Failure to abide by cl. 7.2.ii of the loan agreement, and raise the aforementioned cover to
1.9x by 10 January 2020.
 Failure to make the interest payments for the months of July, August, November and
December, 2019.
Besides, the aforementioned breach in the loan agreement in terms of generating the security
amount, the Claimants have also claimed for an anticipatory breach of the loan agreement, based
on the continued breach of the contract by the Respondents since November, 2019 in terms of
payment of interest, which in turn is a breach of cl. 1.2 of loan agreement. Additionally, the
respondent 1 has suffered excessive financial looses, raising the apprehension in the minds of the
claimant to claim for anticipatory breach of the contract.
Anticipatory breach of contract has been defined by the apex court as follows in the Universal
Cargo case:
“Anticipatory breach means that a party is in breach from the moment that his actual breach
becomes inevitable. Since the reason for the rule is that a party is allowed to anticipate an inevitable
event and is not obliged to wait till it happens, it must follow that the breach which he anticipates
is of just the same character as the breach which would actually have occurred if he had waited.”29
Therefore, an essential element for proving a claim for anticipatory breach is that there has been
an “unqualified and positive refusal to perform a contract”.30 Hence, in this case as well citing the
non-performance of the contract and its breach, the claimant have asked for repudiation of the
contract by asking both the borrower and the guarantor to pay the dues that will be due by
November, 2020, which is allowed in law, as it has been observed:
“The damages for breach of a contract by renunciation thereof before performance is due are
measured by what the injured party would have suffered by the continued breach of the other party
down to the time of complete performance, less any abatement by reason of circumstances of
which he ought reasonably to have availed himself.”31
Respondents:
29
Universal Cargo Carriers Corporation v. Citati, [1957] 2 QB 402.
30
Manindra Chandra Nandy v. Aswini Kumar Acharjya, AIR 1921 Cal. 185.
31
Id.
20 | P a g e
The Respondents have not raised any defence against the contention of the breach of contract.
However, the respondents have contended that the anticipatory breach cannot be allowed to be
claimed based on only the argument that the Respondents are in a huge financial crisis and hence
there is a possibility of the Respondent failing to pay the loans and the interests. They have also
stated that in anticipatory breach, the tool cannot be used to advance the performance of the
contract with the risk of losses.32Therefore, the Respondents have prayed that based on that ground
only they should not be asked to pay the dues in advance by March, which ought to have been paid
in November, 2020 according to the contract.
32
Id.
21 | P a g e
AWARD AND DECISION
This Arbitral Tribunal has been constituted under clause 14.1 of the Loan Agreement dated 6th
January, 2018 existing between Callburry Pvt. Ltd. (Claimant) on the one hand and Nestell Private
Ltd. (Respondent 1), Mr. Gaurav Krishnan (Respondent 2) and Mr. Rahul Prasad (Respondent 3).
In pursuance of the notice of arbitration sent on 13th February, 2020, this arbitral tribunal has been
constituted with the aforementioned parties, and three additional respondents being FiveStar
Limited (Respondent 4), Toblerr Limited (Respondent 5) and MarsKing Limited (Respondent 6).
In furtherance of clause 14.1.i and 14.1.ii of the Loan Agreement, the seat of this tribunal is in
New Delhi and the applicable law being the Arbitration and Conciliation Act, 1996 (the Act of
1996). The parties in accordance to s. 11(2) of the Act of 1996 have appointed Retd. Justice
Samarth Pandey as the sole arbitrator, who in turn have submitted the disclosure documents
required under s. 12(1)(b) and Sixth Schedule of the Act of 1996.
Appointment of the sole arbitrator
The sole arbitrator of this tribunal dealing with an international commercial arbitration has been
appointed by agreement of both the parties involved. However, the Act of 1996 provides for an
alternative methodology for the appointment of arbitrators.
In case of a domestic arbitration, the respective High Courts having jurisdiction shall appoint
arbitrators, upon a request of a party. However, in case of an international commercial arbitration,
for seeking appointment of arbitrators, a request will have to be filed by a party before the Supreme
Court under Section 11(9) of the Act of 1996.33
But both the parties have sought to not go under the procedure laid down under s. 11(9) of the Act
of 1996, by deciding the same by their own mutual agreement in accordance to the loan agreement
clause 14.1.i. Such an act has been held to be valid in the eyes of law.
The Bombay High Court, in its judgment dated 6 September 2019 in Earnest Business Services
Pvt Ltd v the Government of the State of Israel34, has inter alia held that parties to a dispute can
agree on appointment of an arbitrator without filing an application under Sections 11(6) or 11(9)
33
34
Earnest Business Services Pvt Ltd v. The Government of the State of Israel, 2019 SCC OnLine Bom 1793.
22 | P a g e
of the Arbitration and Conciliation Act, 1996, as the case may be, including in a petition under
Section 9 of the Act or even without intervention of court.
Further, since no such claim has been made by either party disputing the appointment of the sole
arbitrator, it is presumed that there is no dispute with respect to the appointment of the arbitrator
and therefore there is no attraction of section 11.
In other words, even in an international commercial arbitration, if there is an agreement between

the parties on appointment of arbitrator, when the dispute is before a High Court, the provisions
of Section 11(9) of the Act35 will not be attracted.
Further, the requirement that the sole arbitrator is of a different nationality from the parties is
preceded by a “may” and hence it is not mandatory that this criteria is fulfilled. Further, this criteria
comes into picture only when the parties have approached the court of law for the appointment of
the arbitrator, which is clearly not the case here.
Therefore, there is no illegality with respect to the appointment of the sole arbitrator, which has
been clarified by the tribunal for the purpose of maintenance of judicial propriety.
Wherefrom, having heard both the parties in due course of time and considered the statement of
Defence and Claims, the tribunal now proceeds hereinafter to pronounce the arbitral award.
I. What is the applicable law of the present arbitration?

It has been correctly pointed out by the claimant that the present falls under the definition of an
international commercial arbitration with its seat in India. However, as according to the act of
1996, the arbitration is guided by part 1 of the act, which mandates under s. 28, that the applicable
law will be the one decided by the parties in their contract. While determining the applicable rule,
it is mandated by s. 28(3) of the Act of 199636, by the use of the word “shall” that the tribunal in
all cases have to consider the “terms of the contract and trade usages applicable to the transaction”.
It is noteworthy to mention here that the present section 28(3) is a result of the Amendment to the
Arbitration Act in 2015, which have introduced the words “take into account” and therefore not
binding the tribunal to go strictly according to the terms of the contract, in case a reasoned
35
36
23 | P a g e
departure therefrom can be warranted under the usages of trade or the applicable law and therefore
provides a leeway to escape unfavourable and controversial clauses in the contract.
It has truly been referred that under cl. 13 of the loan agreement, the applicable law should be the
Indian Law.
However, there indeed exists a complication, as pointed out by the respondent that the addition of
non-signatories to this arbitration goes beyond the scope of the agreement and hence in line with
the same, the applicable law at the jurisdictional stage should be based on the usages of trades and
the intention of the parties as reflected by the contract.
A perusal of the authorities cited by the respondents show that the tribunal indeed has the power
to consider the usages of the trade, which in this case is that of loans granted by NBFCs.
In this initial stage, since it is the jurisdictional stage and the applicable laws has to be decided
based on materials which is not extrinsic to the contract37, this tribunal can rely on the trades and
usages and the circumstances in which the companies are functioning, which is essentially the
Indian legal scenario, with all the companies being registered in India. It has to be reiterated here
that even the Respondent 2 who is a UK citizen, also has his business in India and has abided by
all the necessary regulations of foreign investments and for his commercial relations overseas,
hence it can be of no harm to assume that the Indian Contract Act of 1872, will be functional in
resolving this dispute surrounding this present contract of guarantee.
However, the application of Indian Law, does not only include the Indian Contract Act and the
closest connection test which is relied upon by the Claimants has been time and again been relied
upon by the arbitral tribunals.
Hence, this tribunal deems fit to further clarify that as reiterated above it is within the discretionary
power of this tribunal to determine the procedure of examining a trade practice and so is the
intention of the legislature as the procedure would be case specific and in the given case.
Additionally, the apex court has laid down that in determining the proper law of the contract, the
place where it was made, its place of performance, the place of residence or business of the parties,
37
MSK Projects (I) (JV) Ltd. v. State of Rajasthan (2011) 10 SCC 573, ¶ 17.
24 | P a g e
the form and object of the contract and reference to the courts having jurisdiction are examined.38
And a simple perusal to all this factors point out that it is in the best interest of all the parties that
the Indian Law be applicable in this case.
Decision: Therefore, whether the respondents 4, 5 and 6 are bound by the loan agreement or not,
the applicable law for purposes of this arbitration and in determining the rationae personae
jurisdiction of this tribunal, the Indian Law will be referred to.
II. Can the Arbitral Tribunal lift the corporate veil of respondents 4, 5 and 6 to determine
Having dealt with all the procedural requirements of this tribunal and having conclusively settled
all the disputes therein, this tribunal henceforth proceeds to decide its jurisdiction, whereby both
the parties have vehemently contended the rationae personae jurisdiction of this tribunal. In light
of the contentions raised, the tribunal decides as follows under the following two sub-headings.
This tribunal in this part of the award, will deal with firstly the power of an arbitration tribunal to
lift the corporate veil and secondly, whether such a lifting of the corporate veil can be done in this
case, as has been argued by the parties.
i. Power to lift the corporate veil
With respect to the power of an arbitration tribunal to lift the corporate veil of companies to bind
such non-signatory companies as party to an arbitration agreement, both the parties have contended
based on the authorities cited. It is undoubtedly true that privity of contract is a universal principle
which is accepted in all contractual disputes and arbitrations having arisen from contracts, should
also be bound by the self-same principle. However, the lifting of the corporate veil when compiled
with the group of companies’ doctrine, an exception can be created to this principle. On this point,
it has been held that:
“There may be cases where courts can compel non signatory(ies) to arbitrate. These may be on
grounds of (a) implied consent and/or (b) disregard of corporate personality.”39
38
Id. at 17.
39
Sudhir Gopi v. Indira Gandhi National Open University, 2017 SCC OnLine Del 8345.
25 | P a g e
The same approach has also been followed in the Chloro Chemicals case, where the presence of
inter-related and interdependent agreements and complex corporate personality can together be
contributing factors to create an exception to the privity of contract.
To determine the existence of this complex corporate personality, the corporate veil of a company
can be lifted in certain cases. But before going there first the power of the tribunal to lift the veil
has to be determined.
In this regard, a simple perusal to the cases cited by the Claimants, especially the GMR Energy
Ltd. Case, would clearly show that the principle relied upon by the Respondents in the case of
Sudhir Gopi case, has not only been overruled but also been declared per incuriam, thereby raising
the balance of favours in favour of the Claimant. This in turn is depiction of the liberal approach
that is being taken in company law jurisprudence, whereby the lifting of corporate veil has been
lifted so that companies may not be allowed to use corporate personality to their unfair advantage.
And, with growing arbitrations in company law and contractual matters, extending this principle
to arbitrations is an absolutely necessary step, which has been lately taken by the Delhi High Court.
Relying on the same, it is being held that this tribunal has the power to lift the corporate veil of
companies.
b. Can the corporate veil be pierced in this case?
The next question of importance before this tribunal is whether given the power to lift the corporate
veil, this arbitral tribunal, in the given circumstance can be allowed to pierce the corporate veil to
disclose the corporate personality of the respondents 4, 5 and 6. As contended by the claimants,
the purpose of this lifting of corporate veil is to do justice to all the parties involved, so that no
party is harmed by another hiding behind a corporate personality. At the same time,
The claimants have heavily relied on the rule of economic interconnectedness to justify the
addition of the third parties. But with respect to the principle of economic control, it has already
been decisively held that mere economic control is not sufficient to ask a court of law to lift the
veil. Even the apex court has gone to the extent of saying that “directors of subsidiaries have
separate responsibility to the subsidiary and hence, common directorship ought not to be
considered as a criterion to lift the corporate veil.”40 Though common directorship has been linked
40
Vodafone International Holdings B.V. v. UOI, (2012) 6 SCC 613.
26 | P a g e
to management control, but the existence of these controls, without the existence of the
aforementioned criteria will not be a conclusive prove to lift the veil.
 The evasion principle refers to instances where a transaction in a matter of law of contracts
is shown to be fraudulent, sham, circuitous or a device designed t defeat the interests of the
shareholders, investors, parties, etc.41 In such case, the court can allow the lifting of the
veil, so as to find the fraudulent practice.
 The second principle has been enumerated in the case of LIC v. Escorts Ltd., where it has
been emphasised that the corporate veil should be lifted where the associated companies
are inextricably connected as to be, in reality, part of one concern. This is the test to find
as to who is the true beneficial owner of the network of companies or in other words, if the
subsidiaries or contentious companies are alter egos of another main company who has the
beneficial ownership over the network of companies.42
 The third limb of the test deals with the factor as to whether the respondent is using the
group of companies and using the camouflage of the network of companies to avoid any
legal liability, in which the respondent may be involved.
Therefore, all of these judicial pronouncements indicate that an abuse of rights or an unjust
enrichment is an essential element in a case to determine whether the corporate veil can be faced.
While it is true that the jurisprudence has been evolving to support the claimants in this case. But
it also has to be kept in mind by the courts of law that such a tool cannot be unnecessarily used
just to add in more parties and subsidiaries to the case so as to make the enforcement of rights
more feasible on the part of the applicant.
Further, in this case, to the dissatisfaction of this tribunal, the claimants have not been able to show
any particular ulterior motive on the part of the respondents, as the shares in the subsidiaries are
being put as collateral to the claimants. The only probable reason why they are being looped in the
proceedings is because of their common management and economic control lying in the hands of
the guarantors and that the addition of the three contentious companies are for the benefit of the
claimants to the extent that they get a surety that their collateral will not be lost, which till now has
not been granted by the respondents as according to the loan agreement.
41
Id. at 277.
42
Id. at 74.
27 | P a g e
Even for the test of group of companies’ doctrine, the Claimants have failed to show that how all
the respondents are essentially interlinked from the point of view of the agreement and hence are
a singular party by lifting the corporate veil, and therefore bound by the loan agreement and the
arbitration clause therein, they have now contended that these parties be added under the group of
companies doctrine. The Claimants have also relied on the Chloro Controls Case, to show how
interconnectedness can be established as a ground for invoking the doctrine, whereby they have
tried to interconnect the loan agreement and the share pledge agreement.
But since, in our case there is not a multiplicity of agreements or a composite transaction but rather
a simple contract of guarantee, and it is that simple contract which is in light of contention.
Therefore, one would have to look into the question as to (i) whether the shareholders and directors
can be equated with the companies to be held as a single group of companies and (ii) whether in
the given circumstances it was the mutual intention of the parties to even non-signatories?
However, the Claimants have failed to show that how non-signatory parties can be added under
the group of companies doctrine, if the corporate veil cannot be pierced. While it has been observed
that the group of companies is an alternative argument to justify the piercing of the veil 43. Hence,
for the sake for argumentation, this tribunal would further look into the group of companies
doctrine as well. However, as a precaution it has to be specified that it is rarely done that companies
are added by virtue of shareholders and directors being the parties in lieu of the group of companies
doctrine relying on the intention of the parties, it is based rather on legal relationship of agent-
principal relations, apparent authority, piercing of the veil, etc.44
The group of companies’ doctrine, which evolved from the landmark English case of Dow
Chemical v. Isover-Saint-Gobain45 has indeed travelled a long way from only the intention of the
parties and as held by the Apex Court of India in the cases of Chloro Controls Case, Cheren
Properties case, MTNL v. Canara Bank Ltd. and in Reckitt Benckiser v. Ryenders Label Printing
Ltd., the conclusive test is three prong in nature:
1. A direct relationship between the party which is a signatory to the arbitration agreement;
2. Direct commonality of the subject matter; and
43
Cheren Properties Ltd. v. Kasturi and Sons Ltd, (2018) 16 SCC 413 ¶ 21.
44
Id.
45
Dow Chemical v. Isover-Saint-Gobain, 1984 Rev Arb 137.
28 | P a g e
3. The composite nature of the transaction between the parties.

Here, as pointed out by the Respondents, there is no direct commonality of the subject matter
which is existing in this case, as the contentious respondents are least concerned with the loan
agreement, or the arrangement of the loan, as they are separate entities from R1, 2, and 3 and
therefore any liability on the shareholders is not a liability on the companies, therefore the absence
of any common subject matter.
Therefore, good faith principle is an essential element in such a scenario, which is essentially
absent in this case. While, it is undeniably true that the respondents 1, 2 and 3 have violated the
loan agreement but that does not give the right to the claimant to loop in the other respondents too,
just to guarantee their own surety. There can reverse impacts in terms of arbitration costs on the
contentious respondents, who are totally oblivious to this loan agreement, and common
directorship cannot be the sole argument against it to lift the veil.46
Hence, this tribunal is not satisfied as to why the contentious respondents should be made a party
to this arbitration.
Decision:Therefore, this tribunal concludes that the claimants cannot add the contentious
respondents on the sole ground of shareholding or common directorship, as that would require
piercing their corporate veil, which cannot be done as already discussed. Additionally, in an
arbitration setting, the weight of various national authorities suggests that the veil should be
pierced seldom. Moreover, an arbitration is created by contract, unlike a court proceeding. It might,
therefore, be argued that arbitrators should be especially hesitant to pierce the veil. That is to say,
since the doctrine is rarely applied by even the higher national courts which possess inherent
jurisdiction, arguably arbitrators should be even more reluctant to pierce the veil.
III. Even if the corporate veil is lifted, can the tribunal add these third parties to the arbitration?
This Tribunal have already decided that the contentious respondents cannot be added by lifting
their corporate veil and linking them with the rest of respondents and making them necessary
parties to this arbitration. However, the tribunal would also like to go into the fact as to in case the
veil could have been pierced, can it have added the parties in such a case!
46
Vodafone International Holdings B.V. v. UOI, (2012) 6 SCC 613.
29 | P a g e
It is undoubtedly true that a simple perusal to s. 45 of the act, especially the non-obstante clause,
which showcases that notwithstanding anything contained in part I, s. 45 of the act will be
applicable to it. Further, it has been clearly held that the section is applicable for all international
commercial arbitrations taking place in India.47
We see a clear strife between an international principle and a national law, but then the question
of lex specialis arises, whereby the applicable law is to be granted an upper hand over the general
international principle. This also signifies that the consent of the parties to act according to a given
applicable law has to be respected by the tribunal.
Decision: While, a tribunal is allowed to read into a contract as has been discussed above, but the
same is not allowed in cases of a clear contradiction, and though there is a need for change in the
nature of s. 45 of the act, but that being beyond the scope of this tribunal, this tribunal holds that
under the given circumstances, it does not have the power to add third parties to the arbitration.
IV. Whether there has been breach of the contract of loan agreement?
The Claimants have proved the point that there has been indeed breach of the contract, which has
also been undeniably accepted by the applicants. However, with respect to anticipatory breach, the
contention raised by the claimant has not been rebutted by the Respondent. The Claimant have
rightly pointed out that in case there has already been a breach of a contract and there is a possibility
of further breach in the future. There is indeed a possibility in the given circumstances as the
respondents have not paid the interest since November 2019, and with the financial crisis lingering
above their heads, there can been a further possibility of breach, because of which the claimant for
their own interest should be allowed to repudiate the contract in advance.
Decision:In tune with this principal only, the claimant have asked for the payment of the entire
loan amount as well as the interest of the period from March to November including the 2% default
interest. In light of the accepted breach of the contract, this tribunal is inclined to adjudicate in
favour of the claimant to protect its rights, and accordingly order for the payment of the loan
amount and all the due interest along with the default interest to the Claimant.
Arbitration Costs
47
Sasan Power Ltd. v. North American Coal Corp. Ltd., (2016) 10 SCC 813.
30 | P a g e
Lastly, having ruled in the favour of the Respondents 4, 5 and 6 with respect to jurisdiction and in
favour of the Claimants in the matter of breach of the loan agreement, the tribunal would decide
the costs accordingly. Additionally it should be brought to the notice that the rules in the act of
1996 for the distribution of arbitration costs does not apply to an ICA as per s. 11(14) of the act of
1996. But this benefit is granted only when the parties have agreed for determination of fees as per
the rules ofan arbitral institution, which has clearly not been done in this case. Therefore, according
to section 11(14) of the act of 1996, the rules in the fourth schedule would determine the arbitration
costs.
Clearly, since the amount of dispute is above Rs. 20,00,00,000/, the model law of Rs. 19,87,500/-
plus 0.5 percentof the claim amount over andabove Rs. 20,00,00,000/-with a ceiling of Rs.
30,00,000/-.
In the given case, the amount of dispute is around 65,40,90,000 inclusive of the loan amount due,
the interest due for 12 months and the default interest of 2% for 2 months. Therefore, accordingly,
the arbitration cost entails to be Rs. 19,87,500 and an additional of Rs. 32,70,450 but since the
additional limit is sealed to Rs. 30,00,000, the total arbitration cost is Rs. 49,87,500. This is added
upon by the fact that it is an arbitration with a sole arbitrator, and therefore an additional 25% is
payable, which raises the arbitration cost to Rs. 62,34,375.
This arbitration cost in accordance with s. 31A(2) of the act of 1996, be payable by the
Respondents 1, 2 and 3. But since a frivolous claim has been brought against the Respondents 4,
5 and 6 by the Claimants, their part of the arbitration cost shall be payable by the Claimant. The
arbitration cost is first divided into 3 parts being Rs. 20,78,125 each.
Therefore, the Claimant has to pay an amount of Rs. 20,78,125 by cheque and the Respondents 1,
2 and 3 will collectively pay Rs. 41,56,250 to the Claimants by cheque as expeditiously as possible.
Hence, accordingly, the arbitration is disposed with the costs accounted for.
31 | P a g e

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T-16

INTERNATIONAL ARBITRAL AWARD WRITING

CALLBURRY PRIVATE FINANCIAL SERVICES LTD. ……………………..CLAIMANT

NESTELL PRIVATE LIMITED AND OTHERS ……………………………RESPONDENT

NON SIGNATORIES TO THE ARBITRATION AGREEMENT

MarsKing Limited is a company engaged in the provision of information technology, consulting

RELEVANT DATES TO THE DISPUTE

1. What is the applicable law of the present arbitration?

ARGUMENTS FROM THE CLAIMANT AND THE RESPONDENT

I. What is the applicable law of the present arbitration?

into consideration for the purpose of construction of a contract. Interpretation of a contract is a

a. Can an arbitral tribunal lift the corporate veil of companies?

b. Can the corporate veil be lifted in the present case?

The discussions presented before the tribunal are presented as follows:

a. Can an arbitral tribunal lift the corporate veil of companies?

b. Can the corporate veil be lifted in this case?

(ii) the totality of circumstances constituted an abuse of rights.

c. Corporate Veil can be pierced only if there is some impropriety;

AWARD AND DECISION

Appointment of the sole arbitrator

In other words, even in an international commercial arbitration, if there is an agreement between

I. What is the applicable law of the present arbitration?

i. Power to lift the corporate veil

b. Can the corporate veil be pierced in this case?

3. The composite nature of the transaction between the parties.

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