Author: Sahaj Mathur*
Practice and Procedure
The case of Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. & Ors. (“Amazon-Future case”) has been the subject of immense controversy in recent months. The magnitude of the case derives not only from the enormity of the monetary implications of its outcome, but also from the significant impact the case would have on India’s retail sector. Within the realm of legal practice and scholarship, the Amazon-Future case is most widely known for the Supreme Court’s decision in August 2021, wherein it affirmed the validity of emergency arbitration in India.
The Supreme Court’s decision to recognise Emergency Arbitration in India has been the subject of an extensive body of literature. However, it is important to note that a significant issue in the dispute concerns the applicability of the “Group of Companies” doctrine. According to the Group of Companies doctrine, a non-signatory to an arbitration agreement can be subjected to arbitration without its prior consent if all the parties to such arbitration had mutually intended to bind the non-signatory to the arbitration agreement, if such non-signatory is part of the same group of companies as one of the signatories. Thus, when the circumstances under which the parties have entered into the transaction reflect an intention to bind both the non-signatory entity and the signatory entity from the same group of companies, such non-signatory entity can be subjected to arbitration. The applicability of the Group of Companies doctrine in the context of the Amazon-Future case merits discussion as it underpins the central question of whether Future Retail can be bound by an arbitration agreement between Amazon and Future Coupons, as will be explained below.
The applicability of the Group of Companies doctrine to the Amazon-Future case has received minimal academic scrutiny. The piece attempts to fill this void. Given the magnitude of the case, this discussion is particularly important in assessing when the Group of Companies doctrine can be invoked, particularly in International Commercial Arbitrations seated in India. To do so, the piece first provides a broad overview of the Amazon-Future case and the relevant legal proceedings. Subsequently, the paper surveys the group of companies doctrine and its application, followed by a critical analysis. The piece ends with concluding remarks. Given the piece’s focus on the invocation of the ‘Group of Companies’ by Indian Courts, the piece does not engage with the SIAC orders — the arbitral institution responsible for the arbitration referred to in the Amazon-Future case — which are, in any case, not publicly available at the date of the paper’s authorship.
II. INDIA AND THE GROUP OF COMPANIES DOCTRINE
Before addressing the applicability of the Group of Companies doctrine to the Amazon-Future case, it is important to understand the analytical framework of how the doctrine operates in India. The Group of Companies doctrine was introduced into India’s arbitral jurisprudence in Chloro Controls India Private Limited v. Severn Trent Water Purification (“Chloro Controls”), in which a three-judge bench of the Supreme Court held that a non-signatory to an arbitration agreement can be subjected to arbitration without their prior consent, but only in exceptional cases.
In assessing when this exception can be invoked to bind a non-signatory, the Supreme Court propounded a four-factor assessment. The four factors include the common intention of parties to arbitrate, the composite nature of the transaction, the direct commonality of the subject matter and agreement between the parties, and common legal and negotiating teams. However, the judgement in Chloro Controls fails to provide any indicative guidance as to how these factors must be assessed, particularly given the complex nature of commercial transactions wherein multiple factors may weight against each other.
Owing to the absence of any guidance in the use of the factors outlined in Chloro Controls, the Group of Companies Doctrine has often been misapplied by courts in India. For instance, in both Ameet Lalchand Shah v. Rishabh Enterprises and RV Solutions v. Ajay Kumar Dixit, wherein the Group of Companies doctrine was invoked to bind third parties to arbitration, where such third parties were not even members of the same group of companies as the signatories. In the two cases, the parties were subjected to arbitration solely because they were involved in a composite interlinked transaction, which is only one of the factors in the Chloro Controls Test.
The widespread misapplication of the Group of Companies doctrine presents a concerning trend. It is important to understand that the doctrine fundamentally conflicts with the principle of party consent, which is the cornerstone of international arbitration. It is unsurprising, therefore, that most common law countries do not recognise the doctrine. Within this analytical framework, the next section assesses the applicability of the doctrine to the factual matrix of the Amazon-Future case.
III. THE AMAZON V. FUTURE RETAIL CASE AND THE GROUP OF COMPANIES DOCTRINE: A CRITICAL ASSESSMENT
The question of whether Future Retail could be bound by the arbitration agreement between Amazon and Future Coupons poses a controversial issue in the dispute. At the core of the Amazon-Future case lies Amazon’s investment into Future Coupons. As per the Shareholder’s Agreement between Amazon and Future Coupons, Amazon was granted certain “special, material and protective” rights available to Future Coupons in Future Retail. Based on these material protective rights, the retail assets of Future Retail could not be alienated prior to the written consent of Amazon, and could not be alienated to a restricted person. Thus, despite Amazon and Future Retail not having a Shareholders Agreement, The Shareholder’s Agreement between Future Coupons and Amazon transferred of these “special, material and protective” rights, previously held by Future Coupons, to Amazon.The dispute arose when Future Retail approved a transfer of its retail assets to Reliance Group.
Amazon alleged that the transfer was void as per the Shareholder’s Agreement, and sought emergency interim relief based on the arbitration clause in the Shareholders Agreement with Future Coupons to restrain Future Retail from pursuing the transaction. The decisions of the Division Bench of the Delhi High Court, the Single Judge of the Delhi High Court, as well as the Supreme Court all had different approaches to the applicability of the ‘Group of Companies’ doctrine.
In its order, the Division Bench concluded that because Future Retail was not a party to the agreement between Future Coupons and Amazon, the Group of Companies doctrine could not be invoked. However, the order is a misapplication of the doctrine itself, and is circular in its reasoning. It must be noted that the very purpose of the doctrine is to bind such non-signatories to the arbitration agreement. Thus, the Division Bench is incorrect in holding that the mere existence of different agreements between the parties precludes the applicability of the doctrine.
On the other hand, the Single Judge upheld the emergency arbitrator’s approach in applying the doctrine based on the test laid down by the Supreme Court in Chloro Controls. The Single Judge noted the presence of factors such as Future Coupons and Future Retail’s common legal and negotiating teams, Future Coupons financial support of Future Retail, the intrinsically intermingled nature of the agreements and similar dispute resolution clauses in the different agreements to conclude that the doctrine can be invoked in the case, and upheld the emergency arbitrator’s award to stay the transaction between Reliance and Future Retail.
From a theoretical perspective, the Group of Companies doctrine’s encroachment on the principle of party autonomy is justified by the application of the doctrine only where there exists a clear intention of the parties to bind the non-signatory to the agreement. When viewing the case from this perspective, it is clear that the Single Judge fails to provide cogent reasons to determine the intention of the parties. Instead, the Single Judge merely emphasises the fulfilment of the indicative test laid down in Chloro Controls to justify the applicability of the doctrine. As shown above, the Court relies on connections such as Future Coupons’ financial support, and the use of the same legal representatives by Future Coupons and Future Retail, to support its invocation of the doctrine. However, the Single Judge’s exclusive reliance on these connections would undermine the commercial realities of business transactions if applied elsewhere, particularly those involving the same group of companies, wherein such connections can be easily found.
While the factors in Chloro Controls are indicative, they cannot be conclusive. Thus, courts must attempt to unravel the true essence of a business arrangement to ascertain the intention of the parties. The Single Judge failed to do so. Further, in a determination of intent, two facts assume importance. Clause No.15.17 of the Shareholder’s Agreement entered into Amazon and Future Coupons provides:
“ For the avoidance of doubt, Parties hereby expressly record their understanding that the Promoters and the Investor have no agreement or understanding whatsoever in relation to the acquisition of shares or voting rights in, or exercising control over, Future Retail and that the Company, the Promoters and the Investor otherwise do not intend to act in concert with each other in any way whatsoever.”
Further, there exists an absence of any amendment to Future Retail’s Articles of Association to reflect the restrictions of the Shareholder’s Agreement entered into Amazon and Future Coupons. These two factors point towards the common intention of the parties not to bind Future Retail to the agreement between Amazon and Future Coupons. More importantly, the Single Judge fails to consider that complex transactions, such as the one in question, are often deliberately structured in this manner in order to limit risk and liability to a specific entity through the principle of separate legal personality. The Single Judge fails to adequately assess these factors and their implications on the applicability of the doctrine. When an invocation of the doctrine is insufficiently reasoned in this manner, it can become a means to bypass and defeat established principles of party consent and separate legal personality.
The Supreme Court did not extensively discuss on the Group of Companies issue. Instead, the Supreme Court held that the emergency arbitrator’s award restraining the transaction was entirely valid and enforceable under Section 17 of the Arbitration and Conciliation Act, 1996. Thus, it deferred to the judgement of the emergency arbitrator, which eliminated the need to consider whether the Group of Companies doctrine could be invoked. The Supreme Court’s lack of engagement, could in significant ways, be perceived as a missed opportunity to clarify India’s tryst with the Group of Companies doctrine.
When considering the totality of the facts and circumstances of the dispute, the emergency arbitrator, Single Judge and the Supreme Court were correct to enjoining Future Retail from pursuing the disputed transaction. However, doing so by applying the doctrine without adequate caution may present a dilution of the doctrine in the Indian context. While the Amazon-Future case propels India’s status as a pro-arbitration jurisdiction by recognising emergency arbitration, its overexpansion of the doctrine may yet hold it back.
* Sahaj Mathur is a Third Year Bachelors of Law Student at the National University of Juridical Sciences, Kolkata. His interests lie in International Arbitration and International Investment Law.
 Swaraj Singh Dhanjal, Amazon, Future Group deal to intensify competition in India’s retail Industry, Mint, (Aug. 23, 2019) https://www.livemint.com/companies/news/amazon-future-group-deal-to-intensify-competition-in-india-s-retail-industry-1566536017989.html.
 Amazon.com NV Investment Holdings LLC v. Future Retail Limited & Ors, (2021) SCC Civil Appeal Nos. 4492-4493 (India).
 Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. (2013) 1 SCC 641 (India); Cheran Props. Ltd. v. Kasturi & Sons Ltd. & Ors. (2018) 16 SCC 413 (India), ¶ 23.
 Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. (2013) 1 SCC 641 (India), ¶ 68.
 Ameet Lalchand Shah and Ors. v. Rishabh Enterprises and Ors., (2018) 15 SCC 678 (India); R.V. Solutions Pvt Ltd. v. Ajay Kumar Dixit & Ors. 2019 SCC Online Del 6531 CS Comm 745/2017 (India).
 E. Gaillard & J. Savage, International Commercial Arbitration 498 (1st ed., 1999); G. Born, International Commercial Arbitration 2432 (2nd ed., 2014); C. Partasides & N. Blackaby, Redfern & Hunter On International Arbitration 71 (6th ed., 2015).
 B. Hanotiau, Complex Arbitrations: Multi-Party, Multi-Contract, Multi-Issue – A Comparative Study 266 (2nd ed., 2020).
 Amazon.com NV, 280 DLT 618 ¶ 8.
 Id. ¶ 9.
 Future Retail Ltd. v. Amazon.com NV Investment Holdings LLC & Ors. (2021) FAO(OS) (COMM) 21/2021(Division Bench of the Delhi High Court), ¶11.
 Chloro Controls, 1 SCC 641 ¶ 68.
 Amazon.com NV, 280 DLT ¶¶ 118, 168.
 Mahanagar Telephone Nigam Ltd. v. Canara Bank & Ors, (2019) Civil Appeal Nos. 6202-6205, ¶ 42.
 Future Retail Ltd., FAO(OS) (COMM) 21/2021 ¶ 11.