Siti Networks Vs Aditya Birla Finance: Top Court Affirms Arbitration In Loan Dispute
The top court has upheld the Delhi High Court's decision to make Zee Enterprises a party to the proceedings.
The Supreme Court on Tuesday upheld an order of the Delhi High Court that referred a dispute between Siti Networks Ltd.—an Essel Group entity—and Aditya Birla Finance Ltd. to arbitration.
The dispute pertains to a Rs 150 crore loan that was extended to Siti by Aditya Birla in 2017. Zee Entertainment Enterprises Ltd. was a guarantor for this term loan facility.
However, Siti failed to pay its dues on time, which prompted Aditya Birla to move the high court.
Zee was tagged as a party to the arbitration proceedings by the high court after Siti defaulted on its loan obligations.
It was contended before the court that since Siti and Zee were a part of a single economic entity, Zee should be made a party to the arbitration proceedings between Siti and Aditya Birla.
Zee had opposed this stance on the ground that it could not be made a party since it was not a signatory to the proceedings.
In March 2023, the high court rejected Zee’s contention and made it a party to the arbitration proceedings, citing the group of companies doctrine.
The high court had appointed L Nageswara Rao, a retired Supreme Court justice, as the sole arbitrator to rule on the matter.
Group Of Companies Doctrine
The top court’s order comes on the heels of its recent judgement in the case of Cox and Kings Ltd. vs SAP IndiaPvt.,. wherein it upheld the group of companies doctrine.
It is not necessary for a person or an entity to be a signatory to an arbitration agreement in order to be bound by it, the apex court held.
The underlying basis for the application of the group of companies' doctrine rests on maintaining the corporate separateness of the group of companies while simultaneously determining the common intention of the parties to bind the non-signatory to the arbitration agreement, as the court had observed.
