Non-signatory affiliates of foreign companies not bound by the arbitration agreement executed by the foreign company: SC  

The Supreme Court (“SC”), in the case of Reckitt Benckiser (India) Pvt. Ltd. (“Reckitt”) v. Reynders Label Printing India Pvt. Ltd. (“Reynders”) has declined to apply the ‘Group of Companies’ doctrine. SC held that Indian affiliates of a foreign company that is a non-signatory to the arbitration agreement executed by the parent foreign company will not be bound by such an arbitration agreement.

In the current case, Reckritt intended to prosecute a Belgian associate company, Reynders under the Arbitration and Conciliation Act, 1996. As per the Arbitration Agreement (“Agreement”) executed between both parties, Reckitt sought to appoint an arbitrator to settle disputes. They further claimed that the Agreement will bind Reynders group of companies and international commercial arbitration was necessary.

The principle behind the ‘group of companies’ doctrine is to bind a party that is not formally a signatory but possess an assumed obligation to be bound by the signatory’s actions.

The SC rejected the plea to involve Reynders to the proceedings on the ground that there was no clear intention to bind any other companies. This was determined on examination of correspondence between Reckitt and Reynders. The Court appointed a sole arbitrator to conduct domestic commercial arbitration to settle any disputes.

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The SC first discussed this doctrine in the case of Chloro Controls India Private Ltd. v. Severn Trent Water Purification Inc. (“Chloro Controls”) and upheld the application of the doctrine in Reckitt v. Reynders.  Through this judgement,  arbitration clauses  cannot be enforced against domestic affiliates of foreign companies (“Domestic Affiliate”) using the “Group of Companies” doctrine. Therefore, customers of Domestic Affiliates should check if their contracts with the Domestic Affiliates contain sufficient arbitration clauses. If not, it is advisable that parties amend their agreements with Domestic Affiliates at the earliest.

 

A liberal view must be taken before a case is dismissed for delay in filing revision petitions: SC

The National Consumer Disputes Redressal Commission (“NCDRC”), in the case of Hemlata Verma v. ICICI Prudential Life Insurance Co. Ltd. refused to accept a revision petition that was filed with a delay of 207 days. The NCDRC rejected the revision petition as the Petitioner had not properly explained the delay.

On appealing to the Supreme Court (“SC”), the SC held that the NCDRC should have followed previous judgements of the SC and should have used a liberal view whilst hearing the reasoning behind the delay in filing the revision petition.  The SC, therefore, using a liberal view, held that there was a reasonable explanation for the delay in filing the revisions petition thereby, over-ruling the decision of the NCDRC.

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By not defining what exactly is a liberal view, the SC has ruled that any judicial or quasi-judicial forum should ensure that cases are not dismissed due to a delay in filing petitions so long as the Petitioner can provide an explanation for the same. We believe that this may lead to additional backlogs in our judicial system.

 

No injunction can be made preventing the advertising of a generic product: Delhi HC

The Delhi High Court (“Delhi HC”), in the case of Dabur India Ltd. v. Emami Ltd. has refused to grant Dabur (manufacturer of “Chyawanprash”) an interim injunction to restrain Emami from broadcasting, publishing and printing “Zandu Chyavanprashad” advertisements in any media. The injunction application was filed on the basis of Emami’s advertisements being disparaging and injurious to the goodwill and reputation of Chyawanprash. Emami’s advertisements asserted that other Chyawanprash brands contained 50% sugar as opposed to Emami’s Chyavanprashad.

Dabur claimed that this mislead and misrepresented facts to the customers since Emami’s Chyavanprashad was intended for diabetic patients and should not be compared to the other Chyawanprash products in the market, was harmful to their reputation. Emami replied that the advertisements were intended to inform the public at large regarding the availability of sugar-free Chyavanprashad and not tarnish Dabur’s Chyawanprash.

The Delhi High Court dismissed Dabur’s plea on the ground that Dabur’s Chyawanprash specifically was not the subject matter of comparison, but Chyawanprash as a generic product.

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The advertisement was not strictly comparative since it communicated to the public that the defendant’s product is a sugar-free variant in the market. The claim that other Chyawanprash products in the market contained more than 50% sugar was factually correct. Hence, Courts should not stifle innovation and fair competition in the market from new products which are in tune with the consumer’s demands.

 

Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.