India:
Delhi High Court: Directors Cannot Be Made Parties To The Arbitration Proceedings Against The Company Through The Group Of Companies Doctrine
20 February 2024
Acuity Law
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The Delhi High Court in its recent decision of Vingro
Developers Pvt. Ltd. v. Nitya Shree Developers Pvt. Ltd. held
that the directors of a company cannot be made parties to the
arbitration proceedings against the company under the group of
companies doctrine.
While distinguishing the facts of the matter from the recent
Supreme Court ruling of Cox & Kings v. SAP India, the
Ld. Single Judge held that merely because a director signs a
contract on behalf of the company, it does not confer ‘common
intention' to bind the said director as a signatory. The Ld.
Single judge referred to the provisions of agency under the Indian
Contract Act which specifically denote that an agent of a disclosed
principal cannot be made liable for the acts of its principal to
hold that the group of companies doctrine cannot be applied in the
sad situation.
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