ADITYA BIRLA FINANCE LTD v SITI NETWORKS LTD[1]
The Delhi High Court has recently invoked the “group of companies” doctrine and referred the disputes between a lender and borrower (as well as the borrower’ssister concerns) to arbitration.
Facts
Aditya Birla had extended a term loan of ₹150 crores to Siti Networks under a Credit Arrangement Letter and a Facility Agreement (Agreements). During the subsistence of the Agreements,
correspondence was exchanged between the parties regarding an increase in the interest rate of the loan, and representatives of Zee Entertainment Enterprises Ltd and Essel Corporate LLP were
also involved in these negotiations. Thereafter, Zee and Essel issued 2 letters to Aditya Birla on 26 June 2018 assuring it that Siti would repay the amounts due under the Agreements. Following Siti’s failure to repay, Aditya Birla invoked arbitration under the Agreements against Siti, Zee and Essel and subsequently filed an application under §11 of the Arbitration Act for the appointment of an arbitrator. Aditya Birla’s case was that Siti, Zee and Essel were all part of the Essel Group of Companies and therefore they all ought to be referred to arbitration on the basis the “group of companies” doctrine. Zee and Essel resisted the reference primarily on the basis that the correctness of the “group of companies” doctrine was being considered by a larger Bench of the Supreme Court in Cox & Kings Ltd v SAP India Pvt Ltd[2] . They thus argued that the doctrine has been doubted and may not be good law.
