The claimant entered into a supply agreement with the first of the three respondents. The agreement was governed by the laws of India. The claimant initiated arbitration proceedings in which it sought damages for wrongful termination of the agreement. In their answer to the arbitration request, the respondents contended that the first respondent had been acquired by the X group and changed its name to that of the second respondent, which was thus the proper respondent. The third respondent argued that it bore no liability as the holding company of the second respondent. In his award, the sole arbitrator began by dealing with the jurisdictional issues thus raised.

'Issue 1: Is . . . (the 1st Respondent) a proper party to the Arbitration in view of the fact that in 1998, [X] Group acquired [First Respondent] (and associated businesses) from [Y] and changed its name to . . . (the 2nd Respondent)?

The undisputed facts pertaining to the first issue are that on . . . 1998, the name of the 1st Respondent was changed by Special Resolution to . . . (the 2nd Respondent). . . . The 1st Respondent therefore contended that there is no entity existing under the name of the 1st Respondent . . . and therefore no claim can be made against the 1st Respondent and that the correct Respondent is in fact the 2nd Respondent.

The Claimants did not seriously dispute this contention. . . .

I therefore rule that the [X] Group, having acquired [First Respondent] (and associated business) from [Y] and having changed its name to . . ., the 2nd Respondent and not the 1st Respondent, is a proper party to this arbitration.

I will now address the 2nd and 3rd issues jointly, as they are interrelated. Issues 2 and 3 read as follows:

(ii) The Respondents in paragraph 7 of the Response has [sic] raised the jurisdictional issue namely as to whether . . . (the 3rd Respondent) is a proper party to the Arbitration and come within the purview of the Arbitration Clause.

(iii) Assuming that [Third Respondent] is a proper party to the Arbitration, does the principle and concept of lifting the corporate veil apply in view of the fact that [Second Respondent] is a wholly-owned subsidiary of [Third Respondent], which is a wholly-owned subsidiary of [Z], whether that is a basis for establishing liability, if any, in respect of [Third Respondent]?

The issue that has to be decided is whether one could pierce the corporate veil and hold the 3rd Respondent to be a proper party to the arbitration on the ground that the 2nd Respondent is a wholly-owned subsidiary of the 3rd Respondent. The Claimants in their submissions and in their answers to the questions put to their Counsel by me, had stated clearly that they wished the corporate veil to be pierced purely on the grounds that the 2nd Respondent is a wholly-owned subsidiary of the 3rd Respondent. . . .

The Claimants had, in their submissions, relied on, inter alia, the following cases of DHN Food Distributors Ltd and others vs London Burrow of Towers [sic] (1976) 3 All ER 462; W T Ramsay Ltd. vs England Revenue Commissioner (1981) 1 All ER 865; Furniss vs Dawson (1984) 1 All ER 530 and Subhra Mukherjee and anor vs Bharat Coking Coal Ltd and anor (2000) 3 SCC 312 in support of their contentions.

The Respondents in opposing the Claimants' submissions on the other hand, had cited various authorities, in particular, the decision of the Madras High Court in SAE India Ltd v EID Parry India Ltd (1998) Schi & Corporate Laws, Vol. 18, page 481. The other authorities are I.T. Commissioner Madras v Meenakshi Mills AIR (1967) SC 819 and Juggi Lal v I.T. Commissioner AIR (1969) SC 932.

The Claimants contended that by virtue of the 2nd Respondent being a wholly-owned subsidiary of the 3rd Respondent, that the corporate veil should be pierced and the 3rd Respondent be held liable and they rely on the authorities referred to earlier.

The Claimants had relied on the case of DHN Food Distributors Ltd v London Borough of Towers (1976) 3 All ER 462. I have considered that decision. I refer to the judgment of Lord Goff, where at page 468, he stated:

Secondly, on the footing that that is not in itself sufficient, still, in my judgment, this is a case in which one is entitled to look at the realities of the situation and to pierce the corporate veil. I wish to safeguard myself by saying that so far as this ground is concerned, l am relying on the facts of this particular case. I would not at this juncture accept that in every case where one has a group of companies one is entitled to pierce the veil, but in this case the two subsidiaries were both wholly owned; further, they had no separate business operations whatsoever;

The question of whether the corporate veil should be pierced depends on the facts of the relationship adduced in this Arbitration. The Claimants had led no evidence of fraud, deceit, collusion, avoidance of income tax legislation or that the underlying Agreement is a sham by the 2nd Respondent or the 3rd Respondent or that the 2nd Respondent is a 'shell' company. They merely relied on the fact that the 2nd Respondent is a wholly owned subsidiary of the 3rd Respondent. I am of the view that the Claimants have the burden of satisfying the Tribunal that there is some exceptional reason why the Tribunal should not regard each company in a group of companies as a separate legal entity, possessing separate rights and liabilities. There must be appropriate circumstances on the facts of this Arbitration, to indicate the distinction between them and treat them as one. There was no evidence led in this particular instance to indicate that distinction. I have looked at the underlying provisions of the Agreement and the transaction and all the circumstances in this case and I am satisfied that there is no reason whatsoever why the corporate veil should be pierced. There is also no evidence whatsoever before the Tribunal, for the Tribunal to take the exceptional step of disregarding the well recognised rule that companies are separate legal entities despite being in the same economic group.

I am therefore of the view that the 3rd Respondent is not a proper party to the arbitration within the meaning of the Arbitration Clause.

I am also of the view that the 3rd Respondent merely being the holding company of the 2nd Respondent does not warrant in law for the corporate veil to be lifted.

I therefore answer the 2nd and 3rd jurisdictional issues in favour of the Respondents.'