Non-signatory company arbitration clauses bind only through written agreement, not later conduct or shared corporate connections.

An arbitration agreement under section 7 of the Arbitration and Conciliation Act, 1996 must be a written agreement falling within the recognised statutory modes, and a non-signatory company cannot be treated as bound merely because it is described as a nominee or promoter, shares directors or shareholders, or later engages in related commercial transactions. Binding effect requires a written basis such as incorporation by reference, exchange of communications, or ratification or approval of the contract. A section 11 proceeding is limited to examining whether an arbitration agreement exists between the parties, and separate corporate personality cannot be ignored without such a basis.

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Issues: Whether a non-signatory company can be bound by an arbitration clause in an agreement executed only by other parties, and whether subsequent conduct can make it a party to the arbitration agreement.

Analysis: An arbitration agreement under section 7 of the Arbitration and Conciliation Act, 1996 must be a written agreement between the parties, falling within the modes specified in section 7(4) or section 7(5). A person who is not a signatory cannot be treated as a party merely because it is described as a nominee or promoter, or because it later entered into related commercial transactions, unless there is a written basis showing agreement, incorporation by reference, exchange of communications, or ratification/approval of the contract. The separate corporate identity of companies cannot be ignored merely because they share directors or shareholders, and the scope of a section 11 proceeding is limited to deciding whether an arbitration agreement exists between the parties.

Conclusion: A non-signatory company was not bound by the arbitration clause, and the section 11 appointment of arbitrator against it was unsustainable.

Ratio Decidendi: An arbitration agreement binds only those who are parties to a written arbitration agreement, or who are brought within section 7 through incorporation by reference, exchange of written communications, or equivalent statutory modes; subsequent conduct alone does not create such an agreement for a non-signatory.

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