TaxTMI 
TaxTMI 
2025 (5) TMI 567
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on behalf of the Respondent No. 1 .....................12 C. ANALYSIS ......................15 i. Whether the Arbitral Tribunal has the power to Implead / Join Non- Signatories to the Arbitration Agreement? ......................15 a. Contradictory Views of different High Courts on the subject ...............16 I. Decisions holding that the Arbitral Tribunal does not have the power to Implead a non-signatory to the Arbitration Agreement ....................16 II. Decisions holding that the Arbitral Tribunal has the power to Implead a non-signatory to the Arbitration Agreement ........................41 b. Evolution of the law on referral or joinder of Non-Signatories to arbitration proceedings and the Aversion to the power of Arbitral Tribunals to implead a Non-Signatory .....................62 I. Decision of Chloro Controls and the Arbitration and Conciliation (Amendment) Act, 2015 ..............62 II. Decision of Cox and Kings (I) and the Judicial Rectification of the first misconception by Chloro Controls ..................77 III. Decision of Krish Spinning and the Judicial Rectification of the second misconception emanating from SBP & Co ................
X X X X Extracts X X X X
X X X X Extracts X X X X
....24.07.2020. 5. SPCPL filed its Counter-Claim against BCSPL as well as the appellant herein (ASF Buildtech Pvt. Ltd or "ABPL") and Respondent No.2 (ASF Insignia SEZ Pvt. Ltd or "AISPL"), which constituted and formed part of the 'ASF Group'. SPCPL has pleaded before the Arbitrator that BCSPL, ASIPL and ABPL being a part of the ASF Group are bound by the Arbitration Agreement contained in the Works Contract dated 21.11.2016 on the basis of the Group of Companies Doctrine. 6. BCSPL, ABPL, and AISPL respectively filed separate Section 16 Applications before the Arbitrator seeking rejection of SPCPL's counter claim to the extent it is against AISPL and ABPL. By the Arbitrator's Orders dated 23.05.2023 and 17.10.2023 respectively ("Tribunal's First Order"and 'Tribunal's Second Order' respectively), the Arbitrator dismissed the said Applications, inter alia holding that, in order to decide whether or not the inclusion of AISPL and ABPL amongst the party-Respondents on basis of such doctrine is correct on basis of facts narrated by SPCPL, some crucial aspects as regards the role and conduct of AISPL and ABPL, would need adjudication as questions mixed of facts and law, which cannot be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arbitral proceedings. ii) The SoC filed by SPCL is treated as counterclaim against BCSPL, AISPL and ABPL. iii) The delineation of Case No. 1 and Case No.2 was wholly unnecessary and is set aside. iv) For all practical purposes, the case pending before the Ld. Sole Arbitrator shall be treated as one case arising out of reference order dated 22nd July, 2022. v) There is no legal incapacity in the Ld. Sole Arbitrator to deal with the claims and counterclaims and the mandate of the Ld. Arbitrator does not deserves to be terminated. vi) The Ld. Sole Arbitrator was correct in his observation that, for reasons of financial and strategic convenience, BCSPL's attempt was to restrict the counterclaim only to BCSPL and not to AISPL & ABPL. Considering that AISPL and the ASF Group had assumed responsibility for payments to be made to SPCPL and for the implementation of the project, as evidenced by the Comfort Letter and various emails exchanged, their impleadment was necessary for a comprehensive adjudication of the matter. vii) In view of the fact that SPCPL has no objection to its claim petition being treated as a counterclaim to the BCSP....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ration Ltd v. Discovery Enterprises Pvt. Ltd., (2022) 8 SCC 42; Cox and Kings Ltd. v. SAP India Pvt. Ltd. & Anr., 2023 SCC Online SC 1634 and Ajay Madhusudan Patel (supra). B. Essential Questions of Law 4. The important questions of law falling for kind consideration of this Hon'ble Court in the present Special Leave Petition are: a. Whether the Petitioner, who is not a signatory to the arbitration agreement, could be joined as a party Respondent by the Counter Claimant ("SPCPL"/ "Respondent No. 1") in its 'Separate Statement of Claim', without the referral court under section 11 of the Arbitration and Conciliation Act, 1996 ("Act") directing as such, and without any leave of the Ld. Arbitral Tribunal being sought in this regard? b. If so, could the same be done by directly issuing notice for filing of statement of defense to the Counter Claim (wrongly styled as 'Separate Statement of Claim') without a prior opportunity being granted to the Petitioner to contest such joinder as a party Respondent? c. Whether such joinder as a party Respondent could be carried out in contravention of the principles laid down in Oil and Natural Gas Corpora....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not to ABPL. 9. Further, even the order of the High Court of Delhi in the Section 11 Application under the Act records that SPCPL had only insisted on making AISPL as a party and there is not even a whisper about ABPL. Further, the reference to ASF in the said order is clearly a reference to AISPL who was the original contracting party and not to ASG Group. 10. As per the law laid down by this Hon'ble Court in Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors., 2024 SCC OnLine SC 2597 (Para 71), this Hon'ble Court has held that: "71. It is evident that the intention of the parties to be bound by an arbitration agreement can be gauged from the circumstances that surround the participation of the non-signatory party in the negotiation, performance, and termination of the underlying contract containing such an agreement. Further, when the conduct of the non-signatory is in harmony with the conduct of the others, it might lead the other party or parties to legitimately believe that the non-signatory was a veritable party to the contract containing the arbitration agreement. However, in order to infer consent of the non-signatory party, their involvement in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orporation (supra), are thereafter discussed in Para 91-94. It is relevant to note that none of the said paragraphs show any direct involvement of ABPL, in so far as the transaction in question is concerned. 16. The only reason due to which ABPL has been allowed to be continued as a party to the arbitration proceedings is because ABPL is a holding company of BCSPL, which is completely contrary to the law laid down by this Hon'ble Court in Cox and Kings (supra) and Oil and Natural Gas Corporation (supra). 17. Merely because a company is a holding company, it cannot, by itself, be a ground to implead the holding company in an arbitration proceeding. To do so would result in disastrous consequences, where the mere factum of the company being a holding company would expose the holding company to litigations initiated against its subsidiary. This would completely militate against and obliterate the fundamental principle of separate corporate personality. 18. It is submitted that none of the five ingredients laid down by this Hon'ble Court in Oil and Natural Gas Corporation (supra) and affirmed, in Cox and Kings (supra) (Para 170) are prima facie satisfied, in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted 23.05.2023 with detailed reasoning. b) Second, in AISPL and ABPL's Section 16 Applications dated 03.07.2023 seeking their own removal from the array of parties, which was rejected by the Tribunal's Second Order dated 17.10.2023 with detailed reasoning; c) Third, before the High Court, where BCSPL filed a Petition u/s 14 seeking removal of the Arbitrator, while ABPL and AISPL preferred Appeals u/s 37, culminating in the common Impugned Judgement dated 04.07.2024 ('Impugned Judgement') rejecting the said challenge with detailed reasoning. Only ABPL remains aggrieved and has sought to challenge the Impugned Judgement by way of the present SLP. 13. ABPL has sought to mis-categorize SPCPL's case against ABPL as merely being against the holding company of AISPL and BCSPL. However, this is ex-facie misconceived and contrary to the record, inasmuch as SPCPL has specifically pleaded that the entire negotiation, performance and termination of the Works Contract dated 21.11.2024 was with the ASF Group, though in the name of its SPV, AISPL to develop the SEZ. It was represented and assured to SPCPL throughout that AISPL had the entire support, backing an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Group'. Agenda items 1 & 2 of the aforementioned Minutes of Meeting also show 'ASF' as having agreed to the change requested by SPCPL. 18. The Comfort Letter issued to SPCPL dated 17.04.2018 (on the same day as the Novation Agreement) acknowledges that 'AISPL and BCSPL are the group companies of ASF group and both companies are under the management & control of the same set of management/owners.' and that AISPL had 'nominated/appointed its associate company Black Canyon SEZ Pvt. Ltd. ("BCSPL") as a Co-Developer with regard to Black Canyon Private Campus Land, Black Canyon Building and its allied structure...". Subsequently, in a clear admission of all liabilities being jointly and severally shared between BCSPL, AISPL and ABPL, Sh. Anil Sharma, Vice President (Projects), ASF Group vide his email dated 02.06.2021 conveyed the commitment of 'ASF management' to release outstanding dues to SPCPL. 19. Even Clause 5 of the Settlement Agreement dated 24.07.2020 ('the Settlement Agreement') expressly records that the cost of materials 'taken over by ASF' from SPCPL, as mutually determined, would form part of the outstanding dues of SPCPL. Even the Statement of Accounts an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat have been expressed as regards the scope and power of an arbitral tribunal to implead or join a non-signatory to an arbitration agreement. I. Decisions holding that the Arbitral Tribunal does not have the power to Implead a non-signatory to the Arbitration Agreement. 16. The question whether an arbitral tribunal can implead a non-signatory to an arbitration agreement or not came to be examined for the first time by the Bombay High Court in Oil and Natural Gas Corporation Ltd. v. Jindal Drilling and Industries Ltd. reported in (2015) SCC OnLine Bom 1707, wherein the petitioners therein had entered into separate and independent contracts with the respondents therein as-well as one 'DEPL'; an off-shoot company of the respondents therein. When the respondents therein demanded payment of its dues under its own contract, the petitioners refused payment on the ground that DEPL previously owed them a certain sum of money, and since it was an off-shoot of the respondents, the amount owed to the respondents had been adjusted against DEPL's liability. The dispute came to be referred to arbitration and award was passed against the petitioners directing them to repay the outstanding d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Delhi High Court observed that an arbitral award cannot be enforced against non-parties to the arbitration. This in its opinion was because, an arbitral tribunal draws its jurisdiction only from the arbitration agreement, and an arbitral tribunal cannot proceed against persons who are not a party to such agreement, and as such any award rendered by it would not be binding upon non-parties to the arbitration agreement. It further observed that although in exceptional circumstances, non-signatories who are otherwise bound by the arbitration agreement may be compelled to arbitrate and thereby be liable for any award passed therein, yet such a course can only be adopted by the courts and an arbitral tribunal cannot lift the corporate veil and proceed against non-parties, as arbitration is always consensual and confined to the arbitration agreement and as such an arbitral tribunal cannot enlarger its jurisdiction to non-parties. The relevant observations read as under: - "13. In the first instance, it is doubtful whether this Court could enforce the arbitral award against non parties to the arbitration agreement. It is trite law that an arbitral tribunal draws its jurisdicti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the jurisdiction to lift the corporate veil and pass an award against non-signatories to an arbitration agreement. It observed that consent of parties is the cornerstone of arbitration and it is from such arbitration agreement that the arbitral tribunal derives its jurisdiction to render an award. It further held that in exceptional cases, the non-signatories can be compelled to arbitrate, but that it is only the courts who are empowered to refer them to arbitrate and that the arbitral tribunals have no power or jurisdiction to do so as its jurisdiction is confined by the arbitration agreement. The relevant observations read as under: - "11. "Like consummated romance, arbitration rests on consent". The agreement between parties to resolve their disputes by arbitration is the cornerstone of arbitration. The arbitral tribunal derives its jurisdiction from the consent of parties (other than statutory arbitrations). In absence of such consent, the arbitral tribunal would have no jurisdiction to make an award and the award so rendered would, plainly, be of no value. [...] xxx xxx xxx 16. There may be cases where courts can compel non signatory (ies) to arbitra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Court comes to the conclusion that the conduct of the shareholder is abusive and the corporate façade is used for an improper purpose, for perpetuating a fraud, or for circumventing a statute." (Emphasis supplied) 19. The Madras High Court in V.G. Santhosam v. Shanthi Gnanasekaran reported in 2020 SCC OnLine Mad 560, was called upon to examine whether an arbitral tribunal has the jurisdiction to pass an order impleading a non- signatory to an arbitration agreement, with a view to enable such non- signatory to participate in the arbitration proceedings. In the said case, there was a dispute amongst the partners of a firm which came to be referred to arbitration. In the arbitration proceedings the respondent therein filed an application for her impleadment on the ground that she is the legal heir of one of the erstwhile partners and thus entitled to his share into the firm. The arbitral tribunal allowed the application and impleaded the respondent by taking recourse to the powers provided under Order I Rule 10 of the Code of Civil Procedure, 1908 (for short, the "CPC"). In appeal, the Madras High Court held as follows: - (i) First, that there is no express pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of the very Scheme of the Act itself. 61. It is pertinent to note that Section 2(h) of the Arbitration Act defines "Party means a party to an Arbitration Agreement". When the definition for the word 'Party' is provided under the Act, then no other party other than the party to the "Arbitration Agreement" is entitled to participate in the arbitral proceedings. The term 'Arbitration Agreement' is defined under Section 2(b) as an agreement referred to in Section 7 of the Act. Section 7(1) of the Act, stipulates that Arbitration Agreement means "an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not." Thus, the Arbitrator has committed an error in interpreting the scope of the Act and allowed the impleading petition in violation of the very Scheme and the provisions of the Act. 63. Section 2(1)(b) of the Act defines 'Arbitration Agreement' as an agreement referred to in Section 7 and Section 7 provides that an Arbitration Agreement is an agreement between the parties to submit all or any of the disputes to be adjudicated by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court by the parties. However, such civil rights cannot be adjudicated or enforced by the Arbitrator in the contracted arbitration proceedings under the provisions of the Act. If an Arbitrator is allowed to adjudicate the civil rights of the parties or the rights regarding inheritance of properties, then it would result in submerger of the very Arbitration Agreement. 84. Even after impleadment, the possible disputes to be raised by the first respondent in the arbitration proceedings are that she is the legal heir of late Mr. V.G. Panneerdas and therefore, she is entitled to be a partner in the partnership firm in her capacity as a legal heir. This Court is doubtful, whether such a dispute affecting the rights of all other legal heirs shall be adjudicated by the Arbitrator in the arbitration proceedings. Considering the scope of the arbitration proceedings and taking note of the rights of the legal heirs of late Mr. V.G. Panneerdas and the terms and conditions of the Partnership Deed as well as the disputes raised under the Arbitration Act, it is highly improper on the part of the learned Arbitrator to adjudicate the civil rights of the parties under the General Laws. In su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y creature of the Act, 1996 and its scope, powers and jurisdiction is confined all but to the statutory provisions of the said Act. An arbitrator cannot travel beyond the statute and the arbitration agreement in such a manner so as to usurp the jurisdiction of civil courts. As such an arbitral tribunal cannot exercise the inherent powers conferred upon national courts such as under Order I Rule 10 of the CPC, and is bound to function only within the scope of the Act, 1996 and adjudicate disputes between parties to the "arbitration agreement" in terms of the said Act. A power which is not contemplated under the Act, 1996 cannot be exercised by an arbitral tribunal. It observed that if such concept of power to impleadment is provided to the arbitrator then not only would it lead to widening the scope of arbitration proceeding but also would defeat the very purpose of the Act, 1996 i.e., the adjudication between the consenting parties to the arbitration agreement with a defined contractual legal relationship. The relevant observations read as under: - "77. The above proposition of law laid down by the Courts would reveal that the Arbitrator cannot exercise an inherent power c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....igation between the Arbitrator as well as the parties to the Arbitration Agreement under the provisions of the Arbitration and Conciliation Act, 1996. The Arbitrator in the event of exercising such wide powers under the Code of Civil Procedure, the same would infringe the rights of other parties, which cannot be adjudicated in the arbitration proceedings. 85. Therefore, the civil rights of the parties are to be established before the Competent Court of Law. The disputes raised under the Arbitration Act alone can be adjudicated by the Arbitrator by exercising the powers conferred under the Act. The Arbitrator cannot be equated with the Court of Law and this proposition is well settled as the Arbitrator is a creator of the Statute and has no inherent power, which exists in the Civil Court and the Arbitrator cannot exercise the inherent power and has to exercise the powers strictly within the ambit of the Arbitration Act and certainly not beyond the scope of the arbitration proceedings. 99. The spirit of the order passed by the Arbitrator with reference to the Arbitration Act is to be considered by this Court. The above findings would reveal that the Arbitrator has m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion clause, a sole arbitrator was appointed by the referral court to resolve the said dispute between the respondent groups therein. The appellants therein were never arrayed as parties in the proceedings before the referral court, and it was only when one of the respondents therein moved an application before the arbitral tribunal for seeking impleadment of the appellants therein, that they were arrayed in the arbitration proceeding. The Sole arbitrator allowed the said application and impleaded the appellants therein. In appeal, the Delhi High Court held that the arbitral tribunal's power to implead does not flow from the provisions of the Act and that it being a creature of the Act, 1996 and the arbitration agreement cannot assume powers other than those conferred upon it. It can neither join or delete parties that were never referred to arbitration by the referral court. The said decision is in four- parts: - (i) First, although Section 19 of the Act, 1996 permits the arbitral tribunal to formulate the procedure to be followed in accordance with the CPC yet it does not mean that all powers that are ordinarily vested in a national court by the CPC could also be said to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r considered appropriate and which is recognised by Section 19(3) also cannot possibly be stretched to be read as a source of the authority of an AT to join parties. 61. It is relevant to note that the discretion conferred on an AT to formulate the procedure to be followed in proceedings which it proposes to initiate cannot be extended to contemplate joinder of persons who are not signatories to an arbitration agreement. This more so since the joinder of parties which may otherwise not be signatories to an arbitration agreement raises substantive issues. The impleadment of a party in arbitral proceedings results in that individual or entity becoming bound by an award, interim or final, that may be rendered by the AT even though it may have never consented to seek resolution of questions by that tribunal. The impleadment of a party unilaterally by the AT thus results in a non-signatory being subjected to the authority of that tribunal and accepting its right to adjudicate upon disputes even though it may have never consented to subject itself to the authority of the said AT. This would clearly militate against the principle of "party consent" which forms the very foundation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al hierarchy of legal institutions and which may be compendiously referred to as national courts. AT's thus constitute forums outside the circuit of national courts and remain to be institutions which owe their existence principally to the agreement between parties. [...] 66. [...] An AT remains an institution which comes to be constituted merely on the basis of a private agreement between parties. It must also be remembered that the inherent power recognised to exist in courts flows from their right to act ex debito justitiae. The power to do so has always been recognised to exist in national courts with Section 151 of the CPC merely recognizing and reaffirming that power inhering in courts. [...] 67. What the Court seeks to highlight is the superior powers which are recognised to exist in national courts as opposed to ATs' generally. Statutes while according recognition to the inherent powers recognised to exist in national courts accept such a supervening power inhering in those courts and which enables them to pass such orders as would subserve the ends of justice. AT's on the other hand derive the power to adjudicate based on an express conferral of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re which may be considered to be "just and convenient" and which is spoken of in clause (e) also cannot be justifiably extended as embodying a power to implead. This since Section 17 fundamentally deals with "interim measures". The impleadment or the joinder of a party to arbitral proceedings cannot be construed to be an order which may be termed as either interim or interlocutory. This since the moment a party is joined in the proceedings, it becomes bound by the award which may be ultimately rendered by the AT. 70. This Court also finds itself unable to recognize a power to implead being liable to be read in Section 17 merely because post its amendment by Act 3 of 2016 the AT now stands empowered to grant interim measures at par with the power which stands vested in courts in terms of Section 9 of the Act. The clear intent underlying the amendment to Section 17 is to enable AT's to frame interim measures from a position of equivalence with courts. The amendment to Section 17 appears to have been motivated solely by the felt need to save courts from being deluged with applications for interim relief. However, one must not lose sight of the fact that both Sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the larger Bench is still awaited, this Court finds that the various decisions rendered on the subject and as were noticed in Cox & Kings essentially related to cases where courts were called upon to invoke those theories and hold parties, who even though may not have been signatories to the arbitration agreement, to be bound by the same. In fact, some of the decisions which were noticed in Cox & Kings had been rendered in the context of Section 45 which, as was noticed above, specifically employs the expression "any person claiming through or under him". The more fundamental question which remains to be answered by the Court is whether an AT would be justified in invoking those doctrines. This Court is of the firm opinion for reasons which are set out hereinafter that such a power cannot be recognised to inhere in an AT." (Emphasis supplied) Accordingly, the Delhi High Court concluded that since an arbitral tribunal owes its origin to the arbitration agreement providing for resolution of disputes between the parties to such agreement in a private forum outside the ordinary hierarchy of judicial authorities, the arbitration agreement alone, along with the intended applicab....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... power to implead cannot be sustained or traced to Sections 16 or 17 or 19 of the Act. In fact, the Act incorporates no provision which could be even remotely considered as being liable to be read as being the repository of the power of the AT to implead. 94. The Act, wherever it was intended to expand the meaning to be ascribed to the word "party" has done so by introducing specific provisions in that respect. Even where such recourse was taken, the power has come to be conferred upon a judicial authority. If the AT were recognised to have the authority to invoke the alter ego or group of companies principles, it would undoubtedly result in the Court recognising a power vesting in the AT to compel the presence of a party who had never, at least ostensibly, agreed or conceded to its jurisdiction or authority to decide. Such a party would necessarily be one who had not even made party to the proceedings by the referral court. This would clearly result in the AT seeking to exercise authority over a party and compelling it to join the proceedings even though it may have never been ad idem on disputes being resolved by way of arbitration. This would not only result in the AT t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt and thus, it would be futile to say that a non-signatory to an arbitration agreement can be compelled to submit to the jurisdiction of the arbitral tribunal so validly constituted. In the last, it observed that whether a particular case is a fit one for enjoining a third-party on the aforesaid principles would be for the arbitral tribunal to determine, being the appropriate forum by examining the facts of each case, an exercise which is neither possible nor proper for the courts to embark upon. The relevant observations read as under: - "13. It is no longer res integra that in given set of circumstances, even a non-signatory to an arbitral agreement can be subjected to arbitration proceedings. Such instances may be rare and may arise in special facts of the case and would ordinarily provide an exception to the normal rule, that only a signatory to the arbitral proceedings can be compelled to submit to the jurisdiction of the arbitral tribunal. Nevertheless, instances have been recognized by Courts where either on the ground of piercing corporate veil as one entity found to be the alter ego of the other or some such similar ground, even a non-signatory entity to an arbit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng a third- party (sic non-signatory) or not would be a matter for the arbitral tribunal being the proper designated forum for adjudication of disputes, keeping in mind the facts of each case and the position of law. It further observed that both the recognition of such power of an arbitral tribunal AND the non-issuance of a notice of invocation in terms of Section 21 of the Act, 1996 to the third-party sought to be impleaded will hardly occasion any prejudice, as it is always open to such a third-party to challenge its impleadment by way of an application under Section 16 of the Act, 1996. The relevant observations read as under: - "23. Reverting to the facts of the case on hand, it is to be noticed that the order passed by the learned Arbitral Tribunal clearly records that opinion expressed is prima-facie and subject to objections and remedies available under the Arbitration Act to the impleaded respondent, i.e. the appellant herein. If the appellant claims that it is not a party to the agreement, as such it cannot be impleaded as party respondent in the arbitration proceedings, it is always open for it to move an application under Section 16 of the Arbitration Act to ru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly considered by the Hon'ble Supreme Court in the case of A. Ayyasamy v. A. Paramasivam reported in (2016) 10 SCC 386. [...] xxx xxx xxx 47. Further, in the case of IVRCL Limited v. Gujarat State Petroleum Corporation Limited - First Appeal No. 1714 of 2015 and other allied appeals, decided on 08-13/10/2015, a Division Bench of this Court held that it is no longer res-integra that in a given set of circumstances, even a non-signatory to an arbitral agreement can be subjected to arbitration proceedings. It is further observed that instances have been recognized by Courts where on the ground of piercing corporate veil, as one entity being found to be an alter ego of the other or on similar grounds, even a non-signatory entity to an arbitration agreement is allowed to be joined in the arbitration proceedings. The Division Bench has disapproved the argument that, in no case, a non-signatory to the arbitration agreement can be compelled to submit to the jurisdiction of the Arbitral Tribunal validly constituted. 48. In view of the aforesaid judgments of the Hon'ble Supreme Court and Division Bench of this Court, we are not in agreement with the submissi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r observed that as long as the interpretation of the agreement by the arbitrator is reasonable, the courts would refrain from interfering with the same merely because another view is possible. Although the Bombay High Court did not make any observations as regards the power of tribunal to implead or join a non-signatory, yet its observations as to the scope of jurisdiction of the arbitral tribunal, more particularly for determining whether there exists any principal-agent relationship nevertheless is of significance, which we shall discuss in more detail in the latter parts of this judgment. The relevant observations read as under: - "4. Learned Counsel for the Petitioner submits that dealership agreement, which gave rise to the Respondent's claim, was entered into by the Petitioner as an agent of KBIL. Learned Counsel submits that the Petitioner having disclosed in the dealership agreement its principal and its express authority to name a dealer whilst acting for the principal, namely, KBIL, the Respondent's dealership is not a sub-agency of the Petitioner, but an agency of the principal itself, namely, KBIL. Learned Counsel relies on Section 194 read with Section....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9;s acts had directly resulted in the Respondent suffering losses, the proceedings did not suffer from any mis-joinder or non-joinder of necessary party so as to vitiate the proceedings. This conclusion is clearly a possible view based on the material placed before the learned arbitrator. Construction of a contract is a matter strictly within the jurisdiction of the arbitrator, and so long as the arbitrator construes it on a reasonable interpretation and his construction denotes a possible view, there is nothing for the challenge court to interfere with under Section 34 of the Arbitration and Conciliation Act, 1996 ("Act"). 6. There is no denial of the proposition of law laid down by the Supreme Court or our court in the cases cited by learned Counsel for the Petitioner. Prem Nath Motors Limited's case (supra) basically considers the effect of Section 230 of the Contract Act. In that case, it was held that the agent had acted on behalf of a disclosed principal and there was no contract to the contrary placed before the court so as to make the agent liable for the act of the disclosed principal. Even in Vivek Automobiles Limited (supr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....13) 1 SCC 641 Chrolo Controls India Private Ltd. v. Severn Trent Water Purification Inc. though dealing with an international arbitration under Section 45 of the Act, held that even third parties who are not signatories to the arbitration agreement can be joined in arbitration. It laid down categories where the third parties can be impleaded to the arbitration and held that the expression 'claiming through them' should be construed strictly. [...] 12. The decision in Chrolo Controls (supra) clearly holds that in exceptional cases applying the principle of "composite performance" or implied authority, even a third party who is not a signatory to the arbitration agreement can be joined in arbitration. 13. Hon'ble Supreme Court in Vidya Drolia (supra) further considering the issue as to who would decide the non-arbitrability of the claim held that there cannot be a straightforward universal answer. Reiterating the law laid down in Shin Etsu Chemical Co.Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234, it was held that the correct approach to the review of the arbitration agreement is restricted to prima facie finding that there exists an arbitration agreement that i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e-parts: - (i) First, placing reliance on the decision of this Court in Cox and Kings (I) (supra), it held that the question whether a non-signatory is bound by the arbitration agreement or not, is for the arbitral tribunal to decide and not the referral court. Thus, even if the non-signatory was not impleaded at the time of filing of application under Section 11 of the Act, 1996, it would be incorrect to say that the same would exclude the arbitral tribunal from impleading such party by applying the 'group of companies' doctrine on its own accord. The relevant observations read as under: - "40. The Sole Arbitrator has referred to the decision of the Supreme Court in Cox and Kings (Supra) where the Supreme Court has enunciated the 'Group of Companies' doctrine and in particular the impleadment of a non- signatory to an Arbitration Agreement in arbitral proceedings based on such doctrine. The Supreme Court in the said decision has considered a case where an Application was made to the Referral Court to join a non- signatory to the Arbitration Agreement and it was in such scenario that the Supreme Court held that, the Referral Court is required to prima facie rule o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to an Arbitration Agreement. I thus find no merit in the submission of Mr. Rustomjee that in the event the issue of joinder of a non-signatory to an Arbitration Agreement is not raised before the Referral Court, the Arbitral Tribunal on its own accord does not have the power to determine this issue and/or allow the impleadment of a non-signatory to an Arbitration Agreement. I do not find there to be any estoppel on the Arbitral Tribunal determining this issue. xxx xxx xxx 44. There have been submissions made by Mr. Rustomjee on the power of the Referral Court to determine whether the Arbitration Agreement exists and/or validity of the Arbitration Agreement and which would include whether the Arbitration Agreement is applicable to non-signatories to the Agreement. The Supreme Court in National Insurance Company Ltd. (Supra) at paragraph 22 has referred to the issues which the Chief Justice or his designate is bound to decide and which includes whether there is an Arbitration Agreement and whether the party who has applied under Section 11 of the Act is a party to such agreement. However, this will not preclude the Arbitral Tribunal from deciding the issue of implea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the premise that the impugned Order is an interim award. However, one cannot lose sight of the fact that the Arbitrator under Section 16 of the Arbitration Act has the power to determine issues of jurisdiction which in my view would include whether the Arbitrator has jurisdiction over nonsignatories to an Arbitration Agreement. Any such decision taken by the Arbitrator can always be the subject matter of a challenge by the Petitioners in a Petition filed under Section 34 of the Arbitration Act after the final Award is passed. Further, I do not find merit in the submission of Mr. Rustomojee that the aforesaid points for determination namely, issue Nos. (ii), (iii) and (v) which have been extracted above have been finally determined. It is always open for the Petitioners to lead evidence on these issues and invite final adjudication by the learned Sole Arbitrator on these issues. The decisions of the Delhi High Court in National Highway Authority of India (Supra) and Goyal MG Gases Pvt. Ltd. (Supra) are apposite." (Emphasis supplied) 26. Similarly, the Delhi High Court in Indraprastha Power Generation Co. Ltd.v. Hero Solar Energy Pvt. Ltd. reported in (2024) SCC OnLine Del 60....
X X X X Extracts X X X X
X X X X Extracts X X X X
....parties may once again be debatable after the said decision. [...] xxx xxx xxx 24. These passages indicate that the Section 11 Court should leave, to the Arbitral Tribunal, the decision as to whether a non- signatory to the arbitration agreement should be bound by it. The corollary would obviously be that if the Arbitral Tribunal were to find that a nonsignatory is bound by arbitration agreement, it would necessarily have to include such non-signatory in the arbitration proceedings. Following Cox and Kings-II, therefore, it may be possible to argue that an Arbitral Tribunal does possess the jurisdiction to implead non-signatories who may be bound by the outcome of the arbitral proceedings. 26. The impugned order of the Arbitral Tribunal has observed that, in the above passages from Cox and Kings-I as endorsed in Cox and Kings-II, a non-signatory could be impleaded in arbitral proceedings only if there is some kind of connection or positive act by the conduct of the non-signatory subsequent to the execution of the contract, or participation by the non-signatory in the negotiation, performance or termination of the contract indicating a connection in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ries, which are rooted in equity and encompass doctrines such as alter ego/piercing the corporate veil, estoppel, succession, and apparent authority [refer to Cox & Kings (supra), para 192]. At this stage and as a referral court, as per Ajay Madhusudan Patel (supra), the test is whether prima facie the respondents are veritable parties to the MoS containing the arbitration clause. This has been dealt with in detail in Issue I. 79. It is settled position of law that the definition of parties under the 1996 Act [as envisaged under Section 2(1)(h)] is inclusive of both signatories and non-signatories. The Hon'ble Supreme Court in Cox & Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1 observed that if a nonsignatory party actively participates in the performance of a contract, and its actions align with those of the other members of the group, it gives the impression that the non- signatory is a "veritable" party to the contract which contains the arbitration agreement. Based on this impression, the other party may reasonably assume that the non-signatory is indeed a veritable party to the contract and bind it to the arbitration agreement. [...] 80. Thus, the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd does not go into minute details is only for the purpose of referring the parties to arbitration. The respondents will be at liberty to agitate this issue before the arbitrator, who shall take an independent view based on the pleadings and arguments of the parties." (Emphasis supplied) 28. What is discernible from the aforesaid is that despite the wide recognition of the doctrinal principles of 'group of companies', 'alter-ego', agency, implied consent, assignment or transfer of contractual rights, estoppel, 'apparent authority' etc. to law of arbitration, the High Courts throughout the country remained averse to accepting the application of these principles by the arbitral tribunals. Even after the decision of this Court in Chloro Controls (supra) allowing non-signatories to an arbitration agreement to be referred and enjoined to arbitration on the basis of their conduct, role, and involvement in the underlying contract, the High Courts consistently held that such power to refer or implead a non-signatory was only available to the courts and not to the arbitral tribunals. It is only after the decision of this Court in in Cox and Kings (I) (supra), that the position of law ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....veloped in the international context, whereby an arbitration agreement entered into by a company, being one within a group of companies, can bind its non-signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates. This theory has been applied in a number of arbitrations so as to justify a tribunal taking jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement. [Russell on Arbitration (23rd Edn.)] 72. This evolves the principle that a non-signatory party could be subjected to arbitration provided these transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non-signatory parties. In other words, "intention of the parties" is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties. 73. A non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wider import to encourage arbitration and bring it in tune with the prevalent best international practices. Thus, this very ostensible legislative intent cannot be ignored by the courts and must be given due weightage. The relevant observations read as under: - "69. We have already noticed that the language of Section 45 is at a substantial variance to the language of Section 8 in this regard. In Section 45, the expression "any person" clearly refers to the legislative intent of enlarging the scope of the words beyond "the parties" who are signatory to the arbitration agreement. Of course, such applicant should claim through or under the signatory party. Once this link is established, then the court shall refer them to arbitration. The use of the word "shall" would have to be given its proper meaning and cannot be equated with the word "may", as liberally understood in its common parlance. The expression "shall" in the language of Section 45 is intended to require the court to necessarily make a reference to arbitration, if the conditions of this provision are satisfied. To that extent, we find merit in the submission that there is a greater obligation upon the judicial au....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that the court may refer the parties to arbitration. There is some element of similarity in the language of Section 8 and Section 45 read with Article II(3). The language and expressions used in Section 45, "any person claiming through or under him" including in legal proceedings may seek reference of all parties to arbitration. Once the words used by the legislature are of wider connotation or the very language of the section is structured with liberal protection then such provision should normally be construed liberally. 96. Examined from the point of view of the legislative object and the intent of the framers of the statute i.e. the necessity to encourage arbitration, the court is required to exercise its jurisdiction in a pending action, to hold the parties to the arbitration clause and not to permit them to avoid their bargain of arbitration by bringing civil action involving multifarious causes of action, parties and prayers." (Emphasis supplied) 33. However, this rudimentary understanding of the expression "parties" and "parties or any person claiming through or under him" in Section(s) 8 and 45 of the Act, 1996 respectively by Chloro Controls (supra) for t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....these issues in the very first instance by the judicial forum, evident from the absence of any provision analogous to Section 16 of the Act, 1996 in Part II of the Act. The relevant observations read as under: - "118. An application for appointment of the Arbitral Tribunal under Section 45 of the 1996 Act would also be governed by the provisions of Section 11(6) of the Act. This question is no more res integra and has been settled by decision of a Constitution Bench of seven Judges of this Court in SBP & Co. v. Patel Engg. Ltd., wherein this Court held that power exercised by the Chief Justice is not an administrative power. It is a judicial power. It is a settled principle that the Chief Justice or his designate Judge will decide preliminary aspects which would attain finality unless otherwise directed to be decided by the Arbitral Tribunal. 119. [...]This aspect of the arbitration law was explained by a two- Judge Bench of this Court in Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. wherein, while referring to the judgment in SBP & Co. particularly the above paragraph (para 39) of SBP case21, this Court held that the scope of order under Section 11 of the 199....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce to arbitration, in both cases, the applicant has to pray for a reference before the Chief Justice or his designate in terms of Section 11 of the 1996 Act. [...] We are conscious of the fact that the above dictum of the Court in SBP case is in relation to the scope and application of Section 11 of the 1996 Act. It has been held in various judgments of this Court but more particularly in SBP which is binding on us that before making a reference, the Court has to dispose of the objections as contemplated under Section 8 or Section 45, as the case may be, and wherever needed upon filing of affidavits. Thus, to an extent, the law laid down by this Court on Section 11 shall be attracted to an international arbitration which takes place in India as well as domestic arbitration. This, of course, would be applicable at pre-award stage. Thus, there exists a direct legal link, limited to that extent. xxx xxx xxx 130. [ ] The more important aspect as far as Chapter I of Part II of the 1996 Act is concerned, is the absence of any provision like Section 16 appearing in Part I of the same Act. Section 16 contemplates that the arbitrat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he analogy thereof will fortify the view that determination of fundamental issues as contemplated under Section 45 of the 1996 Act at the very first instance by the judicial forum is not only appropriate but is also the legislative intent. Even the language of Section 45 of the 1996 Act suggests that unless the court finds that an agreement is null and void, inoperative and incapable of being performed, it shall refer the parties to arbitration. (Emphasis supplied) 35. This rudimentary understanding and legislative position of the extent of judicial scrutiny and determination at the referral stage in terms of Section 11 of the Act, 1996, could be said to be the second reason why arbitral tribunals were not found to be empowered to identify and implead a non-signatory to the arbitration agreement. 36. In the aftermath of Chloro Controls (supra), the Law Commission of India in its 246th Report observed that a party to an arbitration agreement does not necessarily mean only the signatory to such agreement, and that internationally it has been widely accepted that even non-signatories may be parties to the arbitration agreement. It further took note of the decision of Chloro C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Hon'ble Supreme Court follows from the wording of section 45 of the Act which recognizes the right of a "person claiming through or under [a party]" to apply to a judicial authority to refer the parties to arbitration. The same language is also to be found in section 54 of the Act. This language is however, absent in the corresponding provision of section 8 of the Act. It is similarly absent in the other relevant provisions, where the context would demand that a party includes also a "person claiming through or under such party". To cure this anomaly, the Commission proposes an amendment to the definition of "party" under section 2 (h) of the Act." (Emphasis supplied) 37. Based on the suggestions made by the Law Commission, the legislature promptly introduced the Arbitration and Conciliation (Amendment) Act, 2015 whereby inter-alia although Section 8 sub-section (1) of the Act, 1996 was amended and the phrase "a party to an arbitration agreement or any person claiming through or under him" was inserted yet for reasons unknown, the suggestion for amending Section 2(1)(h) of the Act by the Law Commission did not see the light of day. 38. At this juncture it would be app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fically by the courts. This along with the standard of scrutiny that was expected by the referral courts under Section 11 of the Act, 1996 in terms of SBP & Co. (supra) meant that, unless a non-signatory is referred to arbitration by a court after a thorough application of mind and after a final determination by such referral courts as to whether the non-signatory is said to bound by the arbitration agreement or not, no non-signatory can be subjected to arbitration. 40. Thus, due to the aforesaid, a misconception plagued the position of law that an arbitral tribunal does not have the authority or power to implead a non- signatory to the arbitration proceedings, and that only the courts are empowered to do so. It was largely in this backdrop that the decisions of Oil and Natural Gas Corporation Ltd. (supra), Balmer Lawrie & Co. Ltd. (supra), Sudhir Gopi (supra), V.G. Santhosam (supra) and other decisions of various different High Courts came to be rendered. II. Decision of Cox and Kings (I) and the Judicial Rectification of the first misconception by Chloro Controls. 41. In Cox and Kings (I) (supra) a five-Judge Bench of this Court wherein one of us (J.B. Pardiwala J.) was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rson claiming through or under him" is concerned, was incorrect. It held that the words "any person" in Section 45 of the Act, 1996 by itself does not connote a wider import to the term "party". The aforesaid phrase cannot be singled out and construed devoid of the context provided in the subsequent phrase "claiming through or under". It held that the entire expression only refers and includes persons / parties acting in a derivative capacity such as in the instances of successors in interest or assignees of any such interest that have been devolved upon them by the original signatories / parties. The import of the expression "a party to an arbitration agreement or any person claiming through or under him" only refers to that persons which it is deriving its claim or right by virtue of it standing in the shoes of the original signatory party. The expression "claiming through or under" can only bind those third parties who irrespective of being a non-signatory to the arbitration agreement are nevertheless bound by it, by virtue of them substituting the signatory party in their derivative capacity. However, the 'Group of Companies' doctrine functions on a completely different tangent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are acting only in a derivative capacity. Since an arbitration agreement excludes the jurisdiction of national courts, it is essential that the parties consent, either expressly or impliedly, to submit their dispute to the arbitral tribunal. 145. The second and third proposition of law states that a non- signatory party may claim through or under a signatory party by virtue of its legal or commercial relationship with the latter. However, this proposition is contrary to the common law position as evidenced in Sancheti (supra) and Tanning Research Laboratories (supra) according to which a mere legal or commercial connection is not sufficient to allow a non-signatory to claim through or under a party to the arbitration agreement. [...] Therefore, even though a subsidiary derives interests or benefits from a contract entered into by the company within a group, they would not be covered under the expression "claiming through or under" merely on the basis that it shares a legal or commercial relationship with the parties. 146. [...] The group of companies doctrine is founded on the mutual intention of the parties to determine if the non-signatory entity within a group ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rst, it observed that Section 7 of the Act, 1996 which defines an "Arbitration Agreement" lays down in sub-section (4) the various circumstances where a legal relationship is said to exist of such nature as if there is an agreement in writing for arbitration. Section 7 more particularly sub-section (4)(b) provides the circumstances where the existence of an arbitration agreement can be inferred from various documents that indicate a manifestation of consent of persons or entities through their actions of exchanging documents, even if there is no formal agreement executed between such persons in the conventional sense. Similarly, Section 7 sub-section (4)(c) which provides that if there is an assertion of the existence of an arbitration agreement by one party which was never denied or disputed by the other, then such agreement would be considered a valid arbitration agreement, is one another provision that lays down the circumstances when the existence of an arbitration agreement may be assumed based on the conduct of a person or entity. The relevant observations read as under: - "70. Section 2(h) of the Arbitration Act defines a "party" to mean a party to an arbitration ag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lecommunication.61 Thus, the act of agreeing by the persons or entities has to be inferred or derived by the courts or tribunals from the relevant documents and communication, neither of which can be equated with a conventional contract. 73. The third circumstance is provided under Section 7(4)(c), according to which an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. A two- Judge Bench of this Court clarified in S N Prasad v. Monnet Finance Limited62 that there will be an "exchange of statements of claim and defence" for the purposes of Section 7(4)(c) if there is an assertion of the existence of an arbitration agreement in any suit, petition or application filed before any court or tribunal, and if there is no denial of it in the defence, counter, or written statement. Thus, in the third circumstance the court proceeds on the assumption that the conduct of the person or entity in not denying the existence of an arbitration agreement leads to the conclusive proof of its existence. [...]" (ii) Secondly, it found that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties. Thus what emanates is that even non-signatories can be regarded as a "party" to an arbitration agreement. The relevant observations read as under: - "75. The second aspect is contained in Section 7(3) which stipulates the requirement of a written arbitration agreement. A written arbitration agreement need not be signed by the parties if there is a record of agreement.63 The mandatory requirement of a written arbitration agreement is merely to ensure that there is a clearly established record of the consent of the parties to refer their disputes to arbitration to the exclusion of the domestic courts. 76. Section 2(h) read with Section 7 does not expressly require the "party" to be a signatory to an arbitration agreement or the underlying contract containing the arbitration agreement. [...] The above provision states that an arbitration agreement may be entered into in any form, for example orally or tacitly, as long as the content of the agreement is recorded. It eliminates the requirement of the signature of parties or an exchange of messages between the parties." 44. Accordingly, Cox and Kings (I) (supra) made a significant shift from the original unders....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an arbitration agreement can be subject to the full effects of the agreement in terms of the reliefs and remedies because they consented to be bound by the arbitration agreement. Therefore, the decisive question before the courts or tribunals is whether a non-signatory consented to be bound by the arbitration agreement. To determine whether a non-signatory is bound by an arbitration agreement, the courts and tribunals apply typical principles of contract law and corporate law. The legal doctrines provide a framework for evaluating the specific contractual language and the factual settings to determine the intentions of the parties to be bound by the arbitration agreement. xxx xxx xxx 153. The group of companies doctrine is based on determining the mutual intention to join the non-signatory as a "veritable" party to the arbitration agreement. Once a tribunal comes to the determination that a non-signatory is a party to the arbitration agreement, such non-signatory party can apply for interim measures under Section 9 of the Arbitration Act. Establishing the legal basis for the application of the group of companies doctrine in the definition of "party" under Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f such person is found to be bound to the arbitration agreement. III. Decision of Krish Spinning and the Judicial Rectification of the second misconception emanating from SBP & Co. 47. As discussed in the foregoing paragraphs, the second reason why the various High Courts were hesitant from recognizing the arbitral tribunal's power to implead a non-signatory on its own accord, stemmed from the understanding and position of law that existed then as regards the scope and extent of judicial scrutiny of the courts which was required at the referral stage under Section 11 of the Act, 1996, before the subject matter could be referred to arbitration and an arbitral tribunal be constituted. 48. In Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd. reported in (2002) 2 SCC 388, a five-Judge Bench of this Court observed that the power exercised by the referral court under Section 11 of the Act, 1996 is an administrative power and thus the Chief Justice or his designate do not have to decide any preliminary issue at that stage. Any issue pertaining to non-arbitrability, validity and existence of the arbitration agreement ought to be decided by the arbitrator. 49. The aforesa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments to sections 8 and 11 of the Arbitration and Conciliation Act, 1996. The scope of the judicial intervention is only restricted to situations where the Court/Judicial Authority finds that the arbitration agreement does not exist or is null and void. In so far as the nature of intervention is concerned, it is recommended that in the event the Court/Judicial Authority is prima facie satisfied against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be. The amendment envisages that the judicial authority shall not refer the parties to arbitration only if it finds that there does not exist an arbitration agreement or that it is null and void. If the judicial authority is of the opinion that prima facie the arbitration agreement exists, then it shall refer the dispute to arbitration, and leave the existence of the arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie. [...]" 53. The aforesaid recommendations of the Commission were taken no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....honest litigation so as to ensure expeditious and efficient disposal at the referral stage and prevent unnecessary subjugation to arbitration. The relevant observations read as under: - "147.4. Most jurisdictions accept and require prima facie review by the court on non-arbitrability aspects at the referral stage. 147.5. Sections 8 and 11 of the Arbitration Act are complementary provisions as was held in Patel Engg. Ltd. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] The object and purpose behind the two provisions is identical to compel and force parties to abide by their contractual understanding. This being so, the two provisions should be read as laying down similar standard and not as laying down different and separate parameters. Section 11 does not prescribe any standard of judicial review by the court for determining whether an arbitration agreement is in existence. Section 8 states that the judicial review at the stage of reference is prima facie and not final. Prima facie standard equally applies when the power of judicial review is exercised by the court under Section 11 of the Arbitration Act. Therefore, we can read the mandate of valid arbitration ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct 33 of 2019 (with effect from 9-8-2019), is no longer applicable. 154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted. 154.3. The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence competence, is that the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non arbitrability. The court has been conferred power of "second look" on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act. 154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. The restricted and limited review is to check and protect parties from being force....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(supra) is evident from the subsequent decisions of this Court in DLF Home Developers Ltd. v. Rajapura Homes (P) Ltd. reported in (2021) 16 SCC 743 and BSNL v. Nortel Networks (India) (P) Ltd., reported in (2021) 5 SCC 738 and a catena of other decisions wherein it was held that while undertaking a prima facie review under Section 11 of the Act, 1996, the interference of the courts in certain aspects and merits of the subject-matter may be warranted in exceptional cases, to weed out any frivolous or vexatious claims and prevent wastage of public and private resources. 60. The next chapter in the saga of scope and ambit of Section 11 of the Act, 1996 came in the form of the seven-Judge Bench decision of this Court in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899 reported in 2023 INSC 1066 wherein one of us (J.B. Pardiwala J.) as part of the Bench, undertook a comprehensive analysis of Section(s) 8 and 11 respectively of the Act, 1996 and, inter alia, made poignant observations about the nature of the power vested in the Courts insofar as the aspect of appointment of arbitrator is concerned. It held th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 1996, held that the courts at the referral stage should not venture into contested questions involving complex facts. It was held that the observations made in Vidya Drolia (supra) insofar as it allowed the referral courts under Section 11 of the Act, 1996 to intervene and refuse appointment of an arbitrator in matters that were ex-facie meritless, frivolous, vexatious or deadwood, no longer could be said to hold field in view of the observations made in the subsequent and larger bench decision of In Re: Interplay (supra). The relevant observations read as under: - "98. What follows from the negative facet of arbitral autonomy when applied in the context of Section 16 is that the national courts are prohibited from interfering in matters pertaining to the jurisdiction of the arbitral tribunal, as exclusive jurisdiction on those aspects vests with the arbitral tribunal. The legislative mandate of prima facie determination at the stage of Sections 8 and 11 respectively ensures that the referral courts do not end up venturing into what is intended by the legislature to be the exclusive domain of the arbitral tribunal. xxx xxx xxx 113. Referring to the Sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the parties to arbitrate in a state of limbo or worse, remediless, if the courts themselves decide to proceed in determining the validity of the arbitration agreement while the arbitral tribunal simultaneously continues with the substantive claims. However, Section 11 on the other hand, is the very first step in commencement of arbitration proceedings, no arbitration proceedings can commence or continue unless the application under the said provision is decided. Furthermore, the determination by a judicial authority under Section 8 of the Act, 1996 can be assailed by way of an appeal under Section 37, however, a determination under Section 11 of the Act, 1996 is not appealable, thus, the approach which the courts are expected to undertake under Section 8 viz-à-viz Section 11, must be reflective of these nuanced differences in the scope of these provisions. Thus, it held that the observations of Vidya Drolia (supra) in conflating the nature of the test envisaged under Section 8 of the Act, 1996 with that under Section 11, cannot be said to be a good law. The relevant observations read as under: - "108. Section 11 of the Act, 1996 is provided to give effect to the m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... passed by the referral court under Section 11 for either appointing or refusing to appoint an arbitrator. Thus, by delving into the domain of the arbitral tribunal at the nascent stage of Section 11, the referral courts also run the risk of leaving the claimant in a situation wherein it does not have any forum to approach for the adjudication of its claims, if it Section 11 application is rejected. 124. Section 11 also envisages a time-bound and expeditious disposal of the application for appointment of arbitrator. One of the reasons for this is also the fact that unlike Section 8, once an application under Section 11 is filed, arbitration cannot commence until the arbitral tribunal is constituted by the referral court. This Court, on various occasions, has given directions to the High Courts for expeditious disposal of pending Section 11 applications. It has also directed the litigating parties to refrain from filing bulky pleadings in matters pertaining to Section 11. [...]" 63. Accordingly, Krish Spinning (supra) held that the scope of enquiry at the referral stage under Section 11 of the Act, 1996 is confined to a prima facie determination of the existence of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Controls (supra) came, the position of law as regards the standard of scrutiny expected by the referral courts was governed by the decision of SBP Co. (supra), which as already discussed, was premised on the rudimentary understanding that the arbitral tribunals are not empowered to determine issues as regards the validity and existence of the arbitration agreement and whether the claims are time-barred or vexatious due to the non-applicability of Section 16 in instances of court referred arbitrations. The understanding which stemmed from SBP Co. (supra) was that the referral courts were required to conduct mini trials and indulge in the appreciation of evidence on the aforesaid issues, even though they were inextricably linked with the substantive merits of the subject-matter. 65. Accordingly, when Chloro Controls (supra) held that a non-signatory to the arbitration agreement may be bound by the arbitration agreement by the doctrine of 'Group of Companies', the test which it laid down for applying the said doctrine had been evolved, squarely keeping in mind the decision of SBP Co. (supra). Which is why, Chloro Controls (supra) held that before a non- signatory can be held to be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tantive contract in which it is contained, continues to remain in existence even after the original contract stands discharged by "accord and satisfaction". 116. The question of "accord and satisfaction", being a mixed question of law and fact, comes within the exclusive jurisdiction of the arbitral tribunal, if not otherwise agreed upon between the parties. Thus, the negative effect of competence-competence would require that the matter falling within the exclusive domain of the arbitral tribunal, should not be looked into by the referral court, even for a prima facie determination, before the arbitral tribunal first has had the opportunity of looking into it. xxx xxx xxx 125. We are also of the view that ex-facie frivolity and dishonesty in litigation is an aspect which the arbitral tribunal is equally, if not more, capable to decide upon the appreciation of the evidence adduced by the parties. We say so because the arbitral tribunal has the benefit of going through all the relevant evidence and pleadings in much more detail than the referral court. If the referral court is able to see the frivolity in the litigation on the basis of bare minimum pleadin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appellant herein, that in the absence of the appellant herein being a party to the application under Section 11 and in the absence of the referral court directing or leaving the question of impleadment of the appellant for the arbitral tribunal to decide, the appellant herein could not have been impleaded to the arbitration proceedings by the arbitral tribunal. 70. To put it simply, the argument of the appellant herein is that, where the non- signatory is a party to the application under Section 11 of the Act, 1996, the referral court must first make a prima-facie determination as to whether such non-signatory is bound by the arbitration agreement or not, before leaving the conclusive determination of such question to the arbitral tribunal. Conversely, where the non-signatory sought to be enjoined in arbitration is not a party to the application under Section 11, the referral court must give leave or direct the arbitral tribunal to examine whether such non-signatory is bound by the arbitration agreement or not, before it can be impleaded by the arbitral tribunal on its own accord. 71. In other words, the question that has been canvassed before us for our consideration is whet....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the arbitration agreement contained under it. Therefore, the group of companies doctrine is applied to ascertain the intentions of the parties by analysing the factual circumstances surrounding the contractual arrangements. 101. [...] Rather, the courts need to determine: first, the existence of a group of companies; and second, the conduct of the signatory and non-signatory parties which indicate their common intention to make the non-signatory a party to the arbitration agreement.95 Thus, the group of companies doctrine is similar to other consent based doctrines such as agency, assignment, assumption, and guarantee to the extent that it is ordinarily applied as a means of identifying the common intention of the parties to bind the non- signatory to the arbitration agreement. 102. [...] Thus, the existence of a group, of companies is a factual element that the court or tribunal has to consider when analysing the consent of the parties. It inevitably adds an extra layer of criteria to an exercise which at its core is preponderant on determining the consent of the parties in case of complex transactions involving multiple parties and agreements. 105. In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n agreement: "40. In deciding whether a company within a group of companies which is not a signatory to arbitration agreement would nonetheless be bound by it, the law considers the following factors: (i) The mutual intent of the parties; (ii) The relationship of a non-signatory to a party which is a signatory to the agreement; (iii) The commonality of the subject-matter; (iv) The composite nature of the transactions; and (v) The performance of the contract." 75. Cox and Kings (I) (supra) observed that doctrines such as 'Group of Companies' being a consent-based theory, as a necessary implication requires that the inquiry must not be superficial or perfunctory but must instead involve a comprehensive and holistic assessment of the composite relationship among the entities concerned, the underlying transactions, and the attendant circumstances evincing mutual intention to be bound by the arbitration agreement. Endorsing the view taken in Discovery Enterprises (supra), it held that mere incidental involvement in the negotiation or performance of the contract is not sufficient to infer the consent of the non-signatory to be boun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he group, leading the other party to legitimately believe that the non-signatory was a veritable party to the contract; and third, the other party has legitimate reasons to rely on the appearance created by the non-signatory party so as to bind it to the arbitration agreement. 122. [...] Rather, the courts or tribunals should closely evaluate the overall conduct and involvement of the non-signatory party in the performance of the contract. The nature or standard of involvement of the non-signatory in the performance of the contract should be such that the non-signatory has actively assumed obligations or performance upon itself under the contract. In other words, the test is to determine whether the non- signatory has a positive, direct, and substantial involvement in the negotiation, performance, or termination of the contract. Mere incidental involvement in the negotiation or performance of the contract is not sufficient to infer the consent of the non signatory to be bound by the underlying contract or its arbitration agreement. 127. We are of the opinion that there is a need to seek a balance between the consensual nature of arbitration and the modern commerci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ence stage, and as such is uniquely positioned to undertake such a nuanced determination. II. Determining the "existence" viz-à-viz the intention of parties from "express words" of an Arbitration Agreement. 77. In order to resolve the question whether the issue of a non-signatory being bound by an arbitration agreement could be said to be inextricably intertwined with the determination of the "existence" of the arbitration agreement, it is apposite to once again advert to Cox and Kings (I) (supra), more particularly, as to the manner in which it envisages the identification and determination of the binding effect of an arbitration agreement upon a non-signatory, based on the factual aspects delineated by it, as mentioned in the foregoing paragraphs. 78. Cox and Kings (I) (supra) observed that the "legal relationship of a non- signatory to a party which is a signatory to the agreement" must be analyzed in the context of the underlying substantive contract which contains the arbitration agreement. This may be ascertained either from the duty or relationship attributed to the non-signatory within the underlying contract or may be inferred from its conduct with respect ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bution of healthcare goods. The determination of this factor is important to demonstrate that the non-signatory party consented to arbitrate with respect to the particular subject matter. 116. In case of a composite transaction involving multiple agreements, it would be incumbent for the courts and tribunals to assess whether the agreements are consequential or in the nature of a follow-up to the principal agreement. This Court in Canara Bank (supra) observed that a composite transaction refers to a situation where the transaction is interlinked in nature or where the performance of the principal agreement may not be feasible without the aid, execution, and performance of the supplementary or ancillary agreements. 117. The general position of law is that parties will be referred to arbitration under the principal agreement if there is a situation where there are disputes and differences "in connection with" the main agreement and also disputes "connected with" the subject- matter of the principal agreement In Chloro Controls (supra), this Court clarified that the principle of "composite performance" would have to be gathered from the conjoint reading of the princi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the substantive provisions of both the principal and supplementary agreements, and not merely of the arbitration agreement or clause in isolation. 80. The determination of the "existence" of an arbitration agreement, by contrast, is confined to examining the formal validity of the arbitration agreement or the arbitration clause itself, where only the arbitration agreement or clause, as the case may be has to be looked into. It does not require delving into the broader legal relationships emerging from the underlying contractual framework. Cox and Kings (I) (supra) specifically mandates a holistic appraisal of the principal and supplementary agreements in tandem with the parties' intention and conduct, thereby demanding an inquiry far more extensive than that required for the mere establishment of the existence of the arbitration agreement. 81. Thus, by no stretch of imagination can the issue of whether a non-signatory is bound by the arbitration agreement be characterized as one that is either significant or sine qua non to the determination of the arbitration agreement's "existence". The former necessitates a substantive examination of the entire contractual relationshi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has until now been independent of Section 7, its juxtaposition with Section 7(4)(b) case-law shows that the inquiry under both is premised on determining the mutual intention of parties to submit to arbitration. The mutual intention of the parties is discernible from their conduct in the performance of the contract and this inquiry is common to Section 7(4)(b) jurisprudence and the Group of Companies doctrine. Even the precedents on the doctrine, national and international, look to additional factors beyond the non-signatory being in the same group of companies, such as commonality of subject-matter, composite nature of transaction, and interdependence of the performance of the contracts to determine mutual intent." 83. The subsequent observations of P.S. Narasimha J. in his concurring opinion in Cox and Kings (I) (supra) are of significance, and read as under: - "55. Since the fundamental issue before the court or tribunal under Section 7(4)(b) and the Group of Companies doctrine is the same, the doctrine can be subsumed within Section 7(4)(b). Consequently, the record of agreement that evidences conduct of the non-signatory in the formation, performance, and terminat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in terms of Section 11 sub-section (6A) of the Act, 1996, is said to have been fulfilled, and the referral courts have no option but to refer the dispute to arbitration, notwithstanding whether the intention of a non-signatory as a veritable partly to such agreement is established or not. Apart from the pre-condition of examining the "existence" of an arbitration agreement, Section 11 of the Act, 1996 does not either contemplate or require determination of the "defined legal relationship" in terms of Section 7, nor does it mandate an assessment of the futuro intention of the parties, whether signatories or non-signatories, from the "express words" of the arbitration agreement. This limited inquiry does not extend to the substantive legal consequences or implications of such arbitration agreement. The question of whether a non-signatory is bound by the arbitration agreement is entirely separate from the question of its "existence." The latter is a relatively straightforward, procedural determination based on the formal presence of the agreement, whereas the former involves a substantive and contextual inquiry into the mutual intent of the parties, which may be examined by the arbi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....veritable party to the arbitration agreement or not, was described as an "extra layer of criteria" and that such an exercise is only to "discern the true "party" in interest". The relevant observations read as under: - "102. [...] Thus, the existence of a group of companies is a factual element that the court or tribunal has to consider when analysing the consent of the parties. It inevitably adds an extra layer of criteria to an exercise which at its core is preponderant on determining the consent of the parties in case of complex transactions involving multiple parties and agreements. 103. [...] the group of companies doctrine helps in decoding the layered structure of commercial arrangements to unravel the true intention of the parties to bind someone who is not formally a signatory to the contract, but has "assumed" the obligation to be bound by the actions of a signatory. This court explained the purport of the doctrine to discern the "true" party in interest [...]" (Emphasis supplied) 90. This is further fortified from the fact that, Cox and Kings (I) (supra) in its subsequent paragraphs, more particularly paragraph no. 164, while discussing the scope ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....who have not formally signed the arbitration agreement or the underlying contract containing the arbitration agreement may also intend to be bound by the terms of the agreement. Further, the requirement of a written agreement under Section 7 of the Act, 1996 does not exclude the possibility of binding non-signatory parties if there is a defined legal relationship between the signatory and non-signatory parties. Therefore, the issue as to who is a "party" to an arbitration agreement is primarily an issue of consent. Actions or conduct could be an indicator of the consent of a party to be bound by the arbitration agreement. This aspect is also evident from a reading of Section 7(4)(b) which emphasises on the manifestation of the consent of persons or entities through actions of exchanging documents." (Emphasis supplied) 92. Thus, what has been conveyed in so many words by Ajay Madhusudan Patel (supra) is that the inquiry into whether a non-signatory is bound by an arbitration agreement is not, in its essence, an inquiry into the formal or juridical existence of the arbitration agreement itself. It is an exercise of determining the functional concept of consent within the existi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....operly mitigated by leaving such question for the arbitral tribunal to decide, as such party can always take recourse to Section 16 of the Act, 1996 and thereafter in appeal under Section 37, and where it is found that such party was put through the rigmarole of arbitration proceedings vexatiously, both the tribunal and the courts, as the case may be, should not only require that all costs of arbitration insofar as such non- signatory is concerned be borne by the party who vexatiously impleaded it, but the arbitral tribunal would be well within its powers to also impose costs. III. Decision of Cox and Kings (II) and Ajay Madhusudan and the scope of Section 11 of the Act, 1996 for joinder of non-signatories to arbitration proceedings. 96. The aforesaid may be looked at from one another angle. This Court in Cox and Kings (I) (supra) also discussed the role and scope of jurisdiction of the referral courts and arbitral tribunals under Section(s) 11 and 16 of the Act, 1996, particularly in the context of binding a non-signatory to the arbitration agreement. It reiterated that under Section 11, the referral court only has to determine the prima-facie existence of an arbitration agr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and Kings (I) (supra) further observed that in case of joinder of non- signatory parties to an arbitration agreement, the referral court will be required to prima-facie rule on the existence of the arbitration agreement and whether the non-signatory is a veritable party to the arbitration. However, it further clarified that, due to the inherent complexity in determining whether the non- signatory is indeed a veritable party, the referral court should leave this question for the arbitral tribunal to decide as it can delve into the factual and circumstantial evidence along with its legal aspects for deciding such an issue. The relevant observations read as under: - "163. [...] Thus, when a non-signatory person or entity is arrayed as a party at Section 8 or Section 11 stage, the referral court should prima facie determine the validity or existence of the arbitration agreement, as the case may be, and leave it for the arbitral tribunal to decide whether the non signatory is bound by the arbitration agreement. 164. In case of joinder of non-signatory parties to an arbitration agreement, the following two scenarios will prominently emerge: first, where a signatory part....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ide, after taking into consideration the evidence adduced before it by the parties and the principles enunciated under Cox and Kings (I) (supra). 100. Similarly, in Ajay Madhusudan (supra) it was held that since a detailed examination of numerous disputed questions of fact was required for determining whether the non-signatory is a veritable party to the arbitration agreement, the same cannot be examined in the limited jurisdiction under Section 11 of the Act, 1996 as it would tantamount to a mini trial. Accordingly, the arbitral tribunal was found to be the appropriate forum for deciding the said issue on the basis of the evidence that may be adduced by the parties. 101. This approach is necessitated by the inherent complexity involved in determining whether a non-signatory qualifies as a veritable party to the arbitration agreement, a determination that hinges upon a multiplicity of factual aspects and demands a high threshold of satisfaction based on a cumulative and holistic evaluation of the entire factual matrix. Such an intricate and evidence-driven exercise makes the arbitral tribunal the most appropriate forum to adjudicate the matter, as it possesses the institution....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... existence of a valid arbitration agreement between the parties, yet it referred the dispute along with the issue of existence of the arbitration agreement to the arbitral tribunal to decide after conducting a detailed examination of documentary evidence and cross-examination of witnesses. Thus, even where the referrals courts either find that there is no arbitration agreement in "existence" or as a logical sequitur never embarked upon determining such "existence", for whatever reasons, the matter should still nevertheless be referred to arbitration. 104. It is not difficult to comprehend why the above approach, endorsed in Pravin Electricals (supra) ought to be adopted and followed. The rationale behind this, as explained in Krish Spinning (supra), is that there exists no right to appeal under the Act, 1996 against an order passed by the referral court under Section 11 for either appointing or refusing to appoint an arbitrator. Any refusal for appointment runs the risk of leaving the claimant in a situation wherein it does not have any forum to approach for the adjudication of its claims, if it Section 11 application is rejected. However, on the contrary, appointment of an arbi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st possible stage to prevent any grave prejudice being occasioned to such non-signatory, makes all possible efforts - whether by way of imposition of costs or through other appropriate measures -to mitigate and deter the possibility of any abuse by the signatories who might seek to coerce or arm twist the non-signatory by frivolously or vexatiously subjecting it to arbitration, and lastly, that its decision is grounded in the factors and threshold requirements laid down in Cox and Kings (I) (supra) as explained by us. 108. Moreover, one must not lose sight of the fact that, the provision of Section 11 of the Act, 1996 only comes into the picture where there has been a failure in appointment of an arbitrator. Could it be said that where, the signatories have consensually appointed an arbitrator in terms of the arbitration agreement, then in such cases, the arbitral tribunal that has been so constituted, would not be empowered to implead a non-signatory as-well, merely because, the referral court did not either determine the 'existence of the arbitration agreement qua the non-signatory' or did not leave such question for determination of the arbitral tribunal, even though no such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... powers, free from any statutory prohibition. 110. The aversion towards recognizing such power of the arbitral tribunal to implead a non-signatory, that previously prevailed, had stemmed from two major misconceptions - a lack of power being vested on the arbitral tribunal and a corresponding entrustment of this duty to implead a non-signatory to the referral courts alone. (i) First, the initial understanding of Chloro Controls (supra) that the legal basis for the doctrine of 'group of companies' and other alike principles for determining mutual consent was only under the provisions which empowered the courts to make a reference to arbitration i.e., under Section(s) 8 and 45 of the Act, 1996, was construed to mean that only the courts have the power to resort to and apply the aforesaid principles for determining mutual consent. Similarly, the unaltered general definition of "party" under Section 2(1)(h) of the Act, 1996 as opposed to the wide meaning assigned to the term "party" under Section(s) 8 and 45 of the Act, 1996, was misconstrued as a positive indicium that an arbitral tribunal lacks the power to implead a non-signatory as the scope and exercise of its jurisdict....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ine, when determining whether a non-signatory may be bound by an arbitration agreement. 113. It is well within the jurisdiction of the Arbitral Tribunal to decide the issue of joinder and non-joinder of parties and to assess the applicability of the Group of Companies Doctrine. Neither in Cox and Kings (I) (supra) nor in Ajay Madhusudhan (supra), this Court has said that it is only the reference courts that are empowered to determine whether a non-signatory should be referred to arbitration. The law which has developed over a period of time is that both 'courts and tribunals' are fully empowered to decide the issues of impleadment of a non-signatory and Arbitral Tribunals have been held to be preferred forum for the adjudication of the same. 114. In the case of Ajay Madhusudhan (supra), this Court, placing reliance on Cox and Kings (I) (supra), has expressly held that Section 16 is an inclusive provision which comprehends all preliminary issues touching upon the jurisdiction of the arbitral tribunal and the issue of determining parties to an arbitration agreement goes to the very root of the jurisdictional competence of the arbitral tribunal. 115. The case of Ajay Madhusud....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to implead them as parties to the arbitration proceedings in exercise of its jurisdiction under Section 16 of the Act, 1996. The relevant observations read as under: - "24. As briefly stated above, the determination of who is a party to the arbitration agreement falls within the domain of the arbitral tribunal as per Section 16 of the ACA. Section 16 embodies the doctrine of kompetenz-kompetenz, i.e., that the arbitral tribunal can determine its own jurisdiction. The provision is inclusive and covers all jurisdictional questions, including the existence and validity of the arbitration agreement, who is a party to the arbitration agreement, and the scope of disputes referrable to arbitration under the agreement. Considering that the arbitral tribunal's power to make an award that binds the parties is derived from the arbitration agreement, these jurisdictional issues must necessarily be decided through an interpretation of the arbitration agreement itself. Therefore, the arbitral tribunal's jurisdiction must be determined against the touchstone of the arbitration agreement. 25. This view finds support in the jurisprudence and practice of international commercial a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 39. [...] Since they are parties to the underlying contract and the arbitration agreement, the arbitral tribunal has the power to implead them as parties to the arbitration proceedings while exercising its jurisdiction under Section 16 of the ACA and as per the kompetenz-kompetenz principle." (Emphasis supplied) 117. As observed in Adavya Projects (supra), Gary Born in his seminal work; the International Commercial Arbitration, Vol 2 (3rd edn, Kluwer Law International 2021) as held that consolidation and joinder/intervention may be ordered by an arbitral tribunal, arbitral institution, as long as the same is pursuant to parties (unanimous) agreement thereto. He has observed that "In almost all cases, the approach taken by national law is that consolidation and joinder/intervention may be ordered by an arbitral tribunal, arbitral institution, or a national court, but only pursuant to the parties' (unanimous) agreement thereto. If the parties have not so agreed, both the tribunal and local courts will lack the authority under national law to order either consolidation or joinder/intervention." Since the aspect of joinder of a party to the arbitration agreement, either signa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Act, 1996, even if there is no explicit statutory provision recognizing such power of impleadment, it nevertheless should not only be permitted but also required, as long as it is exercised within the confines of the intention of the parties and the scope of arbitration agreement, which is exactly what has also been laid down in so many words by Cox and Kings (I) (supra). 119. He says that, more often than not arbitration agreements, particularly for ad hoc arbitration "will neither expressly preclude nor expressly authorize consolidation". But, "there is no reason, however, that an agreement authorizing (or forbidding) consolidation or joinder/intervention cannot be implied ... various aspects of an arbitration agreement are routinely implied (such as confidentiality, a tribunal's power to order provisional relief or disclosure, the choice of applicable law and the like". He accordingly, advocates that "The same approach can, and indeed must, be taken to questions of consolidation and joinder/intervention" where the "questions of implied agreement to consolidation and joinder/intervention depend in substantial part on the structure of the parties' contractual relations and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....grant effective. xxx xxx xxx 102. As is clear, the doctrine of implied powers is invoked to effectuate the final power. Where it is impossible to effectuate the final power unless something not authorized in express terms be also done, in such an event, the power will be supplied by necessary intendment as an exception. The exceptional situation is to advance the object of the legislation under consideration and to avoid grave hardship." 122. Reliance was also placed on the decision of Savitri v. Govind Singh Rawat, reported in (1985) 4 SCC 337, wherein it was held that "Whenever anything is required to be done by law and it is found impossible to do that thing unless something not authorised in express terms be also done then that something else will be supplied by necessary intendment. Such a construction though it may not always be admissible in the present case however would advance the object of the legislation under consideration. A contrary view is likely to result in grave hardship to the applicant, who may have no means passed to subsist until the final order is passed." It further, observed that "Every court must be deemed to possess by necessary inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, as long as they were a veritable party and found to have impliedly consented to such agreement. The legal basis of these principles were traced to not only the object of the Act, 1996, but to the substantive provisions of Section(s) 2(1)(h) and 7 thereto. However, mere recognition of this principles which ultimately seeks to make the Indian arbitration law more responsive to the contemporary requirements, would be a farce, if the power to actually effectuate such principles, is not recognized, merely due to the absence of any explicit provision in this regard. We are of the considered opinion, that recognition of the power of joinder or impleadment of a non-signatory by an arbitral tribunal is a necessary intendment of the express provisions of Section(s) 2(1)(h) and 7 and the overall scheme and object of the Act, 1996 as well as the fundamental cannons of the law of arbitration of providing an effective alternative dispute resolution mechanism. 127. Thus, even in the absence of an express provisions in the Act, 1996 empowering the arbitral tribunal to implead or join a party who is otherwise bound by the arbitration agreement, the arbitral tribunal does possess such power by....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... include such things as the existing state of the law and the mischief which, by legitimate means such as reference to reports of law reform bodies, one may discern the statute was intended to remedy. 131. If close consideration of a statutory text in its wider context and by reference to its purpose establishes that Parliament has deliberately chosen words to provide for its application to new circumstances and developments then the application of the 'always speaking' approach is judicially required. The interpretive process with the 'always speaking' approach is, in essence, to put the cart before the horse. 132. Section 16 of the Act, 1996, which enshrines the principle of "kompetenz- kompetenz" could be said to be one such provision when seen in light of the object of the Act, 1996, which requires the courts to adopt a pragmatic and 'always speaking' approach in its interpretation. 133. Section 16 of the Act, 1996 empowers the arbitral tribunal to rule on its own jurisdiction. The policy rationale underlying this provision is twofold: first, to respect and uphold the intention of the parties to resolve their disputes through arbitration by empowering the forum they ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al to allow for the joinder or intervention of third parties to an arbitration is limited" to the arbitration agreement and parties bound by it. 137. Adavya Projects (supra) has observed that Section 16 of the Act, 1996 is inclusive and covers all jurisdictional questions, including the existence and validity of the arbitration agreement, who is a party to the arbitration agreement, and the scope of disputes referrable to arbitration under the agreement and thus, the arbitral tribunal's jurisdiction must also be determined against the touchstone of the arbitration agreement. 138. It is often loosely said that an arbitral tribunal does not have any jurisdiction except what has been conferred by the parties. While the same may on the surface be correct, however much significance of an arbitral tribunal's jurisdiction often finds itself lost and obscured due to the semantics of the above statement. The misconception arises when the acts of party is conflated with the source of legal authority. 139. The present case is a classic textbook example of this misconception. What has ben argued by the appellants herein in so many words, is that since it was never a party to the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 142. In other words, it is not the tribunal's subsequent constitution through procedural steps - whether by the parties themselves or by the intervention of a court under Section 11 of the Act, 1996 - that bestows jurisdiction upon it. Rather, such procedural mechanisms merely activate or operationalise a jurisdiction that is already in existence by virtue of the arbitration agreement. The arbitral tribunal, upon being constituted, steps into an already established legal framework of jurisdiction, rooted in the consensual and binding nature of the arbitration agreement. The arbitral tribunal is not a creature of mere procedural will but of substantive legal consequence flowing from the arbitration agreement. To hold otherwise would be to invert the fundamental cannons of law of arbitration which treats the arbitration agreement as the cornerstone of arbitral competence. 143. It was in this background, that Adavya Projects (supra) held, and rightly so, that the jurisdiction of the arbitral tribunal to implead a person depends on whether such person is a party to the arbitration agreement. c. Requirement of Notice of Invocation under Section 21 of the Act, 1996. 144. At....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mentioned in the notice. The language in which the said provision is couched is neither prohibitive or exhaustive insofar as reference of any other disputes which although not specified in the notice of invocation yet, nonetheless falls within the scope of the arbitration agreement. The term "particular dispute", does not mean all disputes, nor does it confine the jurisdiction of the arbitral tribunal which is said to be one emanating from the 'arbitration agreement' to only those disputes mentioned in the notice of invocation, as it would tantamount to reading a restriction into the jurisdiction of the arbitral tribunal to the bounds of the notice of invocation instead of the arbitration agreement. Thus, there is no inhibition under Section 21 of the Act, 1996 for raising any other dispute or claim which is covered under the arbitration agreement in the absence of any such notice. Section 21 is procedural rather than jurisdictional - it does not serve to create or validate the arbitration agreement itself, nor is it a precondition for the existence of the tribunal's jurisdiction, but merely operates as a statutory mechanism to ascertain the date of initiation for reckoning lim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otice of invocation, we do not think so. We say so because, the requirement for providing the points at issue and the relief or remedy sought that exists in sub-section (1) of Section 23 of the Act, 1996 is patently absent in Section 21 of the Act, 1996, which clearly shows that the scope and object of these two provisions are at variance to each other. Further this, sub-section does not stipulate either explicitly or implicitly, that such "claim" must be the same or in tandem with the "particular dispute" in respect of which the notice of invocation was issued under Section 21 of the Act, 1996. This distinction in terminology is neither incidental nor redundant; rather, it reflects a conscious legislative design to demarcate the procedural objective of Section 21 from the substantive function served by Section 23. Unlike Section 23, Section 21 does not require any articulation of the relief sought or the framing of issues-its sole purpose is to indicate when arbitration is deemed to have commenced, for the limited purpose of computing the limitation period. 148. This is further fortified from the fact that nowhere does the Act, 1996 lay down any specific format or form of notic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eking such amendment or supplement. What can be discerned from the above is that there is no restriction whatsoever, in the plain words of Section 23 of the Act, 1996, which would be indicative of an inhibition in raising those claims or counter-claims etc., that have no bearing with the notice of invocation under Section 21 of the Act, 1996. 150. The language used in Section 23 of the Act, 1996 makes no reference whatsoever, either explicitly to the provision of Section 21 or the particular words used thereunder, that would be suggestive of any correlation between the two provisions. On the contrary, the singular ground that has been mentioned in Section 23 sub-section (3) upon which an amendment or supplement of claim may be rejected by the arbitral tribunal i.e., if it is deemed inappropriate due to delay, is a positive indicium that that no restriction can be read into the scope of claims that may be raised in the statement of claim or counter-claim beyond what was stipulated in the notice of invocation under Section 21 of the Act, 1996. Any limitation or restriction on the scope of a statement of claim or a counter-claim as the case may be, has to be understood not from the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act is of great significance. Even Section 43(1) of the 1996 Act provides that the Limitation Act, 1963 shall apply to the arbitration as it applies to proceedings in court. Sub-section (2) thereof provides that for the purpose of the said section and the Limitation Act, 1963, an arbitration shall be deemed to have commenced on the date referred to in Section 21. 29. For the purpose of the Limitation Act an arbitration is deemed to have commenced when one party to the arbitration agreement serves on the other a notice requiring the appointment of an arbitrator. This indeed is relatable to the other purposes also, as, for example, see Section 29(2) of (English) Arbitration Act, 1950. 30. The date when arbitration proceeding commences would depend upon various factors and the purposes which it seeks to achieve. It may be for the purpose of attracting the Limitation Act or for the purpose of time bar clauses or for the rules applicable therefor, as, for example, the rules of the International Chamber of Commerce. 31. The date of commencement of an arbitration also affects the position under the conflict of laws when the proper law of the contract is one law....
X X X X Extracts X X X X
X X X X Extracts X X X X
....4. The aforesaid observations of Milkfood (supra) when read in conjunction with the other observations made therein, more particularly paragraph 32, shows that this Court consistently held that the purpose of Section 21 of the Act, 1996 is for the determination of various time elements in an arbitration. 155. In State of Goa v. Praveen Enterprises reported in (2012) 12 SCC 581, this Court elucidated the limited but important function of Section 21 of the Act, 1996. It held that, in the absence of any contrary stipulation in the arbitration agreement, the purpose of a notice under Section 21 is only to demarcate the commencement of arbitral proceedings with respect to a particular dispute. The issuance of such notice serves primarily to establish a definite point in time when the arbitral proceedings are in the eyes of law said to have commenced for the purpose of calculating and reckoning the period of limitation for the substantive claims therein. It was further held that once arbitral proceedings have commenced, the claimant is not precluded from raising additional claims that were not mentioned in the original notice of invocation under Section 21 of the Act, 1996. Such claim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1963 is made applicable to arbitrations, there is a need to specify the date on which the arbitration is deemed to be instituted or commenced as that will decide whether the proceedings are barred by limitation or not. Section 3 of the Limitation Act, 1963 specifies the date of institution for suit, but does not specify the date of "institution" for arbitration proceedings. Section 21 of the Act supplies the omission. But for Section 21 there would be considerable confusion as to what would be the date of "institution" in regard to the arbitration proceedings. It will be possible for the respondent in an arbitration to argue that the limitation has to be calculated as on the date on which statement of claim was filed, or the date on which the arbitrator entered upon the reference, or the date on which the arbitrator was appointed by the court, or the date on which the application was filed under Section 11 of the Act. In view of Section 21 of the Act providing that the arbitration proceedings shall be deemed to commence on the date on which "a request for that dispute to be referred to arbitration is received by the respondent" the said confusion is cleared. Therefore, the purpose ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f filing of the counterclaim." (Emphasis supplied) 156. In Adavya Projects (supra) this Court held that the purpose of a notice under Section 21 of the Act, 1996 is only to fulfilled the various time-related objects pertaining to the arbitration and the arbitration agreement. The relevant observation reads as under: - "11. It is clear that by fixing the date of commencement of arbitral proceedings by anchoring the same to a notice invoking arbitration, Section 21 of the ACA fulfils various objects that are time-related. The receipt of such notice is determinative of the limitation period for substantive disputes as well as the Section 11 application, and also the law applicable to the arbitration proceedings." (Emphasis supplied) 157. Adavya Projects (supra) explained the aforesaid object of a notice under Section 21 of the Act, 1996 in four parts: - (i) First, that the plain language of Section 21 of the Act, 1996 does not expressly mandate the claimant to send a notice invoking arbitration to the respondents, instead what it mandates is the receipt of such notice for a 'commencement of arbitral proceedings" in terms of the Act, 1996, unless agreed ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es: (i) When the arbitral proceedings are governed by a law that is different from the proper law of the contract, the governing law applies only after the arbitral proceedings have commenced, as held in Milkfood Ltd (supra). And, (ii) Section 85(2)(a) of the ACA provides that the Arbitration Act, 1940 and Foreign Awards (Recognition and Enforcement) Act, 1961 will apply to arbitral proceedings that commenced prior to the ACA coming into force, unless otherwise agreed by the parties. Hence, the date of invoking arbitration is necessary to determine which arbitration law applies to the proceedings as per the decisions in Milkfood Ltd (supra) and Geo-Miller & Co (P) Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd. Similarly, the applicability of amendments to the ACA to arbitral proceedings is determined by reference to the date on which such proceedings commenced as per Section 21." (Emphasis supplied) (iv) Fourthly, in terms of Nortel Networks (supra), it is also relevant for determining the 'failure' on part of any party to the arbitration agreement in appointment of an arbitrator to avail the remedy under Section 11 of the Act, 1996 and for the purpose of reckoni....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aim that is raised before the arbitral tribunal for the first time will be calculated differently vis-a-vis claims raised in the notice. However, non inclusion of certain disputes in the Section 21 notice does not preclude a claimant from raising them during the arbitration, as long as they are covered under the arbitration agreement. Further, merely because a respondent did not issue a notice raising counter-claims, he is not precluded from raising the same before the arbitral tribunal, as long as such counter-claims fall within the scope of the arbitration agreement. 14. A similar rationale may be adopted in this case as well, especially considering the clear purpose served by a Section 21 notice. Extending this logic, non-service of the notice under Section 21 and the absence of disputes being raised against respondent nos. 2 and 3 in the appellant's notice dated 17.11.2020 do not automatically bar their impleadment as parties to the arbitration proceedings. xxx xxx xxx 21. [...] it is clear that not being served with a Section 21 notice and not being made a party in the Section 11 application are not sufficient grounds to hold that a person cannot be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nable, or if there are counter- claims; (iii) For arriving at a consensus for appointment of arbitrators under the arbitration agreement; (iv) For parties to inform each other about their proposed arbitrator, to enable the other party to raise any objections/issues regarding qualification; (v) To trigger the court's jurisdiction under Section 11 in case the appointment procedure fails; and (vi) To fix the date of commencement of arbitration for the purpose of Section 43(1). 30.1 The decision in Alupro Building Systems (supra) has been relied on by the High Court in its impugned order to hold that the notice under Section 21 is a mandatory requirement before a person can be made party to arbitral proceedings. 30.2 While we agree with the decision insofar as holding that the notice under Section 21 is mandatory, unless the contract provides otherwise, we do not agree with the conclusion that non-service of such notice on a party nullifies the arbitral tribunal's jurisdiction over him. The purpose of the Section 21 notice is clear - by fixing the date of commencement of arbitration, it enables the calculation of limitation and it is a necessary precondition for filin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce...'. Further, 'all the correspondence is in respect of the contract with ASF and ASF Group of Companies. There is no differentiation between BCSPL, AISPL, or ABPL, all of which are part of the ASF Group.'. In arriving at its conclusion, the High Court correctly applied the test laid down in Cox and Kings Ltd. (I) (supra), taking note of the communications exchanged, conduct of the ASF Group officials, active involvement of the appellant with contractual obligations, intertwined nature of the agreements involving BCSPL, AISPL, and ABPL and the composite business operations. 163. The conclusion reached by the Arbitral Tribunal and the High Court is premised on the following: - (i) SPCPL had made out a case supported by material, which cannot be rejected at the preliminary stage, that AISPL and ABPL are inextricably linked to and operationally holding control over the performance of the Works Contract and Settlement Agreement which are the subject matter of the arbitral proceedings. (ii) SPCPL had rightly invoked the doctrine of Group of Companies to justify inclusion of the non-signatories. (iii) Having regard to the chronology of events leading to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reement. Emails have been exchanged between SPCPL and ASF Group as a whole, where admission of liability on the part of ASF Group to make payment under the Settlement Agreement stands established. Clause 12 of the Settlement Agreement makes the dispute resolution clause of the Works Contract applicable in the present case. 166. In Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia (P) Ltd., reported in (2015) 13 SCC 477, this Court has held that signature is not a formal requirement under Section 7(4)(b) or 7(4)(c) or under Section 7(5) of the 1996 Act. This position is further supported by the definition of a 'party' in Section 2(h) of the 1996 Act to include a 'party to an arbitration agreement' and not a signatory to an arbitration agreement. Section 7 of the 1996 Act also does not stipulate a qualification that a party must be a signatory to the arbitration agreement or the principal agreement containing the arbitration clause. This was also reiterated in Cox and Kings Ltd. (I) (supra). 167. Even the non-issuance of Section 21 notice on the appellant cannot be said to be fatal to its impleadment. The principle of consensus ad idem for referring disputes to arbitral trib....