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Arbitration as a mechanism of dispute resolution is premised on the principle of the party autonomy, which can be enforced only against the signatories to an agreement. However, challenges arise when there is a non-signatory, who, though is not a party to the arbitration agreement, but shares a commercial relationship and/or is involved in the transaction in any capacity with the signatories. In such cases, it becomes difficult for the Courts and Tribunal to determine whether a party despite being a non-signatory to an arbitration agreement, can still be impleaded as a party in an arbitration.
LEGAL FRAMEWORK
The Arbitration and Conciliation Act, 1996 (“the Act”) does not contain any specific provision that permits or governs the impleadment of a non-signatory to an arbitration proceeding. Nevertheless, certain provisions of the Act are relevant for understanding such questions which have arisen in this respect:
The jurisprudence on this issue has significantly evolved through a series of landmark judgments. The Hon’ble Supreme Court of India, recently in the matter of ASF Buildtech vs Shapoorji Pallonji & Co. Pvt. Ltd. - (2025) SCC Online SC 1016 (“ASF”), was once again faced with the question, whether a non-signatory could be directed by the arbitral tribunal, to be impleaded as a party in a pending arbitration. However, before delving into the details of the abovementioned case, it is important to discuss the developments that has taken place on this issue prior to passing of the above judgment.
JUDICIAL PRECEDENTS
One of the most important judgments, where Supreme Court of India dealt with the issue of impleadment of a non-signatory was Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. - (2013) 1 SCC 641, (“Chloro Controls”). In this case Supreme Court of India discussed in detail the provisions contained under Section 8 & 45 of the Act, particularly, the expression used in Section 45 of the Act i.e., “parties or any person claiming through or under him” and the expression used in Section 8 i.e., “parties”. The Court while dealing with the question relating to referring the parties to arbitration in terms of Section 45 of the Act, interpreted the difference in the language appearing in the above provisions. In this case, various agreements were executed for a composite transaction and the ‘mother agreement’ referred to all the ancillary agreements. The Court, relying upon the expression “parties or any person claiming through or under him” observed that the scope of Section 45 was much wider than Section 8 and thus, even a non-signatory could be made a party to an arbitration. It was further held that in exceptional cases, involving composite transaction with multi-party agreements between various related companies, even a non-signatory could be impleaded in an arbitration. The Court invoked “Group of Companies” doctrine and concluded that when there was a clear intention of parties to bind both, the signatory as well as the non-signatory to the arbitration agreement, even a non-signatory would be bound by the arbitration agreement.
In light of the observations made in Chloro Control (supra), the 246th Law Commission in its Report, recommended amendment in Section 2(1)(h) and Section 8 of the Act. They suggested to insert the phrase “person claiming through or under such party” in both the abovementioned provisions, to make it in consonance with Section 45 of the Act. Considering the report, the Legislature introduced the Arbitration and Conciliation (Amendment) Act, 2015, wherein Section 8 of the Act was amended to “a party to an arbitration agreement or any person claiming through or under him” and the scope of the term ‘party’ was expanded. However, Section 2(1)(h) of the Act, which defines the term ‘party’, was kept unamended for some reasons best known to the legislature.
Subsequently, in Oil and Natural Gas Corporation Ltd. v. Discovery Enterprises Pvt. Ltd. - (2022) 8 SCC 42, the Supreme Court of India further explained the circumstances under which an arbitration agreement could be enforced even against a non-signatory. The Court laid down the following cumulative factors that should be considered while determining whether a Company within a group of companies is bound by the arbitration agreement:
Post amendment of the Act, Supreme Court of India considered the validity and applicability of “Group of Companies” doctrine in Cox and Kings Limited v. SAP India Private Limited - 2023 SCC Online SC 1634. The Court disagreed with the judgment of Chloro Control (supra) and observed that it was not right to include a non-signatory as a party in an arbitration by infusing the Group of Companies doctrine into the expression “claiming through or under” as mentioned in Section 45 of the Act. The Court also referred the judgment of Discovery Enterprises (supra) and held the following:
The question of binding a non-signatory again came up for examination in Ajay Madhusudan Patel & Ors v Jyotrindra S. Patel & Ors. - (2024) SCC Online SC 2597, where Supreme Court after a detailed discussion again upheld the principles laid down in Discovery Enterprises (supra), for determining whether a non-signatory can be said to have consented to be bound by the arbitration agreement. It was further held that the intention of a non-signatory to be bound by the arbitration agreement has to be understood from the circumstances surrounding the participation of the non-signatory party at various stages including the negotiation, performance and/or termination of the contract containing the arbitration agreement.
The case of ASF (supra) is the most recent judgment on the importance of application of Group of Comapanies doctrine and the circumstances under which a non-signatory to an arbitration agreement can be impleaded in an arbitration between the signatories. However, in addition to the above issue, this judgment also dealt with an important legal question, whether an arbitral tribunal has the necessary powers to implead a non-signatory as a party in a pending arbitration.
This case involved a works contract, executed between two companies i.e., Black Canyon SEZ Pvt. Ltd. (“BCSPL”) and Shapoorji Pallonji & Co. Pvt. Ltd. (“SPCPL”), which contained an arbitration clause. Subsequently, certain disputes arose between the parties and a settlement agreement was executed between the abovementioned two entities. However, once again disputes arose and BCSPL initiated arbitration against SPCPL. SPCPL in addition to filing a counterclaim against BCSPL, also filed counterclaims against two other companies namely ASF Buildtech Pvt. Ltd. (“ABPL”), and ASF Insignia SEZ Pvt. Ltd. (“AISPL”), which were related companies of BCSPL. It was contended that the Group of Companies doctrine was applicable in this case as all the above companies were part of the ASF Group. SPCPL further argued that all the aforesaid entities being part of the ASF group were bound by the arbitration agreement contained in the works contract. The three entities filed separate applications before the arbitral tribunal under Section 16 of the Act, challenging the jurisdiction of the Sole Arbitrator to entertain SPCPL’s counterclaims against ABPL and AISPL. It was contended that there was no arbitration agreement between SPCPL and ABPL or AISPL and thus, they could not be impleaded as parties to the arbitration. The aforesaid applications were rejected by the Sole Arbitrator vide two separate orders, holding that the role and conduct of ABPL or AISPL cannot be determined without impleading them as parties to the arbitration. The appeals filed against the above orders, were rejected by Delhi High Court holding that the arbitrator rightly concluded that the ASF group had assumed the responsibility for payments to be made to SPCPL and for implementation of the Project, as evidenced by the comfort letter and various emails exchanged between the parties. The Court finally directed that the claim filed by BCSPL and counterclaims filed by SPCPL be treated as a single arbitral proceeding. Aggrieved by the aforesaid order, ABPL challenged the same before Supreme Court of India.
In light of the above factual background, the Supreme Court of India framed the question of law, “Whether an arbitral tribunal has the authority or power to implead or join a non-signatory to the arbitration agreement as a party to the arbitration proceeding?”
The Court discussed all the judgments mentioned above in this article and examined the basic notion of the Act which gives primacy to party autonomy besides examining the extent of discretion available to an arbitral tribunal under the principle ‘kompetenz-kompetenz’. Additionally, it was also contended that since no arbitration notice under Section 21 of the Act was issued either to ABPL or to AISPL, thus, they could not have been impleaded as parties to the arbitration proceeding.
The Court dismissed the appeal and upheld the judgment of High Court. It was observed that the correspondence was exchanged between SPCPL and ASF group as a whole and thus, admission of liability by ASF group to honour its obligations under the Settlement Agreement stood established. The Court further observed that since an arbitral tribunal was competent to determine whether there is an arbitration agreement between the parties, it was very well capable and competent to identify and implead a non-signatory to the arbitration agreement as well. The Court also reaffirmed the principle laid down in the Cox and Kings (supra), that in terms of Section 7 of the Act, it was not mandatory for a party to be a signatory to an arbitration agreement or the principle agreement containing the arbitration clause, in order to be impleaded as a party in an arbitration. The Court also rejected the contention regarding non issuance of notice under Section 21 of the Act and held that such requirement is only with respect to referring a dispute to arbitration by the signatories to the arbitration agreement and not to the non-signatories who were sought to be impleaded in an arbitration proceeding while relying upon the judgment of Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd. & Ors. – 2025 SCC Online SC 806.
The Court also urged the Department of Legal Affairs, Ministry of Law and Justice to look into this issue and amend the Arbitration and Conciliation Bill, 2024 to include provisions concerning impleadment of non-signatories, so that all the procedural uncertainty and ambiguity existing as on date, could be removed from the Act, making it at par with the current global arbitration law.
All the above judgments primarily deal with the question of impleadment of a company/corporate entity/ corporation as a party in an arbitration, despite being a non-signatory to the arbitration agreement. However, there can also be a situation where an individual is being sought to be impleaded in an arbitration despite being a non-signatory to the arbitration agreement. This question has been dealt with by Supreme Court of India in A.C. Chokshi Sharebroker Pvt. Ltd. v. Jatin Pratap Desai & Anr. – (2025) 5 SCC 321. In this case, a husband and his wife had two separate share trading accounts with Appellant company i.e., the sharebroker. During the course of the share trading in both the accounts there was a certain credit balance in husband’s account and some debit balance in wife’s account. The sharebroker set off the credit balance in husband’s account with debit balance in wife’s account and claimed the balance amount against both of them by invoking the arbitration under client registration agreement executed with wife. The maintainability of the arbitration against husband was challenged on the ground that both the accounts were separate accounts and thus, no claim could be made against the husband. It was also contended that since arbitration was invoked under client registration agreement of the wife, therefore, the husband being a separate legal entity could not be impleaded as a party in the arbitration between the sharebroker and the wife. The award was passed in favour of the sharebroker with a categorical finding by the Tribunal that there was clearly an oral agreement between the husband and the sharebroker that both husband and wife would be jointly and severally liable for the transactions taking place in both the accounts. Accordingly, it was held that sharebroker’s claim was maintainable against both of them. The matter reached up to the Supreme Court whereby, the Court once again relied upon the judgment of Discovery Enterprises (Supra) and upheld the arbitral award passed in favour of the Appellant i.e., the sharebroker. It was once again reiterated that while examining the question of impleadment of a non-signatory in an arbitration, the conduct of the party as well as the composite nature of the transaction and other factors explained above must be kept in mind.
From the above legal position, it can be seen that despite passing of so many judgments, there is no straight jacket formula which can be adopted to determine, whether a non-signatory intended to be bound by the arbitration agreement or when a non-signatory can be impleaded as a party to an arbitration. However, various tests and factors have been laid down by the Courts for the aforesaid purpose which should be applied, depending upon the facts and circumstances of each case.
CONCLUSION
Despite several landmark judgments such as Chloro Controls, Discovery Enterprises, Cox & Kings and ASF Buildtech, the issue of impleadment of non-signatories to arbitration proceeding remains unsettled under the statute. While the judiciary has attempted to clarify and evolve jurisprudence through the application of various doctrines viz Group of Companies doctrine, doctrine of alter ego, piercing the corporate veil etc., the absence of a clear statutory framework under the Act continues to pose challenges in cases involving complex transactions involving multiple parties. Although, the Act has undergone numerous amendments to facilitate efficient dispute resolution, it still suffers from procedural ambiguities. Notably, the Arbitration and Conciliation Bill, 2024, which aimed at modernising the legal framework, remains silent on the critical issue of impleadment of non-signatories to an arbitration proceeding.