ASF BUILDTECH PRIVATE LIMITED v. SHAPOORJI PALLONJI AND COMPANY PRIVATE LIMITED

Citation: [2025] 5 S.C.R. 1565, 2025 INSC 616

Court: Supreme Court of India

Bench: J.B. Pardiwala and R. Mahadevan, JJ.

Judgment text

SUPREME COURT OF INDIA ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited Civil Appeal No. 5823 of 2025 [2025] 5 S. C. R. 1565 : 2025 INSC 616 ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited (Civil Appeal No. 5823 of 2025) 02 May 2025 [J. B. Pardiwala* and R. Mahadevan, JJ. ] Issue for Consideration 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 proceedings. Headnotes† Arbitration and Conciliation Act, 1996 - 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 proceedings: Held: Arbitral Tribunal has the authority and power to implead Non-Signatories to the arbitration agreement on its own accord.

[Paras 109-168] Arbitration and Conciliation Act, 1996 - Whether the Arbitral Tribunal have the power to implead a non-signatory to the Arbitration Agreement - Contradictory views of different High Courts on the subject - Significant change after the decision of a five Judge Bench of this Court in Cox and Kings (I): Held: Even after the decision of this Court in Chloro Controls 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 Cox and Kings (I), that the position of law as regards the power of an arbitral tribunal to implead a non-signatory underwent a significant change, whereby many High Courts which had earlier refused to recognize such power of the arbitral tribunal, came around to recognizing it.

[Para 28] * Author 1566 Arbitration and Conciliation Act, 1996 - 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 - Discussed.

[Paras 29- 40] Arbitration and Conciliation Act, 1996 - Decision of Cox and Kings (I) and the Judicial Rectification of the first misconception by Chloro Controls: Held:Cox and Kings (I) held that the approach adopted by Chloro Controls, so far as infusing or reading the doctrine of 'Group of Companies' into the expression "a party to an arbitration agreement or any person claiming through or under him" is concerned, was incorrect - Cox and Kings (I) made a significant shift from the original understanding and legal basis of the doctrine of 'group of companies' and other allied principles of determining mutual consent in Chloro Controls - It held that the legal basis for the application of the 'Group of Companies' doctrine lies in the very definitions of "party" and "arbitration agreement" under Section(s) 2(1)(h) and Section 7, respectively, and not in the expression "claiming through or under" in Section(s) 8 and 45 of the Act, 1996 - Since both the aforesaid provisions i. e.

Section 2(1)(h) read with Section 7 of the Act, 1996 are not confined in their scope to either the courts or the arbitral tribunal, and rather exists ubiquitously on the statute book and is common or indifferent to both the courts and arbitral tribunals, there cannot be any gainsaying that even the arbitral tribunal now after the decision of Cox and Kings (I) could be said to be clothed with the power to take recourse to the various principles for determining mutual consent, and thereby implead a non-signatory to the arbitration, if such person is found to be bound to the arbitration agreement. [Paras 42, 44, 46] Arbitration and Conciliation Act, 1996 - Decision of Krish Spinning and the Judicial Rectification of the second misconception emanating from SBP & Co. : Held: The understanding which stemmed from SBP Co.

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 - However, with the subsequent developments, particularly in light of two key decisions of this Court being In Re: Interplay Between Arbitration Agreements under the Arbitration and ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited Conciliation Act 1996 and the Indian Stamp Act 1899, 2023 INSC 1066 and SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532, it is no more res-integra, that the extent of scrutiny of the referral courts u/s. 11 of the Act, 1996 is extremely narrow, and confined to only one aspect i. e.

, the prima-facie determination of the "existence" of the arbitration agreement - Krish Spinning has categorically held that only those questions which inextricably attacks or questions the "existence" of the arbitration agreement, should be looked into by the referral courts, that only for the purpose of a prima-facie satisfaction, all other questions, particularly mixed questions of law and fact fall within the exclusive jurisdiction of the arbitral tribunal, and cannot be looked into by the referral court, even for a prima-facie determination. [Paras 64 and 66] Arbitration and Conciliation Act, 1996 - s. 11 - Extent of scrutiny by the Referral Courts and jurisdiction of the Arbitral Tribunal: Held: In light of two key decisions of this Court being In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, 2023 INSC 1066 and SBI General Insurance Co. Ltd. v.

Krish Spinning, 2024 INSC 532, it is no more res-integra, that the extent of scrutiny of the referral courts u/s. 11 of the Act, 1996 is extremely narrow, and confined to only one aspect i. e.

, the prima-facie determination of the "existence" of the arbitration agreement - Krish Spinning has categorically held that only those questions which inextricably attacks or questions the "existence" of the arbitration agreement, should be looked into by the referral courts, that only for the purpose of a prima-facie satisfaction, all other questions, particularly mixed questions of law and fact fall within the exclusive jurisdiction of the arbitral tribunal, and cannot be looked into by the referral court, even for a prima-facie determination - Questions which involve examination of contested question of facts and appreciation of evidence, should be left to the arbitral tribunals to decide, as it is equally, if not more capable to decide such questions, as it has the benefit of going through all the relevant evidence and pleadings in much more detail than the referral courts.

[Para 66] Arbitration and Conciliation Act, 1996 - Whether the archaic understanding that an arbitral tribunal is incapable or incompetent to identify and implead a non-signatory to the arbitration agreement on its own accord, is the correct position of law: 1568 Held: The archaic understanding that an arbitral tribunal is incapable or incompetent to identify and implead a non-signatory to the arbitration agreement on its own accord, is not the correct position of law, in view of the decisions of this Court in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, 2023 INSC 1066 and SBI General Insurance Co. Ltd. v.

Krish Spinning, 2024 INSC 532 - The limited nature and scope of inquiry which the referral courts are expected to undertake as regards the "existence" of the arbitration agreement, would as a logical sequitur obligate the arbitral tribunal also to look into this question - Such a question, by no stretch, can be regarded as falling within the exclusive domain or jurisdiction of the referral courts, so as to render any examination of it by the arbitral tribunal a usurpation of the referral courts authority and duty.

[Paras 67, 68] Arbitration and Conciliation Act, 1996 - The nature and extent of the test laid down in Cox and Kings (I) for determining Non- Signatories who are bound by the arbitration agreements: Held:Cox and Kings (I) after an exhaustive examination of the question of existence or applicability of the 'Group of Companies' doctrine in a particular case, is fundamentally a fact-intensive exercise that involves a nuanced determination of the consent of parties from diverse factual elements and circumstances - The said doctrine and by extension any other principle for determining mutual consent, broadly requires ascertaining the intention of the parties by analysing the factual circumstances surrounding the contractual arrangements, particularly factors such as the level of involvement of the non signatory in the negotiation, conclusion (sic execution), performance or termination of the contract, to what extent such conduct may be indicative its position as a veritable party to the arbitration agreement and common intention to be bound by it - Thus, it was held that the primary test for ascertaining the applicability of the 'Group of Companies' doctrine lies in the determination of the intention of the parties, which is to be inferred from the surrounding factual matrix, or in other words, the inquiry or test is, by its very nature, predominantly factual - Owing to the intrinsic character of the test--being one that entails a fact intensive inquiry involving a mixed question of fact and law--and further, given the extensive standard it demands, requiring a comprehensive and holistic appraisal of all material facts and attendant circumstances, it may be safely ASF Buildtech Private Limited v.

Shapoorji Pallonji and Company Private Limited concluded that the arbitral tribunal is the more appropriate and competent forum to adjudicate upon the issue of whether a non- signatory is bound by the arbitration agreement, as the arbitral as it has the innate advantage of going through all the relevant evidence and pleadings in greater depth and detail than the referral court at the pre-reference stage, and as such is uniquely positioned to undertake such a nuanced determination.

[Paras 73,76] Arbitration and Conciliation Act, 1996 - Appropriate forum to adjudicate upon the issue of whether a non-signatory is bound by the arbitration agreement: Held: The arbitral tribunal is the more appropriate and competent forum to adjudicate upon the issue of whether a non-signatory is bound by the arbitration agreement, as the arbitral as it has the innate advantage of going through all the relevant evidence and pleadings in greater depth and detail than the referral court at the pre-reference stage, and as such is uniquely positioned to undertake such a nuanced determination.

[Para 76] Arbitration and Conciliation Act, 1996 - Determining the "existence" viz-à-viz the intention of parties from "express words" of an Arbitration Agreement: Held: Once the referral court, identifies an arbitration agreement that satisfies the formal requirements of Section 7 of the Act, 1996, either from the record of agreement or the written materials under sub-section (4), the "existence" of the arbitration agreement is said to have been established, even though, its binding nature qua the non-signatory may not be established, as it is entirely possible for a referral court to arrive at finding that prima-facie there exists an arbitration agreement in terms of Section 7 of the Act, 1996 without resolving the question of whether a non-signatory is bound by such arbitration agreement or not, as it depends on additional factors beyond mere existence - Once, the "existence" of the arbitration agreement is said to have been established, the condition stipulated 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 - 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 arbitral tribunal.

[Paras 85, 86] Arbitration and Conciliation Act, 1996 - 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: Held: This hands-off approach of referral courts in relation to the question of whether a non-signatory is a veritable party to the arbitration agreement or not was reiterated in Cox and Kings (II), observed that once an arbitral tribunal stands constituted, it becomes automatically open to all parties to raise any preliminary objections, including preliminary objections touching upon the jurisdiction of such tribunal, and to seek an early determination thereof - Consequently, the issue of impleadment of a non-signatory was deliberately left for the arbitral tribunal to decide, after taking into consideration the evidence adduced before it by the parties and the principles enunciated under Cox and Kings (I) - Similarly, in Ajay Madhusudan 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 u/s.

11 of the Act, 1996 as it would tantamount to a mini trial - An additional and equally compelling consideration is that the power exercised by the referral courts under Section 11 of the Act, 1996 is judicial in nature - Consequently, referral courts must refrain from embarking upon an intricate evidentiary inquiry or making final determinations on matters that are within the jurisdiction of the arbitral tribunal - The better course of action is for referral courts to refrain altogether from delving, into the issue of whether a non-signatory is a veritable party to the arbitration agreement, and to leave such matters for the arbitral tribunal to decide in the first instance.

[Paras 99, 100, 102] Arbitration and Conciliation Act, 1996 - There is no inhibition in the scheme of Act, 1996 which precludes the Arbitral Tribunal from impleading a Non-Signatory on its own accord: Held: Even in the absence of an express provisions in the Act, 1996 empowering the arbitral tribunal to implead or join a party ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited who is otherwise bound by the arbitration agreement, the arbitral tribunal does possess such power by virtue of the doctrine of implied powers, as long as the same is in tandem with the scheme of Act, 1996 i. e. , as long as the parties had either expressly or impliedly consented to the arbitration agreement as held in Cox and Kings (I).

[Para 127] Arbitration and Conciliation Act, 1996 - Doctrine of KompetenzKompetenz and the Jurisdictional Reach of an Arbitral Tribunal: Held: 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 - Section 16 of the Act, 1996 empowers the arbitral tribunal to rule on its own jurisdiction - The policy rationale underlying this provision is two-fold: first, to respect and uphold the intention of the parties to resolve their disputes through arbitration by empowering the forum they have contractually chosen; and second, to prevent a fragmentation of proceedings through premature judicial intervention, which can frustrate the efficacy of arbitration by causing delays and fostering multiplicity of litigation - The negative aspect of competence-competence is aimed at restricting the interference of the courts at the referral stage by preventing the courts from examining the issues pertaining to the jurisdiction of the arbitral tribunal before the arbitral tribunal itself has had the opportunity to entertain them and to also enable the arbitral tribunal to exercise necessary powers without any dependency upon the national courts, with the courts taking a back-seat and being permitted to review the exercise of power of the arbitral tribunal and its decision at a later stage.

[Paras 132, 133, 134] Arbitration and Conciliation Act, 1996 - Requirement of Notice of Invocation u/s. 21 of the Act, 1996: Held: The marginal note appended to Section 21 of the Act, 1996 makes it abundantly clear, that the notice to be issued thereunder is for the purpose of "commencement of arbitration proceedings" - 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 limitation.

[Para 145] 1572 Arbitration and Conciliation Bill, 2024 - Ameliorating the position of law as regards the power of impleadment or joinder of an arbitral tribunal - Consideration of: Held: The new Bill has taken no steps whatsoever, for ameliorating the position of law as regards the power of impleadment or joinder of an arbitral tribunal - What is expressly missing in the Arbitration and Conciliation Act, 1996 is still missing in the Arbitration and Conciliation Bill, 2024, despite a catena of decisions of this Court as-well as the various High Courts, highlighting the need for statutory recognition of such power in order to obviate all possibilities of confusion - As observed in Gayatri Balasamy, any uncertainty in the law of arbitration would be an anathema to business and commerce - This Court urges, the Department of Legal Affairs, Ministry of Law and Justice to take a serious look at the arbitration regime that is prevailing in India and bring about necessary changes while the Arbitration and Conciliation Bill, 2024 is still being considered.

[Para 170] Case Law Cited SBP & Co. v. Patel Engg. Ltd. [2005] Supp. 4 SCR 688 : (2005) 8 SCC 618; Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd. [2002] 1 SCR 728 : (2002) 2 SCC 388; In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act,1899, 2023 INSC 1066: [2023] 15 SCR 1081; Cox and Kings Ltd. v. SAP India Pvt. Ltd. & Anr. {Cox and Kings(I)}, 2023 INSC 1051 : [2023] 15 SCR 621 - followed. Cox & Kings Ltd. v. Sap India Pvt. Ltd. & Anr. {Cox and Kings (II)}, 2024 INSC 670 : [2024] 9 SCR 199; SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532 : [2024] 7 SCR 840; Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors. , 2024 INSC 710 :[2024] 9 SCR 894; Adavya Projects Pvt. Ltd. v. M/s Vishal Strcturals Pvt. Ltd. & Ors. , 2025 INSC 507 : [2025] 5 SCR 243; Gayatri Balasamy v. M/s ISG Novasoft Technologies Ltd. , 2025 INSC 605; State of Goa v.

Praveen Enterprises [2011] 10 SCR 1026 : (2012) 12 SCC 581; Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia (P) Ltd. [2014] 12 SCR 488 : (2015) 13 SCC 477 - relied on. Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. [2012] 13 SCR 402 : (2013) 1 SCC 641; Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. [2007] 4 SCR 279 : (2007) 4 ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited SCC 599; Hema Khattar v. Shiv Khera [2017] 4 SCR 425 : (2017) 7 SCC 716; Duro Felguera, S. A. v. Gangavaram Port Ltd. [2017] 10 SCR 285 : (2017) 9 SCC 729; Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd. [2019] 14 SCR 999 : (2020) 2 SCC 455; DLF Home Developers Ltd. v. Rajapura Homes (P) Ltd. [2021] 12 SCR 1 : (2021) 16 SCC 743; BSNL v. Nortel Networks (India) (P) Ltd. [2021] 2 SCR 644 : (2021) 5 SCC 738; M/s Arif Azim Co. Ltd. v. M/s Aptech Ltd. , 2024 INSC 155 :[2024] 3 SCR 73; Oil and Natural Gas Corporation Ltd. v.

Discovery Enterprises Pvt. Ltd. [2022] 4 SCR 926 : (2022) 8 SCC 42; Shin-Etsu Chemical Co Ltd v. Aksh Optifibre Ltd. [2005] Supp. 2 SCR 699 : (2005) 7 SCC 234; Vidya Drolia & Ors v. Durga Trading Corporation [2020] 11 SCR 1001 : (2021) 2 SCC 1; Savitri v. Govind Singh Rawat [1985] Supp. 3 SCR 615 : (1985) 4 SCC 337; Milkfood Ltd. v. GMC Ice Cream (P) Ltd. [2004] 3 SCR 854 : (2004) 7 SCC 288; Pravin Electricals Pvt Ltd v. Galaxy Infra and Engineering Pvt Ltd. [2021] 1 SCR 1162 : (2021) 5 SCC 671 - referred to. Oil and Natural Gas Corporation Ltd. v. Jindal Drilling and Industries Ltd. , 2015 SCC OnLine Bom 1707; Balmer Lawrie & Co. Ltd. v. Saraswathi Chemicals Proprietors Saraswathi Leather, 2017 SCC OnLine Del 7519; Sudhir Gopi v. Indira Gandhi National Open University & Anr. , 2017 SCC OnLine Del 8345; V. G. Santhosam v. Shanthi Gnanasekaran, 2020 SCC OnLine Mad 560; Arupri Logistics Pvt. Ltd. v. Vilas Gupta & Ors. , 2023 SCC OnLine Del 4297; IVRCL Ltd. v.

Gujarat State Petroleum Corporation Ltd. , 2015 GUJHC 31651 DB; IMC Ltd. v. Board of Trustees of Denndayal Port Trust, 2018 SCC OnLine Guj 4972; NOD Bearing Pvt. Ltd. v. Bhairav Bearing Corporation, 2019 SCC OnLine Bom 366; Vistrat Real Estates Pvt. Ltd. v. Asian Hotels North Ltd. , 2022 SCC OnLine Del 1139; Cardinal Energy and Infra Structure Pvt. Ltd. v. Subramanya Construction and Development Co. Ltd. , 2024 SCC OnLine Bom 964; Indraprastha Power Generation Co. Ltd. v. Hero Solar Energy Pvt. Ltd. , 2024 SCC OnLine Del 6080; KKH Finvest Private Ltd. v. Jonas Haggard & Ors. , 2024 SCC OnLine Del 7254; Alupro Building Systems Pvt Ltd. v. Ozone Overseas Pvt Ltd. , 2017 SCC OnLine Del 7228; Gammon India Ltd. v. NHAI, 2020 SCC OnLine Del 659 - referred to.

Books and Periodicals Cited Law Commission of India, 246th Report; Redfern and Hunter on International Arbitration (5th edn, Oxford University Press 2009); 1574 Sir Peter Benson Maxwell, On the Interpretation of Statutes, ed Frederick Stroud (Sweet and Maxwell, 5th ed, 1912); Gary Born in his seminal work; International Commercial Arbitration, Vol 2 (3rd edn, Kluwer Law International 2021). List of Acts Arbitration and Conciliation Act, 1996; Arbitration and Conciliation (Amendment) Act, 2015; UNCITRAL Model Law; UNCITRAL Arbitration Rules; English Arbitration Act, 1996; Arbitration and Conciliation Bill, 2024.

List of Keywords Referral courts; Arbitral Tribunal; Implead or join a non-signatory to the arbitration agreement as a party to the arbitration proceedings; Determination of the "existence" of the arbitration agreement; Jurisdiction of the arbitral tribunal; Test to determine whether a non-signatory is bound by an arbitration agreement; Section 11 sub-section (6A) of the Act, 1996; Doctrine of 'group of companies'; Alter ego; Composite transaction; Doctrine of Kompetenz- Kompetenz; Requirement of Notice of Invocation; Contemporanea expositioest optima et fortissima in lege; Ubi aliquid conceditur, conceditur et id sine quo res ipsa esse non potest; Doctrine of competence-competence; Doctrine of implied power; Principle of composite performance; Principles of contract and commercial law; Principles of mutual consent; Principle of Natural Justice; Principle of consensus ad idem. Case Arising From CIVIL APPELLATE JURISDICTION: Civil Appeal No.

5823 of 2025 From the Judgment and Order dated 04. 07. 2024 of the High Court of Delhi at New Delhi in ARB. A. (COMM. ) No. 4 of 2024 Appearances for Parties Advs. for the Appellant: Devadatt Kamat, Sr. Adv. , Dr. Amit George, Ms. Anindita Mitra, Harsh Pandey, Hruday Bajentri. Advs. for the Respondent: Jayant Mehta, Sr. Adv. , Ms. Aakanksha Kaul, Saurav Agrawal, Salvador Santosh Rebello, Aman Sahani, Anshuman Chowdhary, ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited Ms. Rhea Borkotoky, Akash Saxena, Ms. Kritika, Ms. Ashima Chopra, Ms. Prachi Dubey, Ms. Pooja Gill, S. S. Shroff, Ms. Shruti Sabharwal, Ms. Avlokita Rajvi, Lakshya Khanna, Vikramaditya Sanghi, Ms. Sanskriti Sinha, Sanyat Lodha, Ms. Sanjana Saddy. Judgment / Order of the Supreme Court Judgment J. B. Pardiwala, J. For the convenience of exposition, this judgment is divided in the following parts: - INDEX* A.

FACTUAL MATRIX ....................................................................... 3 B. SUBMISSIONS OF THE PARTIES ............................................... 7 i. Submissions on behalf of the Appellant ............................ 7 ii. Submissions on behalf of the Respondent No. 1 ............. 7 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 * Ed. Note: Pagination as per the original Judgment. 1576 III. Decision of Krish Spinning and the Judicial Rectification of the second misconception emanating from SBP & Co .............................................................................. 89 c.

How Cox and Kings (I) contemplates determination of mutual intention of Non-Signatories to arbitration agreements ...................................................................... 108 I. The nature and extent of the test laid down in Cox and Kings (I) for determining Non-Signatories who are bound by the arbitration agreements ................. 110 II. Determining the "existence" viz-à-viz the intention of parties from "express words" of an Arbitration Agreement ................................................................. 116 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 ............ 131 ii. Arbitral Tribunal has the authority and power to implead Non-Signatories to the arbitration agreement on its own accord ..................................................................................... 141 a.

No inhibition in the scheme of Act, 1996 which precludes the Arbitral Tribunal from impleading a Non-Signatory on its own accord ........................................................ 141 b. Doctrine of Kompetenz-Kompetenz and the Jurisdictional Reach of an Arbitral Tribunal ........................................... 156 c. Requirement of Notice of Invocation under Section 21 ... 163 D. CONCLUSION ............................................................................... 188 1. Leave Granted. 2. This appeal arises from the judgment and order passed by the High court of Delhi dated 4th July, 2024 in Arb. A. (Comm. ) No. 4/2024 & I. As. 2124/2024- 25/2024, Arb. A. (Comm. ) No. 5/2024 & I. A. 2197/2024 and O. M. P. (T)(Comm.

) 4/2024 by which the High Court dismissed the appeals filed by the appellant herein under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, the "Act, 1996") and thereby affirmed the order passed by the Arbitral Tribunal rejecting the challenge made by the appellant herein to its jurisdiction on the ground that the appellant being a non-signatory ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited to the arbitration agreement could not have been impleaded in the array of parties and join the arbitration proceedings. 3. It appears that the High Court decided two appeals filed under Section 37(2) of the 1996 Act. The present appeal arises from the order passed by the High Court in Arb. A. (Comm. ) No. 4 of 2024. A. FACTUAL MATRIX 4. The Respondent No. 1, Shapoorji Pallonji & Co. Pvt. Ltd. ("SPCPL") is the Respondent No. 1/counter claimant before the Arbitrator. The Respondent No. 3 (Black Canyon SEZ Pvt. Ltd.

or "BCSPL") initiated arbitration against SPCPL in relation to Settlement Agreement dated 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 holistically determined without first arraying them as parties. 7. In such circumstances referred to above, the matter was taken to the High Court. The High Court, after an exhaustive consideration of all the relevant aspects of the matter, disposed of the appeal in the following terms: - "96. In the present case, a perusal of the impugned orders shows that the Ld.

Sole Arbitrator has conflated the issue 1578 of the applicability of the Group of Companies doctrine & alter ego doctrine, and thus has resorted to piercing the corporate veil. All three could not have been combined in the manner in which the Ld. Sole Arbitrator has done. However, there are certain facts which are relevant: i) That the ASF Group is one cohesive group in which AISPL, ABPL and BCSPL are part of the group. There is no distinct management dealing with the activities of these three companies. The correspondence on record shows that whether in respect of demobilization or other performances under the contracts, AISPL is backing BCSPL, ASF Group is also standing as guarantee for BCSPL. The Comfort Letter given by ASPL is evidence of this. Thus, in effect, though there are three distinct incorporated legal entities, the group is functioning as one unit. The initial work order was with AISPL.

Claims raised relate to periods even prior to the Novation Agreement where AISPL would be a necessary and a relevant party. ii) Non-payment of dues is also another claim of SPCPL qua which AISPL gave a Comfort Letter. iii) ABPL is the holding company and is part of the ASF Group. The order dated 22nd July, 2022 uses the expression ASF which includes ABPL as its part of ASF. Thus, the Ld. Sole Arbitrator ought to have simply applied GoCD as enshrined in the Cox and Kings (supra) to entertain the claims filed by the SPCPL. 97. In the overall scheme of things, therefore, the delineation of Case No. 1 and Case No. 2 was wholly unnecessary. The impleadment of AISPL and ABPL is in accordance with law, though the Ld. Sole Arbitrator used different reasons for dismissing the Section 16 applications. In effect, the Ld. Sole Arbitrator has held that claims can be maintained against AISPL and ABPL.

In these facts and circumstances, the Court disposes of the three petitions in the following terms: i) AISPL and ABPL are impleaded as Respondent Nos. 2 and 3 in the arbitral proceedings. ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited 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 BCSPL's claim, it is ordered that both cases shall be treated as a single reference and a single dispute. The claims of BCSPL and the counterclaim of SPCPL shall be adjudicated by the Ld. Sole Arbitrator after framing issues. No bifurcation would be permissible. viii) Evidence shall be led first by BCSPL, AISPL and ABPL and thereafter SPCPL in their respective claims and counterclaims. 98. Let the present order be communicated to the Ld. Sole Arbitrator by the Registry. The above two appeals and the Section 14 petition are disposed of in the above terms.

All pending applications are disposed of. " 8. In such circumstances referred to above, the appellant is here before this Court with the present appeal. 1580 B. SUBMISSIONS OF THE PARTIES i. Submissions on behalf of the Appellant 9. In the written submissions filed on behalf of the appellant herein, it is submitted as under: - "A. Introductory Submissions: 2 At the outset, it is respectfully submitted that there is not even a shred of material to show any involvement whatsoever, much less prima facie, regarding the involvement of ABPL in the negotiation, performance or termination of the subject agreements which are the subject matter of the arbitral proceedings. Accordingly, the tests laid down by this Hon'ble Court in Para 71 of Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors. , 2024 SCC OnLine SC 2597, for making ABPL a 'veritable party' is not at all fulfilled.

As a matter of fact, the Arbitral Tribunal and the High Court have sought to rope in ABPL on three counts, namely: (i) that ABPL is the holding company of Black Canyon SEZ Private Limited ("BCSPL" / "Respondent No. 2") and ASF Insignia SEZ Pvt. Ltd. ("AISPL" / "Respondent No. 3"); (ii) there is common management between ABPL and BCSPL (Impugned Judgment at Pg. 47-48 of the Petition, and (iii) the branding / logo used by BCSPL is the common logo of 'ASF Group' (Impugned Judgment at Pg. 67-68 of the Petition. 3. It is submitted that none of the aforesaid three aspects relied upon the Arbitral Tribunal and the High Court can be the ground for arraying a non-signatory as a 'veritable party'. If such contention is accepted, every holding company will have to be necessarily arrayed as a 'veritable party' which is completely against the dictum of Oil and Natural Gas Corporation 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). ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited 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 Corporation (supra); Cox and Kings (supra) and Ajay Madhusudan Patel (supra) as regards the parameters for invocation of group of companies doctrine? d. Whether merely because the Petitioner is stated to be the holding company for BCSPL and AISPL; all group companies have the same domain name/website and the email signature states 'ASF Group', the same would suffice to satisfy the tests for invocation of the group of companies doctrine for joinder of the Petitioner to the array of respondents? C. ABPL not a party to the dispute 5.

ABPL was not a party or had any involvement in the following: (i) Negotiations for executing Work Contract dated 21 November 2016; (ii) Works Contract dated 21 November 2016; (iii) Supplementary Works Contract dated 9 February 2018; (iv) Novation Agreement on 17 April 2018; (v) Letter 1582 of Comfort dated 17 April 2018; (vi) Addendum No. 1 dated 27 February 2019 to the Works Contract; (vii) Settlement Agreement dated 24 July 2020; (viii) Notice invoking arbitration dated 24 January 2022; (ix) Reply to Notice invoking arbitration dated 4 March 2022, where SPCPL itself did not make ABPL a party in this reply; (x) Section 11 proceedings before the High Court of Delhi; and (xi) BCSPL's statement of claim dated 31 October 2022. A table on stages of disputes and involvement of parties therein is annexed herewith as Schedule A.

The same leads to an inescapable conclusion that the involvement of the Petitioner herein in the negotiation or performance of the contract was neither positive, nor direct and substantial, in fact it was not even incidental. 6 It is for the first time that ABPL was made a party to the proceedings by direct joinder as a respondent to the SPCPL's counter claim or 'statement of claim' dated 14 February 2023, without obtaining any leave from the Arbitral Tribunal in this regard and merely on account of being a holding company of BCSPL. D. No material whatsoever to show ABPL's direct involvement 7. There is not even a single correspondence or transactional document to show the involvement of ABPL qua the negotiation towards, execution of or discussions towards Works Contract, the Novation Agreement, the Letter of Comfort and the Settlement Agreement in question. 8. Even SPCPL, in the Reply, had only limited its contention for inclusion of a non-signatory to AISPL and 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. ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited 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 the negotiation or performance of the contract must be positive, direct and substantial and not be merely incidental. Thus, the conduct of the non-signatory party along with the other attending circumstances may lead the referral court to draw a legitimate inference that it is a veritable party to the arbitration agreement. " (emphasis supplied) 11. It is most humbly submitted that in the facts and circumstances of the present case, which have been altogether ignored by the Ld.

Arbitral Tribunal and the High Court, there is neither any finding nor any material to support the inference that that the involvement of the Petitioner herein in the negotiation or performance of the contract was either positive, direct and substantial, in fact, it was not even incidental. 12. It is prima facie evident that ABPL is not a party to the Agreements and a mini trial is not required to determine the same. Additionally, the arbitral tribunal while directly issuing a notice to ABPL for filing of statement of defence to the 'statement of claim' filed by SPCPL had not gone into such questions in depth, thus indicating that no evidence was taken into consideration to implead ABPL without the leave of the arbitral tribunal in this regard; and by way 1584 of a procedure unknown to arbitration law inasmuch as a separate statement of claim was entertained by the arbitral tribunal, contrary to established procedure that there can only be a counter claim by respondent, i. e. , SPCPL.

E. Patent errors in the Impugned Judgment 13. The analysis by the High Court in the Impugned Judgment begins at Page 43 of the Petition wherein the High Court notices the: (a) Works Contract; (b) Novation Agreement; (c) Settlement agreement; (d) Letter of Comfort. Notably, in any of the aforesaid paragraphs, ABPL is neither involved nor mentioned. 14. In Para 66, the High Court notes that there is common management between ABPL and BCSPL, and in Para 70, an email dated 9 December 2020 is noted to conclude that because one of the personnel of BCSPL had used the same domain name, and there was a logo of ASF Group/ ASF Insignia, therefore, ABPL being part of the ASF group and the holding company of BCSPL and AISPL was to be included as a party to the arbitration proceedings. 15. The five factors laid down by this Hon'ble Court in Oil and Natural Gas Corporation (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 ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited 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 the facts of the present case. 19. Further, the High Court in Para 97(viii) of the Impugned Judgment has further patently erred in exceeding the jurisdiction under Section 37 of the Act and suo motu directing that evidence shall be inter alia led by ABPL prior to SPCPL in whose counter- claim ABPL has been arrayed as a party Respondent. Pertinently, the said aspect was neither a submission nor in issue before the High Court. " 10. In such circumstances referred to above, Mr. Devadatt Kamat, the learned senior counsel appearing on behalf of the appellant herein submitted that there being merit in his appeal, the same may be allowed and the impugned order passed by the High Court may be set aside. ii. Submissions on behalf of the Respondent No. 1 11.

In the written submissions filed on behalf of the respondent No. 1 herein, it is submitted as under: - "II. Questions of law involved 5. The present SLP broadly gives rise to three questions of law for the kind consideration of the Hon'ble Court: a. Whether the Arbitrator could have issued notice to parties (AISPL and ABPL) arrayed in SPCPL's Counter Claim? b. Whether AISPL and ABPL ought to be removed from the array of parties at the threshold stage before the complete pleadings or evidence are before the Arbitrator? c. Whether the Arbitrator's Orders rejecting ABPL's Section 16 Applications without finally deciding the legal or factual role and liability of ABPL ought to be interfered with before the final Arbitral Award is rendered? 1586 6. It is submitted that the three issues are not distinct and rather inter-linked inasmuch as the underlying premise pertains to the Arbitrator's power to adjudicate on matters in respect of non- signatories, both procedurally and substantively.

It is SPCPL's case that all three issues have already been answered in SPCPL's favour by the Hon'ble Supreme Court in in Cox and Kings Ltd. v. SAP India Pvt. Ltd. & Anr. and Ajay Madhusudhan Patel & Ors. v. Jyotrindra S. Patel & Ors. III. The present SLP is ABPL's fourth bite at the cherry 7. SPCPL has succeeded on the issues presently agitated on three prior occasions- a) First, in BCSPL's Section 16 Application dated 03. 03. 2023 seeking removal of AISPL and ABPL from the array of parties, which was rejected by the Tribunal's First Order dated 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 ASF Buildtech Private Limited v.

Shapoorji Pallonji and Company Private Limited and assured to SPCPL throughout that AISPL had the entire support, backing and strength of the ASF Group of Companies. 14. This representation and assurance to SPCPL was backed by, rather than being premised (as sought to be alleged by ABPL), the fact that the BCSPL, AISPL and ABPL represented themselves to the world at large as the 'ASF Group', functioning with the same staff & officials, using common website 13 BCSPL, is part of the ASF Group. Even behind the scenes, ABPL is the holding company of BCSPL and AISPL, with 81. 01% and 100% shareholding, respectively. All the three ASF Group companies have common directors and also share a common registered address. It is SPCPL's case that the commonality of resources of the ASF Group (i. e. , the promoters, the directors, the shareholding, the officials, the financial and commercial backing, technical and IT systems etc) is not a coincidence or a by-product and rather is by design. 15.

At all times, in the ASF Group's dealing with SPCPL, BCSPL/AISPL/ABPL were acting as single economic unit and were together directly, substantially and actively involved in the negotiation and performance of the subject Works Contract and Settlement Agreement. It is further SPCPL's case that BCSPL/AISPL/ABPL and/or ASF Group are inextricably linked and the ASF Group as a whole maintained operational control over the performance of the Works Contract and Settlement Agreement between the parties. 16. There was no distinction between ABPL, AISPL and BCSPL insofar as the negotiation and performance of the Subject Contracts was concerned. For instance, the Novation Agreement dated 17. 04. 2018 was executed on behalf of the Petitioner by one ASF official Sh. Vinod Kumar Bhartiya. The same ASF official had earlier attended the pre-bid meeting held on 30. 01. 2016 in relation to the Works Contract in the stated capacity of AVP (Commercial) 1588 of the 'ASF Group'. Item 2.

1 of the Minutes states 'ASF Project Team' and bidders were introduced. The same ASF official had thereafter also attended the Meeting held on 02. 06. 2016 for LOI Civil Works of Building B1 awarded to SPCPL on behalf of 'AISPL'. 17. Similarly, Minutes of Meeting dated 25. 10. 2016 i. e. , after the Meeting held on 02. 06. 2016 recording Mr. Bhartiya to have attended on behalf of AISPL, reflects his attendance on behalf of the 'ASF 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 annexed to the Settlement Agreement, on the basis of which monies were to be disbursed to SPCPL records TDS value debited by 'ASF', not by BCSPL or AISPL. 20. In the Section 16 application filed by ABPL 21 , ABPL admitted that "ABPL is a part of the ASF group of companies, and Respondents No.

1 [BCSPL] and 2 [AISPL] are associate companies of ABPL. " ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited 12. In such circumstances referred to above, Ms. Aakanksha Kaul, the learned counsel prayed that there being no merit in this appeal, the same may be dismissed. C. ANALYSIS 13. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is 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 proceedings? i. Whether the Arbitral Tribunal has the power to Implead / Join Non- Signatories to the Arbitration Agreement? 14.

One of the principle contentions raised by the appellants herein for the purpose of assailing the Impugned Judgment is that the petitioner company being a non-signatory to the arbitration agreement was never made a party to the proceedings before the referral court under Section 11 of the Act, 1996 by virtue of which the arbitral tribunal came to be constituted. No notice of invocation was issued either to the appellant company herein. In such circumstances, it was submitted that the appellant company; a non-signatory to the arbitration agreement could not have been joined as a party after the referral stage i. e. , after the constitution of the arbitral tribunal solely on the basis of the averments made in the counter-claim / statement of claim of the respondent no. 1 herein.

In other words, it was contended that after the culmination of the referral stage in terms of Section 11 of the Act, 1996, the arbitral tribunal has no power whatsoever to implead or join a non-signatory to the arbitration agreement and that such power vests only with the referral court that too prior to the arbitral tribunal coming into existence. a. Contradictory Views of different High Courts on the subject. 15. Before we proceed to answer the aforesaid contention canvassed on behalf of the appellant, it would be appropriate to first refer to the decisions of various High Courts and the cleavage of opinion that have been expressed as regards the scope and power of an arbitral tribunal to implead or join a non-signatory to an arbitration agreement. 1590 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 dues to the respondents.

The award came to be challenged before the Bombay High Court, wherein it was contended by the petitioners that the arbitral tribunal ought to have lifted the corporate veil to find out whether DEPL formed part of the respondent companies or not. The Bombay High Court inter-alia held that an arbitral tribunal does not have the power to lift the corporate veil and that only the courts have such power. In such circumstances, it held that since DEPL was not a party to the arbitration proceedings between the petitioner and the respondents, and the tribunal having no power to pierce the corporate veil, the High Court upheld the award. The relevant observations read as under: - "47.

The petitioners had canvassed before the arbitral tribunal that the arbitral tribunal shall lift the corporate veil to find out that the said DEPL and the respondents herein were forming part of the said Jindal Group and were one and the same entity and thus the respondents were liable for the liabilities of the said DEPL. In my view, the arbitral tribunal has no power to lift the corporate veil. Only a Court can lift the corporate veil of a company if the strongest case is made out. In my view, the prayer of the petitioners for lifting the corporate veil of the said DEPL was itself not maintainable in the arbitration proceedings. ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited The said DEPL was not a party to these proceedings.

Be that as it may, a perusal of the arbitral award clearly indicates that the arbitral tribunal has refused to lift the corporate veil after considering the evidence produced by both the parties and has rendered finding of fact that no such case was made out by the petitioners for lifting the corporate veil which are not perverse and thus cannot be interfered with by this Court under Section 34 of the Arbitration Act. " (Emphasis supplied) 17. In Balmer Lawrie & Co. Ltd. v. Saraswathi Chemicals Proprietors Saraswathi Leather reported in (2017) SCC OnLine Del 7519, the Delhi High Court was inter-alia dealing with the question whether an arbitral award can be enforced against non-parties to the arbitration. The awardee therein sought amendment of the execution petition in order to implead the directors of the judgment-debtor on the ground that they had siphoned off the assets and hence ought to be held responsible to satisfy the arbitral award.

In this context, the 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 jurisdiction from the agreement between the parties and persons who are not party to the arbitration agreement 1592 cannot be proceeded against by an arbitral tribunal. Thus, an arbitral award made by an arbitral tribunal against any person who is not a party to the arbitration agreement would be wholly without jurisdiction and unenforceable. There may be exceptional cases where a court may compel persons who are not signatories to an arbitration agreement to arbitrate provided it is established that the non-signatory(ies) are either claiming through signatory(ies) or there was clear intention to be bound as parties (see : Chloro Controls India Private Limited v. Severn Trent Water Purification Inc : (2013) 1 SCC 641).

However an arbitrator cannot lift the corporate veil and proceed against non parties. An arbitration is consensual. It is based on the agreement between parties. The arbitrator derives his jurisdiction to adjudicate disputes from the consent of parties, therefore, he is not in a position to enlarge the scope of his influence and extend his jurisdiction to non-parties by exercise of his limited jurisdiction based on the consent of parties. 14. Though a court can lift the corporate veil, the same can be done only in extraordinary circumstances and by due adjudicatory process. It is trite law that an executing court cannot go behind thedecree; it must be enforced as it is. Thus, it is not open for a petitioner to claim that although the decree is against one entity it must be enforced against another.

However, there may be cases where it is found that the assets of the judgement debtor have been secreted, siphoned off, or by a fraudulent device ostensibly placed outside the control of the judgement debtor, in an endeavour to frustrate the enforcement of the decree. In such cases, the court is not powerless to extend its reach to third parties to enforce the decree; however this is limited for recovering the assets of the judgement debtor. In the event a corporate facade is used to perpetuate such fraud, the corporate veil may be lifted. " (Emphasis supplied) 18. In yet another decision of the Delhi High Court in Sudhir Gopi v. Indira Gandhi National Open University & Anr. reported in (2017) ASF Buildtech Private Limited v.

Shapoorji Pallonji and Company Private Limited SCC OnLine Del 8345, placing reliance on Oil and Natural Gas Corporation (supra) and Balmer Lawrie (supra) it was held that an arbitral tribunal does not have 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 arbitrate. These may be on grounds of (a) implied consent and/or (b) disregard of corporate personality. In cases of implied consent, the consent of non signatory (ies) to arbitrate is inferred from the conduct and intention of the parties. Thus, in cases where it is apparent that the non-signatory (ies) intended to be bound by the arbitration agreements, the courts have referred such non- signatories to arbitration. xxx xxx xxx 20.

The courts would, undoubtedly, have the power to determine whether in a given case the corporate veil should be pierced and the persons behind the corporate façade be held accountable for the obligations of the corporate entity. However as stated earlier, an arbitral tribunal, has no jurisdiction to lift the corporate veil; its jurisdiction is 1594 confined by the arbitration agreement - which includes the parties to arbitration - and it would not be permissible for the arbitral tribunal to expand or extend the same to other persons. xxx xxx xxx 35. Arbitration agreement can be extended to non- signatories in limited circumstances; first, where the Court comes to the conclusion that there is an implied consent and second, where there are reasons to disregard the corporate personality of a party, thus, making the shareholder(s) answerable for the obligations of the company. In the present case, the arbitral tribunal has proceeded to disregard the corporate personality of UEIT.

The arbitral tribunal has lifted the corporate veil only for the reason that UEIT's business was being conducted by Mr. Sudhir Gopi who was also the beneficiary of its business being the absolute shareholder (barring a single share held by Mr. Fikri) of UEIT. This is clearly impermissible and militates against the law settled since the nineteenth century. Any party dealing with the limited liability company is fully aware of the limitations of corporate liability. Business are organised on the fundamental premise that a company is an independent juristic entity notwithstanding that its shareholders and directors exercise the ultimate control on the affairs of the company. In law, the corporate personality cannot be disregarded. Undisputedly, there are exceptions to this rule and the question is whether this case falls within the scope of any exceptions. 36.

A corporate veil can be pierced only in rare cases where the 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 ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited 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 provision under the Act, 1996 that allows for impleadment of a third-party, and as such any order of impleadment by an arbitral tribunal can at best be considered to be an interim measure in terms of Section 17 of the Act, 1996.

However, since Section 17 contemplates exercise of only those powers provided within the scope of the arbitral proceedings and by extension within the ambit of Act, 1996, the order of the arbitral tribunal in impleading a third-person unconnected with the dispute between the parties of arbitration was impermissible and in violation of the scheme of the Act, 1996. Placing reliance on Section 2(h) and 7 of the Act, 1996 respectively, the High Court held that since "party" has been defined to mean only a party to the "arbitration agreement", the arbitral tribunal in exercise of its powers under Section 17 could not have impleaded the respondent therein, who was not a party to the arbitration agreement. The relevant observations read as under: - "60. Section 17 of the Arbitration and Conciliation Act, 1996, provides interim measures ordered by the Arbitral Tribunal.

The impleading petition is entertained under Section 17(1)(ii)(e), which states that "such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient". By invoking the said provision of Law, the Tribunal can pass any order regarding interim measures. There is no express provision for impleadment in the Act. In the 1596 absence of any such express provision, the Arbitrator impliedly could entertain the impleading petition only under Section 17(1)(ii)(e) of the Arbitration and Conciliation Act, 1996. However, the said provision indicates that the power is to be exercised within the ambit of the Act and cannot be extended so as to exercise an inherent power by invoking the Code of Civil Procedure.

Thus, the very findings of the Arbitrator by exercising wide powers under Order I, Rule 10 of the Code of Civil Procedure, he entertained the impleading petition is absolutely untenable and beyond the scope of the arbitral proceedings as well as the Act itself. Any interim measure is to be granted within the scope of the arbitral proceedings and not beyond the dispute raised between the parties for arbitration. Therefore, the very exercise of power to implead a third person who is unconnected with the Partnership Deed is improper and in violation 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 ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited is an agreement between the parties to submit all or any of the disputes to be adjudicated by an Arbitrator in respect of their definite legal relationship whether contractual or not.

Section 7 contemplates that the agreement should be in writing and signed by the parties. Therefore, a nonsignatory or a third party could not be subjected to arbitration. Only in exceptional cases like the case whether the rights of the parties are flowing under the Arbitration Agreement, third parties could be subjected to arbitration. The Court is required to examine the exceptions from the touchstone of direct relationship of the party signatories to the contract. " (Emphasis supplied) (ii) Secondly, that Section 16 of the Act, 1996 cannot be interpreted in such a manner to allow any third-party to the arbitration agreement to have itself impleaded and get its rights or dispute adjudicated. It held that Section 16 contemplates the competence of the Arbitral Tribunal to only rule on its jurisdiction as regards the existence or validity of the arbitration agreement, and cannot enter upon adjudication on the civil rights of the parties. "78.

The sole object of the Arbitration Act is to resolve the disputes as expeditiously as possible with the minimum intervention of the Court of Law. The scope of Alternative Dispute Resolution (ADR) cannot be expanded so as to usurp the inherent powers of Civil Courts. Section 16 cannot be interpreted so as to entertain an application from any person, who is a third party to the Arbitration Agreement for the purpose of arbitral adjudications and competence of the Arbitral Tribunal to Rule of its Jurisdiction would indicate that the Arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the Arbitration Agreement and for that purpose, the Tribunal may consider the facts and the terms and conditions of the agreement. Section 16(2) states that "a plea that the Arbitral Tribunal does not have jurisdiction 1598 shall be raised not later than the submission of the statement of defence". 80.

This Court is of the considered opinion that even such a right is traceable in favour of the first respondent, then the only possible course would be to approach the Competent Court of Law and establish her legal right, if any, available based on the documents or the evidences. Civil rights are to be established independently before the Competent Civil 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 such an event, the Arbitrator would be travelling beyond the scope of the Arbitration Act and such a power is not vested with an Arbitrator under the provisions of the Arbitration Act, 1996. 85. Therefore, the civil rights of the parties are to be established before the Competent Court of Law. The ASF Buildtech Private Limited v.

Shapoorji Pallonji and Company Private Limited 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. 105. [... ] However, such Alternative Dispute Resolution processes would not confer any power to the Arbitrator to decide the civil rights of a third person, who is not a party to the Arbitration Agreement. Alternative Dispute Resolution mechanism would not provide any competency to exercise the inherent power conferred to the competent Civil Court of Law.

The Alternative Dispute Resolution processes with reference to the Statute is to be exercised within the ambit of the provisions and not to decide the civil rights of the citizen. In such an event, we are converting the Alternative Dispute Resolution System as the Court of Law and such a practice would be dangerous as the Arbitrators are appointed based on contract basis and by consent of the parties and the remuneration to the Arbitrator is also paid by the parties to the Arbitration Agreement. When the Arbitrators are receiving their remuneration from the parties to the Arbitration Agreement, which is contractual in nature, they are bound to act as a neutral person between the parties to the agreement and resolve the disputes raised between those parties.

In the event of allowing the Arbitrator to exercise the powers beyond the scope of the Arbitration Act, then the Arbitrator would be exercising the inherent powers of the Court, so as to grant the relief to a person, who is not a party to the Arbitration Agreement and the very nature of the arbitration proceedings do not permit such a situation. (Emphasis supplied) 1600 (iii) Lastly, that an arbitrator is a statutory 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 conferred to the Civil Courts under the Code of Civil Procedure. The Arbitrator is bound to function within the scope and ambit of the Act and resolve the disputes between the contracted parties to the Arbitration Agreement as defined under the Act.

Travelling beyond the scope of the Act is impermissible and if such an exercise is made, then the same would result in exercise of excess jurisdiction and finally the Arbitrator would be functioning as a Civil Court, which is not intended under the provisions of the Arbitration and Conciliation Act, 1996. When the Arbitrator is appointed under the Statute, scope, powers and jurisdiction shall be within the provisions of the said Statute. The Arbitrator is not empowered to travel beyond the scope of such powers and in the event of such an exercise, the same would cause prejudice to either of the parties to the Arbitration Agreement and this apart, certain common civil rights cannot be decided by the Arbitrator. ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited 81. The Arbitrator is a person appointed in order to resolve the dispute between the parties under certain terms and conditions in the Arbitration Agreement.

The disputes between the parties are definite and existence of Arbitration Agreement is an essential one, while-so, the Arbitrator cannot invoke the powers contemplated under Order 1, Rule 10 of the Code of Civil Procedure, wherein wide powers are granted, so as to implead a person, which is otherwise unconnected with the partnership or in the Arbitration Agreement. If such a concept of power to impleadment is provided to the Arbitrator, then the scope of arbitration proceedings will be, not only widened but, the purpose and the object of the Act, would be defeated. Thus, the Arbitrator is empowered to adjudicate the disputes strictly with reference to the Arbitration Agreement and with the consent of the parties to the Arbitration Agreement. Contrary to the contractual agreement between the parties, the Arbitrator cannot exercise any powers so as to implead a third party to the Arbitration Agreement for the purpose of adjudicating the right of any such third party. 83.

However, the Arbitrator usurped the wide powers conferred under Order 1, Rule 10 of the Code of Civil Procedure and impleaded the first respondent for the purpose of adjudicating the disputes aroused through an Arbitration Agreement. It violates the very contractual obligation 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 1602 adjudicated by the Arbitrator by exercising the powers conferred under the Act. The Arbitrator cannot be equated wit