\n<\/p>\n
In ASF Buildtech Private Limited v Shapoorji Pallonji & Co Private Limited<\/em><\/a>[1]<\/em><\/strong> (<\/em>ASF Buildtech<\/em><\/strong>), <\/em>the Supreme Court recently clarified <\/em>that an arbitral tribunal has the power to implead a non-signatory who is bound by an arbitration agreement.<\/p>\n Along with the key findings in ASF Buildtech<\/em>, this piece sets out a few thoughts on the test for joining non-signatories and the extent of an arbitral tribunal\u2019s jurisdictional powers in India.<\/p>\n FACTUAL BACKGROUND<\/strong><\/p>\n The dispute under arbitration arose from a settlement agreement and works contract involving Shapoorji Pallonji & Co Pvt Ltd (Shapoorji<\/strong>) and Black Canyon SEZ Pvt Ltd (Black Canyon<\/strong>). Shapoorji filed a counterclaim against ASF Buildtech Pvt Ltd and ASF Insignia SEZ Pvt Ltd (collectively, ASF Entities<\/strong>) \u2013 who were not signatories to the works contract.<\/p>\n The ASF Entities challenged the tribunal\u2019s jurisdiction, claiming that the tribunal cannot and should not join the ASF Entities. The arbitrator dismissed this challenge, noting that the ASF Entities\u2019 impleadment needs a detailed examination \u2013 which cannot be made without adding them as parties.\u00a0<\/p>\n In ASF Buildtech\u2019s appeal, filed under Section 37(2) of the Arbitration Act, the Delhi High Court upheld<\/a> the impleadment \u2013 albeit finding that the arbitrator wrongly conflated the \u2018group of companies doctrine\u2019 (GOC Doctrine<\/strong>) with lifting the corporate veil. The High Court also confirmed that ASF Insignia (and the ASF Group overall) had assumed responsibility for making payments to Shapoorji and implementing the project.\u00a0<\/p>\n SUPREME COURT\u2019S ANALYSIS<\/strong><\/p>\n The Supreme Court identified two misconceptions responsible for the then prevailing aversion to upholding an arbitral tribunal\u2019s power to implead. One, the Arbitration and Conciliation Act 1996 (Arbitration Act<\/strong>) confers no express power of impleadment on courts or tribunals. Two, previous decisions have required the referral court to dispose of all preliminary issues \u2013 including impleadment of non-signatories.<\/p>\n SBP v Patel Engineering<\/a><\/em>[2]<\/em><\/strong> (<\/em>SBP<\/em><\/strong>) <\/em>made it <\/em>mandatory for courts to decide all preliminary issues at the referral stage. Separately, Chloro Controls v Severn Trent<\/em><\/a>[3]<\/em><\/strong> <\/em>sourced the GOC Doctrine to \u2018parties claiming through or under a party<\/em>\u2019 under Sections 8 and 45 of the Arbitration Act. Therefore, a non-signatory\u2019s impleadment had to be decided by the referral court \u2013 not the tribunal.<\/p>\n While SBP <\/em>was legislatively overruled by the 2015 and 2019 amendments to the Arbitration Act, Vidya Drolia v Durga Trading<\/em><\/a>[4] (<\/em>Vidya Drolia<\/em><\/strong>) <\/em>nonetheless required referral courts to dispose of \u2018deadwood\u2019 claims. This short window, too, was shut in SBI General Insurance v Krish Spinning<\/em><\/a>[5]<\/em><\/strong> (<\/em>Krish Spinning<\/em><\/strong>). <\/em>Relying on the Stamp Duty Judgment<\/em><\/a>[6]<\/em><\/strong>, Krish Spinning<\/em> held that all preliminary issues \u2013 including deadwood matters \u2013 must be decided by the tribunal.<\/p>\n Meanwhile, Cox & Kings v SAP<\/em><\/a><\/em>[7]<\/em><\/strong> (<\/em>Cox & Kings<\/em><\/strong>) <\/em>clarified that a non-signatory to whom the GOC Doctrine applies is a \u2018party\u2019 \u2013 not \u2018a party claiming through or under a party.<\/em>\u2019 Therefore, it was held that an arbitral tribunal is entirely competent to decide who is a veritable party \u2013 not least since it has the benefit of pleadings and evidence.<\/p>\n The Supreme Court noted that it is not enough to merely recognise the complexities of multi-party and multi-contract arrangements, albeit without compromising consent and party autonomy. They must also be effectuated by the tribunal. The Court viewed Section 16 from the \u2018always speaking\u2019 principle of statutory interpretation, by which statutory words speak continuously and carry a contemporary meaning. Section 16 is meant to uphold parties\u2019 intention to arbitrate and curb judicial interference in matters the tribunal can decide. Section 16 categorically provides for the tribunal to \u2018rule on\u2019 \u2013 not just consider or review \u2013 all questions of its jurisdiction. The tribunal also has the power to give effect to its ruling. Accordingly, given a tribunal can (and must) decide who is veritable party as part of its jurisdictional powers, Section 16 necessarily intends that the tribunal also have the power to implead a party who is decidedly bound by the arbitration agreement.<\/p>\n The Supreme Court also clarified that the parties\u2019 agreement sets the arbitral process in motion \u2013 but it is not determinative of the tribunal\u2019s jurisdiction. The true source of arbitral jurisdiction is the legal effect of an arbitration agreement.<\/p>\n Existence vis-\u00e0-vis a non-signatory<\/em><\/strong><\/p>\n The Court also clarified that the examination under Section 11 does not extend to whether an arbitration agreement exits qua<\/em> a non-signatory is a party. The latter is a matter of consent and, as such, should be decided by the tribunal. Even if the referral court believes that a non-signatory is not a veritable party, it would be open for the tribunal to determine the issue.<\/p>\n The Court noted that fairness also lies in giving due time and respect to the arbitral process. The non-signatory\u2019s concerns remain protected, including through Sections 16, 34 and 37. While determining who is a veritable party, however, the non-signatory must be heard by the tribunal \u2013 including on jurisdictional objections. The tribunal should decide the impleadment at the earliest opportunity. It should also mitigate, by imposing costs or otherwise, any prejudice caused to the non-signatory.<\/p>\n The test of a veritable party\u00a0<\/em><\/strong><\/p>\n Cox & Kings v SAP<\/em> observed that all parties \u2013 including the non-signatories in question \u2013 should evince a mutual intention to arbitrate. Mere membership of a corporate group is not enough. ONGC v Discovery Enterprises Pvt. Ltd. & Anr<\/em><\/a>[8] <\/em>required the following <\/em>factors to apply the GOC Doctrine:<\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The mutual intent of the parties;\u00a0<\/em><\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The relationship of a non-signatory to a party which is a signatory to the agreement;<\/em><\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The commonality of the subject-matter;\u00a0<\/em><\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The composite nature of the transactions; and<\/em><\/p>\n \u00b7\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 The performance of the contract.<\/em><\/p>\n [Discovery<\/em> Test<\/em><\/strong>] The Supreme Court upheld and applied the Discovery Test in ASF Buildtech<\/em>.<\/p>\n Prior notice to the non-signatory<\/em><\/strong><\/p>\n It was also clarified that a non-signatory can be impleaded in an arbitration, including in a counterclaim, even if it did not receive a notice under Section 21 or was not a party to referral proceedings.<\/p>\n COMMENT<\/strong><\/p>\n Under Indian law, non-signatories can be bound by contracts in exceptional cases, e.g. in cases of waiver, election, or estoppel. The Contract Act, too, recognises implied acceptance of agreements.[9] The deeply entrenched principle of separate legal personality also has exceptions, including alter ego and lifting the corporate veil. Each principle has a high threshold.[10] If the relevant threshold is met, there is no reason these principles should not apply to arbitration.<\/p>\n That said, an arbitration agreement is not a plain contract. It must satisfy the requirements of Section 7 of the Arbitration Act. On the one hand, Section 7 has an in-built flexibility. An arbitration agreement can exist in an unsigned document.[11] It can also be culled from exchange of documents. On the other hand, an agreement to arbitrate cannot be inferred by incorporation<\/a> unless the parties express an unambiguous intention to incorporate the arbitration clause. The latter contract must specifically refer to the arbitration clause in the contract sought to be incorporated. <\/em>[12] <\/em>Therefore, <\/em>Section 7 also places limitations on inferring consent to arbitrate.<\/p>\n The Discovery Test<\/em> seems a bit too broad \u2013 particularly to the extent considers conduct outside<\/em> the contract and arbitration agreement; such as one\u2019s role in negotiations and performance surrounding the contract. It will be interesting to see how it is applied against clauses on entire agreement[13], exclusion of liability, no-waiver (among others) \u2013 which are quite common in commercial agreements. The test may also be streamlined by the rule on parol evidence[14], which excludes evidence of any oral agreements regarding written instruments.<\/p>\n Commercial reality<\/em><\/strong><\/p>\n In Cox & Kings,<\/em> the Supreme Court cited commercial reality while recognising a non-signatory\u2019s implied consent to arbitrate. ASF Buildtech<\/em> also alludes to this commercial reality.[15] However, parties to complex transactions are often well abreast of commercial reality. Indeed, they create it. Such transactions are heavily negotiated and, often with expert assistance, infused with specific allocations of risk and liability among participants. Though involved in the composite transaction, a non-signatory may not be aligned on the law applicable to the arbitration agreement, the arbitral institution (or lack thereof), number of arbitrators, venue, or seat. Therefore, impleading a non-signatory in arbitration can also be contrary to the commercial reality designed by transaction participants.<\/p>\n Tribunal\u2019s jurisdiction<\/em><\/strong><\/p>\n Arbitral jurisdiction is fundamentally a creation of statute. Without the Arbitration Act, even a mutually appointed arbitrator\u2019s decisions would have no legal effect. It is Section 16 that breathes legal life into an arbitral tribunal. Notably, it does not provide for parties to agree otherwise. While parties retain their freedom of contract, including their choice to arbitrate and arbitral procedure, they cannot cannot dilute arbitral jurisdiction.[16] Therefore, while a valid arbitration agreement acts as the trigger, an arbitral tribunal is arguably not a creature of consent or party autonomy.[17]<\/p>\n Section 16 categorically provides for an arbitrator to rule on her own jurisdiction. It does not prescribe any specific fetters on this jurisdictional power. Not all components and contours of a statutory power need to be spelled out in the empowering provision. For instance, the Arbitration Act does not expressly say that an arbitral tribunal can grant specific performance \u2013 though it does.[18] A natural part of jurisdiction is personal jurisdiction or jurisdiction ratione personae.[19] Coupled with the tribunal\u2019s negative competence (i.e. judicial non-interference) and procedural autonomy, the plain language of Section 16 should suffice to uphold an arbitral tribunal\u2019s power to decide if a non-signatory is a veritable party and, if yes, if it should be impleaded to the arbitration. It may well turn out that a non-signatory is not a veritable party. However, this does not affect the position that impleadment is within the tribunal\u2019s jurisdiction. Respectfully, this was always the position under the Arbitration Act \u2013 and ASF Buildtech rightly affirms it.<\/p>\n Importantly, the fact that a non-signatory may have no say in the appointment of arbitrator(s) is not necessarily prejudicial, since no person gains any legal mileage from the appointment of its nominee.[20] If a non-signatory is joined, each arbitrator should reconfirm her independence and impartiality. The non-signatory can also challenge any existing arbitrator\u2019s appointment on the grounds available in the Arbitration Act. Of course, the tribunal\u2019s exercise of its power to implead will also also remain subject to judicial review.<\/p>\n Concluding thoughts<\/strong><\/p>\n The Supreme Court\u2019s decision in ASF Buildtech<\/em> is an emphatic confirmation of arbitrator autonomy. However, with great power comes great responsibility. Impleading non-signatories can go wrong. If based merely on a non-signatory\u2019s role in negotiations or overall performance of a contract, it can also lead to unintended dilution of the parties\u2019 distribution of risk and liability.<\/p>\n While the Supreme Court rightly reassures non-signatories with access to costs and challenges under Section 16 (among others), it will be interesting to see how the Discovery Test <\/em>develops over time. Legislative changes may also play a significant role.[21]<\/p>\n Until then, ASF Buildtech<\/em> will pave the way.<\/p>\n ***<\/em><\/strong><\/p>\n Disclaimer \u2013 All views expressed in the post above are strictly personal and purely for discussion. They do not necessarily represent the views of any organisation with which the author is affiliated.<\/em><\/strong>\u00a0<\/p>\n [1] 2025 INSC 616, Pardiwala and Mahadevan JJ, decision dated 2 May 2025.<\/p>\n [2] (2005) 8 SCC 618. See ASF Buildtech<\/em> at paras 49-50,<\/p>\n 49. The aforesaid view occupied the field till the seven-Judge Bench decision of\u00a0\u00a0 this Court in SBP & Co. (supra) which held that the power conferred upon the\u00a0\u00a0 Chief Justice or his designate under Section 11 of the Act, 1996 is a judicial\u00a0\u00a0 power and not merely an administrative power. It held that being a judicial\u00a0\u00a0 power, the Chief Justice or his designate had the right to decide all preliminary\u00a0\u00a0 issues at the referral stage under Section 11(6) of the Act, 1996, and that the\u00a0\u00a0 power of the arbitral tribunal to rule on its own jurisdiction under Section 16\u00a0\u00a0 would come into the picture only when the parties go before the arbitral\u00a0\u00a0 tribunal without recourse to the courts either under Sections 8 or 11\u00a0\u00a0 respectively of the Act, 1996.\u00a0<\/p>\n 50.The ultimate effect of the ratio of SBP & Co. (supra) was that the scope for\u00a0\u00a0 interference available to the referral courts when acting under Section 11 of\u00a0\u00a0 the Act, 1996 was substantially expanded, and the referral courts were not only\u00a0\u00a0 empowered but also expected to conduct mini trials and indulge in the\u00a0\u00a0 appreciation of evidence on various issues concerned with the subject matter\u00a0\u00a0 of arbitration.\u00a0<\/p>\n [3] (2013) 1 SCC 641<\/p>\n [4] Vidya Drolia & Ors v. Durga Trading Corporation, (2021) 2 SCC 1 at Para 154.1<\/p>\n [5] SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532<\/p>\n [6] In Re: Interplay Between Arbitration Agreements under the\u00a0Arbitration and Conciliation Act<\/a>\u00a01966 and the\u00a0Indian Stamp Act<\/a>\u00a01899, 2023 INSC 1066<\/p>\n [7] Cox & Kings Ltd. v. SAP India (P) Ltd., 2023 INSC 1051<\/p>\n [8] (2022) 8 SCC 42<\/p>\n [9] Section 9 of the Contract Act 1872,<\/p>\n 9. Promises, express and implied.\u2014In so far as the proposal or acceptance of any promise is made<\/p>\n in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.<\/p>\n [10] See e.g., Kalparaj Dharamshi v. Kotak Investment Advisors Ltd 2021 SCC OnLine SC 204 regarding waiver and estoppel; and Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 regarding separate legal personality and lifting the corporate veil.<\/p>\n [11] See Glencore International AG v M\/s Shree Ganesh Metals and another, 2025 INSC 1036. At paragraph 19, the Supreme Court observes that \u201c\u2026[t]he mere fact that Contract No. 061-16-12115-S was not\u00a0 signed by respondent No.1 would not obviate from this principle when the he conduct of the parties in furtherance of the said contract, clearly\u00a0 manifested respondent No. 1\u2019s acceptance of the terms and conditions\u00a0 contained therein, which would include the arbitration agreement in\u00a0 clause 32.2 thereof.\u201d <\/em>Also see, Caravel Shipping Services Private Limited v. Premier Sea Foods Exim Private Limited (2019) 11 SCC 461.<\/p>\n [12] 2024 INSC 218, see Para 22<\/p>\n [13] See Neelkanth Mansions and Infrastructures Private Limited and Ors. v. Urban Infrastructure Ventures Capital Limited and Ors, 2018 SCC OnLine Bom 5970<\/p>\n [14] See Bharatiya Sakshya Adhiniyam, 2023, Section 95: Exclusion of evidence of oral agreement.<\/p>\n When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to section 94, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of contradicting, varying, adding to, or subtracting from, its terms:<\/p>\n Provided that any fact may be proved which would invalidate any document, or which would entitle any person to any decree or order relating thereto; such as fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration, or mistake in fact or law:<\/p>\n Provided further that the existence of any separate oral agreement as to any matter on which a document is silent, and which is not inconsistent with its terms, may be proved. In considering whether or not this proviso applies, the Court shall have regard to the degree of formality of the document:<\/p>\n Provided also that the existence of any separate oral agreement, constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of property, may be proved:<\/p>\n Provided also that the existence of any distinct subsequent oral agreement to rescind or modify any such contract, grant or disposition of property, may be proved, except in cases in which such contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents:<\/p>\n Provided also that any usage or custom by which incidents not expressly mentioned in any contract are usually annexed to contracts of that description, may be proved:<\/p>\n Provided also that the annexing of such incident would not be repugnant to, or inconsistent with, the express terms of the contract:<\/p>\n Provided also that any fact may be proved which shows in what manner the language of a document is related to existing facts.<\/p>\n [15] ASF Buildtech <\/em>at Para 125<\/p>\n [16] See also, ASF Buildtech<\/em> at Para 117<\/p>\n Since the aspect of joinder of a party\u00a0\u00a0 to the arbitration agreement, either signatory or non-signatory stems from a\u00a0\u00a0 conjoint reading of Section(s) 2(1)(h) and 7 of the Act, 1996 as explained by\u00a0\u00a0 Cox and Kings (I) (supra) and by us in the foregoing paragraphs, even if the\u00a0\u00a0 parties are to agree that a tribunal or for that matter a referral court will not\u00a0\u00a0 have the power to implead any party to the arbitration proceeding, such an\u00a0\u00a0 agreement will only operate to the extent that (i) the arbitration agreement is\u00a0\u00a0 not governed by the Act, 1996 i.e., does not fall under Part I of the Act, 1996\u00a0\u00a0 and (ii) that such party is not otherwise bound by the arbitration agreement.<\/p>\n [17] See ASF Buildtech<\/em> at Para 141<\/p>\n The jurisdiction of an arbitral tribunal is not created by the mere subjective\u00a0\u00a0 intent or volition of the parties. Rather, it is the arbitration agreement\u2014a\u00a0\u00a0 legally cognisable and objective instrument\u2014that operates as the foundational\u00a0\u00a0 source of jurisdiction in the eyes of the law. Just as the creation of a property\u00a0\u00a0 automatically vests jurisdiction in the territorial courts competent to\u00a0\u00a0 adjudicate over such property, the conclusion of an arbitration agreement ipso\u00a0\u00a0 jure brings into existence the jurisdiction of the arbitral tribunal. This\u00a0\u00a0 jurisdiction exists in a de jure sense from the moment the arbitration\u00a0\u00a0 agreement is validly executed, regardless of whether the tribunal has been\u00a0\u00a0 formally constituted<\/p>\n [18] See Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. & Ors. (2011) 5 SCC 532. See also, Olympus Superstructures Pvt Ltd vs. Meena Vijay Khetan and others, 1999 (5) SCC 651 at Para 34,<\/p>\n \u201cWe are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree \u2013 with a view to shorten litigation in regular courts \u2013 to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immoveable property<\/strong>.\u201d (emphasis added)<\/p>\n [19] Adavya Projects v Vishal Structurals, 2025 INSC 507<\/em><\/strong><\/p>\n Section 16 embodies the\u00a0 doctrine of kompetenz-kompetenz, i.e., that the arbitral tribunal\u00a0 can determine its own jurisdiction. The provision is inclusive and\u00a0 covers all jurisdictional questions, including the existence and\u00a0 validity of the arbitration agreement, who is a party to the\u00a0 arbitration agreement, and the scope of disputes referrable to\u00a0 arbitration under the agreement. Considering that the arbitral\u00a0 tribunal\u2019s power to make an award that binds the parties is\u00a0 derived from the arbitration agreement, these jurisdictional issues\u00a0 must necessarily be decided through an interpretation of the\u00a0 arbitration agreement itself. Therefore, the arbitral tribunal\u2019s\u00a0 jurisdiction must be determined against the touchstone of the\u00a0 arbitration agreement.<\/p>\n [20] See also ASF Buildtech<\/em> at para 108<\/p>\n \u201c\u2026Could it be said that where, the signatories have\u00a0\u00a0 consensually appointed an arbitrator in terms of the arbitration agreement,\u00a0\u00a0 then in such cases, the arbitral tribunal that has been so constituted, would not\u00a0\u00a0 be empowered to implead a non-signatory as-well, merely because, the\u00a0\u00a0 referral court did not either determine the \u2018existence of the arbitration\u00a0\u00a0 agreement qua the non-signatory\u2019 or did not leave such question for\u00a0\u00a0 determination of the arbitral tribunal, even though no such occasion had arisen\u00a0\u00a0 for the referral court to do so? The answer to the aforesaid, must be an\u00a0\u00a0 emphatic \u201cno\u201d\u201d<\/p>\n [21] See ASF Buildtech at para 170<\/p>\n Unfortunately, even 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\u00a0\u00a0 tribunal. What is expressly missing in the Act, 1996 is still missing in the\u00a0\u00a0 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\u00a0\u00a0 recognition of such power in order to obviate all possibilities of confusion.\u00a0 As observed in Gayatri Balasamy (supra), any uncertainty in the law of\u00a0\u00a0 arbitration would be an anathema to business and commerce. We urge, the\u00a0\u00a0 Department of Legal Affairs, Ministry of Law and Justice to take a serious\u00a0\u00a0 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.<\/p>\n<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":" In ASF Buildtech Private Limited v Shapoorji Pallonji & Co Private Limited[1] (ASF Buildtech), the Supreme Court recently clarified that an arbitral tribunal has the power to implead a non-signatory who is bound by an arbitration agreement. Along with the key findings in ASF Buildtech, this piece sets out a few thoughts on the test […]<\/p>\n","protected":false},"author":1,"featured_media":291071,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[112560,147158,147159,103321],"tags":[120664,147160,147161,147164,147165,147166,147163,1783,147162,47036],"dealstore":[],"offerexpiration":[],"class_list":["post-318697","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-arbitration","category-jurisdiction","category-non-signatories","category-supreme-court","tag-arbitral","tag-asf","tag-buildtech","tag-dissecting","tag-implead","tag-nonsignatories","tag-pallonji","tag-power","tag-shapoorji","tag-tribunals"],"yoast_head":"\n
<\/em><\/p>\n