ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

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agreement in a private forum outside the ordinary hierarchy of judicial authorities, the arbitration agreement alone, along with the intended applicable statutory laws constitute the body of laws within which the arbitral tribunal may exercise its powers. The arbitral tribunal cannot arrogate to itself powers which are neither conferred by the statute or the rules which govern the arbitration nor can it take recourse to inherent powers that ordinarily vests within a judicial authority. Even in exceptional cases where the scope of arbitration may be expanded to include even non-signatories, any such power to do so has been expressly conferred by the legislature only upon courts within the Act, 1996 by appropriate legislative insertions to the term “party”. The relevant observations read as under: - “92. As was held hereinbefore, the AT owes its origin principally to well recognised and identifiable sources. The principal source would be the agreement in terms of which parties may have resolved for all disputes being referred to an AT and thus choose a forum falling outside the circuit of national courts and the ordinary hierarchy of judicial authorities. The other would be rules framed by a body where the agreement contemplates institutional arbitration. Last but not the least would be the statutory laws framed by countries which are intended to govern and regulate ATs’. The agreement, institutional rules or national statutes would thus constitute the code or the body of laws specifying the powers that may be available to be exercised by the AT. As was pertinently observed by Redfern and Hunter, parties cannot by agreement invest powers upon an AT which are otherwise reserved to be exercised by courts and judicial institutions created by the State.

93. What needs to be emphasised is that an AT cannot arrogate to itself powers which are neither conferred by the statute or the rules which govern the arbitration nor can it take recourse to inherent powers, which as has been found hereinabove, are acknowledged to inhere in courts and judicial authorities only. The AT, cannot, therefore, expropriate for itself powers

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which are vested solely in judicial institutions. It remains bound by the provisions of the statutes which prevail and which in this case undisputedly is the Act. In the absence of a power of impleadment having been conferred upon the AT in terms thereof, it would have no authority or jurisdiction to join or implead parties to the proceedings. The Court has already found that the power to implead cannot be sustained or traced to Sections 16 or 17 or 19 of the Act. In fact, the Act incorporates no provision which could be even remotely considered as being liable to be read as being the repository of the power of the AT to implead.

94. The Act, wherever it was intended to expand the meaning to be ascribed to the word “party” has done so by introducing specific provisions in that respect. Even where such recourse was taken, the power has come to be conferred upon a judicial authority. If the AT were recognised to have the authority to invoke the alter ego or group of companies principles, it would undoubtedly result in the Court recognising a power vesting in the AT to compel the presence of a party who had never, at least ostensibly, agreed or conceded to its jurisdiction or authority to decide. Such a party would necessarily be one who had not even made party to the proceedings by the referral court. This would clearly result in the AT seeking to exercise authority over a party and compelling it to join the proceedings even though it may have never been ad idem on disputes being resolved by way of arbitration. This would not only result in the AT travelling far beyond the contours of the arbitration agreement but negate against the fundamental tenet of arbitration which is founded on consensus and agreement. The Court for all the aforesaid reasons, thus, finds itself unable to countenance the position as taken by the Sole Arbitrator in the present case.

95. Quite apart from the Court having found for reasons aforenoted that the AT stands conferred with

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no authority to implead or join parties, a reading of the impugned order would clearly appear to indicate that the Sole Arbitrator has proceeded to join the appellants on considerations which are recognized to constitute the basis for the exercise of power under Order I Rule 10 of the CPC. However, the Sole Arbitrator has failed to bear in mind that the Act confers no authority upon an AT to wield powers akin to Order I Rule 10 of the CPC as specifically conferred on national courts. We have also found for reasons aforenoted that Section 19(2) cannot be read as enabling the AT to adopt Order I Rule 10 of the CPC.” (Emphasis supplied)

II. Decisions holding that the Arbitral Tribunal has the power to Implead a non-signatory to the Arbitration Agreement.

21. While on one hand the Delhi High Court along with the Bombay High Court and the Madras High Court have taken the view that it is only the courts who have the power to implead a non-signatory to partake in arbitration and that such power is not vested in an arbitral tribunal, the High Court of Gujarat on the other hand, speaking through Akhil Kureshi J. (as he then was) in IVRCL Ltd. v. Gujarat State Petroleum Corporation Ltd. reported in 2015 GUJHC 31651 DB observed albeit in the context of scope of Section 9 of the Act, 1996, more particularly whether an injunction would be maintainable against a non-signatory, that it is no longer res-integra that even a non-signatory to an arbitral agreement can be subjected to arbitration proceedings. Placing reliance on the decision of this Court in Chloro Controls (supra), it was held that the courts have recognized various instances where even a non-signatory to an arbitration agreement can be allowed to be joined in the arbitration proceedings by way of principle of alter-ego, apparent authority, agency or group of companies etc. It observed that such instances are premised on the ‘implied consent’ of the third-party to the arbitration agreement and thus, it would be futile to say that a non-signatory to an arbitration agreement can be compelled to submit to the jurisdiction of the arbitral tribunal so validly constituted. In the last, it observed that whether a particular case is a fit one for enjoining a third-party on the aforesaid

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principles would be for the arbitral tribunal to determine, being the appropriate forum by examining the facts of each case, an exercise which is neither possible nor proper for the courts to embark upon. The relevant observations read as under: - “13. It is no longer res integra that in given set of circumstances, even a non-signatory to an arbitral agreement can be subjected to arbitration proceedings. Such instances may be rare and may arise in special facts of the case and would ordinarily provide an exception to the normal rule, that only a signatory to the arbitral proceedings can be compelled to submit to the jurisdiction of the arbitral tribunal. Nevertheless, instances have been recognized by Courts where either on the ground of piercing corporate veil as one entity found to be the alter ego of the other or some such similar ground, even a non-signatory entity to an arbitration agreement is allowed to be joined in the arbitration proceedings. As noted, in case of Chloro Controls (I) P. Ltd. (supra), the law on the point was discussed at length by 3 Judge Bench of the Supreme Court and it was concluded that various legal basis may be applied to bind a non-signatory to an arbitration agreement. Such instances would be of that of implied consent, third party beneficiaries, guarantors, assignment and other transfer mechanisms of contractual rights. Such theory relies on the discernible intentions of the parties and to a large extent, on good faith principle. The second stream of cases would be included in the legal doctrines of agent-principal relations, apparent authority, piercing of veil, joint venture relations, succession and estoppel. It was observed that this principle does not rely on the parties’ intention but rather on the force of the applicable law. It would therefore be futile to argue that in no case, a non-signatory to an arbitration agreement can be compelled to submit to the jurisdiction of the arbitral tribunal so validly constituted. Whether in the present case, facts are such that any of the principles cited above or any other recognized by judicial precedent would apply or not is neither possible nor proper on our part to comment upon. Entire issue is pending before the appropriate forum.

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We would therefore not be justified in allowing the appeal and vacating the injunction only on this ground.” (Emphasis supplied)

22. Similarly in IMC Ltd. v. Board of Trustees of Denndayal Port Trust reported in (2018) SCC OnLine Guj 4972, the Gujrat High Court placing reliance on IVRCL Ltd (supra) held that there is nothing in the Act, 1996 which precludes or prohibits an arbitral tribunal from lifting the corporate-veil and pursuant thereto impleading even a non-signatory to arbitration proceedings. Expressing its disagreement with the views of the Bombay High Court and the Delhi High Court in Sudhir Gopi (supra) and Oil and Natural Gas Corporation Ltd (supra) respectively, it held that except for a limited sphere of fields involving disputes which are non-arbitrable, the arbitral tribunal is well-empowered to take up all other disputes and issues thereto which would necessarily also include the issue of lifting the corporate veil to enjoin a non- signatory to the arbitration. Whether a case is made out for impleading a third- party (sic non-signatory) or not would be a matter for the arbitral tribunal being the proper designated forum for adjudication of disputes, keeping in mind the facts of each case and the position of law. It further observed that both the recognition of such power of an arbitral tribunal AND the non- issuance of a notice of invocation in terms of Section 21 of the Act, 1996 to the third-party sought to be impleaded will hardly occasion any prejudice, as it is always open to such a third-party to challenge its impleadment by way of an application under Section 16 of the Act, 1996. The relevant observations read as under: - “23. Reverting to the facts of the case on hand, it is to be noticed that the order passed by the learned Arbitral Tribunal clearly records that opinion expressed is prima- facie and subject to objections and remedies available under the Arbitration Act to the impleaded respondent, i.e. the appellant herein. If the appellant claims that it is not a party to the agreement, as such it cannot be impleaded as party respondent in the arbitration proceedings, it is always open for it to move an application under Section 16 of the Arbitration Act to rule on its jurisdiction. In view of such remedy and further remedies available under the law, by ordering impleadment, we are of the opinion

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that no prejudice is caused to the appellant. Whether notice is required to be issued to a party before ordering impleadment, or not, is a matter which depends on facts and circumstances of each case. If a strong case is made out for impleadment, it is always open for the Courts and Tribunals to order impleadment and to give an opportunity before deciding the main claim. In that view of the matter and having gone through the case law on the subject as referred above, we are of the view that the order of the learned Arbitral Tribunal cannot be said to be not in conformity with law merely on the ground that appellant was not issued notice before passing the order of its impleadment. Even the learned Single Judge has also rightly rejected the plea of the appellant for quashing the order of the learned Arbitral Tribunal on the aforesaid ground.

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45. On hearing the response on the said issues by the learned Senior Counsel Shri Mihir Thakore and keeping in view of the provisions of the Arbitration Act, 1996, as also the judgment of the Hon’ble Supreme Court in the case of A. Ayyasamy v. A. Paramasivam reported in (2016) 10 SCC 386, we are not in agreement with the view taken by the learned Single Judges in the aforesaid judgments in Sudhir Gopi v. Indira Gandhi National Open University reported in 2017 SCC OnLine Del 8345 and Oil and Natural Gas Corporation Ltd. v. Jindal Drilling and Industries Limited reported in 2015 SCC OnLine Bom 1707. There is nothing in law which prohibits an Arbitral Tribunal from lifting the corporate veil on the basis of doctrine of alter ego. The Arbitral Tribunal has a right to take up all disputes which a Court can undertake, except certain disputes generally treated as non- arbitrable, viz. (i) patent, trade marks and copyright, (ii) anti- trust/competition laws, (iii) insolvency/ winding up, (iv) bribery/corruption, (v) fraud, (vi) criminal matters. The Arbitration and Conciliation Act, 1996, does not make any provision excluding any category of disputes treating them as non- arbitratble but the Courts have held that certain kinds of disputes may not be capable of

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

adjudication through means of arbitration. This issue is elaborately considered by the Hon’ble Supreme Court in the case of A. Ayyasamy v. A. Paramasivam reported in (2016) 10 SCC 386. [...]

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47. Further, in the case of IVRCL Limited v. Gujarat State Petroleum Corporation Limited - First Appeal No. 1714 of 2015 and other allied appeals, decided on 08-13/10/2015, a Division Bench of this Court held that it is no longer res-integra that in a given set of circumstances, even a non-signatory to an arbitral agreement can be subjected to arbitration proceedings. It is further observed that instances have been recognized by Courts where on the ground of piercing corporate veil, as one entity being found to be an alter ego of the other or on similar grounds, even a non-signatory entity to an arbitration agreement is allowed to be joined in the arbitration proceedings. The Division Bench has disapproved the argument that, in no case, a non-signatory to the arbitration agreement can be compelled to submit to the jurisdiction of the Arbitral Tribunal validly constituted.

48. In view of the aforesaid judgments of the Hon’ble Supreme Court and Division Bench of this Court, we are not in agreement with the submission made by Shri S.N. Soparkar, learned Senior Counsel for the appellant, that the learned Arbitral Tribunal has no jurisdiction to examine the issue by lifting the corporate veil and further, on facts, no case is also made out to examine the claim of alter ego by lifting the corporate veil. Whether a case is made out for impleading a third party by applying the doctrine of lifting of corporate veil, is a matter which is to be examined having regard to facts of each case and keeping in mind the concept of group Companies. [...]” (Emphasis supplied)

23. In NOD Bearing Pvt. Ltd. v. Bhairav Bearing Corporation reported in (2019) SCC OnLine Bom 366 the facts germane for our discussion are that an agreement for supply of ball bearings was entered into

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between the petitioner therein and one KBIL group. For facilitation of distribution of these goods, the petitioner therein entered into a dealership agreement with the respondent therein, pursuant to which a certificate of distribution came to be issued to the respondent therein by KBIL. Due to various issues as regards the fulfilment of supply of goods, the KBIL and the petitioner therein terminated the certificate of distribution and the dealership agreement, respectively with the respondent therein. Aggrieved by the aforesaid, the respondent therein initiated arbitration against the petitioner therein inter-alia for the purpose of challenging the aforesaid termination and claiming damages therefrom. Before the arbitral tribunal one of the key issues canvassed by the petitioner therein was that the arbitration suffers from a mis-joinder or non-joinder of parties inasmuch as KBIL had not been impleaded. It contended that the dealership agreement entered into by it with the respondent therein was only in the capacity of an agent of the KBIL, and thus any claims arising out of the same must be made against the principal alone i.e., KBIL, who has not been made a party to the arbitration proceedings. The aforesaid contention came to be rejected by the arbitral tribunal and ultimately an award was passed against the petitioner therein. In appeal, the Bombay High Court upholding the decision of the sole arbitrator held that construction and determination of the scope of agreement so as to determine which parties are necessary to the proceedings is a matter strictly within the jurisdiction of the arbitrator. It further observed that as long as the interpretation of the agreement by the arbitrator is reasonable, the courts would refrain from interfering with the same merely because another view is possible. Although the Bombay High Court did not make any observations as regards the power of tribunal to implead or join a non-signatory, yet its observations as to the scope of jurisdiction of the arbitral tribunal, more particularly for determining whether there exists any principal-agent relationship nevertheless is of significance, which we shall discuss in more detail in the latter parts of this judgment. The relevant observations read as under: - “4. Learned Counsel for the Petitioner submits that dealership agreement, which gave rise to the Respondent’s claim, was entered into by the Petitioner as an agent of KBIL. Learned Counsel submits that the Petitioner having disclosed in the dealership agreement its principal and

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

its express authority to name a dealer whilst acting for the principal, namely, KBIL, the Respondent’s dealership is not a sub-agency of the Petitioner, but an agency of the principal itself, namely, KBIL. Learned Counsel relies on Section 194 read with Section 230 of the Contract Act in this behalf. Based on this contention, it is further submitted that the claim being in respect of a contract of agency as between the Respondent and KBIL, the latter was a necessary party for any adjudication concerning the agreement. [...]

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5. The learned arbitrator rejected the Petitioner’s submissions on the ground that the dealership agreement between the Petitioner and the Respondent was on a principal to principal basis; though this agreement was in pursuance of its entitlement to appoint dealers under its main contract of distributorship with KBIL and this agreement conferred upon KBIL certain rights, in essence, it was an agreement between the Petitioner and the Respondent. The arbitrator considered various circumstances to arrive at this conclusion. The arbitrator inter alia observed that under the dealership agreement, the Respondent was required to place a purchase order on, and purchase bearings from, the Petitioner and prices were required to be separately agreed between the Respondent and the Petitioner from time to time. After considering various clauses of the dealership agreement (in particular, clauses 3(b), 5(a) to (c), 6(a), 7(a), (d), 10, 11(f) and 13 thereof), the arbitrator held that a holistic reading of the agreement did not show that the Petitioner was merely acting as an agent of KBIL, whilst entering into the dealership agreement with the Respondent. The arbitrator relied on the case of Coats Viyella India Ltd. v. India Cement Ltd. in this behalf. In Coats Viyella India Ltd., the Supreme Court, after considering the agreement as a whole, had held that under the agreement, a privity of contract of the appellant was only with the respondent and there was no liability on the other party, who was claimed to be the principal, to make payment to the appellant; the

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agreement was on a principal to principal basis between the appellant and the respondent, the rights and liabilities of the appellant arising only under the agreement. Based on the material placed before the learned arbitrator and a reasonable interpretation of the dealership agreement and application of law, the arbitrator came to his conclusion that the Petitioner did not act merely as an agent on behalf of KBIL in entering into the dealership agreement and since the Respondent’s case was that the Petitioner’s acts had directly resulted in the Respondent suffering losses, the proceedings did not suffer from any mis-joinder or non- joinder of necessary party so as to vitiate the proceedings. This conclusion is clearly a possible view based on the material placed before the learned arbitrator. Construction of a contract is a matter strictly within the jurisdiction of the arbitrator, and so long as the arbitrator construes it on a reasonable interpretation and his construction denotes a possible view, there is nothing for the challenge court to interfere with under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”).

6. There is no denial of the proposition of law laid down by the Supreme Court or our court in the cases cited by learned Counsel for the Petitioner. Prem Nath Motors Limited’s case (supra) basically considers the effect of Section 230 of the Contract Act. In that case, it was held that the agent had acted on behalf of a disclosed principal and there was no contract to the contrary placed before the court so as to make the agent liable for the act of the disclosed principal. Even in Vivek Automobiles Limited (supra), the court applied the same principle. The principle of law enunciated by the Supreme Court in these cases merely implies that an agent is not responsible for the acts of a disclosed principal except in case of a contract to the contrary. The real question in the present case is whether, in so far as the agency agreement between the Petitioner and the Respondent is concerned, the Petitioner could be said to be merely acting as an agent of a disclosed principal, namely, KBIL, or was the agreement entered into by the Petitioner acting in its own rights as a principal. On a reasonable

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construction of the agreement, the arbitrator found that it was the latter case and not the former. The arbitrator held that the relevant clauses of the agreement indicated that the agreement of dealership was entered into by the Petitioner not as an agent of KBIL, but in its individual capacity on a principal to principal basis. That conclusion, as I have noted above, is a possible view based on a reasonable interpretation of the agreement.” (Emphasis supplied)

24. A similar view was taken by the Delhi High Court in Vistrat Real Estates Pvt. Ltd. v. Asian Hotels North Ltd. reported in (2022) SCC OnLine Del 1139 wherein the issue before the court was whether the petitioner therein was entitled to initiate arbitration against a third- party who was not a signatory to the arbitration agreement. The Delhi High Court placing reliance on Chloro Controls (supra), held that in exceptional cases pertaining to either the principle of ‘composite performance’ or ‘implied authority’. even a third party who is not a signatory to the arbitration agreement can be joined in arbitration. It further held that at the stage of appointment of an arbitrator in terms of Section 11 of the Act, 1996, the courts are required only to make a prima-facie determination as regards the validity or existence of the arbitration agreement only. Once it is found that there is a valid arbitration agreement in existence, all other issues including whether any relief can be claimed against a third- party or the necessity for impleading such third party would be a matter to be looked into only by the arbitral tribunal by virtue of the powers devolved upon it by the principle of ‘kompetenz-kompetenz’. The relevant observations read as under: - “11. Hon’ble Supreme Court in the decision reported as (2013) 1 SCC 641 Chrolo Controls India Private Ltd. v. Severn Trent Water Purification Inc. though dealing with an international arbitration under Section 45 of the Act, held that even third parties who are not signatories to the arbitration agreement can be joined in arbitration. It laid down categories where the third parties can be impleaded to the arbitration and held that the expression ‘claiming through them’ should be construed strictly. [...]

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12. The decision in Chrolo Controls (supra) clearly holds that in exceptional cases applying the principle of “composite performance” or implied authority, even a third party who is not a signatory to the arbitration agreement can be joined in arbitration.

13. Hon’ble Supreme Court in Vidya Drolia (supra) further considering the issue as to who would decide the non-arbitrability of the claim held that there cannot be a straightforward universal answer. Reiterating the law laid down in Shin Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234, it was held that the correct approach to the review of the arbitration agreement is restricted to prima facie finding that there exists an arbitration agreement that is not null and void, inoperative or incapable of being performed. The key rationale for holding that the courts’ review of the arbitration agreement should be limited to a prima facie standard is the principle of competence- competence. Further, if the courts are empowered to fully scrutinise the arbitration agreement, an arbitral proceeding would have to be stayed until such time that the court seized of the matter renders a decision on the arbitration agreement. This would defeat the credo and ethos of the Arbitration and Conciliation Act which is to enable expeditious arbitration without avoidable intervention by the judicial authorities. The rule of priority in favour of the arbitrators is counterbalanced by the courts’ power to review the existence and validity of the arbitration agreement at the end of the arbitral process. It was further held that if on a bare perusal of the agreement it is found that a particular dispute is not relatable to the arbitration agreement, then, perhaps the court may decide the relief sought for by a party in a Section 11 petition. However, if there is a contestation with regard to the issue as to whether the dispute falls within the realm of the arbitration agreement, then the best course would be to allow the arbitrator to form a view in the matter.

14. Therefore, once a valid arbitration agreement exists between the parties, the issue whether the petitioner is entitled to any relief in the absence of a third party to the

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agreement or that third party is required to be impleaded in the proceedings, is covered by the Doctrine of Competence- Competence and it will be for the Arbitrator to decide the said issue. Thus, the issue whether in the absence of a third party, the petitioner can claim the refundable security deposit would be for the learned Arbitrator to determine.” (Emphasis supplied)

25. In Cardinal Energy and Infra Structure Pvt. Ltd. v. Subramanya Construction and Development Co. Ltd. reported in (2024) SCC OnLine Bom 964, the Bombay High Court diverging from the views expressed in its earlier decision of Oil and Natural Gas Corporation Ltd. (supra) and the decision of the Madras High Court in V.G. Santhosam (supra), held that the arbitral tribunal does have the power or authority to implead a non-signatory even if such impleadment was never sought at the referral stage. The said decision is in three-parts: - (i) First, placing reliance on the decision of this Court in Cox and Kings (I) (supra), it held that the question whether a non- signatory is bound by the arbitration agreement or not, is for the arbitral tribunal to decide and not the referral court. Thus, even if the non-signatory was not impleaded at the time of filing of application under Section 11 of the Act, 1996, it would be incorrect to say that the same would exclude the arbitral tribunal from impleading such party by applying the ‘group of companies’ doctrine on its own accord. The relevant observations read as under: - “40. The Sole Arbitrator has referred to the decision of the Supreme Court in Cox and Kings (Supra) where the Supreme Court has enunciated the ‘Group of Companies’ doctrine and in particular the impleadment of a non- signatory to an Arbitration Agreement in arbitral proceedings based on such doctrine. The Supreme Court in the said decision has considered a case where an Application was made to the Referral Court to join a non- signatory to the Arbitration Agreement and it was in such scenario that the Supreme Court held that, the

p. 1624

Referral Court is required to prima facie rule on the existence of the Arbitration Agreement and whether the nonsignatories is a veritable party to the Arbitration Agreement. The Supreme Court has held that in view of the complexity of such a determination, the Referral Court should leave it for the Arbitrator to decide, whether the non-signatory party is indeed a party to the Arbitration Agreement on the basis of the factual evidence and application of legal doctrine. It is necessary to reproduce paragraphs 171 and 172 of the said decision [...]

41. Thus from the conclusions of the Supreme Court, it is clear that the Supreme Court has held that where at a referral stage impleadment of a non- signatory to the Arbitration Agreement is raised, the Referral Court should leave it for the Arbitral Tribunal to decide whether the non- signatory is bound by the Arbitration Agreement. Thus, it is clear that the Arbitral Tribunal has the power to decide whether the non-signatory is bound by the Arbitration Agreement and to implead the non-signatory if answered in the affirmative.

42. I do not find from a reading of the decision of the Supreme Court in Cox and Kings Ltd. (Supra) that merely by there being no prayer for impleadment of a non- signatory in the Section 11 Application, the applicability of the doctrine of ‘group of companies’ by the Sole Arbitrator is excluded. [...]” (Emphasis supplied)

(ii) The arbitral tribunal being the appropriate forum to determine the issue as to joinder of a non-signatory to an arbitration agreement, would undoubtedly have the power to implead such non-signatory. Although, at the referral stage the court is bound to decide whether there is an arbitration agreement and whether the parties before it are bound by such agreement or not, yet this does not preclude the arbitral tribunal from deciding these issues after the proceedings have commenced on its own accord,

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particularly when such issues were not conclusively decided by the courts in the first instance. The relevant observations read as under: - “42. [...] The Arbitrator does have the power/authority to implead the non-signatory if such non-signatory is otherwise liable to be impleaded on the basis of the ‘group of companies’ doctrine. Thus, the Supreme Court has infact considered that the Arbitral Tribunal is the appropriate forum to determine the issue as to joinder of a non- signatory to an Arbitration Agreement. I thus find no merit in the submission of Mr. Rustomjee that in the event the issue of joinder of a non-signatory to an Arbitration Agreement is not raised before the Referral Court, the Arbitral Tribunal on its own accord does not have the power to determine this issue and/or allow the impleadment of a non-signatory to an Arbitration Agreement. I do not find there to be any estoppel on the Arbitral Tribunal determining this issue.

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44. There have been submissions made by Mr. Rustomjee on the power of the Referral Court to determine whether the Arbitration Agreement exists and/or validity of the Arbitration Agreement and which would include whether the Arbitration Agreement is applicable to non-signatories to the Agreement. The Supreme Court in National Insurance Company Ltd. (Supra) at paragraph 22 has referred to the issues which the Chief Justice or his designate is bound to decide and which includes whether there is an Arbitration Agreement and whether the party who has applied under Section 11 of the Act is a party to such agreement. However, this will not preclude the Arbitral Tribunal from deciding the issue of impleadment of a non-signatory to an Arbitration Agreement, particularly when this issue was not before the Referral Court. Thus, in my view, the Sole Arbitrator in the present case was perfectly justified in determining the issue

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of whether the Petitioners as non-signatories to the Arbitration Agreement could be impleaded as parties to the arbitration. (Emphasis supplied)

(iii) Thirdly, it observed that although the power of impleadment cannot be traced to any provision of the Act, 1996, yet such power has been recognized to exist with the arbitral tribunal by virtue of the law expounded by Cox and Kings (I) (supra). It then held that such power to implead can be traced to the arbitral tribunal’s power to determine its own jurisdiction under Section 16 of the Act, 1996, which includes the power to determine whether the arbitral tribunal has jurisdiction over non- signatories to the arbitration agreement in question. Moreover, under the scheme of Act, 1996, it is always open to the parties to challenge such impleadment by leading evidence on these issues before the arbitrator and thereafter before the courts by taking recourse to Section 34 of the Act, 1996 after the award is passed. The relevant observations read as under: - “43. I further find much substance in the argument of Mr. Sarda on behalf of the Respondent Nos. 1 and 2 that the Arbitral Tribunal is obliged to follow the law laid down by the Supreme Court and/or judge made law. This would be the case despite the Arbitral Tribunal not having specific power to consider an application for impleadment and/or the power of the Civil Court under Order I Rule 10 of the CPC. The Delhi High Court in Abhibus Services India Private Ltd. (Supra), paragraph 136 has the recognized concept of judge made law. However, it has been held that in the absence of any trace of such power in the entire scheme of the Act, the power of impleadment cannot be said to be conferred upon the Tribunal on the basis of judge made law. This decision of the Delhi High Court was prior to the decision of the Supreme Court in Cox and Kings (Supra) which in my view has changed the law with regard to impleadment of non-signatories to the Arbitration Agreement on the ‘group of companies’

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doctrine and has left it to the Arbitral Tribunal to determine this issue.

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45. The aforementioned findings are on the premise that the impugned Order is an interim award. However, one cannot lose sight of the fact that the Arbitrator under Section 16 of the Arbitration Act has the power to determine issues of jurisdiction which in my view would include whether the Arbitrator has jurisdiction over nonsignatories to an Arbitration Agreement. Any such decision taken by the Arbitrator can always be the subject matter of a challenge by the Petitioners in a Petition filed under Section 34 of the Arbitration Act after the final Award is passed. Further, I do not find merit in the submission of Mr. Rustomojee that the aforesaid points for determination namely, issue Nos. (ii), (iii) and (v) which have been extracted above have been finally determined. It is always open for the Petitioners to lead evidence on these issues and invite final adjudication by the learned Sole Arbitrator on these issues. The decisions of the Delhi High Court in National Highway Authority of India (Supra) and Goyal MG Gases Pvt. Ltd. (Supra) are apposite.” (Emphasis supplied)

26. Similarly, the Delhi High Court in Indraprastha Power Generation Co. Ltd. v. Hero Solar Energy Pvt. Ltd. reported in (2024) SCC OnLine Del 6080 held that although Arupri Logistics (supra) when it was rendered was correct in holding that an arbitral tribunal cannot join or delete parties, or proceed on principles akin to Order I Rule 10 of the CPC, and that such power vests only with the courts, yet after the decisions of this Court in Cox and Kings (I) (supra) and Cox and Kings (II) (supra), it is crystal clear that arbitral tribunals do indeed have the power to implead a non-signatory. It observed that since, Cox and Kings (II) (supra) has held that the question whether a non-signatory is bound by the arbitration agreement or not should be left to the arbitral tribunals to decide, the obvious corollary to the aforesaid would be that if the arbitral tribunal were

p. 1628

to arrive at a finding that such non-signatory is indeed bound by the arbitration agreement, it would necessarily have to include (sic implead) such party to the arbitration proceedings. Accordingly, it held that the arbitral tribunal would possess the jurisdiction to implead non-signatories who may be bound by the outcome of the arbitral proceedings, if there exists some kind of connection or positive act or conduct by the non-signatory that would indicate its connection to the contractual duties of the signatories. The relevant observations read as under: - “20. In Arupri Logistics, as Mr. Ghose correctly points out, a coordinate Bench of this Court has clearly held that an Arbitral Tribunal cannot join or delete parties, or proceed on principles akin to Order I Rule 10 of the Code of Civil Procedure 1908. The power to join or delete parties in a proceeding, it is held, vests only in Court. As such, it is only the Referral Court which, at the stage of referring the dispute to arbitration, can join non- signatories to the arbitral proceedings. The Arbitral Tribunal is bound to decide the issue inter se the parties who are before it and cannot carry out any addition or deletion thereto. Arupri Logistics thus, holds that an Arbitral Tribunal cannot add parties to the proceedings before it, and that the jurisdiction to do so vests only in the referral Court. After the decision was rendered by the Coordinate Bench in Arupri Logistics, however, the Constitution Bench of the Supreme Court has rendered its decision in Cox and Kings-II on 6 December 2023, and the issue of whether an Arbitral Tribunal can join parties may once again be debatable after the said decision. [...]

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24. These passages indicate that the Section 11 Court should leave, to the Arbitral Tribunal, the decision as to whether a non- signatory to the arbitration agreement should be bound by it. The corollary would obviously be that if the Arbitral Tribunal were to find that a nonsignatory is bound by arbitration agreement, it would necessarily have to include such non-signatory in the arbitration

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proceedings. Following Cox and Kings-II, therefore, it may be possible to argue that an Arbitral Tribunal does possess the jurisdiction to implead non-signatories who may be bound by the outcome of the arbitral proceedings.

26. The impugned order of the Arbitral Tribunal has observed that, in the above passages from Cox and Kings-I as endorsed in Cox and Kings-II, a non-signatory could be impleaded in arbitral proceedings only if there is some kind of connection or positive act by the conduct of the non-signatory subsequent to the execution of the contract, or participation by the non-signatory in the negotiation, performance or termination of the contract indicating a connection in the contractual duties of the parties. [ ]”

27. In yet another decision of the Delhi High Court in KKH Finvest Private Ltd. v. Jonas Haggard & Ors. reported in (2024) SCC OnLine Del 7254 although the issue primarily entailed whether the non-signatories therein could be regarded as a ‘veritable party’ to the arbitration agreement and thus, be referred to arbitration or not, yet the observations therein could be said to be a trail blazer on the issue of whether the arbitral tribunal has the power to implead a non-signatory or not. It observed that as per the decision of this Court in Ajay Madhusudan Patel (supra), at the stage of deciding an application under Section 11 of the Act, 1996, the referral courts are only required to prima-facie determine if the non-signatories are a veritable party to the arbitration clause or not. It held that as per Cox and Kings (I) (supra) the definition of “party” under Section 2(1)(h) of the Act, 1996 is inclusive of both signatories and non-signatories, provided that such non-signatory actively participates in the performance of a contract, and its actions align with those of the other members of the group. Furthermore, the court, taking note of the contradictory views expressed by two coordinate benches in Arupri Logistics (supra) and Indraprastha Power Generation Co. Ltd. (supra), observed that since the findings of a referral court is only limited to a bird’s eye view of whether a non-signatory is a veritable party or not, the issue of whether such party can be impleaded and made part of the arbitration proceedings or not ought to be decided by the arbitral tribunal based on the pleadings and arguments. The relevant observations read as under: -

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“75. Hence, at this stage, this Court being a referral court is only required to take a prima facie view on whether there exists an arbitration agreement and whether the respondents who are non- signatories to the MoS are veritable parties to the arbitration agreement.

xxx xxx xxx

78. In cases where impleadment of non-signatories to arbitration proceedings is necessary, courts have delineated various approaches. It can be achieved via : a) consent-based theories, which emphasize identifying the mutual intent of the parties and include concepts like agency, implied consent, and the assignment or transfer of contractual rights; and b) non-consensual theories, which are rooted in equity and encompass doctrines such as alter ego/piercing the corporate veil, estoppel, succession, and apparent authority [refer to Cox & Kings (supra), para 192]. At this stage and as a referral court, as per Ajay Madhusudan Patel (supra), the test is whether prima facie the respondents are veritable parties to the MoS containing the arbitration clause. This has been dealt with in detail in Issue I.

79. It is settled position of law that the definition of parties under the 1996 Act [as envisaged under Section 2(1)(h)] is inclusive of both signatories and non-signatories. The Hon’ble Supreme Court in Cox & Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1 observed that if a nonsignatory party actively participates in the performance of a contract, and its actions align with those of the other members of the group, it gives the impression that the non- signatory is a “veritable” party to the contract which contains the arbitration agreement. Based on this impression, the other party may reasonably assume that the non-signatory is indeed a veritable party to the contract and bind it to the arbitration agreement. [...]

80. Thus, the assessment required to be undertaken by this Court - to give prima facie observations on whether the respondents are veritable parties or not - is primarily an assessment regarding the conduct, role, and involvement

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

of the non-signatory in the underlying contract i.e. the MoS. At the outset, it is to be noted that the term “veritable parties” applies to both persons and entities [refer to Cox & Kings (supra), para 96]. In order to assess the same, this Court is required to consider factors such as mutual intent, relationship between the signatories and non- signatories, commonality of subject matter, composite nature of transactions and performance of the contract.

81. The intention of the parties to be bound by an arbitration agreement is to be gathered from the circumstances surrounding the involvement of a non-signatory party in the negotiation, performance, and termination of the underlying contract containing the agreement. If the non-signatory’s actions align with those of the signatories, it could reasonably lead the signatories to believe that the non- signatory was a veritable party to the contract containing the arbitration clause. To infer the non- signatory’s consent, its participation/involvement in the negotiation or performance of the contract must be positive, direct, and substantial, rather than merely incidental. The burden of proof to establish the same lies on the party seeking to implead the non-signatories to the arbitration proceedings, in this case, the petitioners.

xxx xxx xxx

101. Two coordinate benches of this Court have taken contrary views on whether the arbitral tribunal is vested with the power to implead parties in arbitration proceedings. While Arupri Logistics (P) Ltd. v. Vilas Gupta, 2023 SCC OnLine Del 4297 holds that the arbitral tribunal lacks the jurisdiction to implead, Indraprastha Power Generation Co. Ltd. v. Hero Solar Energy (P) Ltd., 2024 SCC OnLine Del 6080 holds that following Cox and Kings (supra), such jurisdiction may be conferred upon the arbitral tribunal. Since I have referred respondent Nos. 2 to 5 to arbitration, the only issue that remains to be adjudicated is whether respondent Nos. 2 to 5 are, in fact, proper and necessary parties. The same shall be decided by the arbitrator in accordance with law. The finding of the referral court

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which takes a bird’s eye view and does not go into minute details is only for the purpose of referring the parties to arbitration. The respondents will be at liberty to agitate this issue before the arbitrator, who shall take an independent view based on the pleadings and arguments of the parties.” (Emphasis supplied)

28. What is discernible from the aforesaid is that despite the wide recognition of the doctrinal principles of ‘group of companies’, ‘alter- ego’, agency, implied consent, assignment or transfer of contractual rights, estoppel, ‘apparent authority’ etc. to law of arbitration, the High Courts throughout the country remained averse to accepting the application of these principles by the arbitral tribunals. Even after the decision of this Court in Chloro Controls (supra) allowing non- signatories to an arbitration agreement to be referred and enjoined to arbitration on the basis of their conduct, role, and involvement in the underlying contract, the High Courts consistently held that such power to refer or implead a non-signatory was only available to the courts and not to the arbitral tribunals. It is only after the decision of this Court in in Cox and Kings (I) (supra), that the position of law 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.

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.

29. For a better exposition, it would be apposite to first understand the evolution of the law pertaining to the referral or joinder of even non- signatories to an arbitration agreement as a party to the arbitration proceedings. In other words, to better cull out the reasons for why there existed a divergence of views among various High Courts and the general reluctance to recognise the arbitral tribunal’s power — as opposed to that of a court — in impleading such non- signatories to arbitration proceedings.

I. Decision of Chloro Controls and the Arbitration and Conciliation (Amendment) Act, 2015.

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30. It all started with the three-Judge Bench decision of this Court in Chloro Controls (supra) when this Court was called upon to determine an arbitral reference in case of multi-party agreements where performance of the ancillary agreements was substantially dependent upon effective execution of the principal agreement. This Court held that in exceptional cases involving composite transactions with multi-party agreements, a non-signatory could be subjected to arbitration by virtue of the ‘group of companies’ doctrine, provided there was a clear intention of the parties to bind both the signatory as well as non-signatory parties to the arbitration agreement. It observed that although the scope of am arbitration agreement is limited to the parties who entered into it, yet the doctrine of ‘group of companies’ has found favour albeit in a limited sense both under the English Law which was the original genesis of the Act, 1996 and under the international commercial arbitration landscape, particularly in the United States and French jurisdictions. The relevant observations read as under: - “71. Though the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the courts under the English law have, in certain cases, also applied the “group of companies doctrine”. This doctrine has developed in the international context, whereby an arbitration agreement entered into by a company, being one within a group of companies, can bind its non-signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates. This theory has been applied in a number of arbitrations so as to justify a tribunal taking jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement. [Russell on Arbitration (23rd Edn.)]

72. This evolves the principle that a non-signatory party could be subjected to arbitration provided these transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non-signatory parties. In other words, “intention of the parties” is a very significant feature which must be established before the scope of

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arbitration can be said to include the signatory as well as the non-signatory parties.

73. A non-signatory or third party could be subjected to arbitration without their prior consent, but this would only be in exceptional cases. The court will examine these exceptions from the touchstone of direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the court would have to examine whether a composite reference of such parties would serve the ends of justice. Once this exercise is completed and the court answers the same in the affirmative, the reference of even non-signatory parties would fall within the exception afore-discussed.”

31. The aversion or misconception that loomed before the various High Courts as regards the inhibition of an arbitral tribunal to resort to the principles of ‘group of companies’, ‘alter-ego’, agency etc. or to put it more simply, to implead a non-signatory to the arbitration proceedings on its own accord can be deftly traced to two pertinent observations that were made in Chloro Controls (supra).

32. Apart from the aforesaid reasons of economic reality and judicial comity justifying the recognition of ‘group of companies’ in the modern regime of the law of arbitration including that of India, Chloro Controls (supra) further reinforced the genesis of recognizing this doctrine within the scheme of Act, 1996 by tracing it to Section 45 of the Act, more particularly the expression “parties or any person claiming through or under him” used therein. It held that the aforesaid language of Section 45 reflects a legislative intent of enlarging the scope beyond “parties” who are signatories to the arbitration agreement to include non-signatories. It observed that Section 8 of the Act, 1996 does not import the same expression; “parties or any person claiming through or under him” which can be found in

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Section 45 and simpliciter uses the expression “parties” without any extension, even though Section 8 is a contemporary counter-part of Section 45 for the purpose of domestic arbitrations under Part I. This clearly indicates that the legislature consciously and deliberately opted to incorporate the aforesaid expression to give the provision a wider import to encourage arbitration and bring it in tune with the prevalent best international practices. Thus, this very ostensible legislative intent cannot be ignored by the courts and must be given due weightage. The relevant observations read as under: - “69. We have already noticed that the language of Section 45 is at a substantial variance to the language of Section 8 in this regard. In Section 45, the expression “any person” clearly refers to the legislative intent of enlarging the scope of the words beyond “the parties” who are signatory to the arbitration agreement. Of course, such applicant should claim through or under the signatory party. Once this link is established, then the court shall refer them to arbitration. The use of the word “shall” would have to be given its proper meaning and cannot be equated with the word “may”, as liberally understood in its common parlance. The expression “shall” in the language of Section 45 is intended to require the court to necessarily make a reference to arbitration, if the conditions of this provision are satisfied. To that extent, we find merit in the submission that there is a greater obligation upon the judicial authority to make such reference, than it was in comparison to the 1940 Act. However, the right to reference cannot be construed strictly as an indefeasible right. One can claim the reference only upon satisfaction of the prerequisites stated under Sections 44 and 45 read with Schedule I of the 1996 Act. Thus, it is a legal right which has its own contours and is not an absolute right, free of any obligations/limitations.

xxx xxx xxx

93. As noticed above, the legislative intent and essence of the 1996 Act was to bring domestic as well as international commercial arbitration in consonance with the Uncitral Model Rules, the New York Convention and the Geneva Convention. The New York Convention was physically

p. 1636

before the legislature and available for its consideration when it enacted the 1996 Act. Article II of the Convention provides that each contracting State shall recognise an agreement and submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not concerning a subject-matter capable of settlement by arbitration. Once the agreement is there and the court is seized of an action in relation to such subject-matter, then on the request of one of the parties, it would refer the parties to arbitration unless the agreement is null and void, inoperative or incapable of performance.

94. Still, the legislature opted to word Section 45 somewhat dissimilarly. Section 8 of the 1996 Act also uses the expression “parties” simpliciter without any extension. In significant contradistinction, Section 45 uses the expression “one of the parties or any person claiming through or under him” and “refer the parties to arbitration”, whereas the rest of the language of Section 45 is similar to that of Article II(3) of the New York Contention. The court cannot ignore this aspect and has to give due weightage to the legislative intent. It is a settled rule of interpretation that every word used by the legislature in a provision should be given its due meaning. To us, it appears that the legislature intended to give a liberal meaning to this expression.

95. The language of Section 45 has wider import. It refers to the request of a party and then refers to an Arbitral Tribunal, while under Section 8(3) it is upon the application of one of the parties that the court may refer the parties to arbitration. There is some element of similarity in the language of Section 8 and Section 45 read with Article II(3). The language and expressions used in Section 45, “any person claiming through or under him” including in legal proceedings may seek reference of all parties to arbitration. Once the words used by the legislature are of wider connotation or the very language of the section is structured with liberal protection then such provision should normally be construed liberally.

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

96. Examined from the point of view of the legislative object and the intent of the framers of the statute i.e. the necessity to encourage arbitration, the court is required to exercise its jurisdiction in a pending action, to hold the parties to the arbitration clause and not to permit them to avoid their bargain of arbitration by bringing civil action involving multifarious causes of action, parties and prayers.” (Emphasis supplied)

33. However, this rudimentary understanding of the expression “parties” and “parties or any person claiming through or under him” in Section(s) 8 and 45 of the Act, 1996 respectively by Chloro Controls (supra) for the import of the doctrine of ‘group of companies’ into the Act, 1996 was one of the two-fold reasons that eventually convoluted the position of law as regards impleadment of non-signatories, which we shall further discuss.

34. After having established the foundational basis of the doctrine of ‘group of companies’ in the Act, 1996, Chloro Controls (supra) then proceeded to explain the manner in which the aforesaid doctrine is to be applied. Since any application under Section 45 of the Act, 1996 for appointment of an arbitrator would be governed by Section 11 sub-section (6) of the Act, it as a natural corollary would necessarily entail the adjudication and disposal of objections contemplated thereunder, more particularly the validity or existence of the arbitration agreement, the application not satisfying the ingredients of Section 11(6) of the 1996 Act and claims being barred by time, etc as mandated by sub-section (7) of Section 11 of the Act. For the aforesaid proposition, reliance was placed on the seven- Judge Bench decision of this Court in SBP & Co. v. Patel Engg. Ltd. reported in (2005) 8 SCC 618 and the subsequent decision of Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. reported in (2007) 4 SCC 599 which held that the primarily it is for the courts to decide all preliminary issues at the referral stage under Section 11(6) of the Act, and the principle of kompetenz-kompetenz enshrined in Section 16 empowering the arbitral tribunal to rule on its own jurisdiction, applies only when the parties go before the tribunal without having taken recourse to Section(s) 8 or 11 respectively of the Act, 1996 or where these issues are explicitly left open to the arbitral tribunal to decide by the referral court. Accordingly,

p. 1638

Chloro Controls (supra) held that Section 45 of the Act, 1996 which envisages the same test as Section(s) 8 and 11 of the Act, insofar as the preliminary determination for making a reference to an arbitral tribunal is concerned, would as a natural corollary to the ratio of SBP & Co. (supra) contemplate the determination of all fundamental issues for making such reference by the courts, including the issue whether a non-signatory could be said to be bound by the arbitration agreement. In the last, it further observed that even the legislative intent behind Section 45 of the Act, 1996, without any ambiguity contemplates determination of these issues in the very first instance by the judicial forum, evident from the absence of any provision analogous to Section 16 of the Act, 1996 in Part II of the Act. The relevant observations read as under: - “118. An application for appointment of the Arbitral Tribunal under Section 45 of the 1996 Act would also be governed by the provisions of Section 11(6) of the Act. This question is no more res integra and has been settled by decision of a Constitution Bench of seven Judges of this Court in SBP & Co. v. Patel Engg. Ltd., wherein this Court held that power exercised by the Chief Justice is not an administrative power. It is a judicial power. It is a settled principle that the Chief Justice or his designate Judge will decide preliminary aspects which would attain finality unless otherwise directed to be decided by the Arbitral Tribunal.

119. [...]This aspect of the arbitration law was explained by a two- Judge Bench of this Court in Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. wherein, while referring to the judgment in SBP & Co. particularly the above paragraph (para 39) of SBP case21, this Court held that the scope of order under Section 11 of the 1996 Act would take in its ambit the issue regarding territorial jurisdiction and the existence of the arbitration agreement. The Court noticed that if these issues are not decided by the Chief Justice or his designate, there would be no question of proceeding with the arbitration. [...] Thus, the Bench while explaining the judgment of this Court in SBP & Co. has stated that the Chief Justice may not decide certain issues finally and upon recording satisfaction that prima facie the issue has

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not become dead even leave it for the Arbitral Tribunal to decide.

xxx xxx xxx

121. [...] The expressions “Chief Justice does not in strict sense decide the issue” or “is prima facie satisfied”, will have to be construed in the facts and circumstances of a given case. Where the Chief Justice or his designate actually decides the issue, then it can no longer be prima facie, but would be a decision binding in law. On such an issue, the Arbitral Tribunal will have no jurisdiction to redetermine the issue. In Shree Ram Mills, the Court held that the Chief Justice could record a finding where the issue between the parties was still alive or was dead by lapse of time. Where it prima facie found the issue to be alive, the Court could leave the question of limitation and also open to be decided by the Arbitral Tribunal.

122. The above expressions are mere observations of the Court and do not fit into the contours of the principle of ratio decidendi of the judgment. The issues in regard to validity or existence of the arbitration agreement, the application not satisfying the ingredients of Section 11(6) of the 1996 Act and claims being barred by time, etc. are the matters which can be adjudicated by the Chief Justice or his designate. Once the parties are heard on such issues and the matter is determined in accordance with law, then such a finding can only be disturbed by the court of competent jurisdiction and cannot be reopened before the Arbitral Tribunal. [...]

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128. [ ] However, as already noticed, the Court clearly took the view that the findings returned by the Chief Justice while exercising his judicial powers under Section 11 relatable to Section 8 are final and not open to be questioned by the Arbitral Tribunal. Sections 8 and 45 of the 1996 Act are provisions independent of each other. But for the purposes of reference to arbitration, in both cases, the applicant has to pray for a reference before

p. 1640

the Chief Justice or his designate in terms of Section 11 of the 1996 Act. [...] We are conscious of the fact that the above dictum of the Court in SBP case is in relation to the scope and application of Section 11 of the 1996 Act. It has been held in various judgments of this Court but more particularly in SBP which is binding on us that before making a reference, the Court has to dispose of the objections as contemplated under Section 8 or Section 45, as the case may be, and wherever needed upon filing of affidavits. Thus, to an extent, the law laid down by this Court on Section 11 shall be attracted to an international arbitration which takes place in India as well as domestic arbitration. This, of course, would be applicable at pre- award stage. Thus, there exists a direct legal link, limited to that extent.

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130. [ ] The more important aspect as far as Chapter I of Part II of the 1996 Act is concerned, is the absence of any provision like Section 16 appearing in Part I of the same Act. Section 16 contemplates that the arbitrator may determine its own jurisdiction. Absence of such a provision in Part II Chapter I is suggestive of the requirement for the court to determine the ingredients of Section 45, at the threshold itself. It is expected of the court to answer the question of validity of the arbitration agreement, if a plea is raised that the agreement containing the arbitration clause or the arbitration clause itself is null and void, inoperative or incapable of being performed. Such determination by the court in accordance with law would certainly attain finality and would not be open to question by the Arbitral Tribunal, even as per the principle of prudence. It will prevent multiplicity to litigation and reagitating of same issues over and over again. The underlining (sic underlying) principle of finality in Section 11(7) would be applicable with equal force while dealing with the interpretation of Sections 8 and 45. Further, it may be noted that even the judgment of this Court in SBP & Co. takes a view in favour of finality of determination by the Court despite the

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language of Section 16 in Part I of the 1996 Act. Thus, there could hardly be any possibility for the Court to take any other view in relation to an application under Section 45 of the 1996 Act. Since, the categorisation referred to by this Court in National Insurance Co. Ltd. is founded on the decision by the larger Bench of the Court in SBP & Co., we see no reason to express any different view. The categorisation falling under para 22.1 of National Insurance Co. case would certainly be answered by the Court before it makes a reference while under para 22.2 of that case, the Court may exercise its discretion and decide the dispute itself or refer the dispute to the Arbitral Tribunal. Still, under the cases falling under para 22.3, the Court is expected to leave the determination of such dispute upon the Arbitral Tribunal itself. But wherever the Court decides in terms of categories mentioned in paras 22.1 and 22.2, the decision of the Court is unreviewable by the Arbitral Tribunal.

xxx xxx xxx 131.2. The issue of jurisdiction normally is a mixed question of law and facts. Occasionally, it may also be a question of law alone. It will be appropriate to decide such questions at the beginning of the proceedings itself and they should have finality.

xxx xxx xxx 131.4. Applying the analogy thereof will fortify the view that determination of fundamental issues as contemplated under Section 45 of the 1996 Act at the very first instance by the judicial forum is not only appropriate but is also the legislative intent. Even the language of Section 45 of the 1996 Act suggests that unless the court finds that an agreement is null and void, inoperative and incapable of being performed, it shall refer the parties to arbitration. (Emphasis supplied)

35. This rudimentary understanding and legislative position of the extent of judicial scrutiny and determination at the referral stage in terms of

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Section 11 of the Act, 1996, could be said to be the second reason why arbitral tribunals were not found to be empowered to identify and implead a non-signatory to the arbitration agreement.

36. In the aftermath of Chloro Controls (supra), the Law Commission of India in its 246th Report observed that a party to an arbitration agreement does not necessarily mean only the signatory to such agreement, and that internationally it has been widely accepted that even non-signatories may be parties to the arbitration agreement. It further took note of the decision of Chloro Controls (supra), more particularly how this Court has recognized this concept in the phrase “claiming through or under” in Section 45 of the Act,

1996. However, noticing the absence of the same expression in the corresponding provision of Section 8 and other relevant provisions where the context requires recognition of non-signatories, the Law Commission suggested that Section 2(1)(h) of the Act, 1996 which defines “party” be amended and the phrase “person claiming through or under such party” be inserted to cure this anomaly. The relevant observations read as under: - “62. However, a party does not necessarily mean only the “signatory” to the arbitration agreement. In appropriate contexts, a “party” means not just a signatory, but also persons “claiming through or under” such signatory – for instance, successors-of- interest of such parties, alter-ego’s of such parties etc. This is particularly true in the case of unincorporated entities, where the issue of “personality” is usually a difficult legal question and raises a host of other issues. This principle is recognized by the New York Convention, 1985 which in article II (1) recognizes an agreement between parties “in respect of a defined legal relationship, whether contractual or not.”

63. The Arbitration and Conciliation Act, 1996 under section 7 borrows the definition of the “arbitration agreement” from the corresponding provision at article 7 of the UNCITRAL Model Law which in turn borrows this from article II of the New York Convention. However, the definition of the word “party” in section 2(1)(h) refers to a “party” to mean “a party to an arbitration agreement.” This cannot be read restrictively to imply a mere “signatory” to an arbitration

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agreement, since there are many situations and contexts where even a “non-signatory” can be said to be a “party” to an arbitration agreement. This was recognized by the Hon’ble Supreme Court in Chloro Controls v. Severn Trent Water Purification, (2013) 1 SCC 641, where the Hon’ble Supreme Court was dealing with the scope and interpretation of section 45 of the Act and, in that context, discussed the scope of the relevant doctrines on the basis of which “non-signatories” could be said to be bound by the arbitration agreement, including in cases of inter-related contracts, group of companies doctrine etc.

64. This interpretation given by the Hon’ble Supreme Court follows from the wording of section 45 of the Act which recognizes the right of a “person claiming through or under [a party]” to apply to a judicial authority to refer the parties to arbitration. The same language is also to be found in section 54 of the Act. This language is however, absent in the corresponding provision of section 8 of the Act. It is similarly absent in the other relevant provisions, where the context would demand that a party includes also a “person claiming through or under such party”. To cure this anomaly, the Commission proposes an amendment to the definition of “party” under section 2 (h) of the Act.” (Emphasis supplied)

37. Based on the suggestions made by the Law Commission, the legislature promptly introduced the Arbitration and Conciliation (Amendment) Act, 2015 whereby inter-alia although Section 8 sub-section (1) of the Act, 1996 was amended and the phrase “a party to an arbitration agreement or any person claiming through or under him” was inserted yet for reasons unknown, the suggestion for amending Section 2(1)(h) of the Act by the Law Commission did not see the light of day.

38. At this juncture it would be apposite to briefly explain the object of Section(s) 8 and 45 of the Act, 1996 respectively and the nature of the said provisions. Section(s) 8 and 45 of the Act, 1996 empowers the parties who have approached the courts with a subject-matter which is covered by an arbitration agreement to refer such dispute

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to an arbitral tribunal, with the only difference between the two being that the former pertains to domestic arbitrations whereas the latter deals with international arbitrations in terms of the New York Convention. In essence, it entitles any party that is before a court or judicial forum to seek a reference to arbitration subject to the conditions laid down in the subsequent sub-sections. As held in Hema Khattar v. Shiv Khera reported in (2017) 7 SCC 716, Section(s) 8 and 45 of the Act, 1996 are peremptory in nature that obligates the courts to refer the parties to arbitration where there is an arbitration agreement.

39. Since Chloro Controls (supra) recognized the applicability of the principles of ‘group of companies’, (sic) ‘alter-ego’, agency etc. for enjoining a non- signatory to the arbitration proceedings only from an interpretation of the phrase “a party to an arbitration agreement or any person claiming through or under him” which by virtue of the Arbitration and Conciliation (Amendment) Act, 2015, found place only in Section(s) 8 and 45 of the Act, 1996, which as discussed above deals with only the power of the courts or judicial authorities to make a reference to arbitration, and no such phrase was inserted in the substantive definition of “party” in Section 2(1)(h), the net effect of the decision of Chloro Controls (supra) and the Arbitration and Conciliation (Amendment) Act, 2015 was that only the courts by virtue of Section(s) 8 and 45 of the Act, 1996 were empowered to implead a non- signatory to the arbitration proceedings, and not the arbitral tribunals. The omission of amending Section 2(1)(h) of the Act, 1996 further fortified the notion that the exercise of authority and power by the arbitral tribunal would continue to be confined to the ordinary substantive definition of “party” under the said provision and not by the enlarged understanding of the term “party … or any person claiming through or under him” as used for the courts under Section(s) 8 and 45 of the Act, 1996, except where an arbitral tribunal has been constituted specifically by the courts. This along with the standard of scrutiny that was expected by the referral courts under Section 11 of the Act, 1996 in terms of SBP & Co. (supra) meant that, unless a non-signatory is referred to arbitration by a court after a thorough application of mind and after a final determination by such referral courts as to whether the non-signatory is said to bound by the arbitration agreement or not, no non-signatory can be subjected to arbitration.

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

40. Thus, due to the aforesaid, a misconception plagued the position of law that an arbitral tribunal does not have the authority or power to implead a non- signatory to the arbitration proceedings, and that only the courts are empowered to do so. It was largely in this backdrop that the decisions of Oil and Natural Gas Corporation Ltd. (supra), Balmer Lawrie & Co. Ltd. (supra), Sudhir Gopi (supra), V.G. Santhosam (supra) and other decisions of various different High Courts came to be rendered.

II. Decision of Cox and Kings (I) and the Judicial Rectification of the first misconception by Chloro Controls.

41. In Cox and Kings (I) (supra) a five-Judge Bench of this Court wherein one of us (J.B. Pardiwala J.) was part of the Bench were called upon to determine the validity and applicability of the ‘Group of Companies’ doctrine in the jurisprudence of Indian arbitration. This Court after an extensive examination of the international practices and the scheme of Act, 1996 held that the ‘Group of Companies’ doctrine was invariably a part of the larger arbitration framework that has been developing across the world and was in tune with the avowed object of the Act, 1996 which aims to make the Indian arbitration law more responsive to the contemporary requirements. The relevant observations read as under: - “128. [...] This approach ensures that a dogmatic emphasis on express consent is eschewed in favour of a modern approach to consent which focuses on the factual analysis, complexity of commercial projects, and thereby increases the relevance of arbitration in multi-party disputes. Moreover, it is also keeping in line with the objectives of the Arbitration Act which aims to make the Indian arbitration law more responsive to the contemporary requirements.

148. [...] The group of companies doctrine has important utility in determining the mutual intention of the parties in the context of complex transactions involving multiple parties and multiple agreements. Moreover, the doctrine has been substantively entrenched in the Indian arbitration jurisprudence. We are aware of the fact that the group of companies doctrine has not found favor in some other jurisdictions, including in English law. However, we deem it appropriate to retain the doctrine which has held the

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field in Indian jurisprudence though by firmly establishing it within the realm of the mutual consent or the mutual intent of the parties to a commercial bargain. This will ensure on the one hand that Indian arbitration law retains a sense of dynamism so as to respond to contemporary challenges. At the same time, structuring the doctrine in the manner suggested so as to ground it in settled principles governing the elucidation of mutual intent is necessary. This will ensure that the doctrine has a jurisprudential foundation in party autonomy and consent to arbitrate.”

42. Cox and Kings (I) (supra) further held that the approach adopted by Chloro Controls (supra), 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. It held that the words “any person” in Section 45 of the Act, 1996 by itself does not connote a wider import to the term “party”. The aforesaid phrase cannot be singled out and construed devoid of the context provided in the subsequent phrase “claiming through or under”. It held that the entire expression only refers and includes persons / parties acting in a derivative capacity such as in the instances of successors in interest or assignees of any such interest that have been devolved upon them by the original signatories / parties. The import of the expression “a party to an arbitration agreement or any person claiming through or under him” only refers to that persons which it is deriving its claim or right by virtue of it standing in the shoes of the original signatory party. The expression “claiming through or under” can only bind those third parties who irrespective of being a non-signatory to the arbitration agreement are nevertheless bound by it, by virtue of them substituting the signatory party in their derivative capacity. However, the ‘Group of Companies’ doctrine functions on a completely different tangent whereby, a non-signatory is held bound by the arbitration agreement in its own individual capacity AND in addition to the signatories on the basis of mutual consent, regardless of whether they may have derived any rights or benefits from the signatories and independent of the identity of the signatories. It observed that since consent forms the cornerstone of arbitration, merely because any party shares certain interests or benefits from a contract, they would not be covered under the expression “claiming through or under” just because they

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

happen to share a legal or commercial relationship. Thus, Chloro Controls (supra) to the extent that it traced the group of companies doctrine to the phrase “claiming through or under” was held to be erroneous and against the well-established principles of contract and commercial law. The relevant observations read as under: - “137. The word “claim” is of very extensive significance embracing every species of legal demand. In the ordinary sense, it means to demand as one’s own or as one’s right.114 A “claim” also means assertion of a cause of action.115 The expression “through” connotes “by means of, in consequence of, by reason of.”116 The term “under” is used with reference to an inferior or subordinate position. P Ramanatha Aiyar’s Law Lexicon defines “claiming under” or “claiming under him” to denote a person putting forward a claim under derived rights.117 When the above definitions are read harmoniously, it gives rise to an inference that a person “claiming through or under” is asserting their legal demand or cause of action in an intermediate or derivative capacity. We can also conclude that a person “claiming through or under” has inferior or subordinate rights in comparison to the party from which it is deriving its claim or right. Therefore, a person “claiming through or under” cannot be a “party” to an arbitration agreement on its own terms because it only stands in the shoes of the original signatory party.

144. The first proposition of law relies on the construction of the expression “any person” to conclude that the language of Section 45 has wider import. However, the expression “any person” cannot be singled out and construed devoid of its context. The context, in terms of Section 8 and 45, is provided by the subsequent phrase – “claiming through or under”. Therefore, such “any persons” are acting only in a derivative capacity. Since an arbitration agreement excludes the jurisdiction of national courts, it is essential that the parties consent, either expressly or impliedly, to submit their dispute to the arbitral tribunal.

145. The second and third proposition of law states that a non- signatory party may claim through or under a signatory party by virtue of its legal or commercial

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relationship with the latter. However, this proposition is contrary to the common law position as evidenced in Sancheti (supra) and Tanning Research Laboratories (supra) according to which a mere legal or commercial connection is not sufficient to allow a non-signatory to claim through or under a party to the arbitration agreement. [...] Therefore, even though a subsidiary derives interests or benefits from a contract entered into by the company within a group, they would not be covered under the expression “claiming through or under” merely on the basis that it shares a legal or commercial relationship with the parties.

146. [...] The group of companies doctrine is founded on the mutual intention of the parties to determine if the non-signatory entity within a group could be made a party to the arbitration agreement in its own right. Such non-signatory entity is not “claiming through or under” a signatory party. As mentioned above, the phrase “claiming through or under” is used in the context of successors in interest that act in a derivative capacity and substitute the signatory party to the arbitration agreement. To the contrary, the group of companies doctrine is used to bind the non-signatory to the arbitration agreement so that it can agitate the benefits and be subject to the burdens that it derived or is conferred in the course of the performance of the contract. The doctrine can be used to bind a non- signatory party to the arbitration agreement regardless of the phrase “claiming through or under” as appearing in Sections 8 and 45 of the Arbitration Act.

147. In Chloro Controls (supra), this Court joined the non- signatory entities as parties to the arbitration agreement in their own rights on the basis that they were signatories to ancillary agreements which were closely interlinked with the performance of the principal agreement containing the arbitration agreement. This Court in Chloro Controls (supra) reasoned that the non signatory entities, being part of the same corporate group as the signatory parties, were subsidiaries in interest or subsidiary companies, and therefore were “claiming through or under” the signatory

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

parties. As held above, the phrase “claiming through or under” only applies to entities acting in a derivative capacity and not with respect to joinder of parties in their own right. Therefore, we hold that the approach of this Court in Chloro Controls (supra) to the extent that it traced the group of companies doctrine to the phrase “claiming through or under” is erroneous and against the well-established principles of contract and commercial law. As observed above, the existence of the group of companies doctrine is intrinsically found on the principle of the mutual intent of parties to a commercial bargain.” (Emphasis supplied)

43. Cox and Kings (I) (supra) observed that the correct legal basis for the application of the doctrine of ‘group of companies’ (sic and other allied principles of mutual consent) can be found in the Act, 1996 from a conjoint reading of the provisions of Section(s) 2(1)(h) and 7, respectively. The aforesaid may be understood as under: - (i) First, it observed that Section 7 of the Act, 1996 which defines an “Arbitration Agreement” lays down in sub-section (4) the various circumstances where a legal relationship is said to exist of such nature as if there is an agreement in writing for arbitration. Section 7 more particularly sub-section (4)(b) provides the circumstances where the existence of an arbitration agreement can be inferred from various documents that indicate a manifestation of consent of persons or entities through their actions of exchanging documents, even if there is no formal agreement executed between such persons in the conventional sense. Similarly, Section 7 sub-section (4)(c) which provides that if there is an assertion of the existence of an arbitration agreement by one party which was never denied or disputed by the other, then such agreement would be considered a valid arbitration agreement, is one another provision that lays down the circumstances when the existence of an arbitration agreement may be assumed based on the conduct of a person or entity. The relevant observations read as under: - “70. Section 2(h) of the Arbitration Act defines a “party” to mean a party to an arbitration agreement. Section 7 defines an arbitration agreement to mean

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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.” Section 7 requires that an arbitration agreement has to be in writing. Section 7 indicates the circumstances in which it is regarded as an agreement in writing. Such an agreement may be embodied in a document, an exchange of communications, including in the electronic form, or in a statement of claim which is not traversed in the defence. In Vidya Drolia v. Durga Trading Corporation, this Court observed that a legal relationship means a relationship which gives rise to legal obligations and duties, and confers a right. Such a right may be contractual or non-contractual. In case of a non- contractual legal relationship, the cause of action arises in tort, restitution, breach of statutory duty, or some other non-contractual cause of action. Thus, the legislative intent underlying Section 7 suggests that any legal relationship, including relationships where there is no contract between the persons or entities, but whose actions or conduct has given rise to a relationship, could form a subject matter of an arbitration agreement under Section 7. [...]

72. Section 7(4)(b) provides the second circumstance, according to which an arbitration agreement is in writing if it is contained in an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement. According to this provision, the existence of an arbitration agreement can be inferred from various documents duly approved by the parties.60 Section 7(4) (b) dispenses with the conventional sense of an agreement as a document with signatories. Rather, it emphasizes on the manifestation of the consent of persons or entities through their actions of exchanging documents. However, the important aspect of the said provision lies in the fact that the parties should be

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

able to record their agreement through a documentary record of evidence. In Great Offshore Ltd. v. Iranian Offshore Engineering and Construction Company, this Court observed that Section 7(4)(b) requires the court to ask whether a record of agreement is found in the exchange of letters, telex, telegrams, or other means of telecommunication.61 Thus, the act of agreeing by the persons or entities has to be inferred or derived by the courts or tribunals from the relevant documents and communication, neither of which can be equated with a conventional contract.

73. The third circumstance is provided under Section 7(4)(c), according to which an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. A two- Judge Bench of this Court clarified in S N Prasad v. Monnet Finance Limited62 that there will be an “exchange of statements of claim and defence” for the purposes of Section 7(4)(c) if there is an assertion of the existence of an arbitration agreement in any suit, petition or application filed before any court or tribunal, and if there is no denial of it in the defence, counter, or written statement. Thus, in the third circumstance the court proceeds on the assumption that the conduct of the person or entity in not denying the existence of an arbitration agreement leads to the conclusive proof of its existence. [...]” (ii) Secondly, it found that Section 7 of the Act, 1996 is unique in nature inasmuch as it has two distinct features; (I) that sub-section (1) provides that for there to be a valid arbitration agreement, there must exists a defined legal relationship to arbitration, and (II) that sub-section (4) goes one step beyond the traditional understanding of legal relationship, by laying down circumstances where mutual intention of creating such legal relationship to arbitrate may be assumed or gathered from the conduct of the parties. The relevant observations read as under: -

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“73. [...] All the three circumstances contained in Section 7(4) are geared towards determining the mutual intention of the parties to be bound by the arbitration agreement.

74. Section 7 of the Arbitration Act contains two aspects: a substantive aspect and a formal aspect. The substantive aspect is contained is Section 7(1) which allows parties to submit disputes arising between them in respect of a defined legal relationship to arbitration. The legal relationships between and among parties could either be contractual or non-contractual. For legal relations to be contractual in nature, they ought to meet the requirements of the Indian contract law as contained in the Contract Act. It has been shown in the preceding paragraphs that a contract can either be express or implied, which is inferred on the basis of action or conduct of the parties. Thus, it is not necessary for the persons or entities to be signatories to a contract to enter into a legal relationship – the only important aspect to be determined is whether they intended or consented to enter into the legal relationship by the dint of their action or conduct.” (iii) Thirdly, it observed that Section 7 sub-section (3) of the Act, 1996 stipulates that where there is a record of agreement to arbitrate, then there would be no requirement for having a written arbitration agreement. Furthermore, Section 2(h) read with Section 7 of the Act, 1996 also places no requirement that the “party” to an arbitration agreement must be a signatory to such agreement. The natural corollary to the aforesaid would be that an arbitration agreement may be entered into in any form, for example orally or tacitly, as long as the content of the agreement is recorded. It eliminates the requirement of the signature of parties or an exchange of messages between the parties. Thus what emanates is that even non-signatories can be regarded as a “party” to an arbitration agreement. The relevant observations read as under: - “75. The second aspect is contained in Section 7(3) which stipulates the requirement of a written

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ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited

arbitration agreement. A written arbitration agreement need not be signed by the parties if there is a record of agreement.63 The mandatory requirement of a written arbitration agreement is merely to ensure that there is a clearly established record of the consent of the parties to refer their disputes to arbitration to the exclusion of the domestic courts.

76. Section 2(h) read with Section 7 does not expressly require the “party” to be a signatory to an arbitration agreement or the underlying contract containing the arbitration agreement. [...] The above provision states that an arbitration agreement may be entered into in any form, for example orally or tacitly, as long as the content of the agreement is recorded. It eliminates the requirement of the signature of parties or an exchange of messages between the parties.”

44. Accordingly, Cox and Kings (I) (supra) made a significant shift from the original understanding and legal basis of the doctrine of ‘group of companies’ and other allied principles of determining mutual consent in Chloro Controls (supra). 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. The relevant observations read as under: - “78. Reading Section 7 of the Arbitration Act in view of the above discussion gives rise to the following conclusions: first, arbitration agreements arise out of a legal relationship between or among persons or entities which may be contractual or otherwise; second, in situations where the legal relationship is contractual in nature, the nature of relationship can be determined on the basis of general contract law principles; third, it is not necessary for the persons or entities to be signatories to the arbitration agreement to be bound by it; fourth, in case of non- signatory parties, the important determination for the courts is whether the persons or entities intended or consented to be bound by the arbitration agreement or the underlying

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contract containing the arbitration agreement through their acts or conduct; fifth, the requirement of a written arbitration agreement has to be adhered to strictly, but the form in which such agreement is recorded is irrelevant; sixth, the requirement of a written arbitration agreement does not exclude the possibility of binding non signatory parties if there is a defined legal relationship between the signatory and non-signatory parties; and seventh, once the validity of an arbitration agreement is established, the court or tribunal can determine the issue of which parties are bound by such agreement.

79. It is presumed that the formal signatories to an arbitration agreement are parties who will be bound by it. However, in exceptional cases persons or entities who have not signed or formally assented to a written arbitration agreement or the underlying contract containing the arbitration agreement may be held to be bound by such agreement. As mentioned in the preceding paragraphs, the doctrine of privity limits the imposition of rights and liabilities on third parties to a contract. Generally, only the parties to an arbitration agreement can be subject to the full effects of the agreement in terms of the reliefs and remedies because they consented to be bound by the arbitration agreement. Therefore, the decisive question before the courts or tribunals is whether a non-signatory consented to be bound by the arbitration agreement. To determine whether a non-signatory is bound by an arbitration agreement, the courts and tribunals apply typical principles of contract law and corporate law. The legal doctrines provide a framework for evaluating the specific contractual language and the factual settings to determine the intentions of the parties to be bound by the arbitration agreement.

xxx xxx xxx

153. The group of companies doctrine is based on determining the mutual intention to join the non-signatory as a “veritable” party to the arbitration agreement. Once a tribunal comes to the determination that a non-signatory

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