By Shailendra Singh Advocate, Founder & Managing Partner August Attorneys LLP
Introduction
In a landmark judgment that significantly impacts arbitration practices in India, the Supreme Court in ASF Buildtech Private Limited v. Shapoorji Pallonji and Company Private Limited (2025 INSC 616) has unequivocally affirmed that arbitral tribunals possess the inherent power to implead non-signatories to arbitration proceedings. This comprehensive decision not only resolves conflicting High Court views but also provides much-needed clarity on procedural aspects that have plagued India’s arbitration regime for decades.
Background of the Dispute
The case involved ASF Buildtech Private Limited (ABPL), which challenged its impleadment in arbitration proceedings between Black Canyon SEZ Pvt. Ltd. (BCSPL) and Shapoorji Pallonji & Co. Pvt. Ltd. (SPCPL). Though ABPL was neither a signatory to the arbitration agreement nor made a party in the referral proceedings under Section 11 of the Arbitration and Conciliation Act, 1996, the arbitral tribunal impleaded ABPL as a party based on SPCPL’s counter-claim, applying the ‘Group of Companies’ doctrine.
ABPL’s primary contention was that an arbitral tribunal lacks the authority to implead a non-signatory, especially when such non-signatory was never made a party before the referral court that constituted the tribunal.
The Court’s Analysis
The Supreme Court bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan conducted an exhaustive analysis of the arbitral tribunal’s power to implead non-signatories, addressing two critical misconceptions that had previously inhibited recognition of this power:
1. Legal Basis for the ‘Group of Companies’ Doctrine
The Court clarified that the legal foundation for principles determining mutual consent, including the ‘Group of Companies’ doctrine, lies in the definition of “party” under Section 2(1)(h) read with Section 7 of the Act. This differs from the earlier understanding in Chloro Controls (2013), which traced such power to expressions in Sections 8 and 45 of the Act that had been misinterpreted as exclusively empowering courts, not tribunals.
As Justice Pardiwala notes in the judgment:
“Cox and Kings (I) (supra) has made it abundantly clear that the legal basis for the application of the ‘Group of Companies’ doctrine or any other principle for determining mutual consent is in the definition of ‘party’ under Section 2(1)(h) read with the meaning of ‘arbitration agreement’ under Section 7 of the Act, 1996.”
2. Scope of Judicial Scrutiny at the Referral Stage
The Court demolished the second misconception by explaining that the scope of scrutiny under Section 11 is extremely narrow and confined to the prima-facie determination of the “existence” of the arbitration agreement. The judgment emphasizes that whether a non-signatory is bound by the arbitration agreement is a fact-intensive inquiry best undertaken by the arbitral tribunal, which has the advantage of evaluating comprehensive evidence.
Key Holdings of the Supreme Court
The Court made several significant pronouncements:
- Arbitral Tribunal’s Authority: The arbitral tribunal has the power to implead non-signatories to arbitration proceedings if such parties are found to be bound by the arbitration agreement based on the principles laid down in Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2023).
- Distinction Between “Existence” and “Intention”: The Court distinguished between determining the “existence” of an arbitration agreement and determining the intention of parties from the “express words” used in the agreement. The former is within the limited domain of the referral court under Section 11(6A), while the latter falls within the arbitral tribunal’s competence.
- Doctrine of Implied Powers: Even without express statutory provisions, the tribunal possesses the power to implead parties by virtue of the doctrine of implied powers, which is necessary to effectuate and advance the Act’s object and avoid hardship.
- Section 21 Notice Requirement: Non-service of a notice under Section 21 does not nullify the tribunal’s jurisdiction over a party. The Court clarified that Section 21’s primary purpose is to determine time elements in arbitration, not to restrict the substantive scope of claims or the tribunal’s jurisdiction.
Implications for Arbitration Practice
This judgment carries several significant implications for arbitration practitioners:
- Enhanced Tribunal Powers: Arbitral tribunals now have clear authority to implead non-signatories based on principles like the ‘Group of Companies’ doctrine, without needing prior court approval.
- Procedural Flexibility: Parties can raise claims against non-signatories even if they were not mentioned in the initial notice of invocation, removing procedural roadblocks to comprehensive dispute resolution.
- Minimal Judicial Intervention: The judgment reinforces the principle of minimal judicial intervention at the pre-reference stage, preserving the arbitral tribunal’s role as the preferred first authority to determine jurisdictional issues.
- Holistic Dispute Resolution: The ruling promotes the resolution of multi-party, complex commercial disputes in a single forum, aligning with modern commercial realities where transactions often involve multiple related entities.
The Court’s Call for Legislative Reform
Perhaps most notably, the Court strongly criticized the legislative gap in the existing framework and the proposed Arbitration and Conciliation Bill, 2024. The judgment laments that “what is expressly missing in the Act, 1996 is still missing in the Arbitration and Conciliation Bill, 2024,” urging the Department of Legal Affairs to “take a serious look at the arbitration regime that is prevailing in India and bring about necessary changes.”
This judicial plea for legislative clarity reflects the Court’s concern that procedural issues continue to plague India’s arbitration landscape even after nearly three decades of the 1996 Act.
Conclusion
The Supreme Court’s judgment in ASF Buildtech represents a significant stride toward aligning India’s arbitration regime with international best practices. By empowering arbitral tribunals to implead non-signatories based on established principles of mutual consent, the Court has removed a substantial procedural hurdle that had impeded efficient dispute resolution.
For corporate entities operating through group structures, this judgment underscores the importance of carefully managing inter-company relationships and communications, as conduct indicating involvement in contract performance may create arbitration liability even absent a signature on the agreement.
As arbitration practitioners, we must adapt our strategies to this evolved understanding of arbitral jurisdiction and tribunal powers, ensuring our clients receive comprehensive advice that accounts for this expanded framework of arbitral authority.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. The views expressed are solely those of the author and do not reflect the opinions of August Attorneys LLP. Readers should not act or refrain from acting based on this publication without seeking professional legal counsel. This article complies with the standards prescribed by the Bar Council of India.