Beyond Privity: Non-Signatory Joinder in Arbitration

An article titled “𝐁𝐞𝐲𝐨𝐧𝐝 𝐏𝐫𝐢𝐯𝐢𝐭𝐲: 𝐍𝐨𝐧-𝐒𝐢𝐠𝐧𝐚𝐭𝐨𝐫𝐲 𝐉𝐨𝐢𝐧𝐝𝐞𝐫 𝐢𝐧 𝐀𝐫𝐛𝐢𝐭𝐫𝐚𝐭𝐢𝐨𝐧” co-authored by our Senior Partner, Sanjeev Sharma and Associate, Anushree Poddar, has been published by Bar and Bench.

Arbitration, as a fundamental principle, is a creature of consent between parties to a contract. With privity of contract and consensus to arbitrate being focal points of arbitration, the joinder of non-signatory parties to arbitration agreements represents an ever-evolving area of Indian arbitration law. This article traces the evolution of Indian jurisprudence on the joinder of non-signatory parties to arbitrations in light of the recent Supreme Court judgment in ASF Buildtech Pvt Ltd v. Shapoorji Pallonji & Company Pvt Ltd.

Strict Adherence to Privity: Pre-Chloro Controls Era

Before 2012, Indian courts strictly enforced privity of contract in arbitration, requiring only signatories to be referred under Section 8 of the Arbitration and Conciliation Act, 1996 (“the Act”) and interpreted ‘party’ as synonymous with ‘signatory’. The Supreme Court, in Sukanya Holdings (P) Limited v. Jayesh H. Pandya and Anr and in Indowind Energy Limited v. Wescare (India) Limited and Anr, placed significant emphasis, though for different reasons, on consensus ad idem as a result of which, non-signatories were not included in arbitral proceedings.

The Watershed Moment: Chloro Controls (2012)

In a landmark three-judge bench decision, in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. (2013), the Supreme Court made a paradigm shift in its approach towards inclusion of non-signatories in an arbitration agreement under Section 45 of the Act (pertaining to International Commercial Arbitration). Departing from Indowind (supra), the Court introduced the ‘group of companies’ doctrine, allowing non-signatories to be joined in arbitration if the transactions involved group entities and the parties intended to bind both signatories and non-signatories.

After Chloro Controls, the 246th Law Commission Report highlighted the absence of “or any person claiming through or under him” in Section 8 (domestic arbitration) and recommended amending it, as well as the definition of ‘party’ under Section 2(1)(h). The 2015 amendment updated Section 8 to match Section 45, extending the doctrine to domestic arbitrations, though the definition of ‘party’ remained unchanged.

Developments after Chloro Controls

After the judgment in Chloro Controls (supra) and the 2015 amendment, courts started interpreting whether a non-signatory to an arbitration agreement ought to be impleaded or not, in light of the facts on a case-to-case basis. In Ameet Lalchand Shah v. Rishabh Enterprises, the Court demarcated between the principal/main agreement and other agreement and placed emphasis on the interconnected nature of the agreements.

In a more cautious approach, in Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited, the Supreme Court refused to allow the joinder of a non-signatory. It held that a non-signatory without any causal connection with the process of negotiations preceding the arbitration agreement cannot be made party to the arbitration.

While the holdings of various courts refined the application of doctrine of binding non-signatories to arbitration agreements, one position remained unclear – Was this power truly intended to only be vested upon courts or should the determination be made by arbitral tribunals?

Questioning the Prevailing Position of Law: Cox and Kings

In 2022, the Supreme Court expressed doubts about the correctness of the Chloro Controls (supra) judgment in Cox and Kings Limited v. SAP India Private Limited. The Court held that Chloro Controls is incorrect to the extent that it infuses the group of companies doctrine into the phrase “a party to an arbitration agreement or any person claiming through or under him” in Section 45 of the Act. However, the group of companies doctrine operates on a completely different tangent – the correct legal basis for the application of the group of companies doctrine is from a conjoint reading of Section 2(1)(h) and Section 7 of the Act which define ‘party’ and ‘arbitration agreement’ respectively, and not from Section 8 or 45 of the Act. The net effect of changing the legal basis from the provisions that provide for reference by courts to the very definition clauses of ‘party’ and ‘arbitration agreement’ was that arbitral tribunals had the power to implead a non-signatory to partake in an arbitration.

In 2023, the Cox and Kings Constitution Bench also provided guidance on the procedural aspects of joining non-signatories to arbitration. It was held that a referral court is required to prima facie rule on the existence of the arbitration agreement and whether the non-signatory is a veritable party to it. However, given the complexity of such determination, the court should leave it for the arbitral tribunal to decide whether the non-signatory is indeed a party to the arbitration agreement based on factual evidence and application of legal doctrine.

Current Legal Position: ASF Buildtech Private Limited v. Shapoorji Pallonji and Co Private Limited (2025)

On May 2, 2025, the Supreme Court delivered an important judgment in ASF Buildtech, addressing the authority of arbitral tribunals to implead non-signatories to arbitration agreements. The case arose from a commercial dispute involving multiple companies that were part of the ASF Group. Black Canyon SEZ Private Limited (BCSPL) filed a petition under Section 11 of the Arbitration and Conciliation Act against Shapoorji Pallonji and Company Private Limited (SPCPL) to resolve disputes arising from a Settlement Agreement. During the arbitration proceedings, SPCPL sought to implead ASF Buildtech Private Limited (ABPL) and ASF Insignia SEZ Private Limited (AISPL) as parties to the arbitration by making counterclaims against them, despite them being non-signatories to the Settlement Agreement containing the arbitration clause and also not being a party in the Section 11 proceeding.

The Court traced the legal trajectory and the confusion in law which led to contrary findings in earlier judgments regarding the power to decide whether non-signatory is a party to the arbitration agreement. However, the issue of whether an arbitral tribunal can permit impleadment at the stage of filing of claim and counter-claim still remained undecided. The Court noted the insertion of Section 11(6A) to conclude that a court is only required to look into one aspect – the existence of an arbitration agreement – nothing more, nothing less. All other issues were now invariably left for the final determination by the arbitral tribunal.

In decisions subsequent to the insertion of Section 11(6A), particularly In Re: Interplay, Krish Spinning and Ajay Madhusudan,  courts have clarified and narrowed the scope of judicial scrutiny under Section 11. The Supreme Court now holds that referral courts are only required to undertake a prima facie determination of the existence of an arbitration agreement, and all other complex or mixed questions of law and fact including the applicability of the group of companies doctrine to non-signatories should be left to the arbitral tribunal. This shift recognizes the Tribunal’s capacity to decide such issues, and aligns with the kompetenz-kompetenz principle

Further, even on the question of failure to array parties in the Section 21 notice, the Court clarified that the notice under Section 21 of the Act is only for “commencement of arbitration proceedings” and therefore, a non-signatory can be impleaded even if it is not arrayed in the Section 21 notice.

Conclusion: Takeaways from ASF Buildtech

The Supreme Court has upheld, with abundant clarity, the competence of arbitral tribunals in deciding on impleadment thereby, limiting the scope for judicial intervention in the interest of efficiency of arbitration processes in India. The Court has also made it clear that the power to implead a non-signatory does not come from Section 8, 11 or 45 of the Act.

In sum, the legal trajectory regarding the joinder of non-signatory parties to arbitration agreements in India has undergone a significant transformation. From an era of strict adherence to privity and formal consent, the jurisprudence has matured to accommodate the complexities of modern commercial arrangements. The focus has shifted from whether non-signatories can be joined at all, to which forum should decide on their impleadment.

The Supreme Court’s recent decision in ASF Buildtech cements the principle that arbitral tribunals possess the authority to determine whether a non-signatory can be impleaded in arbitral proceedings. Furthermore, the judgment underscores that procedural aspects—such as the issuance of notice for invocation —should not unduly constrain the tribunal’s jurisdiction, provided natural justice is upheld and affected parties are afforded a fair hearing.

As Indian arbitration law continues to evolve, this clarity regarding the role and powers of arbitral tribunals enhances the efficiency, autonomy, and international credibility of arbitration in India.