Supreme Court Affirms Arbitral Tribunal’s Power to Implead Non-Signatories: Clarifying the Scope of Party Joinder in Arbitration

In a landmark judgment the Supreme Court of India (Supreme Court) in ASF Buildtech Private Limited vs. Shapoorji Pallonji and Company Private Limited, clarified the scope of powers of an Arbitral Tribunal, definitively ruling that it possesses the authority to implead or join non-signatories to an arbitration agreement. The division bench comprising J.B. Pardiwala and R. Madhevan, JJ decided on this judgment which encountered issues arising from a commercial dispute and provided clarity in long-standing divergence of opinion among High Courts in relation to the powers of an arbitral tribunal in impleading non- signatories. The judgment was authored by J.B. Pardiwala, JJ and it reaffirms the tribunal’s role as a comprehensive dispute resolution forum, advocating for the lack of judicial interference beyond discerning the existence of an Arbitration agreement at the referral stage.

The central issue before the Supreme Court was whether an arbitral tribunal possesses the authority or power to implead or join a non-signatory to an arbitration agreement as a party to the arbitration proceedings, or whether such power is exclusively vested with the referral court prior to the tribunal’s constitution. The appellant specifically questioned whether its joinder was permissible without a prior direction or leave from a Section 11 referral court.

In its exhaustive analysis, the Supreme Court first acknowledged the historical “aversion” among various High Courts to recognize an arbitral tribunal’s power to implead non-signatories. This reluctance, the Court observed, stemmed from two primary misconceptions. Firstly, the seminal decision in Chloro Controls India Private Limited v. Severn Trent Water Purification Inc. (2013) (“Chloro Controls”) had traced the application of the ‘Group of Companies’ doctrine to the phrase “claiming through or under him” in Section 45 of the Act. Since this phrase was also introduced into Section 8 (for domestic arbitrations) by the 2015 amendment, but not into the general definition of “party” in Section 2(1)(h), it was misconstrued that only courts had the power to implead non-signatories. Secondly, at the time of Chloro Controls, the prevailing judicial view (from SBP & Co. v. Patel Engg. Ltd., 2005) was that referral courts, when appointing arbitrators under Section 11, should conduct a detailed examination of all preliminary issues, including the existence and validity of the arbitration agreement and whether a non-signatory was bound by it. This requirement of an expansive judicial scrutiny further cemented the belief that arbitral tribunals were incompetent to undertake such a task independently.

However, the Supreme Court highlighted a significant judicial rectification of these misconceptions. In Cox and Kings Ltd. v. SAP India Pvt. Ltd. (2023) (“Cox and Kings (I)”), the Court unequivocally rejected the premise that the ‘Group of Companies’ doctrine was derived from the “claiming through or under” phrase. Instead, Cox and Kings (I) rooted the doctrine’s legal basis in the combined reading of Section 2(1)(h) (defining “party”) and Section 7 (defining “arbitration agreement”) of the Act, 1996. Section 7, particularly sub-sections (4)(b) and (c), allows for the inference of an arbitration agreement from the conduct and actions of parties, even in the absence of a formal signature. Crucially, since Sections 2(1)(h) and 7 apply universally to both courts and arbitral tribunals, this clarifies that tribunals are indeed empowered to apply such principles and determine whether a non-signatory is bound by an arbitration agreement.

Furthermore, the court addressed the second misconception regarding the scope of judicial scrutiny at the referral stage. While SBP & Co. had expanded this scope, subsequent legislative amendments (Section 11(6A) in 2015) aimed to limit it to the “existence” of the arbitration agreement. Although Vidya Drolia v. Durga Trading Corporation (2021) still allowed for limited intervention in “ex facie meritless” cases, the Supreme Court in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899 (2023) and SBI General Insurance Co. Ltd. v. Krish Spinning (2024) significantly narrowed this scope. These decisions affirmed that the referral court’s inquiry is confined to a prima facie determination of the existence of the arbitration agreement, leaving all contested questions of fact and law, including the nuanced determination of whether a non-signatory is bound, to the arbitral tribunal. The Court reasoned that deciding such complex factual questions, which delve into the merits of the underlying contract and the parties’ conduct, is better suited for the arbitral tribunal, which has the benefit of detailed pleadings and evidence. This approach upholds the principle of kompetenz-kompetenz, where the arbitral tribunal is competent to rule on its own jurisdiction. The Court also emphasized the “always speaking” rule of statutory interpretation, implying that Section 16’s broad language can encompass new commercial realities like complex corporate structures. It stressed that the jurisdiction of an arbitral tribunal arises from the arbitration agreement itself, not merely from the act of appointment by a court. Therefore, there is no inhibition in the Act, that precludes an Arbitral Tribunal from impleading a non-signatory on its own accord, as long as it adheres to applicable legal principles like the Group of Companies doctrine. This power, the Court clarified, exists impliedly even without explicit statutory provision, aligning with the doctrine of implied powers. The recent decision in Adavya Projects Pvt. Ltd. v. Vishal Strcturals Pvt. Ltd. (2025) further reinforced that an arbitral tribunal, under Section 16, has the power to implead parties, signatory or non-signatory, to arbitration proceedings.

Regarding the appellant’s argument about the non-issuance of a notice of invocation under Section 21 of the Act, the Supreme Court clarified that Section 21 primarily serves a procedural function related to the commencement of arbitration for the purpose of reckoning limitation. It does not restrict the tribunal’s jurisdiction to only those disputes or parties explicitly mentioned in the notice. Section 23, which governs statements of claim and defense, allows for raising claims, counter-claims, or amendments without prior Section 21 notices, with limitation periods calculated from when they are actually raised before the arbitrator. Relying on State of Goa v. Praveen Enterprises (2012) and Adavya Projects (2025), the Court concluded that non-service of a Section 21 notice on a party does not nullify the arbitral tribunal’s jurisdiction over that party and does not bar their impleadment into the proceedings.

In its decision, the Supreme Court found no error in the High Court’s judgment affirming the Arbitral Tribunal’s orders. The Court concurred that the Arbitral Tribunal and the High Court had correctly applied the principles laid down in Cox and Kings (I) by noting the common management, the use of ASF insignia, the active involvement of ABPL with contractual obligations, the intertwined nature of the agreements, and the composite business operations that justified impleading ABPL. The Court emphasized that once an Arbitral Tribunal is appointed, it acts as a “one-stop forum” for adjudication of all disputes and issues. All other legal contentions available to the parties were kept open to be canvassed before the Arbitral Tribunal. Consequently, the appeal was dismissed. The Court, however, expressed its dismay at the persistent procedural ambiguities in Indian arbitration law, noting that even the proposed Arbitration and Conciliation Bill, 2024, fails to provide explicit statutory recognition for the power of impleadment or joinder. The Court urged the Department of Legal Affairs, Ministry of Law and Justice, to address this critical gap, stating that “any uncertainty in the law of arbitration would be an anathema to business and commerce”.

The crucial takeaway from this judgment is that the Hon’ble Apex court has clarified an important facet pertaining to dealing with issues of arbitration vis-à-vis commercial contracts in India. The court emphasized upon the importance of understanding the spirit and purpose of the Arbitration Laws in India. The court has deduced the intent of the legislature and the judiciary through various amendments and judicial decisions which have time and again reflected a pro- arbitration stance which consequently leads to promotion of commerce in India. The court in this particular judgment has also urged the lawmakers of the country to ensure that the statutes are amended in line to ensure effective implementation of principles like party autonomy and Kompetenz- Kompetenz which form the bed rock of International Arbitration Laws.