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TMI Blog2025 (5) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... ....12 C. ANALYSIS ......................15 i. Whether the Arbitral Tribunal has the power to Implead / Join Non- Signatories to the Arbitration Agreement? ......................15 a. Contradictory Views of different High Courts on the subject ...............16 I. Decisions holding that the Arbitral Tribunal does not have the power to Implead a non-signatory to the Arbitration Agreement ....................16 II. Decisions holding that the Arbitral Tribunal has the power to Implead a non-signatory to the Arbitration Agreement ........................41 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 .....................62 I. Decision of Chloro Controls and the Arbitration and Conciliation (Amendment) Act, 2015 ..............62 II. Decision of Cox and Kings (I) and the Judicial Rectification of the first misconception by Chloro Controls ..................77 III. Decision of Krish Spinning and the Judicial Rectification of the second misconception emanating from SBP & Co ..................89 c. How Cox and Kings (I) contemplates determination of mutua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uildtech Pvt. Ltd or "ABPL") and Respondent No.2 (ASF Insignia SEZ Pvt. Ltd or "AISPL"), which constituted and formed part of the 'ASF Group'. SPCPL has pleaded before the Arbitrator that BCSPL, ASIPL and ABPL being a part of the ASF Group are bound by the Arbitration Agreement contained in the Works Contract dated 21.11.2016 on the basis of the Group of Companies Doctrine. 6. BCSPL, ABPL, and AISPL respectively filed separate Section 16 Applications before the Arbitrator seeking rejection of SPCPL's counter claim to the extent it is against AISPL and ABPL. By the Arbitrator's Orders dated 23.05.2023 and 17.10.2023 respectively ("Tribunal's First Order"and 'Tribunal's Second Order' respectively), the Arbitrator dismissed the said Applications, inter alia holding that, in order to decide whether or not the inclusion of AISPL and ABPL amongst the party-Respondents on basis of such doctrine is correct on basis of facts narrated by SPCPL, some crucial aspects as regards the role and conduct of AISPL and ABPL, would need adjudication as questions mixed of facts and law, which cannot be holistically determined without first arraying them as parties. 7. In such circumstances referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Case No.2 was wholly unnecessary and is set aside. iv) For all practical purposes, the case pending before the Ld. Sole Arbitrator shall be treated as one case arising out of reference order dated 22nd July, 2022. v) There is no legal incapacity in the Ld. Sole Arbitrator to deal with the claims and counterclaims and the mandate of the Ld. Arbitrator does not deserves to be terminated. vi) The Ld. Sole Arbitrator was correct in his observation that, for reasons of financial and strategic convenience, BCSPL's attempt was to restrict the counterclaim only to BCSPL and not to AISPL & ABPL. Considering that AISPL and the ASF Group had assumed responsibility for payments to be made to SPCPL and for the implementation of the project, as evidenced by the Comfort Letter and various emails exchanged, their impleadment was necessary for a comprehensive adjudication of the matter. vii) In view of the fact that SPCPL has no objection to its claim petition being treated as a counterclaim to the BCSPL's claim, it is ordered that both cases shall be treated as a single reference and a single dispute. The claims of BCSPL and the counterclaim of SPCPL shall be adjudicated by the Ld. Sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kind consideration of this Hon'ble Court in the present Special Leave Petition are: a. Whether the Petitioner, who is not a signatory to the arbitration agreement, could be joined as a party Respondent by the Counter Claimant ("SPCPL"/ "Respondent No. 1") in its 'Separate Statement of Claim', without the referral court under section 11 of the Arbitration and Conciliation Act, 1996 ("Act") directing as such, and without any leave of the Ld. Arbitral Tribunal being sought in this regard? b. If so, could the same be done by directly issuing notice for filing of statement of defense to the Counter Claim (wrongly styled as 'Separate Statement of Claim') without a prior opportunity being granted to the Petitioner to contest such joinder as a party Respondent? c. Whether such joinder as a party Respondent could be carried out in contravention of the principles laid down in Oil and Natural Gas Corporation (supra); Cox and Kings (supra) and Ajay Madhusudan Patel (supra) as regards the parameters for invocation of group of companies doctrine? d. Whether merely because the Petitioner is stated to be the holding company for BCSPL and AISPL; all group companies have the same domain nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty and not to ASG Group. 10. As per the law laid down by this Hon'ble Court in Ajay Madhusudan Patel & Ors. v. Jyotrindra S. Patel & Ors., 2024 SCC OnLine SC 2597 (Para 71), this Hon'ble Court has held that: "71. It is evident that the intention of the parties to be bound by an arbitration agreement can be gauged from the circumstances that surround the participation of the non-signatory party in the negotiation, performance, and termination of the underlying contract containing such an agreement. Further, when the conduct of the non-signatory is in harmony with the conduct of the others, it might lead the other party or parties to legitimately believe that the non-signatory was a veritable party to the contract containing the arbitration agreement. However, in order to infer consent of the non-signatory party, their involvement in the negotiation or performance of the contract must be positive, direct and substantial and not be merely incidental. Thus, the conduct of the non-signatory party along with the other attending circumstances may lead the referral court to draw a legitimate inference that it is a veritable party to the arbitration agreement." (emphasis supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the law laid down by this Hon'ble Court in Cox and Kings (supra) and Oil and Natural Gas Corporation (supra). 17. Merely because a company is a holding company, it cannot, by itself, be a ground to implead the holding company in an arbitration proceeding. To do so would result in disastrous consequences, where the mere factum of the company being a holding company would expose the holding company to litigations initiated against its subsidiary. This would completely militate against and obliterate the fundamental principle of separate corporate personality. 18. It is submitted that none of the five ingredients laid down by this Hon'ble Court in Oil and Natural Gas Corporation (supra) and affirmed, in Cox and Kings (supra) (Para 170) are prima facie satisfied, in the facts of the present case. 19. Further, the High Court in Para 97(viii) of the Impugned Judgment has further patently erred in exceeding the jurisdiction under Section 37 of the Act and suo motu directing that evidence shall be inter alia led by ABPL prior to SPCPL in whose counter- claim ABPL has been arrayed as a party Respondent. Pertinently, the said aspect was neither a submission nor in issue before the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) rejecting the said challenge with detailed reasoning. Only ABPL remains aggrieved and has sought to challenge the Impugned Judgement by way of the present SLP. 13. ABPL has sought to mis-categorize SPCPL's case against ABPL as merely being against the holding company of AISPL and BCSPL. However, this is ex-facie misconceived and contrary to the record, inasmuch as SPCPL has specifically pleaded that the entire negotiation, performance and termination of the Works Contract dated 21.11.2024 was with the ASF Group, though in the name of its SPV, AISPL to develop the SEZ. It was represented and assured to SPCPL throughout that AISPL had the entire support, backing and strength of the ASF Group of Companies. 14. This representation and assurance to SPCPL was backed by, rather than being premised (as sought to be alleged by ABPL), the fact that the BCSPL, AISPL and ABPL represented themselves to the world at large as the 'ASF Group', functioning with the same staff & officials, using common website 13 (www.asfinfrastructure.com) and domain email IDs (@asfinfrastructure.com). ABPL, as also AISPL and BCSPL, is part of the ASF Group. Even behind the scenes, ABPL is the holding compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Campus Land, Black Canyon Building and its allied structure...". Subsequently, in a clear admission of all liabilities being jointly and severally shared between BCSPL, AISPL and ABPL, Sh. Anil Sharma, Vice President (Projects), ASF Group vide his email dated 02.06.2021 conveyed the commitment of 'ASF management' to release outstanding dues to SPCPL. 19. Even Clause 5 of the Settlement Agreement dated 24.07.2020 ('the Settlement Agreement') expressly records that the cost of materials 'taken over by ASF' from SPCPL, as mutually determined, would form part of the outstanding dues of SPCPL. Even the Statement of Accounts annexed to the Settlement Agreement, on the basis of which monies were to be disbursed to SPCPL records TDS value debited by 'ASF', not by BCSPL or AISPL. 20. In the Section 16 application filed by ABPL 21, ABPL admitted that "ABPL is a part of the ASF group of companies, and Respondents No.1 [BCSPL] and 2 [AISPL] are associate companies of ABPL." 12. In such circumstances referred to above, Ms. Aakanksha Kaul, the learned counsel prayed that there being no merit in this appeal, the same may be dismissed. C. ANALYSIS 13. Having heard the learned counsel ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers therein had entered into separate and independent contracts with the respondents therein as-well as one 'DEPL'; an off-shoot company of the respondents therein. When the respondents therein demanded payment of its dues under its own contract, the petitioners refused payment on the ground that DEPL previously owed them a certain sum of money, and since it was an off-shoot of the respondents, the amount owed to the respondents had been adjusted against DEPL's liability. The dispute came to be referred to arbitration and award was passed against the petitioners directing them to repay the outstanding dues to the respondents. The award came to be challenged before the Bombay High Court, wherein it was contended by the petitioners that the arbitral tribunal ought to have lifted the corporate veil to find out whether DEPL formed part of the respondent companies or not. The Bombay High Court inter-alia held that an arbitral tribunal does not have the power to lift the corporate veil and that only the courts have such power. In such circumstances, it held that since DEPL was not a party to the arbitration proceedings between the petitioner and the respondents, and the tribunal having n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liable for any award passed therein, yet such a course can only be adopted by the courts and an arbitral tribunal cannot lift the corporate veil and proceed against non-parties, as arbitration is always consensual and confined to the arbitration agreement and as such an arbitral tribunal cannot enlarger its jurisdiction to non-parties. The relevant observations read as under: - "13. In the first instance, it is doubtful whether this Court could enforce the arbitral award against non parties to the arbitration agreement. It is trite law that an arbitral tribunal draws its jurisdiction from the agreement between the parties and persons who are not party to the arbitration agreement cannot be proceeded against by an arbitral tribunal. Thus, an arbitral award made by an arbitral tribunal against any person who is not a party to the arbitration agreement would be wholly without jurisdiction and unenforceable. There may be exceptional cases where a court may compel persons who are not signatories to an arbitration agreement to arbitrate provided it is established that the non-signatory(ies) are either claiming through signatory(ies) or there was clear intention to be bound as parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvations read as under: - "11. "Like consummated romance, arbitration rests on consent". The agreement between parties to resolve their disputes by arbitration is the cornerstone of arbitration. The arbitral tribunal derives its jurisdiction from the consent of parties (other than statutory arbitrations). In absence of such consent, the arbitral tribunal would have no jurisdiction to make an award and the award so rendered would, plainly, be of no value. [...] xxx xxx xxx 16. There may be cases where courts can compel non signatory (ies) to arbitrate. These may be on grounds of (a) implied consent and/or (b) disregard of corporate personality. In cases of implied consent, the consent of non signatory (ies) to arbitrate is inferred from the conduct and intention of the parties. Thus, in cases where it is apparent that the non-signatory (ies) intended to be bound by the arbitration agreements, the courts have referred such non- signatories to arbitration. xxx xxx xxx 20. The courts would, undoubtedly, have the power to determine whether in a given case the corporate veil should be pierced and the persons behind the corporate façade be held accountable for the obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. In the arbitration proceedings the respondent therein filed an application for her impleadment on the ground that she is the legal heir of one of the erstwhile partners and thus entitled to his share into the firm. The arbitral tribunal allowed the application and impleaded the respondent by taking recourse to the powers provided under Order I Rule 10 of the Code of Civil Procedure, 1908 (for short, the "CPC"). In appeal, the Madras High Court held as follows: - (i) First, that there is no express provision under the Act, 1996 that allows for impleadment of a third-party, and as such any order of impleadment by an arbitral tribunal can at best be considered to be an interim measure in terms of Section 17 of the Act, 1996. However, since Section 17 contemplates exercise of only those powers provided within the scope of the arbitral proceedings and by extension within the ambit of Act, 1996, the order of the arbitral tribunal in impleading a third-person unconnected with the dispute between the parties of arbitration was impermissible and in violation of the scheme of the Act, 1996. Placing reliance on Section 2(h) and 7 of the Act, 1996 respectively, the High Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a defined legal relationship, whether contractual or not." Thus, the Arbitrator has committed an error in interpreting the scope of the Act and allowed the impleading petition in violation of the very Scheme and the provisions of the Act. 63. Section 2(1)(b) of the Act defines 'Arbitration Agreement' as an agreement referred to in Section 7 and Section 7 provides that an Arbitration Agreement is an agreement between the parties to submit all or any of the disputes to be adjudicated by an Arbitrator in respect of their definite legal relationship whether contractual or not. Section 7 contemplates that the agreement should be in writing and signed by the parties. Therefore, a non- signatory or a third party could not be subjected to arbitration. Only in exceptional cases like the case whether the rights of the parties are flowing under the Arbitration Agreement, third parties could be subjected to arbitration. The Court is required to examine the exceptions from the touchstone of direct relationship of the party signatories to the contract." (Emphasis supplied) (ii) Secondly, that Section 16 of the Act, 1996 cannot be interpreted in such a manner to allow any third-party to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her legal heirs shall be adjudicated by the Arbitrator in the arbitration proceedings. Considering the scope of the arbitration proceedings and taking note of the rights of the legal heirs of late Mr. V.G. Panneerdas and the terms and conditions of the Partnership Deed as well as the disputes raised under the Arbitration Act, it is highly improper on the part of the learned Arbitrator to adjudicate the civil rights of the parties under the General Laws. In such an event, the Arbitrator would be travelling beyond the scope of the Arbitration Act and such a power is not vested with an Arbitrator under the provisions of the Arbitration Act, 1996. 85. Therefore, the civil rights of the parties are to be established before the Competent Court of Law. The disputes raised under the Arbitration Act alone can be adjudicated by the Arbitrator by exercising the powers conferred under the Act. The Arbitrator cannot be equated with the Court of Law and this proposition is well settled as the Arbitrator is a creator of the Statute and has no inherent power, which exists in the Civil Court and the Arbitrator cannot exercise the inherent power and has to exercise the powers strictly within the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then not only would it lead to widening the scope of arbitration proceeding but also would defeat the very purpose of the Act, 1996 i.e., the adjudication between the consenting parties to the arbitration agreement with a defined contractual legal relationship. The relevant observations read as under: - "77. The above proposition of law laid down by the Courts would reveal that the Arbitrator cannot exercise an inherent power conferred to the Civil Courts under the Code of Civil Procedure. The Arbitrator is bound to function within the scope and ambit of the Act and resolve the disputes between the contracted parties to the Arbitration Agreement as defined under the Act. Travelling beyond the scope of the Act is impermissible and if such an exercise is made, then the same would result in exercise of excess jurisdiction and finally the Arbitrator would be functioning as a Civil Court, which is not intended under the provisions of the Arbitration and Conciliation Act, 1996. When the Arbitrator is appointed under the Statute, scope, powers and jurisdiction shall be within the provisions of the said Statute. The Arbitrator is not empowered to travel beyond the scope of such powers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Civil Court and the Arbitrator cannot exercise the inherent power and has to exercise the powers strictly within the ambit of the Arbitration Act and certainly not beyond the scope of the arbitration proceedings. 99. The spirit of the order passed by the Arbitrator with reference to the Arbitration Act is to be considered by this Court. The above findings would reveal that the Arbitrator has made an initiation to decide the legal rights of the parties, including the rights of the first respondent. The Arbitrator in express terms held that the impleadment of party, provisions contained in the Code of Civil Procedure through Order 1, Rule 10 gives a wide power to a Court and in our context, the same must apply to an Arbitral Tribunal. Such a conclusion arrived by the Arbitral Tribunal is undoubtedly an exercise of inherent power, which is impermissible in law. The power which is not contemplated under the Arbitration Act, cannot be exercised by the Arbitral Tribunal. The power being statutory in character, the inherent power is not vested. While-so, the Arbitrator cannot invoke the provisions of the Code of Civil Procedure for the purpose of impleading a third person into th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or delete parties that were never referred to arbitration by the referral court. The said decision is in four- parts: - (i) First, although Section 19 of the Act, 1996 permits the arbitral tribunal to formulate the procedure to be followed in accordance with the CPC yet it does not mean that all powers that are ordinarily vested in a national court by the CPC could also be said to have been conferred upon the arbitration tribunal which have otherwise not been provided by the statute. The power to implead has been explicitly conferred upon a court in terms of Order I Rule 10, and in the absence of any such provision in the Act, 1996, the power to conduct proceedings under Section 19 sub-section (3) of the Act, 1996 can neither be construed as a source of power of the arbitral tribunal to join parties nor can such power be readily inferred due to its nature of militating against the very consensual scheme of arbitration. The relevant observations read as under: - "58. As this Court reads Section 19(1), it finds that all that the said provision purports to achieve is to unfetter an AT from the rigors of procedure as embodied in the two statutes noticed above. While it may still ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a party unilaterally by the AT thus results in a non-signatory being subjected to the authority of that tribunal and accepting its right to adjudicate upon disputes even though it may have never consented to subject itself to the authority of the said AT. This would clearly militate against the principle of "party consent" which forms the very foundation of arbitration." (Emphasis supplied) (ii) Secondly, an arbitral tribunal owes its existence to the arbitration agreement and is essentially a designated private forum for resolving the disputes between the parties to such agreement and as such is detached from the hierarchy of 'courts'. Its genesis flows from the arbitration agreement and upon its constitution, the arbitral tribunal is governed by such agreement and the contours of the Act, 1996 only. The idea of vesting of inherent powers have been recognized only for adjudicatory institutions such as national court's whose genesis and by extension their powers flows from their right to act as a matter of justice and hence, the vesting of such powers to meet the ends of justice. However, an arbitration tribunal cannot be equated to a national court since it derives its power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according recognition to the inherent powers recognised to exist in national courts accept such a supervening power inhering in those courts and which enables them to pass such orders as would subserve the ends of justice. AT's on the other hand derive the power to adjudicate based on an express conferral of authority by parties to an agreement. Even where parties confer a power on the AT to arbitrate, that conferral must be within the contours of the applicable law. [...]" (Emphasis supplied) (iii) Thirdly, it held that the power to implead a party could also not be said to flow from either Section(s) 16 or 17 of the Act, 1996 respectively. The doctrine of kompetenz-kompetenz enshrined in Section 16 that enables the arbitral tribunal to rule on any jurisdictional objection such as the existence or validity of the arbitration agreement is confined or limited only to the objections raised by the parties before it by virtue of the arbitration agreement. It cannot be regarded as a source of power to implead parties. Similarly, the power to pass interim measures under Section 17 of the Act, 1996 cannot possibly encompass the power to implead or join a third-party to the arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me interim measures from a position of equivalence with courts. The amendment to Section 17 appears to have been motivated solely by the felt need to save courts from being deluged with applications for interim relief. However, one must not lose sight of the fact that both Section 17 as well as Section 9 continue to deal with interim measures. The power to join a party and thus subject it to the ultimate decision and award that may be rendered by the AT cannot be conceived to be a component of the power to frame interim orders under Section 17. The Court in this respect concurs with the view expressed by the Madras High Court and reflected in Paras 127-134 of Abhibus as well as the legal position as enunciated and explained in Paras 81 and 99 of V.G. Santhosam. (Emphasis supplied) (iv) Lastly, it observed that although various principles such as 'alter ego' or 'group of companies' have been recognized to compel a third-party to partake in the arbitration proceedings, yet such principles have been invoked only in the context of Section(s) 8 or 45 of the Act, 1996 respectively which empowers a judicial authority to make a reference to arbitration. Since both these provisions uses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... origin to the arbitration agreement providing for resolution of disputes between the parties to such 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 cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult 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 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) canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces 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 arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty 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 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. xxx xx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship 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. [...] xxx xxx xxx 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced 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 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 si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitration 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court held that, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [ ]" 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations on whether the respondents are veritable parties or not - is primarily an assessment regarding the conduct, role, and involvement 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, 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. 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 effecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignatories, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice 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 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riably 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng such legal relationship to arbitrate may be assumed or gathered from the conduct of the parties. The relevant observations read as under: - "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 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of "party" in Section 2(1)(h) of the Act, 1996 was understood to be at significant variance from Section(s) 8 and 45 of the Act, 1996, more particularly the expression "any person claiming through or under" with the former being construed to be much narrow in scope and include only the signatories to the arbitration agreement, there was misconceived assumption, that the authority and jurisdiction of an arbitral tribunal was only limited to this narrowly misconstrued definition of "party", unlike that of the courts who had been endowed with the power and jurisdictional reach to even non-signatories by virtue of the enlarged meaning of "party", couched in the very language of Section(s) 8 and 45 of the Act, 1996. Thus, it was assumed and rather wrongly, that an arbitral tribunal does not itself have the power to lift the corporate veil or apply the doctrine of 'Group of Companies' and by extension to implead a non-signatory to partake in arbitration by taking recourse to these principles of implied mutual consent. 46. However, as discussed, the decision of Cox and Kings (I) (supra) has made it abundantly clear that the legal basis for the application of the 'Group of Companies' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l tribunal to rule on its own jurisdiction under Section 16 would come into the picture only when the parties go before the arbitral tribunal without recourse to the courts either under Sections 8 or 11 respectively of the Act, 1996. 50. The ultimate effect of the ratio of SBP & Co. (supra) was that the scope for interference available to the referral courts when acting under Section 11 of the Act, 1996 was substantially expanded, and the referral courts were not only empowered but also expected to conduct mini trials and indulge in the appreciation of evidence on various issues concerned with the subject matter of arbitration. 51. Overtime, the decision of SBP & Co. (supra) insofar as the extent of judicial scrutiny that was required under Section 11 of the Act, 1996 was concerned, proved to be counter serving as the enlarged scope of judicial interference at the referral stage induced significant delays in the process of appointment of arbitrators and constitution of arbitral tribunals, thereby rendering the very framework of arbitration in India, ineffective, unviable and cumbersome. 52. The Law Commission of India in its 246th Report taking note of the aforesaid problem inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Duro Felguera, S.A. v. Gangavaram Port Ltd. reported in (2017) 9 SCC 729] 54. A two-Judge Bench of this Court in Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd. reported in (2020) 2 SCC 455 held that the issue of limitation being a mixed question of law and fact should be best left to the tribunal to decide and that the referral court should restrict its examination only to the existence of an arbitration agreement between the parties. 55. Then came the decision of this Court in Vidya Drolia & Ors v. Durga Trading Corporation reported in (2021) 2 SCC 1, which inter-alia held that although Section(s) 8 and 11 of the Act, 1996 are at some variance inasmuch as the former requires the referral courts to determine the "validity" of an arbitration agreement whereas the latter requires determining only the "existence", yet since both the provisions are complementary to each other insofar as they both deal with the power of courts to refer the parties to arbitration, the aspect of "existence" as specified under Section 11 should be seen construed along with the aspect of "validity" as specified under Section 8. It held that both the provisions insofar as the stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itration. xxx xxx xxx 147.11. The interpretation appropriately balances the allocation of the decision-making authority between the court at the referral stage and the arbitrators' primary jurisdiction to decide disputes on merits. The court as the judicial forum of the first instance can exercise prima facie test jurisdiction to screen and knock down ex facie meritless, frivolous and dishonest litigation. Limited jurisdiction of the courts ensures expeditious, alacritous and efficient disposal when required at the referral stage." "148. Section 43(1) of the Arbitration Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to court proceedings. Sub-section (2) states that for the purposes of the Arbitration Act and Limitation Act, arbitration shall be deemed to have commenced on the date referred to in Section 21. Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism." (Emphasis supplied) 57. As is clear from the aforesaid extract, Vidya Drolia (supra) held that although the arbitral tribunal is the preferred first authority to determine the questions pertaining to non-arbitrability, yet the referral court may exercise its limited jurisdiction to refuse reference to arbitration in cases which are ex-facie frivolous and where it is certain that the disputes are non-arbitrable. 58. What can be discerned from the aforesaid is that while the enlarged scope and extent of judicial intervention at the referral stage as held in SBP & Co. (supra) was legislatively overruled by the insertion of Section 11 sub-section (6A) in the Act, 1996, the avowed legislative intent of minimal judicial intervention was still far from being achieved, partly due to the misconception created in the position of law as regards ambit of scrutiny under Section 11 of the Act, 1996 by Vidya Drolia (supra). Although, Vidya Drolia (supra) predominantly found favour with the principal of minimal interference at the stage of Section 11 sub-section (6) petitions by referral courts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided on a prima facie basis. Objections of this kind will require a detailed consideration of evidence and submissions and a finding as to the law as well as the facts. Obligating the court to decide issues of stamping at the Section 8 or Section 11 stage will defeat the legislative intent underlying the Arbitration Act. 186. The purpose of vesting courts with certain powers under Sections 8 and 11 of the Arbitration Act is to facilitate and enable arbitration as well as to ensure that parties comply with arbitration agreements. The disputes which have arisen between them remain the domain of the arbitral tribunal (subject to the scope of its jurisdiction as defined by the arbitration clause). [...] 209. The above extract indicates that the Supreme Court or High Court at the stage of the appointment of an arbitrator shall "examine the existence of a prima facie arbitration only pertain to the validity of the arbitration agreement, but also include any other issues which are a consequence of unnecessary judicial interference in the arbitration proceedings. Accordingly, the "other issues" also include examination and impounding of an unstamped instrument by the referral court at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the observations made in Vidya Drolia (supra) and adopted in NTPC v. SPML (supra) that the jurisdiction of the referral court when dealing with the issue of "accord and satisfaction" under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in In Re: Interplay (supra). xxx xxx xxx 125. We are also of the view that ex-facie frivolity and dishonesty in litigation is an aspect which the arbitral tribunal is equally, if not more, capable to decide upon the appreciation of the evidence adduced by the parties. We say so because the arbitral tribunal has the benefit of going through all the relevant evidence and pleadings in much more detail than the referral court. If the referral court is able to see the frivolity in the litigation on the basis of bare minimum pleadings, then it would be incorrect to doubt that the arbitral tribunal would not be able to arrive at the same inference, most likely in the first few hearings itself, with the benefit of extensive pleadings and evidentiary material." 62. Krish Spinning (supra) further held that, the scope of Section 8 is markedly different from the scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different. 109. The difference between Sections 8 and 11 respectively of the Act, 1996 is also evident from the scope of these provisions. Some of these differences are: i. While Section 8 empowers any 'judicial authority' to refer the parties to arbitration, under Section 11, the power to refer has been exclusively conferred upon the High Court and the Supreme Court. ii. Under Section 37, an appeal lies against the refusal of the judicial authority to refer the parties to arbitration, whereas no such provision for appeal exists for a refusal under Section 11. iii. The standard of scrutiny provided under Section 8 is that of prima facie examination of the validity and existence of an arbitration agreement. Whereas, the standard of scrutiny under Section 11 is confined to the examination of the existence of the arbitration agreement. iv. During the pendency of an application under Section 8, arbitration may commence or continue and an award can be passed. On the other hand, under Section 11, once there is failure on the part of the parties in appointing the arbitrator as per the agreed procedure and an application is preferred, no arbitration proceedings can commence or co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also to the view taken in In Re: Interplay (supra). The relevant ovservations read as under: - "111. The use of the term 'examination' under Section 11(6-A) as distinguished from the use of the term 'rule' under Section 16 implies that the scope of enquiry under section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the arbitral tribunal to 'rule' under Section 16. The prima facie view on existence of the arbitration agreement taken by the referral court does not bind either the arbitral tribunal or the court enforcing the arbitral award. xxx xxx xxx 133. Thus, we clarify that while determining the issue of limitation in exercise of the powers under Section 11(6) of the Act, 1996, the referral court should limit its enquiry to examining whether Section 11(6) application has been filed within the period of limitation of three years or not. The date of commencement of limitation period for this purpose shall have to be construed as per the decision in Arif Azim (supra). As a natural corollary, it is further clarified that the referral courts, at the stage of dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of scrutiny of the referral courts under Section 11 of the Act, 1996 is extremely narrow, and confined to only one aspect i.e., the prima-facie determination of the "existence" of the arbitration agreement. Krish Spinning (supra) has categorically held that only those questions which inextricably attacks or questions the "existence" of the arbitration agreement, should be looked into by the referral courts, that only for the purpose of a prima-facie satisfaction, all other questions, particularly mixed questions of law and fact fall within the exclusive jurisdiction of the arbitral tribunal, and cannot be looked into by the referral court, even for a prima-facie determination. Questions which involve examination of contested question of facts and appreciation of evidence, should be left to the arbitral tribunals to decide, as it is equally, if not more capable to decide such questions, as it has the benefit of going through all the relevant evidence and pleadings in much more detail than the referral courts. Although the aforesaid observations were in the context of "accord and satisfaction" yet, the principles laid therein, would, nevertheless apply with equal force to all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this question. Such a question, by no stretch, can be regarded as falling within the exclusive domain or jurisdiction of the referral courts, so as to render any examination of it by the arbitral tribunal a usurpation of the referral courts authority and duty. c. How Cox and Kings (I) contemplates determination of mutual intention of Non-Signatories to arbitration agreements. 68. However, even though an arbitral tribunal undoubtedly would be empowered to identify and implead a non-signatory to the arbitration agreement on its own, yet the question still remains, if the arbitral tribunal could be considered to be the appropriate forum for deciding this issue? In other words, whether, the issue that a non-signatory is bound by the arbitration agreement could be termed to be a question which inextricably attacks or questions the "existence" of the arbitration agreement, and thus, should be looked into by the referral courts? 69. The seminal importance of the aforesaid question lies in the contention that has been vehemently put forward before us by the appellants herein. It has been contended that when the application under Section 11 of the Act, 1996 was filed by the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of the question whether a non-signatory is bound by the arbitration agreement or not, and the manner in which the referral courts and the arbitral tribunal are expected to tackle such a question. 73. Cox and Kings (I) (supra) after an exhaustive examination of the question of existence or applicability of the 'Group of Companies' doctrine in a particular case, is fundamentally a fact-intensive exercise that involves a nuanced determination of the consent of parties from diverse factual elements and circumstances. The said doctrine and by extension any other principle for determining mutual consent, broadly requires ascertaining the intention of the parties by analysing the factual circumstances surrounding the contractual arrangements, particularly factors such as the level of involvement of the non- signatory in the negotiation, conclusion (sic execution), performance or termination of the contract, to what extent such conduct may be indicative its position as a veritable party to the arbitration agreement and common intention to be bound by it. Thus, it was held that the primary test for ascertaining the applicability of the 'Group of Companies' doctrine lies in the determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereby ensuring the efficacy of the agreement between the parties. 74. From above, it is manifest that the test for determining the applicability of the 'Group of Companies' doctrine is intrinsically factual in nature, necessitating a close and context-specific inquiry. However, Cox and Kings (I) (supra) did not merely stop at just establishing the factual nature of such an exercise, but further proceeded to expound, the extent and depth in which the aforementioned factual factors must be determined in the course of such exercise by laying down the threshold standards for determining the applicability of the said doctrine. Placing reliance on one another decision of this Court in Oil and Natural Gas Corporation Ltd. v. Discovery Enterprises Pvt. Ltd. reported in (2022) 8 SCC 42, it held that the test for determining applicability of the 'Group of Companies' doctrine envisages a cumulative and holistic determination of the factual aspects such as the relationship between and among the legal entities within the corporate group structure, their underlying contractual obligations, the commonality of the subject matter and the composite nature of the transactions undertaken, and thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing contractual obligations are indicators to determine the mutual intentions of the parties. The other factors such as the commonality of the subject matter, composite nature of the transactions, and the performance of the contract ought to be cumulatively considered and analysed by courts and tribunals to identify the intention of the parties to bind the non-signatory party to the arbitration agreement. [...] 112. [...] However, we clarify that mere presence of a commercial relationship between the signatory and non-signatory parties is not sufficient to infer "legal relationship" between and among the parties. If this factor is applied solely, any related entity or company may be impleaded even when it does not have any rights or obligations under the underlying contract and did not take part in the performance of the contract. The group of companies doctrine cannot be applied to abrogate party consent and autonomy. The doctrine, properly conceptualised and applied, gives effect to mutual intent and autonomy. 121. Evaluating the involvement of the non-signatory party in the negotiation, performance, or termination of a contract is an important factor for a number of reasons. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intricately linked to the subject matter, are not actually strangers to the dispute between the signatory parties. 128. We hold that all the cumulative factors laid down in Discovery Enterprises (supra) must be considered while determining the applicability of the group of companies doctrine. However, the application of the above factors has to be fact- specific, and this Court cannot tie the hands of the courts or tribunals by laying down how much weightage they ought to give to the above factors. 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. [...] (Emphasis supplied) 76. Owing to the intrinsic character of the test - being one that entails a fact- intensive inquiry involving a mixed question of fact and law - and further, given the extensive standard it demands, requiring a comprehensive and holistic appraisal of all material facts and attendant circumstances, it may be safely concluded that the arbitral tribunal is the more appropriate and competent foru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g contract is the most crucial factor to discern the intention of the parties. "112. Section 7 of the Arbitration Act broadly talks about an agreement by the parties in respect of a defined legal relationship, whether contractual or not. Such a legal relationship must give rise to legal obligations and duties. In a corporate group, a company may have various related companies. The legal relationship must be analysed in the context of the underlying contract containing the arbitration agreement. The nature of the contractual relationship can either be formally encrusted in the underlying contract, or it can also be inferred from the conduct of the signatory and non-signatory parties with respect to such contract. [...] 115. In case of multiple parties, the necessity of a common subject- matter and composite transaction is an important factual indicator. An arbitration agreement arises out of a defined legal relationship between the parties with respect to a particular subject matter. Commonality of the subject matter indicates that the conduct of the non-signatory party must be related to the subject matter of the arbitration agreement. For instance, if the subject matter of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning such agreement. The UNIDROIT Principle of International Commercial Contract, 201698 provides that the subjective intention of the parties could be ascertained by having regard to the following circumstances: (a) preliminary negotiations between the parties; (b) practices which the parties have established between themselves; (c) the conduct of the parties subsequent to the conclusion of the contract; (d) the nature and purpose of the contract; (e) the meaning commonly given to terms and expressions in the trade concerned; and (f) usages. (Emphasis supplied) 79. What can be discerned from the above is that, the entire exercise of determining whether a non-signatory is bound by an arbitration agreement, in contradistinction to the narrow question of the "existence" of the arbitration agreement, necessitates a far more expansive inquiry. This inquiry transcends the limited question of the mere "existence" as it entails an interpretation of the scope and contours of the principal agreement, an assessment of the commercial understanding between the parties, examination of the nature and purpose underlying the principal contract, and the character of the transactions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting, as against an oral agreement, but need not be signed by the parties. The written arbitration agreement can be in the form of a document signed by the parties, or be evidenced in the record of agreement. Section 7(4)(b) prescribes the written material from which a non-signatory's consent and intention can be deciphered by a court or arbitral tribunal. 53. The existence of an arbitration agreement with a non signatory is a matter of interpretation and construction. The express words employed by the parties enable the court to ascertain the intention of the parties and their agreement to resolve disputes through arbitration. For ascertaining the true meaning of the express words, the court or tribunal may look into the surrounding circumstances such as nature and object of the contract and the conduct of the parties during the formation, performance, and discharge of the contract. While interpreting and constructing the contract, courts or tribunals may adopt well established principles, which aid and assist proper adjudication and determination. The Group of Companies doctrine is one such principle. It may be adopted by courts or arbitral tribunals while interpreting the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exists and is present in the record of agreement or the written materials as delineated under Section 7 sub- section (4)(b) of the Act, 1996. The latter, in contrast, involves construction and interpretation of the "express words" that has been used in such material from the surrounding circumstances such as nature and object of the contract and the conduct of the parties during the formation, performance, and discharge of the contract, and how the arbitration agreement fits within the broader contractual framework. 85. Once the referral court, identifies an arbitration agreement that satisfies the formal requirements of Section 7 of the Act, 1996, either from the record of agreement or the written materials under sub-section (4), the "existence" of the arbitration agreement is said to have been established, even though, its binding nature qua the non-signatory may not be established, as it is entirely possible for a referral court to arrive at finding that prima-facie there exists an arbitration agreement in terms of Section 7 of the Act, 1996 without resolving the question of whether a non-signatory is bound by such arbitration agreement or not, as it depends on additional fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitral tribunal by the referral court, the arbitral tribunal would be full empowered to examine this issue in the first instance and determine whether any non- signatory is bound by the arbitration agreement based on the factual circumstances of the case, and if necessary, implead such non-signatory to the arbitration proceedings. 89. P.S. Narasimha J. in his concurring opinion in Cox and Kings (I) (supra), observed that the exercise of determining the binding nature of an arbitration agreement qua a non-signatory is an inquiry pertaining to the interpretation and construction of the agreement for determining the mutual intention, and not the existence of such agreement. We are conscious of the fact that, at paragraph 55, P.S. Narasimha J. observed that the inquiry is to "ascertain the existence of the arbitration agreement with the non-signatory" Semantically, the exercise may well be said to be one for determining the "existence" of an arbitration agreement with the non-signatory, however, the aforesaid observations cannot be singled out and construed devoid of its context. It must be seen in light of the observations made in the majority opinion at paragraphs 102 and 103, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the underlying contract in addition to the arbitration agreement. The relevant observations read as under: - "66. It is well settled that an arbitration agreement, in order to qualify as a valid agreement, has to satisfy the requirements stipulated under Section 7 of the Act, 1996 along with the principles of law under the Indian Contract Act, 1872. Having regard to the submissions of both the Respondent Groups i.e., JRS and SRG, it can be said that they have raised manifold objections to the present petition, however, none of those objections question or deny the existence of the arbitration agreement under which the arbitration has been invoked by the Petitioner AMP Group. In fact, the JRS Group has no objection to resolve the disputes with the AMP Group by way of arbitration. Their primary objection is only that the SRG Group cannot be a part of the arbitration proceedings. Therefore, the requirement of prima facie existence of an arbitration agreement, as stated under Section 11 of the Act, 1996 is satisfied. 67. However, the core issue that falls for our consideration is whether the SRG Group, being a non-signatory to the FAA can also be referred to arbitration and whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the narrow and circumscribed domain of the referral court's singular obligation under Section 11 sub-section (6A) of the Act, 1996 and as such cannot be conflated to be one pertaining to or attacking the "existence" of an arbitration. 95. Even if it is assumed for a moment that the referral court in its jurisdiction under Section 11 of the Act, 1996 has the discretion to determine whether a non-signatory is a veritable party to the arbitration agreement or not, by virtue of Cox and Kings (I) (supra), the referral court should only refrain but rather loathe the exercise of such discretion. Any discretion which is conferred upon any authority, be it referral courts must be exercised reasonably and in a fair manner. Fairness in this context does not just extend to a non-signatory's rights and its apprehension of prejudice, fairness also demands that the arbitration proceedings is given due time to gestate so that the entire dispute is holistically decided. Any determination even if prima-facie by a referral court on such aspects would entail an inherent risk of frustrating the very purpose of resolution of dispute, if the referral courts opine that a non-signatory in question is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision empowers the arbitral tribunal to rule on its own jurisdiction, including any ruling on any objections with respect to the existence or validity of arbitration agreement. Section 16 is an inclusive provision which comprehends all preliminary issues touching upon the jurisdiction of the arbitral tribunal. The doctrine of competence competence is intended to minimize judicial intervention at the threshold stage. The issue of determining parties to an arbitration agreement goes to the very root of the jurisdictional competence of the arbitral tribunal. 161. The above position of law leads us to the inevitable conclusion that at the referral stage, the court only has to determine the prima facie existence of an arbitration agreement. If the referral court cannot decide the issue, it should leave it to be decided by the arbitration tribunal. unnecessarily interfere with arbitration proceedings, and rather allow the arbitral tribunal to exercise its primary jurisdiction. In Shin-Etsu Chemical Co Ltd v. Aksh Optifibre Ltd,125 this Court observed that there are distinct advantages to leaving the final determination on matters pertaining to the validity of an arbitration agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of determination of true parties to an arbitration agreement to be decided by arbitral tribunal under Section 16." (Emphasis supplied) 98. Thus, even if it is assumed for a moment, that the question whether a non- signatory is a veritable party to the arbitration agreement is intrinsically connected with the issue of "existence" of arbitration agreement, the referral courts should still nevertheless, leave such questions for the determination of the arbitral tribunal to decide, as such an interpretation gives true effect to the doctrine of competence-competence enshrined under Section 16 of the Act, 1996. 99. This hands-off approach of referral courts in relation to the question of whether a non-signatory is a veritable party to the arbitration agreement or not was reiterated in Cox and Kings (II), wherein one of us, (J.B. Pardiwala J.), observed that once an arbitral tribunal stands constituted, it becomes automatically open to all parties to raise any preliminary objections, including preliminary objections touching upon the jurisdiction of such tribunal, and to seek an early determination thereof. Consequently, the issue of impleadment of a non-signatory was deliberately lef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al's role as the forum of first instance for dispute resolution but could also cause irremediable prejudice. In particular, if the referral court were to refuse impleadment of a non-signatory, there would be no statutory right of appeal available to challenge such a refusal. In contrast, determinations made by the arbitral tribunal - including on issues of jurisdiction and impleadment - are amenable to challenge under Section 16 of the Act, 1996 and, thereafter, under Section 37. Accordingly, the better course of action is for referral courts to refrain altogether from delving, into the issue of whether a non-signatory is a veritable party to the arbitration agreement, and to leave such matters for the arbitral tribunal to decide in the first instance. 103. At this juncture, it would be apposite to refer to the three-judge Bench decision of this Court in Pravin Electricals Pvt Ltd v. Galaxy Infra and Engineering Pvt Ltd. reported in (2021) 5 SCC 671. In the said decision, this Court was called upon to determine the existence of an arbitration agreement on the basis of the documentary evidence produced by the parties. Although, this Court prima-facie opined that there was no conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first time before the arbitral tribunal. We say so, because the aforesaid decision of Pravin Electricals (supra) where this Court referred the matter to the arbitral tribunal despite prima-facie opining that there is no existence of arbitration agreement was approvingly referred to by Cox and Kings (I) (supra) to hold that "If the referral court cannot decide the issue, it should leave it to be decided by the arbitration tribunal". The natural corollary to the aforesaid is that, where the referral court is either unable to decide the issue as to whether, the non-signatory is a veritable party to the arbitration agreement, or finds in its opinion that such non-signatory is not a veritable party, or in the extreme alternative, had no occasion to decide such an issue, still it would be open for the arbitral tribunal to look into the issue and decide the same. 107. The only thing the arbitral tribunal needs to be mindful of when deciding such an issue is that it adheres to the principles of natural justice by affording the non-signatory a fair opportunity to raise objections with regard to the jurisdiction of the arbitral tribunal, earnestly makes an endeavour to determine this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o implead Non- Signatories to the arbitration agreement on its own accord. a. There is no inhibition in the scheme of Act, 1996 which precludes the Arbitral Tribunal from impleading a Non-Signatory on its own accord. 109. From the above exposition of law, it can be seen that there is nothing within the scheme of the Act, 1996, which prohibits or restrains an arbitral tribunal from, impleading a non-signatory to the arbitration proceedings on its own accord. So long as such impleadment is undertaken upon a consideration of the applicable legal principles - including, but not limited to, the doctrines of 'group of companies', 'alter ego', 'composite transaction', and the like - the arbitral tribunal is fully empowered to summon the non-signatory to participate in the arbitration. This autonomy stems from the broad jurisdiction conferred upon arbitral tribunals under the Act, 1996 to rule upon their own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement, as enshrined under Section 16. The impleadment of a non-signatory, being fundamentally a question of jurisdiction and consent, falls squarely within the province of the trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e various principles for determining mutual consent, and thereby implead a non-signatory since both (i) the power to do so was presumed lie within the exclusive domain and jurisdiction as- well as the (ii) the corresponding duty to undertake this exercise was understood to have been entrusted solely to the referral courts. 112. However, with the advent of Cox and Kings (I) (supra), the legal foundation for the application of the 'Group of Companies' doctrine, or any analogous principles designed to determine mutual consent was clarified to exist in the definition of "party" under Section 2(1)(h) read with the meaning of "arbitration agreement" under Section 7 of the Act, 1996. Unlike Section(s) 8 and 45 of the Act, 1996, the provisions of Section(s) 2(1)(h) and 7 are not confined in their applicability to only judicial forums or courts, and rather extend equally to both courts and arbitral tribunals, as these provisions form the bedrock of the framework of arbitration under the Act, 1996. The logical sequitur of this is that arbitral tribunals, too, are vested with the requisite authority to engage with and apply principles, such as the 'Group of Companies' doctrine, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough P.S. Narasimha J. observed that since an arbitral tribunal's jurisdiction is derived from the consent of the parties to refer their disputes to arbitration, any person or entity who is found to be a party to the arbitration agreement can be made a part of the arbitral proceedings, and the tribunal can exercise jurisdiction over him. Section 16 of the Act, 1996 which empowers the arbitral tribunal to determine its own jurisdiction, is an inclusive provision that covers all jurisdiction question including the determination of who is a party to the arbitration agreement, and thus, such a question would be one which falls within the domain of the arbitral tribunal. It further observed that, although most national legislations do not expressly provide for joinder of parties by the arbitral tribunal, yet an arbitral tribunal can direct the joinder of a person or entity, even if no such provision exists in the statute, as long as such person or entity is a party to the arbitration agreement. Accordingly, this Court held that since the respondents therein were parties to the underlying contract and the arbitration agreement, the arbitral tribunal would have the power to implead them a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the possibility of a unified proceeding to resolve their disputes, rather than necessarily requiring fragmented proceedings in all cases." Further, in jurisdictions where there is no provision in the national arbitration statute authorising the courts to consolidate arbitrations or to join parties, it is left to the arbitral tribunal to determine this issue at the first instance. 26. Therefore, as per the legal principles under the ACA as well as in international commercial arbitration, it is a foundational tenet that the arbitral tribunal's jurisdiction is derived from the consent of the parties to refer their disputes to arbitration, which must be recorded in an arbitration agreement. The proper judicial inquiry to decide a jurisdictional issue under Section 16 as to whether a person/entity can be made a party to the arbitral proceedings will therefore entail an examination of the arbitration agreement and whether such person is a party to it. If the answer is in the affirmative, such person can be made party to the arbitral proceedings and the arbitral tribunal can exercise jurisdiction over him as he has consented to the same. 39. [...] Since they are parties to the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 19(2) of the Act, 1996. Gary Born, further observes that "this approach is consistent with that prescribed by the New York Convention and with the general respect for the parties' procedural autonomy in international arbitration". Thus, it acknowledges, that such stipulation as to consolidation or joinder is purely within the realm of procedural autonomy, hence Section 19 of the Act, 1996 which is the source of procedural autonomy will be subject to the conditions stipulated therein. 118. Further, it is true that the entire scheme of Act, 1996 is silent on the power of a court or arbitral tribunal to join or implead a party to the arbitration proceedings. Gary Born argues, that "In the absence of specific statutory provisions, the topics of consolidation and joinder/intervention are generally subject to the Model Law's basic requirement that arbitration agreements be recognized and enforced in accordance with the parties' intentions. That is, consolidation and joinder/intervention should be both permitted and required - as an element of the parties' agreement to arbitrate" The UNCITRAL Model Law being the genesis of the Act, 1996, even if there is no explicit statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doctrine of implied powers is invoked to effectuate the final power, where it is impossible to effectuate the final power for doing something which although not provided in express terms but nevertheless is required to be done. In such scenarios, the power by virtue of the doctrine of implied powers will be supplied as a necessary intendment of the legislation, to advance its object and avoid grave hardship. The relevant observations read as under: - "100. Undeterred, an attempt was made to fall back upon the doctrine of implied powers to somehow vest in Section 34 Court a power to modify the award. It is well settled that if a statute conferring a power to be exercised on certain conditions, the conditions prescribed are normally held to be mandatory and a power inconsistent with those conditions is impliedly negatived. No doubt, there is a principle in law that a Court must as far as possible adopt a construction which effectuates the legislative intent and purpose and that an express grant of a statutory power carries with it by necessary implication the authority to use all reasonable means to make such grant effective. xxx xxx xxx 102. As is clear, the doctrine of impli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as construction contracts, financing transactions, reinsurance contracts, the framework of arbitration has, to a significant extent remained unchanged, leading to a mismatch between procedural form and commercial substance. 125. For arbitration to remain a viable and effectively alternative mechanism for dispute resolution, it is imperative to ensure that commercial reality does not outgrow this mechanism. The mechanisms of arbitration must be sufficiently elastic to accommodate the complexities of multi-party and multi-contract arrangements without compromising foundational principles such as consent and party autonomy. The approach of courts and arbitral tribunal in particular must be responsive to the emerging commercial practices and expectations of the parties who submit themselves to it. 126. It was in this backdrop and the emerging best international practices that Cox and Kings (I) (supra) recognized the applicability of the 'Group of Companies' doctrine and other principles of determining mutual consent, to bind even non-signatories to the arbitration agreement as parties, as long as they were a veritable party and found to have impliedly consented to such agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect matter. 129. Historically, the rule of interpretation of statutes, was premised on the understanding that statutes were to be construed in accordance with their natural meaning as at the date of their enactment. It was based on the Latin maxim "contemporanea expositio est optima et fortissima in lege" which means "Contemporary exposition is the best and strongest in law". However, over time the courts started recognizing the problems underlying this orthodoxic rule of interpretation. Sir Peter Benson Maxwell, On the Interpretation of Statutes, ed Frederick Stroud (Sweet and Maxwell, 5th ed, 1912) explained that the use of "contemporanea expositio est optima et fortissima in lege" for interpretation of statutes had largely been abandoned except perhaps in the construction of ambiguous language used in very old statutes where the language itself may have had a rather different meaning. 130. The modern approach to statutory interpretation insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and include such things as the existing state of the law and the mischief which, by legitimate means such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e necessary power for effectually issuing binding rulings thereon during the course of the proceedings. It endows the tribunal with the necessary powers to formulate its ruling. It illustrates the intention of the legislature to endow the arbitral tribunal with all powers and jurisdictional reach for effectively deciding its jurisdiction, even where no challenge is made by either parties, and to exercise the necessary powers for making such rulings. 136. Redfern and Hunter on International Arbitration (5th edn, Oxford University Press 2009), have observed that an arbitral tribunal's jurisdiction is derived "from the will of the parties to the arbitration agreement and therefore joinder or intervention is generally only possible with the consent of all parties concerned" and "such consent may be either express, implied, or by reference to a particular set of arbitration rules agreed to by the parties that provide for joinder" However, "unlike litigation in state courts, in which third parties can often be joined to proceedings, the jurisdiction of an arbitral tribunal to allow for the joinder or intervention of third parties to an arbitration is limited" to the arbitration agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement itself. This Court in M/s Arif Azim Co. Ltd. v. M/s Micromax Informatics Fze, wherein, one of us (J.B. Pardiwala J.) had had held that referral courts are only a conduit or means to arbitration, and the sum and substance of the arbitration has to be derived from the choices of the parties and their intentions contained in the arbitration agreement. 141. The jurisdiction of an arbitral tribunal is not created by the mere subjective intent or volition of the parties. Rather, it is the arbitration agreement-a legally cognisable and objective instrument-that operates as the foundational source of jurisdiction in the eyes of the law. Just as the creation of a property automatically vests jurisdiction in the territorial courts competent to adjudicate over such property, the conclusion of an arbitration agreement ipso jure brings into existence the jurisdiction of the arbitral tribunal. This jurisdiction exists in a de jure sense from the moment the arbitration agreement is validly executed, regardless of whether the tribunal has been formally constituted. 142. In other words, it is not the tribunal's subsequent constitution through procedural steps - whether by the parties thems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raneous invocation or commencement of arbitration viz-à-viz the appellant. According to the appellant, this approach not only contravenes the procedural mandate of the Act, 1996, more particularly, the purpose of Section 21 but also undermines the principles of natural justice and party consent, which lie at the heart of consensual arbitration. 145. The marginal note appended to Section 21 of the Act, 1996 makes it abundantly clear, that the notice to be issued thereunder is for the purpose of "commencement of arbitration proceedings". The substantive provision further makes it clear that, the date on which a request / notice of invocation for referring a dispute is received by the respondent, would the date on which the arbitral proceedings in respect of a particular dispute commences. The words "particular dispute" assumes significance in the interpretation of this provision and its underlying object. It indicates that the provision is concerned only with determining when arbitration is deemed to have commenced for the specific dispute mentioned in the notice. The language in which the said provision is couched is neither prohibitive or exhaustive insofar as reference of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate to allow the amendment or supplement having regard to the delay in making it. (4) The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing of their appointment. 147. Section 23 sub-section (1) places an obligation upon the claimant to state the facts supporting his "claim", the points at issue and the relief or remedy sought by way of its statement of claim, before the arbitral tribunal. Notably, the legislature, in the first part of the said sub-section, has deliberately and consciously used the term "claim" as opposed to "particular dispute" employed in Section 21 of the Act, 1996. Although, it could said that the term "particular dispute" under Section 21 connotes a larger umbrella within which the term "claim" under Section 23 would be subsumed, thereby suggesting that there is no scope to deviate from what was sought to be referred by the notice of invocation, we do not think so. We say so because, the requirement for providing the points at issue and the relief or remedy sought that exists in sub-section (1) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1996 Act must be construed accordingly. It defines the moment of the commencement of arbitral proceedings. [...]" 149. Similarly, sub-section (2) of Section 23, which enables the respondent to make a counter-claim or plead set-off, does not envisage any requirement that such counter-claim or set-off must be in respect of or correspond to the "particular dispute" in terms of Section 21 of the Act, 1996, thus, suggesting the legislature's intention to give a wide import to the term "claim" and by extension "counter-claim". In order to further obviate any confusion in respect of what claims can be raised, Section 23 sub-section (3) goes one step ahead and stipulates that, unless agreed otherwise by the parties, any party may amend or supplement its "claim" during the course of the arbitral proceedings, and further, that such amendment or supplement may be rejected only if the arbitral tribunal considers it inappropriate for one and only one reason, that being, the delay in making or seeking such amendment or supplement. What can be discerned from the above is that there is no restriction whatsoever, in the plain words of Section 23 of the Act, 1996, which would be indicative o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appointment of an arbitrator be sought in terms of Section 11 of the Act, 1996. It explained that the date when arbitration proceeding commences would be relevant for the purpose of attracting the Limitation Act, 1963 or for the purpose of time bar clauses or for the rules applicable in terms of the arbitration agreement, such as for setting into motion the conflict of laws when the proper law of the contract is one law and the law of the arbitral procedure is another. Lastly, that this "commencement of arbitration proceeding" by Section 21 of the Act, 1996 would also be relevant for of applicability of the 1940 Act having regard to Section 85(2)(a). Apart from the aforesaid, no other relevancy of Section 21 of the Act, 1996 was laid down by this Court, much less for the purposes of Section 23 thereunder. The relevant observations read as under: - "26. The commencement of an arbitration proceeding for the purpose of applicability of the provisions of the Indian Limitation Act is of great significance. Even Section 43(1) of the 1996 Act provides that the Limitation Act, 1963 shall apply to the arbitration as it applies to proceedings in court. Sub-section (2) thereof provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Law and by extension Section 21 of the Act, 1996, what is necessary in a notice or request under the said proiviosn, is the indication that the claimant seeks arbitration of the dispute. This Court consciously did not hold that such indication must be of what all disputes is sought to be referred to arbitration. The relevant observations read as under: - "27. Article 21 of the Model Law which was modelled on Article 3 of the UNCITRAL Arbitration Rules had been adopted for the purpose of drafting Section 21 of the 1996 Act. Section 3 of the 1996 Act provides for as to when a request can be said to have been received by the respondent. Thus, whether for the purpose of applying the provisions of Chapter II of the 1940 Act or for the purpose of Section 21 of the 1996 Act, what is necessary is to issue/serve a request/notice to the respondent indicating that the claimant seeks arbitration of the dispute." (Emphasis supplied) 154. The aforesaid observations of Milkfood (supra) when read in conjunction with the other observations made therein, more particularly paragraph 32, shows that this Court consistently held that the purpose of Section 21 of the Act, 1996 is for the determinat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of Section 43 of the Act. Sub- section (1) of Section 43 provides that the Limitation Act, 1963 shall apply to arbitrations as it applies to proceedings in courts. Sub-section (2) of Section 43 provides that for the purposes of Section 43 and the Limitation Act, 1963, an arbitration shall be deemed to have commenced on the date referred to in Section 21 of the Act. Having regard to Section 43 of the Act, any claim made beyond the period of limitation prescribed by the Limitation Act, 1963 will be barred by limitation and the Arbitral Tribunal will have to reject such claims as barred by limitation. xxx xxx xxx 18. In regard to a claim which is sought to be enforced by filing a civil suit, the question whether the suit is within the period of limitation is decided with reference to the date of institution of the suit, that is, the date of presentation of a plaint. As the Limitation Act, 1963 is made applicable to arbitrations, there is a need to specify the date on which the arbitration is deemed to be instituted or commenced as that will decide whether the proceedings are barred by limitation or not. Section 3 of the Limitation Act, 1963 specifies the date of instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, in the case of a counterclaim by a respondent in an arbitral proceeding, the date on which the counterclaim is made before the arbitrator will be the date of "institution" insofar as counterclaim is concerned. There is, therefore, no need to provide a date of "commencement" as in the case of claims of a claimant. Section 21 of the Act is therefore not relevant for counterclaims. There is however one exception. Where the respondent against whom a claim is made, had also made a claim against the claimant and sought arbitration by serving a notice to the claimant but subsequently raises that claim as a counterclaim in the arbitration proceedings initiated by the claimant, instead of filing a separate application under Section 11 of the Act, the limitation for such counterclaim should be computed, as on the date of service of notice of such claim on the claimant and not on the date of filing of the counterclaim." (Emphasis supplied) 156. In Adavya Projects (supra) this Court held that the purpose of a notice under Section 21 of the Act, 1996 is only to fulfilled the various time-related objects pertaining to the arbitration and the arbitration agreement. The relevant observatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imitation period as specified in the Schedule to the Limitation Act, as held by this Court in Milkfood Ltd. v. GMC Ice Cream (P) Ltd.5 and State of Goa v. Praveen Enterprises." (Emphasis supplied) (iii) Thirdly, that as held in Milkfood (supra) the date of receipt of such notice is also relevant for determining either (1) when the lex-arbitri or the law governing the arbitration agreement would apply or (2) for ascertaining the applicability of Arbitration Act, 1940 and Foreign Awards (Recognition and Enforcement) Act, 1961 to arbitral proceedings commenced prior to the Act, 1996 in terms of Section 85(2)(a) thereunder. The relevant observations read as under: - "10.2 Second, the date of receipt of notice is also relevant to determine the applicable law to the arbitral proceedings. This can be understood in two senses: (i) When the arbitral proceedings are governed by a law that is different from the proper law of the contract, the governing law applies only after the arbitral proceedings have commenced, as held in Milkfood Ltd (supra). And, (ii) Section 85(2)(a) of the ACA provides that the Arbitration Act, 1940 and Foreign Awards (Recognition and Enforcement) Act, 1961 will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings. The relevant observations read as under: - "12. [...] However, there is nothing in the wording of the provision or the scheme of the ACA to indicate that merely because such notice was not served on respondent nos. 2 and 3, they cannot be impleaded as parties to the arbitral proceedings. The relevant considerations for joining them as parties to the arbitration will be discussed at a later stage. 13. At this point, it is important to note this Court's decision in State of Goa v. Praveen Enterprises (supra) wherein it was held that the claims and disputes raised in the notice under Section 21 do not restrict and limit the claims that can be raised before the arbitral tribunal. The consequence of not raising a claim in the notice is only that the limitation period for such claim that is raised before the arbitral tribunal for the first time will be calculated differently vis-a-vis claims raised in the notice. However, non inclusion of certain disputes in the Section 21 notice does not preclude a claimant from raising them during the arbitration, as long as they are covered under the arbitration agreement. Further, merely because a respondent did not issue a notice raisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such notice is only to the extent of determination of various time elements in an arbitration. The relevant observations read as under: - "30. The Delhi High Court in Alupro Building Systems Pvt Ltd. v. Ozone Overseas Pvt Ltd. allowed an application under Section 34 of the ACA against an award passed by an arbitrator who was unilaterally appointed by the respondent therein, without issuing a notice to the petitioner therein under Section 21 of the ACA. The High Court proceeded to delineate the various functions served by a Section 21 notice as follows: (i) To inform the other party as to the claims, which will enable them to accept or dispute the claims; (ii) To enable the other party to point out if certain claims are time barred, barred by law, or untenable, or if there are counter- claims; (iii) For arriving at a consensus for appointment of arbitrators under the arbitration agreement; (iv) For parties to inform each other about their proposed arbitrator, to enable the other party to raise any objections/issues regarding qualification; (v) To trigger the court's jurisdiction under Section 11 in case the appointment procedure fails; and (vi) To fix the date of commencement of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n hand, as mentioned earlier, the Tribunal has by way of two separate orders passed in Section 16 Applications filed by BCSPL, in the first round, and AISPL and ABPL, in the second round ruled on its jurisdiction and added AISPL and ABPL to the array of parties in the proceedings. This determination under the principle of 'kompetenz-kompetenz' enshrined in Section 16 of the 1996 Act must be permitted to take its course, given that the arbitral proceedings are in any case nearing conclusion. 162. The High Court in its impugned judgment while upholding the Arbitrator's Orders, has rightly held that ABPL, BCSPL and AISPL 'fall under the same management, and it appears that the substitution in the contract, took place merely for convenience...'. Further, 'all the correspondence is in respect of the contract with ASF and ASF Group of Companies. There is no differentiation between BCSPL, AISPL, or ABPL, all of which are part of the ASF Group.'. In arriving at its conclusion, the High Court correctly applied the test laid down in Cox and Kings Ltd. (I) (supra), taking note of the communications exchanged, conduct of the ASF Group officials, active involvement of the appellant with contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all issues should be before the Arbitral Tribunal and the power under Section 11 sub-section (6A) is restricted to examination of the existence of an arbitration agreement. The concept of a 'reference' as it existed under the Arbitration Act, 1940 does not find itself in the 1996 Act. Once the Arbitral Tribunal stands appointed, all disputes and issues are to be decided by it as a 'one-stop forum' for adjudication. [See: Gammon India Ltd. v. NHAI, reported in 2020 SCC OnLine Del 659] 165. As aforementioned, Section 7(4)(b) of the Act, 1996 provides that an Arbitration Agreement may be contained in exchange of telecommunication, such as emails, which provide a record of the principal agreement. Emails have been exchanged between SPCPL and ASF Group as a whole, where admission of liability on the part of ASF Group to make payment under the Settlement Agreement stands established. Clause 12 of the Settlement Agreement makes the dispute resolution clause of the Works Contract applicable in the present case. 166. In Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia (P) Ltd., reported in (2015) 13 SCC 477, this Court has held that signature is not a formal requirement under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itral tribunal. What is expressly missing in the Act, 1996 is still missing in the Arbitration and Conciliation Bill, 2024, despite a catena of decisions of this Court as-well as the various High Courts, highlighting the need for statutory recognition of such power in order to obviate all possibilities of confusion. As observed in Gayatri Balasamy (supra), any uncertainty in the law of arbitration would be an anathema to business and commerce. We urge, the Department of Legal Affairs, Ministry of Law and Justice to take a serious look at the arbitration regime that is prevailing in India and bring about necessary changes while the Arbitration and Conciliation Bill, 2024 is still being considered. 171. In the overall view of the matter, we are convinced that no error, not to speak of any error of law, could be said to have been committed by the High Court in passing the impugned judgment and order. 172. All other legal contentions available to the parties are kept open to be canvassed before the Arbitral Tribunal. 173. For all the foregoing reasons, this appeal fails and is hereby dismissed. 174. Pending application, if any, also stands disposed of accordingly. 175. The Registr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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