IN THE HIGH COURT AT CALCUTTA

ORIGINAL CIVIL JURISDICTION

ORIGINAL SIDE

COMMERCIAL DIVISION

BEFORE :-

THE HON’BLE JUSTICE SHAMPA SARKAR

AP- COM 755 OF 2025

SUSHIL KHAITAN

VS

AJAY MITTAL AND ORS.

For the Petitioner : Mr. Jishnu Chowdhury, Sr. Adv.

Mr. Deepan Kumar Sarkar, Adv.

Mr. Altamash Alim, Adv.

Mr. Samridha Sen, Adv.

Mr. Jaydeb Ghorai, Adv.

Mr. Saugata Banerjee, Adv.

Mr. Diptesh Ghorai, Adv.

For the Respondent no. 1 : Mr. S. N. Mookherjee, Sr. Adv.

Mr. Subrojyoti Mookherjee, Adv.

Mr. Neelash Choudhury, Adv.

Ms. Anuradha Poddar, Adv.

Judgment Reserved on : 24.02.2026

Judgment Delivered on : 19.03.2026

Judgment Uploaded on : 19.03.2026

Shampa Sarkar, J.

1. This application has been filed for appointment of an arbitrator, to

resolve the disputes which arose between the petitioner and the

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respondents. The petitioner and the respondent Nos. 1 and 2 are the

partners of Ashoka Exports (in short ‘the firm’). The firm was

registered under the provisions of Indian Partnership Act, 1932. The

firm was engaged, inter alia, in the business of manufacture and

export of jute and cotton bags. The partnership firm was governed by

a Reconstituted Partnership Deed dated April 1, 2009. The said deed

was renewed from time to time. The reconstituted partnership deed

contained an arbitration agreement under clause 25 thereof, which is

quoted below:-

“THAT all matters of differences/dispute relating to the said

partnership affairs shall be referred to arbitration according to

and subject to the prevailing provisions of the Arbitration Act, or

as amended from time to time.”

2. According to Mr. Chowdhury, learned senior Advocate, pursuant to

the final amendment to the reconstituted deed, vide an agreement

dated April 6, 2023, the petitioner and the respondent Nos. 1 and 2

had the following shares in the partnership business:-

“(a) Petitioner : 47.5%

(b) Respondent No.1 : 47.5%

(c) Respondent No. 2 : 5%”

3. Mr. Chowdhury alleged that the respondent No. 1 acted in an unfair,

unjust, disloyal and inequitable manner and denied the right of

petitioner as a partner of the said firm. The respondent No. 1 was

siphoning off the assets of the firm. The respondent No. 3, was

nothing, but the alter ego of the respondent No 1. The respondent no.

1 was also poaching the clients, customers, employees, staff and

workmen of the firm, thereby promoting the business of the

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respondent No. 3. The respondent No 3 was a company registered

under the Companies Act, 2013 and was running a competitive

business enterprise. It was alleged that the actions of the respondent

No. 1 were contrary to the terms and conditions of the reconstituted

partnership deed. The respondent no. 3 was functioning from the

same premises as the respondent No. 4 and was using the plant,

machinery, space, workmen and the know-how of the partnership

business. Moreover, the petitioner was not being given access to the

accounts and was denied all his rights and privileges as a partner.

4. According to Mr. Chowdhury, t he respondent no.1 induced the

petitioner to amicably divide the partnership business and the

petitioner, believing the proposal of the said respondent to be bona

fide and in good faith, agreed to such proposal. Therefore, the

petitioner and the respondent No. 1 executed a Memorandum of

Understanding on October 30, 2024 as to how they would deal with

their business. The respondent No. 2 was jointly and equally owned by

the families of the petitioner and the respondent No. 1. The petitioner

contends to have performed his obligations under the MOU by selling

and causing the sale of his and his family's shares in the respondent

No. 2, to the respondent No. 1, sometime in December 2024. In

February 2025, the petitioner signed a letter of authority in favour of

the respondent No. 1 in good faith. T he respondent No. 1 was

authorized to take loans for the business of respondent no. 3, by

leveraging the financial credibility of the firm. It was alleged that the

respondent no. 1 had unjustly and unfairly appropriated and

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procured purchase orders of the partnership business, to expand the

business of the respondent no. 3. The respondent no. 3 had also tried

to participate in an international fair, and set up a stall with products

which were akin to those manufactured by the partnership business,

by proclaiming that it was the sole manufacturer of those products.

5. As per the MOU, the division of the business was to be effected from

April 1, 2025. Reciprocal obligations of the petitioner and the

respondent no.1 were contemplated thereunder. The said firm was to

dissolve within a period of 2 years from the date of execution of the

MOU. The respondent no. 1 promised that , he would adhere to the

division of the clients and would not poach any client or employee or

staff of the firm, or take any other step to render the MOU

infructuous. However, there were violations of the terms. The

respondent no. 3 used the same user id of the said firm. Further, the

registered office of the respondent no. 3 was the same as the office of

the respondent no. 4. The business of the firm was usurped by the

respondent no.1. The respondent No. 3 was running a parallel

business. The respondent no.1 severed all relationship with the

petitioner vis-à-vis the firm. The petitioner was kept away from all

such business related activities of the firm. It was further alleged that

the respondent no.1 continued to act unjustly and unfairly against the

interest of the firm.

6. Thus, disputes cropped up between the parties, and the petitioner

filed an application under Section 9 of the Arbitration and Conciliation

Act, 1996 for various interim reliefs. The application under Section 9

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came up for hearing before the High Court. The following order was

passed:-

“……

7. Although the law provides that any difference arising as to ordinary

matters connected with the business may be decided by a majority of

the partners, and every partner shall have the right to express his

opinion before the matter is decided, there is nothing on record to

show that any attempt was made by the partners to resolve the

disputes in terms of Section 12(c). Every partner has a right to have

access to and inspect the books of the firm. Thus, Sushil cannot be

kept away from the accounts, papers and books of accounts of the

firm and he shall have access to the same.

8. General duties of the partners under Section 9 of the said Act

provides that partners are bound to carry on business of the firm to

the greatest common advantage, to be just and faithful to each other,

and to render true accounts and full information of all things affecting

the firm, to any partner or his legal representative.

……

11. Under such circumstances, the petitioner being a partner of the

firm shall enjoy the benefits of the business as per law, shall have

equal right of participation in the business, shall be allowed to visit

the office and access the books of accounts etc. ... All rights

emanating from the Indian Partnersh ip Act, 1932, shall be made

available to Sushil...

12. Status quo will be maintained with regard to the assets. The

assets which have allegedly been sold to Green Bridge, will not be

further alienated. The nature and character of the same shall not be

changed...”

7. Alleging non-compliance and violation of the above order, a contempt

application was filed vide C.P. Com No. 13 of 2025. The following order was

passed:-

“Copy of the contempt application be served upon the learned

Advocate on record for the alleged contemnor. Affidavit in opposition

to be filed within two weeks from date; reply, if any, within a week

thereafter.

Let this matter appear along with AP-COM/ 427/2025 on September

15, 2025.

In the meantime, the interim order already passed, which Mr.

Mookherjee submits to have been complied with, shall continue. Both

the parties shall act in terms of the partnership agreement in respect

of the partnership firm operating under the name and style of 'Ashoka

Exports'. Both the parties shall have access to the official e-mails

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received from the customers or any other third party of the

partnership firm 'Ashoka Exports'.

Needless to mention that all parties shall have access to the accounts

of 'Ashoka Exports' as well.

The submission of Mr. Chowdhury, learned Senior Advocate that,

Green Bridge Exports Private Limited has been using the premises

and the assets of Ashoka Exports, shall be decided on the next date."

8. The petitioner issued a notice under Section 21 of the Arbitration and

Conciliation Act, invoking clause 25 of the reconstituted Partnership Deed,

and nominated a retired Chief Justice to act as the sole arbitrator for

adjudication of the claims of the petitioner. Mr. Jishnu Chowdhury

submitted that this was a fit case for appointment of an arbitrator, in view

of the disputes between the parties. The corporate veil of the respondent

No.3 should be pierced, to appreciate the role and involvement of the

respondent No.3 in the dispute which had arisen.

9. Mr. Jishnu Chowdhury relied on the following decisions:-

(i) Cox and Kings Limited vs Sap India Private Limited and Anr.

reported in (2024) 4 SCC 1

(ii) Oil and Natural Gas Corporation Limtied vs Discovery

Enterprises private Limited and Anr. reported in (2022) 8 SCC 42

(iii) Cox and Kings Limited vs Sap India Private Limited and Anr.

reported in (2025) 1 SCC 611,

(iv) ASF Buildtech Private Limited vd Shapoorji Pallonji and

Company Private Limited reported in (2025) 9 SCC 76.

10. The respondent no.1 replied to the notice invoking arbitration and

refused to agree to the name proposed by the petitioner and recommended

another learned senior Advocate, to act as the Arbitrator.

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11. Hence, this application has been filed for appointment of an arbitrator

in terms of clause 25 of the reconstituted partnership deed, inter alia, for

the resolution of the dispute between the parties. The other respondents

did not enter appearance despite service. The respondent No.1 filed an

affidavit-in-opposition to the application and denied the allegations of the

petitioner. Mr. S.N. Mookherjee, learned senior Advocate for the Respondent

no. 1 submitted that, the petitioner was actually trying to implement the

terms and conditions of the MOU, which did not contain any arbitration

clause. The respondent no. 3 was not a partner of the respondent no.4 and

was in no way connected with the Reconstituted Partnership Deed dated

April 1, 2009. There was no arbitration agreement between the petitioner

and the respondent no.3. The respondent no.3 could not be compelled to

participate in the arbitral proceeding. The respondent no.3 was a company

incorporated under the Companies Act. It had a separate legal identity from

the respondent no.1. When the deed was executed between the parties, that

is, on April 1, 2009, the respondent no.3 was not in existence.

12. It was also urged that, no materials had been disclosed before the

court which would demonstrate that as on April 1, 2009, either the

respondent No.1 or the respondent no.3 had shown any intention to bind

the respondent No.3 either to the partnership business or the arbitration

clause. Further, the averments in the application and the document s

annexed thereto, disclosed a separate and independent legal existence of

the respondent no. 3. The identity of the respondent No. 3 was neither

doubtful nor questionable. The arbitration agreement was contained

exclusively in the partnership deed. The covenants in the said deed, did not

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disclose any obligation of the respondent no.3. The respondent no. 3 was

not connected with the underlying contract. There was nothing on record

which would show that the respondent no.3, either directly or indirectly,

could be bound by the arbitration agreement. Moreover, the respondent

no.3 was not a party to the injunction application, but had been craftily

added as a respondent in this application. This attempt of the petitioner to

drag the respondent no.3 to an arbitral proceeding, was nothing but a ploy

to harass and the respondent no.3 and hinder its business.

13. Mr. Mookherjee learned senior Advocate further submitted that the

decisions relied upon by Mr. Jishnu Chowdhury were under the group

companies doctrine. In those decisions, the central issue was whether a

company who was not a signatory to an arbitration agreement should be

referred to arbitration, being a part or constituent of the same group. In all

such decisions, it had been recognized that the group companies' doctrine

was a consent-based doctrine for identifying the real intention of the parties

to bind the non-signatory corporate entities to an arbitration agreement.

Mr. Mookherjee referred to paragraphs 85 to 94 of the decisions reported in

Cox and Kings Limited vs. Sap India Private Limited and Another

reported in (2024) 4 SCC 1 in support of his contentions.

14. It was urged that, in the case in hand, the respondent no.3 had not

expressed any consent to be bound either by the Reconstituted Partnership

Deed dated April 1, 2009 or by the arbitration clause contained therein. As

such, none of the decisions would be applicable. There was nothing on

record which would indicate that the respondent no.1 was the agent of the

respondent no.3 or that the respondent no.3 had stepped into the shoes of

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the respondent No. 1. It was further submitted that, the doctrine of piercing

the corporate veil could not be easily invoked and ought to be used

sparingly, specially in the context of reference to arbitration. The only

reason cited by the petitioner to invoke arbitration against the respondent

no.3 was that the respondent no.1 was in control and management of the

respondent no.3. Referring to Balwant Rai Saluja vs Air India Ltd.

reported in (2014) 9 SCC 407, it was categorically submitted that the

Hon’ble Apex Court had held that separateness of the corporate personality

could not be disregarded, solely on the ground of ownership and control.

The petitioner had failed to make out and establish a case for piercing the

corporate veil. Mere averment that the respondent no.3 was the alter ego of

the respondent no.1 and that the respondent no.1 was competing with the

partnership business through the respondent no. 3, would not be sufficient

ground to pierce the corporate veil of the respondent no.3. The fact that

some assets of the partnership had been transferred to the respondent no.3

for valuable consideration, also, could not result in the respondent no.3

being bound by the covenants of the partnership deed and by the

arbitration agreement. Thus, in this case, the doctrine of piercing the

corporate veil could not be pressed into service. Distinguishing the decision

reported in Oil and Natural Gas Corporation (supra) , Mr. Mookherjee

submitted that, before a non-signatory could be referred to arbitration,

several factors like intention of the parties, relationship between the

signatory and the non-signatory, commonality of the subject matter,

composite nature of the transaction and performance of the contract, were

to be considered by the referral court.

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15. Mr. Mookherjee vehemently urged that the respondent n o.3 was

unconnected with the affairs of the respondent no.4 and played no role

whatsoever in the internal affairs of the respondent no.4. The reconstituted

partnership deed contained personal covenants which were relevant only to

the partners of the respondent no.4.

16. Moreover, the Hon’ble Apex Court had specifically held in the decision

of Cox and Kings (supra) that the referral court should, prima facie, come

to a finding that the non-signatory was a veritable party before referring

such non-signatory to arbitration.

17. Considered the rival contentions of the parties. The petitioner and the

respondent nos.1 and 2 are partners of a firm registered under the Indian

Partnership Act, The partnership is governed by the Reconstituted

Partnership Deed dated April 1, 2009. Clause 19 provides that each partner

shall be just and faithful to each other in all transactions relating to the

partnership and shall at all times be responsible to give the other a just and

faithful account of the partnership business. Clause 21 provides that no

partner shall, without the consent in writing of the other partner, start a

similar or identical type of business like that of the firm. Clause 25 provides

that all matters of dispute relating to the affairs of the partnership, shall be

referred to arbitration, according to and subject to the prevailing provisions

of the Arbitration and Conciliation Act, as amended from time to time. The

partnership deed underwent various amendments and lastly on April 6,

2023, the profit and loss sharing was amended as follows:

Ajay Mittal - 47.5%

Sushil Khaitan- 47.5%

M/s Preview Barter Private Limited - 5%.

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18. A Memorandum of Understandin g (MOU) was entered into between

the petitioner and the Respondent no. 1 on October 30, 2024. The said

Memorandum of Understanding provided as follows:-

“WHEREAS THE PARTIES hereto of the FIRST AND SECOND PARTS

have been doing, partner of M/s ASHOKA EXPORTS since …….

Sharing profit and Loss equally. In the course of business, the

following companies have also been established for effectively running

the Joint Business.

1. Ashoka Jute Products Pvt. Ltd.

2. Preview Barter Pvt. Ltd.

3. Cegaro Industries Pvt. Ltd.

WHEREAS heirs apparent of both the Parties have joined the business

and keeping future prospects in mind and to av oid any

misunderstanding/dispute it has been amicably decided by both the

Parties to split the existing business of manufacturing and Export of

Jute, Cotton, Juco bags as per the agreed terms and conditions as

enumerated hereunder:

1. That the division will be effective from 1

st

April 2025. However,

orders received up to 28th February or deliverable by March 2025 as

per WO, will remain in joint account.

2. That M/s Ashoka Exports, (AE), the partnership firm will remain a

partnership firm with Parties hereto of the First and second Parts as

equal partners. M/s Preview Barter Pt Ltd, (PBL) which is a 5%

partner will retire and all the investment of PBL will be returned back.

M/s AE will remain in existence till both parties mutually decide to

wind up AE. It is, however, agreed that the winding up process of AE

should start within a maximum of 2 years.

3. That existing domestic and Export clients of AE will be divided

between both Parties as per the attached list, except M/s Promogift

and Promoline of Italy (including any new entity that they max create)

(Promo), which will remain in the joint partnership firm AE.

4. The business of Promo will be divided equally between both the

parties as per Value and Profit and will be executed by the parties

independently. The export would be done through AE at nominal

profit. Both parties have agreed to devise modalities within 2 years

(31.03.2027) so as the business of Promo is also divided equally

between them.”

19. Both parties, keeping the future in mind had amicably decided to split

the existing business of manufacture and export of jute, cotton, jute bags

as per the agreed terms and conditions. The MOU provided that Ashoka

Exports, that is the respondent no. 4, would remain a partnership firm. The

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petitioner and the respondent no. 1 would be equal partners. M/s Preview

Barter Private (PBL) Limited which was a 5% partner, would retire and all

the investments of PBL would be returned back. The r espondent no. 4

would remain in existence till both the parties mutually decided to wind up

the respondent no. 4. and the winding up process would start within a

maximum of 2 years. Therefore, the existing domestic and export clients of

the respondent no. 4 would be divided between both the parties as per the

list attached to the MOU, except M/s Promogift and M/s Promoline of Italy,

which would remain in the joint partnership of Ashoka Exports. The

business of Promo would be divided equally between the parties as per

value and profit and would be executed by the parties independently. The

exports would be done through the respondent no. 4 at nominal profit.

20. It, prima facie, appears to this court from the said MOU that, Ashoka

Exports, the respondent no. 4, continued to be a partnership firm and both

the parties were entitled to their rights and share in profits etc., which

emanated from the Reconstituted Partnership Deed. Under the said deed,

the respondent no.1 had to comply with the covenants and obligations

mentioned therein. One of the covenants being that the petitioner would

enjoy the status of a partner having equal right to the profits and equal

right in participation of the business. The respondent no.1 could not keep

the petitioner away from the business. The allegation of the petitioner was

that the respondent no. 1 had ousted the petitioner completely from the

firm. Further allegation was that, although, the respondent no. 3 was

incorporated under the Companies Act, it was nothing but the alter ego of

the petitioner no.1 and the business of the respondent no. 3 was the same

13

as that of the said partnership firm. The expertise, clients, workers, etc. of

the firm were all being used by the respondent no. 3. Under such

circumstances, a, prima facie, case for piercing the corporate veil of the

respondent no. 3, in order to detect the connection of the respondent no. 3

with the dispute involved has been made out . Impleadment of the

respondent no. 3 in this proceeding, prima facie, appears to be justified.

Moreover, there are documents which would indicate that the respondent

no. 1 had himself acknowledged that, in view of the disputes between the

parties, the respondent no.1 had decided to go on his own and continue

with a similar business, through the respondent no. 3 from the same

premises as the firm. There are allegations that the same user Id as that of

the firm was being used by the respondent No. 3. The workers were being

poached and the purchase orders were diverted to the respondent no. 3.

21. Under such circumstances, based on the allegations made by the

petitioner, it is, prima facie, established that there may be a commonality in

the subject matter of the dispute between the petitioner and the respondent

nos. 1 and 3. The allegations against the respondent no. 3 are specific. The

petitioner’s clear case is that the respondent no. 3 was running a

competitive business as that of the respondent no. 4, during the

subsistence of the firm, by not only poaching the customers and obtaining

the purchase orders, but also by taking away the men and machinery of the

partnership business. The respondent no. 3 was functioning from the same

premises as that of the respondent no. 4 and also using the same user id.

The referral Court cannot delve deeper into the issues and hold a mini-trial,

but refer the dispute to arbitration, leaving it open to the learned Arbitrator

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to decide on the issue of mis-joinder of the respondent No. 3. The learned

arbitrator has the jurisdiction to decide who can be impleaded and who

cannot. The arbitrator can also add a party or delete a party. The learned

arbitrator can impose cost if he finds that a non-signatory has been

unnecessarily dragged into the proceeding. Any firm opinion of the referral

court on the issue of mis-joinder runs the risk of frustrating the arbitration

agreement, thereby, causing serious prejudice to the claimant. The

allegations also revolve around the mode and manner in which the

respondent No.3 had derived benefits from the business of the firm,

thereby, being bound by the doctrine of estoppel.

22. In Cox and Kings (supra), it has been held that, even an alter ego can

be referred to arbitration under exceptional situations:-

“86. Courts and tribunals across the world have been applying

traditional contractual and commercial doctrines to determine the

consent of the non-signatory parties to be bound by the arbitration

agreement. Generally, consent-based theories such as agency,

novation, assignment, operation of law, merger and succession, and

third-party beneficiaries have been applied in different jurisdictions.

In exceptional circumstances, non-consensual theories such as

piercing the corporate veil or alter ego and estoppel have also been

applied to bind a non-signatory party to an arbitration agreement. The

Group of Companies doctrine is one such consent -based doctrine

which has been applied, albeit controversially, for identifying the real

intention of the parties to bind a non-signatory to an arbitration

agreement.”

23. In ONGC Limited (supra), it was held that a non-signatory may be

held to be bound on a non-consensual basis, by applying the principle of

estoppel and alter ego. Thus, a non-signatory to an arbitration agreement,

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even against its wish, can be referred to arbitration. Paragraphs 37-41 are

quoted below:-

“37. Gary B. Born in his treatise on International Commercial

Arbitration indicates that:

“The principal legal basis for holding that a non-signatory is

bound (and benefited) by an arbitration agreement … include

both purely consensual theories (e.g., agency, assumption,

assignment) and non-consensual theories (e.g. estoppel, alter

ego) [ Gary Born, International Commercial Arbitration, 2nd Edn.,

Vol. 1, at p. 1418.] .”

38. Explaining the application of the alter ego principle in

arbitration, Born also notes:

“Authorities from virtually all jurisdictions hold that a party who

has not assented to a contract containing an arbitration clause

may nonetheless be bound by the clause if that party is an ‘alter

ego’ of an entity that did execute, or was otherwise a party to,

the agreement. This is a significant, but exceptional, departure

from the fundamental principle … that each company in a

group of companies (a relatively modern concept) is a separate

legal entity possessed of separate rights and liabilities [Id, p.

1432] .

***

“the group of companies doctrine is akin to principles of agency

or implied consent, whereby the corporate affiliations among

distinct legal entities provide the foundation for concluding that

they were intended to be parties to an agreement,

notwithstanding their formal status as non-signatories [Id, p.

1450] .”

39. Recently, John Fellas elaborated on the principle of binding a

non-signatory to an arbitration agreement from the lens of the

doctrine of estoppel. He situated the rationale behind the

application of the principle of direct estoppel against competing

considerations of party autonomy and consent in interpreting

arbitration agreements. Fellas observed that non-signatory parties

can be bound by the principle of direct estoppel to prohibit such a

party from deriving the benefits of a contract while disavowing the

obligations to arbitrate under the same:

“There are at least two distinct types of estoppel doctrine that

apply in the non-signatory context:“the direct benefits” estoppel

theory and the “intertwined” estoppel theory. The direct benefits

theory bears the hallmark of any estoppel doctrine-prohibiting a

party from taking inconsistent positions or seeking to “have it

both ways” by “rely[ing] on the contract when it works to its

advantage and ignor[ing] it when it works to its

disadvantage.” Tepper Realty Co. v. Mosaic Tile Co. [Tepper

Realty Co. v. Mosaic Tile Co., 259 F Supp 688 (SDNY 1966)]

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. The direct benefits doctrine reflects that core principle by

preventing a party from claiming rights under a contract but, at

the same time, disavowing the obligation to arbitrate in the same

contract.

***

By contrast, the intertwined estoppel theory looks not to

whether any benefit was received by the non -signatory, but

rather at the nature of the dispute between the signatory and

the non-signatory, and, in particular whether “the issues the

non-signatory is seeking to resolve in arbitration are intertwined

with the agreement that the estoppel [signatory party] has

signed….the intertwined estoppel theory has as its central aim

the perseveration of the efficacy of the arbitration process is

clear when one looks at the typical fact pattern of an

intertwined estoppel case.” [ John Fellas, “Compelling

Signatories to Arbitrate with Non-Signatories”, New York Law

Journal (28-3-2022)]

(emphasis supplied)

* * *

* * *

41. Consent and party autonomy are undergirded in Section 7 of

the 1996 Act. However, a non-signatory may be held to be bound

on a consensual theory, founded on agency and assignment or on a

non-consensual basis such as estoppel or alter ego [ Gary

Born, International Commercial Arbitration, 2nd Edn., Vol. 1, at p.

1418.] . These principles would have to be understood in the

context of the present case, where ONGC's attempt at the joinder of

JDIL to the proceedings was rejected without adjudication of

ONGC's application for discovery and inspection of documents to

prove the necessity for such a joinder.”

24. In the decision of ASF Buildtech (supra),the Hon’ble Apex Court held

as follows:-

“110. Even if it is assumed for a moment that the Referral Court

in its jurisdiction under Section 11 of the 1996 Act has the

discretion to determine whether a non-signatory is a veritable

party to the arbitration agreement or not, by virtue of Cox &

Kings (1) [Cox & Kings Ltd. v. SAP (India) (P) Ltd., (2024) 4 SCC

1 : (2024) 2 SCC (Civ) 1 : (2024) 251 Comp Cas 680] , 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

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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 not a veritable party. On the other hand, the

apprehensions of prejudice can be properly mitigated by leaving

such question for the Arbitral Tribunal to decide, as such party

can always take recourse to Section 16 of the 1996 Act and

thereafter in appeal under Section 37, and where it is found

that such party was put through the rigmarole of arbitration

proceedings vexatiously, both the Tribunal and the courts, as

the case may be, should not only require that all costs of

arbitration insofar as such non-signatory is concerned be borne

by the party who vexatiously impleaded it, but the Arbitral

Tribunal would be well within its powers to also impose costs.

This extract is taken from ASF Buildtech (P) Ltd. v. Shapoorji

Pallonji & Co. (P) Ltd., (2025) 9 SCC 76 : 2025 SCC OnLine SC

1016 at page 191

III. Decision of Cox & Kings (2) [Cox & Kings Ltd. v. SAP (India)

(P) Ltd., (2025) 1 SCC 611 : (2025) 1 SCC (Civ) 314 : (2024) 251

Comp Cas 802] andAjay Madhusudan [Ajay Madhusudan Patel

v. Jyotrindra S. Patel, (2025) 2 SCC 147 : (2025) 1 SCC (Civ)

154] and the scope of Section 11 of the 1996 Act for joinder of

non-signatories to arbitration proceedings

111. The aforesaid may be looked at from one another angle.

This Court in Cox & Kings (1) [Cox & Kings Ltd. v. SAP (India)

(P) Ltd., (2024) 4 SCC 1 : (2024) 2 SCC (Civ) 1 : (2024) 251

Comp Cas 680] also discussed the role and scope of jurisdiction

of the Referral Courts and Arbitral Tribunals under Section(s)

11 and 16 of the 1996 Act, particularly in the context of binding

a non-signatory to the arbitration agreement. It reiterated that

under Section 11, the Referral Court only has to determine the

prima facie existence of an arbitration agreement. Whereas, the

issue of determining parties to an arbitration agreement is quite

distinct from “existence” of the arbitration agreement, as such

issue goes to the very root of the jurisdictional competence of

the Arbitral Tribunal, and thus, empowered to decide the same

under Section 16. Placing reliance on the decision of this Court

in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. [Shin-

Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234

: (2005) 127 Comp Cas 97] ,

18

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 determining

whether a non-signatory may be bound by an arbitration

agreement.

113. It is well within the jurisdiction of the Arbitral Tribunal to

decide the issue of joinder and non-joinder of parties and to

assess the applicability of the Group of Companies Doctrine.

Neither in Cox and Kings (I) (supra) nor in Ajay

Madhusudhan (supra), this Court has said that it is only the

reference courts that are empowered to determine whether a

non-signatory should be referred to arbitration. The law which

has developed over a period of time is that both ‘courts and

tribunals’ are fully empowered to decide the issues of

impleadment of a non-signatory and Arbitral Tribunals have

been held to be preferred forum for the adjudication of the

same.

114. In the case of Ajay Madhusudhan (supra), this Court,

placing reliance on Cox and Kings (I) (supra), has expressly

held that Section 16 is an inclusive provision which

comprehends all preliminary issues touching upon the

jurisdiction of the arbitral tribunal and the issue of

determining parties to an arbitration agreement goes to the

very root of the jurisdictional competence of the arbitral

tribunal.

115. The case of Ajay Madhusudhan (supra) also recognizes

that the legal relationship between the signatory and non -

signatory assumes significance in determining whether the non-

signatory can be taken to be bound by the Arbitration

Agreement. This Court also issued a caveat that the ‘courts and

tribunals should not adopt a conservative approach to exclude

all persons or entities who are otherwise bound by the

underlying contract containing the arbitration agreemen t

through their conduct and their relationship with the signatory

parties. The mutual intent of the parties, relationship of a non-

signatory with a signatory, commonality of the subject matter,

the composite nature of the transactions and performance of the

19

contract are all factors that signify the intention of the non-

signatory to be bound by the arbitration agreement’.”

116. Recently, a coordinate bench of this Court in Adavya

Projects Pvt. Ltd. v. Vishal Strcturals Pvt. Ltd., 2025 INSC

507, also held that an arbitral tribunal under Section 16 of

the Act, 1996 has the power to implead the parties to an

arbitration agreement, irrespective of whether they are

signatories or non -signatories, to the arbitration

proceedings. This Court speaking through. 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 as parties to the arbitration proceedings in

exercise of its jurisdiction under Section 16 of the Act, 1996.

The relevant observations read as under: -

"24. As briefly stated above, the determination of

who is a party to the arbitration agreement falls

within the domain of the arbitral tribunal as per

Section 16 of the ACA. Section 16 embodies the

doctrine of kompetenz-kompetenz, i.e., that the

arbitral tribunal can determine its own

jurisdiction. The provision is inclusive and covers

all jurisdictional questions, including the existence

and validity of the arbitration agreement, who is a

party to the arbitration agreement. and the scope

of disputes referrable to arbitration under the

agreement. Considering that the arbitral tribunal's

power to make an award that binds the parties is

derived from the arbitration agreement, these

jurisdictional issues must necessarily be decided

through an interpretation of the arbitration

20

agreement itself. Therefore, the arbitral tribunal's

jurisdiction must be determined against the

touchstone of the arbitration agreement.

* * *

118. Furthermore, the legislative intent underlying

Section 11 of the 1996 Act —particularly sub-

section (6-A)—is to ensure the expeditious disposal

of applications for the appointment of arbitrators.

This legislative objective militates against Referral

Courts undertaking any elaborate or detailed

factual inquiry, which would inevitably delay

proceedings. Prudence thus dictates that the

Referral Courts confine themselves to a prima facie

examination of the existence of the arbitration

agreement and leave substantive determinations,

such as the binding nature of non-signatories, to

the Arbitral Tribunal. An additional and equally

compelling consideration is that the power

exercised by the Referral Courts under Section 11

of the 1996 Act is judicial in nature. Consequently,

the Referral Courts must refrain from embarking

upon an intricate evidentiary inquiry or making

final determinations on matters that are within the

jurisdiction of the Arbitral Tribunal. Any

premature adjudication or opinion by the Referral

Court would not only usurp the Tribunal'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 1996 Act and,

thereafter, under Section 37. Accordingly, the

better course of action is for the 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.”

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25. Under such circumstances, the application is allowed. All objections

raised by Mr. Mookherjee can be raised before the learned Arbitrator. The

observations made hereinabove are prima facie.

26. Mr. Jishnu Saha, learned senior Advocate is appointed as the learned

Arbitrator to arbitrate upon the disputes between the parties.

27. The learned Arbitrator shall comply with the provisions of Section 12

of the Arbitration and Conciliation Act, 1996. The learned Arbitrator shall

be at liberty to fix his remuneration as per the Schedule of Arbitration and

Conciliation Act, 1996.

(Shampa Sarkar, J.)